By Matthew Mosk
Washington Post Staff Writer
Friday, June 15, 2007; A04

When Alan B. Mollohan (D-W.Va.) entered the House of Representatives in 1983, he was coming off a year in which his law firm income was $17,474, and he was losing money on two rental properties.

By the end of 2006, according to financial disclosure reports released yesterday, after dabbling in real estate, Mollohan's wealth had soared to between $6 million and $24 million.

J. Dennis Hastert, a former high school teacher and wrestling coach, was first elected to Congress as a Republican from rural Illinois in 1986, showing assets worth at most $270,000. At the end of last year, after his own real estate investments, Hastert had a net worth of $4 million to $17 million.

Open-government and ethics watchdogs say that Mollohan and Hastert are part of a growing circle on Capitol Hill that is engaging in land deals as a path to wealth, and they argue that such transactions have the potential to benefit from legislators' political connections and official actions.

"I think what you've seen in the last three or four cycles, is you've seen on both sides this new era of the businessman-lawmaker," said Keith Ashdown, the chief investigator for Taxpayers for Common Sense. "They're deal guys. They're always looking for the angles."

Lately, those "deal guys" have had a taste for real estate. Land deals have turned sizable profits for Senate Majority Leader Harry M. Reid (D-Nev.), Sen. Ted Stevens (R-Alaska), Rep. Ken Calvert (R-Calif.) and Rep. Gary G. Miller (R-Calif.), to name a few. The deals brought profits but also headaches, as questions arose about the way private investments intersected with the politicians' congressional activities.

Over Mollohan's first decade in Congress, his disclosure reports showed modest gains. Beginning in the 1990s, as he gained clout on the Appropriations Committee, he set up a network of nonprofit organizations in his district to help administer more than $150 million in federal funds secured for research ventures and preservation efforts.

In the same period, Mollohan partnered in real estate ventures with the head of one of these nonprofit groups and the owner of a local company that received substantial federal aid. Mollohan also bought $2 million worth of property on Bald Head Island, N.C., with a former staffer and close friend who ran one of the nonprofits.

From 2000 to 2004, Mollohan's assets grew from no more than $565,000 to at least $6 million.

Ken Boehm, chairman of the National Legal and Policy Center, a conservative watchdog group, spent nine months researching the transactions and last year handed his findings to the FBI, which he said launched an investigation into the matter.

"Here you had someone who was worth a couple hundred thousand dollars, who had $45,000 Visa debts, five kids and faced college costs," Boehm said. "A few years later you see, hey, the congressman bought a $3.7 million beach house. Sometimes things are what they look like."

Mollohan has defended the transactions, calling them "squeaky clean," though he did tell The Washington Post that given the chance, he may have done things differently to avoid being "in a position where people could say there's something untoward going on."

Hastert followed a similar course, entering the House in 1987 with a 104-acre farm in Shipman, Ill., worth $50,000 to $100,000, and other holdings worth no more than $170,000. When he assumed the job of speaker in 1999, he continued to report modest holdings. Then Hastert began investing money in a series of land deals.

The transactions that brought him the most acute attention involved properties he bought in 2002 and 2004 near Plano, Ill., in partnership with a local Republican Party official. In the summer of 2005, Hastert requested earmarks that would direct more than $200 million in federal funds to a highway project near the land. That December, he sold the properties to a developer for $5 million, making a profit of $1.8 million.

Hastert aides responded to the outcry that followed news reports on the deal last year, saying that the highway is more than five miles from the property and that the money was intended to benefit the entire district. A Hastert spokeswoman declined to comment further yesterday.

Hastert and Reid are not the only congressional leaders to face such scrutiny. The disclosure filing for House Speaker Nancy Pelosi (D-Calif.) showed that she and her husband increased their stake in a property near a San Francisco waterfront redevelopment project for which Pelosi requested $25 million in earmarked funds. In July, the Pelosis spent up to $1 million to buy out partners in 945 Battery, a building worth up to $5 million that generates as much as $1 million a year in rental income, the forms show.

Pelosi's office has denied any conflict in the earmark request, saying it was submitted to her by the Port of San Francisco. The Pelosis' property is "a mile away" from the pier, spokesman Brendan Daly said yesterday. "There's tons of other buildings in between."

Robert Kelner, a Washington lawyer who specializes in ethics matters, said it is very hard to prove that a specific federal action is aimed at increasing the value of a particular property.

"If you know you own a particular stock, it's a lot easier to identify a direct cause-and-effect than it is to draw a connection between a real estate transaction and a legislative action," Kelner said. "If you're a member of Congress, the notion that you have to try and figure out if a vote or an appropriation will cause an appreciation in your real estate -- that's just a level of complexity I don't think one can reasonably expect a member of Congress to think about."

That may be part of the allure of real estate deals, Ashdown said. Unlike stock purchases, real estate ventures can be difficult to trace and conflicts are tricky to evaluate. He noted the case involving Calvert, the California congressman, who repeatedly directed federal funds for a transit center near seven investment properties he owned.

Calvert argued that it was wrong to draw a link, but he sent a letter to the House ethics committee seeking guidance when questions arose about one of the earmarks. The panel responded last month, writing that the $5.6 million would pose a conflict only if his property "would be affected uniquely."

Ashdown said lawmakers should live by a different test: common sense. "Let's put it this way: Their newfound income isn't just because their investments are good," he said.

Calvert's latest disclosure report, released yesterday, shows that in December he sold property near the proposed transit center for between $100,000 and $1 million. Whether that resulted in a profit is unclear -- an earlier report showed that Calvert bought the property in 2004 for between $250,000 and $500,000.

Staff writer Alec MacGillis, political researcher Zachary A. Goldfarb, staff researcher Madonna Lebling and research director Lucy Shackelford contributed to this report.