When Blake Construction Co. erected a small office building at 1122 Connecticut Ave. NW, the firm charged the new building's owners $16,000 less than it cost Blake to do the work.
But Morton, Stanley, and Howard Bender, the brothers who own Blake, were not losing money on the deal. They are the owners of the new building that Blake constructed. The Bender brothers prompty deducted the $16,000 bookkeeping loss from Blake's taxable income for the company's 1974 fiscal year, according to court records arising from an Internal Revenue Service challenge of the deduction.
The $16,000 tax deduction appears small in relation to the Benders' financial empire, which is valued at considerably more than $50 million. But it provide an example of how the Benders meld their multi-faceted holdings to complement one another, much as any smart businessmen might do.
The heart of the Benders' business interests is Blake, this area's second largest construction company. Their other interests range from Glade Valley Farms Inc., a racehorse breeding farm near Frederick, Md., and the Locker Room, a retail outlet selling sports souvenirs at 14th Street and Pennsylvania Avenue NW, to some of Washington's most valuable office buildings. Most of these buildings are clustered around the Benders' offices in the Bender Building at 1120 Connecticut Ave. NW.
The Benders also own the International Inn on Thomas Circle NW, WWDC-AM and WWDC-FM radio at 1150 Connecticut Ave. NW, as well as a 4 percent interest in the Madison National Bank whose main office is at 1730 M St. NW.
Morton Bender, president of Blake Construction Co., is a workaholic who runs the firm almost single-handedly. He spends most of his time in his office and typically is found maintaining simultaneous conversations with callers and visitors on matters ranging from the suitability of some rock music played by WWDC to strategy for winning an important government construction job.
He lives in a 15-room house in Bethesda's Kenwood Park. The house and grounds include a swimming pool, sauna, tennis court and 6 1/2 bathrooms. He tends to dress conservatively, often wearing cuff links bearing the Blake insignia.
Stanley Bender, the Blake treasurer, is more outgoing than his brother, Morton. Stanley often wears openfront shirts, pink slacks, velvet jackets, gold chains and loafers.
Stanley Bender is at Blake's offices infrequently and spends most of his time tending to nightclub investments here and in Florida. He is an owner of Mr. Day's at 1144 18th St. NW and was listed as an officer of Fran O'Brien's Restaurant at 1823 L St. NW before it closed recently.
Howard Bender, the least visible of the Bender brothers, is executive vice president of Blake. He confines his activities to supervising construction work.
Blake specializes in government construction work and the Bender brothers have maintained social ties with government officials in powerful positions.
When Sen. Mike Gravel (D-Ala.) was chairman of the former Senate Public Works subcommittee on buildings and grounds, Morton Bender played tennis with him and took him to dinner at Paul Young's Restaurant in the Bender Building. The two have not maintained contact since Gravel left that committee.
Morton Bender invited Walter E. Huber, a General Services Administration official who approved many of the change orders on Blake's construction of the new J. Edgar Hoover FBI Building, to the bar mitzvah reception of one of his sons.
Most of the Benders' government liaison work, however, is done by James J. Donohue, a Blake employe who has displayed in his office pictures of himself with President Nixon, former House speaker Carl Albert, and other political figures.
Until 1974, Blake paid $24,000 a year to rent a private box at the Capital Center, and government officials were sometimes invited to the events. The box, called a sky suite, was equipped with a bar and closed circuit television. The Capital Centre has about 40 such suites.
In business affairs, the Bender brothers are known as tough negotiators who watch their pennies.
In a recent business deal, much like a game of chess, Blake offered to purchase for $6.4 million the Young Women's Christian Association building at 1649 K St. NW. Then the YWCA decided to sell the choice property to another bidder. Blake then sued the YWCA, claiming failure to negotiate in good faith.
Meanwhile, the YWCA had been negotiating to buy another property for its future headquarters building. That property is occupied by a building that housed Neisner Bros. variety story at 12th and G streets NW. Neisner' filed last year for reorganization under bankruptcy laws.
