West Virginia Democrat is Scrutinized
Mollohan Has Close Ties to Groups Handling His District's Appropriations

By Jeffrey H. Birnbaum
Washington Post Staff Writer
Monday, May 15, 2006

Starting in the 1990s, Rep. Alan B. Mollohan (D-W.Va.) chose an unusual way to funnel federal funds into his poverty-ridden district. He set up a network of nonprofit organizations to administer the millions of dollars he directed to such public endeavors as high-tech research and historic preservation.

Over the same period, Mollohan's personal fortunes soared. From 2000 to 2004, his assets grew from no more than $565,000 to at least $6.3 million. The partners in his rapidly expanding real estate empire included the head of one of these nonprofit groups and the owner of a local company for which he arranged substantial federal aid.

Mollohan used his seat on the House Appropriations Committee to secure more than $150 million for five nonprofit groups. One of the groups is headed by a former aide with whom Mollohan bought $2 million worth of property on Bald Head Island, N.C.

Controversy over this blending of commerce and legislation has triggered a federal probe, cost Mollohan his position on the House ethics committee and undermined the Democrats' effort to portray the GOP as the party of corruption because of the Jack Abramoff scandal. As early as today, the 12-term congressman will admit that he misstated some transactions in his congressional filings, according to Mollohan staffers.

"Mollohan has earmarked tens of millions of dollars to groups associated with his own business partners. That immediately raises the question whether these funds were allocated to promote the public good or to promote his interests and the interests of his partners," said Ken Boehm, chairman of the National Legal and Policy Center, a conservative watchdog group. "He also got very rich very quick, and that suggests a relationship that is suspect if not corrupt."

Mollohan is now engaged in the most arduous election of his career. Republicans have recruited Chris Wakim, a state legislator and Persian Gulf War veteran, to run against him, and have sent President Bush and House Speaker J. Dennis Hastert (R-Ill.) into the district to campaign. To fight back, Mollohan is raising much more money than ever, is visiting the district more often, and has hired a nationally known media consultant to help craft his commercials.

During a trip home last week to northern West Virginia, Mollohan was questioned at length by a radio interviewer from Weirton about his business connections. But everywhere else, Mollohan -- the son of a longtime congressman and a cousin of a former senator -- was welcomed as a patron of the state. At a huge police training event in Moundsville, a federal employee thanked him for providing the money for "everything you see today." In Morgantown, at a meeting about a missing-child alert system that his legislation had underwritten, he received a standing ovation.

In an interview, Mollohan said he is unapologetic and proud of the thousands of jobs he has brought to West Virginia and that, legally speaking, everything he has done to secure them is "squeaky clean." But he acknowledged that his actions might look incriminating and that he may have had an ethical "blind spot" that prevented him from questioning whether he, as a government official and vice chairman of the ethics panel, should have invested with such close associates.

"I would have done things differently," he said as he drove through West Virginia's northern panhandle. "It puts you in a position where people could say there's something untoward going on."

The House ethics committee warns lawmakers to avoid exactly those kinds of situations. Its Web site admonishes federal officials not to accept favors or benefits "in circumstances that might create the appearance of influencing the performance of official duties."

Mollohan's transactions -- first reported last month by the Wall Street Journal -- were uncovered by the National Legal and Policy Center, a small research institute in Virginia that gets some of its funding from the politically conservative Scaife family of Pittsburgh. In March, NLPC turned over 500 pages of documents to the FBI alleging that Mollohan engaged in nine years of false reporting and the appearance of impropriety in his business contacts with contractors.

As a result, Mollohan, 63, faces a widening federal investigation. The FBI has notified his nonprofit organizations that they will be subpoenaed soon and, according to Mollohan, a subpoena has already been served on a D.C. real estate company in which he has invested. In addition, Mollohan plans to divulge that he misstated on House financial disclosure forms the amount of loans and income from some of his real estate holdings.

