By Eric Pianin
Washington Post Staff Writer
Thursday, September 11 1997; Page A10

Rep. Bud Shuster (R-Pa.), chairman of the House Transportation and Infrastructure Committee, yesterday dismissed as "baloney" and "absolutely untrue" allegations he did favors for Boston businessmen in connection with a huge highway construction project in return for campaign contributions and other considerations.

Federal prosecutors in Boston are investigating Shuster's relationship with a Washington transportation lobbyist and at least two Boston businessmen who had long legal disputes over land taken for the $10 billion Central Artery Project, commonly known as the "Big Dig," according to federal officials.

Reacting to a report Wednesday that the federal probe had reached a critical stage, Shuster said, "I have absolutely no information on the story saying I was a target of the investigation. I was absolutely never given that information. . . . It's all baloney."

The embattled chairman also declared during an interview in his congressional office that he was prepared to stand firm against House GOP leaders over his proposed three-year, $103 billion highway reauthorization bill -- that would breach the balanced budget agreement by an estimated $34 billion over the next five years.

House Speaker Newt Gingrich (R-Ga.), House Budget Committee Chairman John R. Kasich (R-Ohio) and other Republican leaders this week urged Shuster temporarily to shelve his plan in favor of a one-year, $29.6 billion extension of the current highway bill while their differences were resolved.

"I don't think it would be a good thing for the Congress to undermine a budget agreement it has just passed," Kasich said yesterday during a joint appearance with Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) and other critics of Shuster's bill. "We're just going to fight like crazy and hopefully we will stop this."

With prodding from Shuster and senior committee Democrats, the House surface transportation subcommittee swiftly approved Shuster's bill yesterday by voice vote. Shuster predicted the bill easily would pass the full committee next week and there would be ample support to force a House vote, despite efforts by GOP leaders to block him and "dictate" to other members.

"A one-year bill politically would be very nice . . . but it's bad transportation policy," said Shuster, who has battled with House leaders over spending policies for the past couple of years. "Also, I have no reason to believe I am being dealt with in good faith because I never was negotiated with in good faith for the past two years. . . . I'm done being stroked."

Republican and Democratic leaders of the Senate Environment and Public Works Committee today are scheduled to unveil a counterproposal to Shuster's plan. It would cover six years instead of three and comply with funding constraints of the budget agreement. But the Senate version has its problems. It is likely to encounter strong resistance or filibuster from New York and New Jersey legislators because of a new formula that would send more money to fast-growing areas of the South, Southwest and Midwest at the expense of big northeastern states that traditionally have enjoyed generous allotments.

During the interview yesterday, the 65-year-old Shuster, one of the most powerful Republicans on Capitol Hill because of his control over highway projects, appeared confident he can prevail in his struggle with the leadership and unfazed by the reports of the grand jury probe. The focus of the investigation is Shuster's relationship with Ann Eppard, who served as the congressman's chief of staff for 22 years before resigning in 1994 to establish what soon became a lucrative transportation lobbying firm. Eppard, a close friend of Shuster's, remained a political adviser and chief campaign fund-raiser, operating out of her Alexandria town house. Federal investigators have examined allegations that Shuster and Eppard have used campaign funds for personal use. They also have looked at campaign contributions to Shuster from Nicholas Contos and Richard Goldberg, two Boston businessmen who were involved in a lengthy dispute over land-taking for the Big Dig project, according to U.S. officials.

Shuster insisted yesterday that he had done nothing improper by accepting campaign contributions and honoraria over the years from developers and businessmen involved in the Boston highway project and that he reported everything he received.

He also disputed assertions in a tangential complaint filed by the Congressional Accountability Project with the House ethics committee in 1996 that he improperly combined fund-raising with official committee business. But he said he had little control over what fund-raisers wanted to discuss with him at events they arranged.

"Now, I go [to these fund-raisers for him] and all these people want to talk about is transportation," Shuster said. "That's the way it is around this town."

Staff writer Richard Tapscott contributed to this report.