But Blake beat the YWCA to the purchase.YWCA Executive Director Mildred L. Savacool said recently that representatives of the property owners told the YWCA that they had contracted to sell the property to Blake.
The YWCA retained the law firms of Covington & Burling and Goldfarb Singer Austern to defend itself against the charges in the suit filed by Blake. In a motion that was recently granted to dismiss Blake's complaint, the YWCA said Blake's offer for the YWCA property was conditioned on the YWCA paying the $192,000 commission of the real estate broker representing Blake. In addition, the offer contained other unacceptable points, the YWCA said.
"Similar events are everyday occurrences in the commercial real estate market in the metropolitan area, but the disappointed bidders normally do not sue the seller for the obvious reason that disappointment does not provide a cause of (legal) action," the YWCA said in its brief.
The YWCA now is looking for a new site.
When the National Association of Home Builders complained about Blake's construction of the trade group's headquarters building at 15th and M streets NW, Morton Bender personally answered the group's letter.
NAHB said the windows in the $6 million building leak, the bathroom tiles fall from the walls and the lobby floors make a popping sound when walked upon.
Morton Bender pointed out in his letter that the building was three years old at the time of the complaint.
"Window leaks will develop in buildings as a result of vibrations and the heating and cooling cycles which we go through during the year," he wrote.
"The long and the short of it," said David E. Stahl, executive vice president of the 98,000-member organization, "was he said it was built three years ago and he is not responsible."
Contractors' practices vary when dealing with such complaints. Unless they specifically have provided a warranty with the project, contractors may not be obligated to correct such problems. Stahl said his group is encouraging home builders to offer such warranties.
The Bender brothers refused to be interviewed about this and other matters.
For businessmen with sizable assets such as those of the Benders, a primary concern is minimizing taxes. Although his net worth as of last year was $24 million, Morton Bender paid $13,652 in taxes in 1972 and $6,880 in taxes in 1973, according to IRS tax deficiency notices filed against the Bender brothers.
The IRS claims that Morton Bender diverted money from Blake Construction Co. to the Benders' other financial interests, similar to what happened when Blake constructed a building for the Benders on Connecticut Avenue and charged $16,000 less than it cost to build.
The IRS has challenged the deduction as part of its contention that the Bender brothers and Blake underpaid taxes during a recent three-year period by $3.6 million. The government's basic allegation is that Blake was used as a financial vehicle by the Benders when it should not have been. The Bender brothers have challenged the IRS claim in U.S. Tax Court, where the tax deficiency notices have been filed.
The IRS contends that the Benders had Blake provide financial benefits to their other interests, and that they should have paid taxes on these benefits as if they were profits paid directly by Blake to the Benders.
The major example cited by the IRS was $1.6 million paid by Blake to architects and others for planning work on an office building to be owned by the Benders and their partners and Dominic F. Antonelli Jr., owner of Parking Management Inc., and his partners.
In papers filed with the U.S. Tax Court, the Benders argued that the money advanced by Blake to the architects and others for the planned project at 13th Street and New York Avenue NW, was part of the normal building process. Blake had the contract to build the structure, the Benders pointed out.
The IRS said the money advanced by Blake amounted to dividends that were taxable.
The Benders also claimed that Blake's $16,000 tax deduction for the loss it sustained when constructing a building for the Benders on Connecticut Avenue was proper because the tax laws do not consider the owners of Blake and of the building to have a relationship that would bar such a deduction. CAPTION: Picture 1, This Bender-owned building is at 1150 Connecticul Ave. NW; Picture 2, Building at 1425 K St. NW is valued at $8.1 million; Picture 3, International Inn at Thomas Circle is owned by Bender brothers, Photos by Vanessa R. Barnes - The Washington Post; Map, shows major Washington builders owned by the Bender brothers and their partners with assessed values. Asterisks mark those leased by U.S; The Washington Post