Mollohan calls the charges against him inaccurate and partisan. He says NLPC is part of an orchestrated effort by Republicans to undermine the Democrats' anti-corruption message -- a charge NLPC denies -- and to transform West Virginia's congressional delegation from majority Democratic to majority Republican. He also asserts that he is being punished for leading the ethics committee when it sanctioned former House majority leader Tom DeLay (R-Tex.) three times in a single year.

Mollohan has served in the House without serious challenge since 1983. He said he knew he wanted to be a congressman from the moment he stood on the House floor in 1953 when his father, Robert H. Mollohan, was first sworn in. "It was like an imprinting," Mollohan said. His first election in 1982 was also formative. The state was in a deep recession, and Mollohan pledged then to make his first priority the diversification of the state's coal-and-steel-dependent economy.

The engine of that initiative, he determined from the beginning, would have to be the federal government. "Immediately I started to try to understand the government marketplace," he said.

From his perch on the Appropriations Committee, Mollohan has directed hundreds of millions of dollars into his district for that purpose. His colleague, Sen. Robert C. Byrd (D-W.Va.), a master of such "earmarking," was responsible for relocating to the state large facilities of NASA and the FBI, among other agencies. But Mollohan was a major player, too. His projects have made him, in effect, one of the region's leading industries.

In his home town of Fairmont, near Morgantown, for example, federal funds allocated at Mollohan's behest have purchased 500 acres for an office park that includes the Alan B. Mollohan Innovation Center, an office building for high-tech firms; a taxpayer-financed, $136 million building (complete with swimming pool and spa) that its manager hopes will house a federal agency; and other offices filled primarily with companies with federal contracts.

The congressman brought in so many taxpayer dollars that he decided to create a special set of organizations to oversee them. These nonprofit groups include the West Virginia High Technology Consortium Foundation, which manages the office park, and the Vandalia Heritage Foundation, which focuses on refurbishing real estate.

The practice of setting up such entities is rare and has been widely criticized as a mutual back-scratching exercise. "These types of organizations permit lawmakers to reward their own people, and themselves, without having to pay federal taxes," said Thomas A. Schatz, president of Citizens Against Government Waste, a watchdog group.

Mollohan defends the groups as the best way to control the appropriations he sends back home. He also said they were needed because it was hard to find people he could trust to run the projects. "There is a limited pool of people who are committed to a service mission," he said.

To head Vandalia Heritage, Mollohan tapped Laura K. Kuhns, who for years was a key aide in his congressional office. But in addition to watching over real estate improvements that Mollohan funded, Kuhns donated personally to a Mollohan political committee and invested with him in North Carolina real estate. The Mollohans and the Kuhnses own four lots on Bald Head Island and built neighboring beachfront homes (though Mollohan is now selling the house to pay debts).

Mollohan denies that he raked off any of the federal funds that went to his state while his personal portfolio ballooned. Rather, he said, his newfound wealth is due primarily to the run-up in value of his family's ownership of 27 condos in a Foggy Bottom high-rise. By leveraging that asset, he said, he has been able to buy other properties, usually with the help of loans, in North Carolina and West Virginia.

One of those properties is a $900,000, 300-acre farm along West Virginia's Cheat River that Mollohan purchased last year with a childhood friend and business associate, Dale R. McBride. A donor to Mollohan's campaigns, McBride is active in the high-tech consortium, a director of the Robert H. Mollohan Family Charitable Foundation (located in the Fairmont office park) and a pleader for taxpayer financing.

McBride asked Mollohan to earmark money for the U.S. space program to buy a special lightweight pallet that McBride's FMW Composite Systems Inc. had the expertise to produce. Mollohan complied, and FMW got a $1.5 million contract in 2005. That same year Mollohan and McBride became 50-50 partners in the farm.

The federal contract and the farm acquisition "were completely independent," McBride said. But he does understand with "regret" that the two are being examined together.

Mollohan promises a report soon that will explain how he so quickly became a multimillionaire.

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