A U.S. grand jury in Alexandria is investigating lucrative federal film-making grants obtained by Murdock Head, director of the controversial Airlie Foundation, a source said yesterday.
The nonprofit foundation, headquartered near Warrenton, recieved hundreds of thousands of dollars in noncompetitive film-making grants from the Department of Health, Education and Welfare in recent years.
This week the grand jury heard testimony from Elliot L. Richardson, former secretary of HEW, and John G.Veneman, an HEW undersecretary during Richardson's tenure. Both were in office from 1970 to 1973.
During that time, the budgets of several films produced by a profit-making film company wholly owned by Airlie greatly exceeded budgets for films of comparable length, according to several sources.
An internal HEW audit of Airlie Foundation grants raised "serious and substantial questions" about the foundation's film-making practices and bookkeeping procedures, a source said.
The source said yesterday that "pressure was brought to bear to ignore" the audit at HEW. The source said he did not know who initiated the pressure.
The grand jury investigation of Head and his activities grew out of court testimony last year that Head secretly funneled $27,000 in cash to Rep. Daniel J. Flood (D-Pa). Head has denied the allegation, made by Flood's former aide, Stephen B. Elko.
In March, an Internal Revenue Service agent was indicted for allegedly receiving an $11,000 "gratuity" arranged in secret by Head after the agent audited the foundation's books in 1970 and approved the foundation's nonprofit, tax-exempt status.
The indictment against the agent, Jesse R. Hare, was dismissed last month by U.S. District Court Judge Oren R. Lewis because the five-year statute of limitations had expired.
U.S. Attorney William B. Cummings and Assistant U.S. Attorney Joseph Fisher, who is conducting the grand jury investigation, have consistently declined comment.
Last year Airlie officials vigorously denied allegations made in a 1974 federal memo that the Warrenton-based foundation had "illegally sold" three films financed by HEW to Blue Cross-Blue Shield for more than $100,000. The films were part of a series of films called "A Distant Drummer." Despite the internal HEW memo, no action was ever taken against Airlie.
According to several sources in and out of government, the film-making arm of the Airlie Foundation always successfully applied for noncompetitive grants to produce films, rather than bid competitively for contracts. One film, called, "American on the Rocks," a film about alcohol abuse, was narrated by actor Robert Mitchum. It is a 30-minute color film, for which Airlie received a grant of about $250,000, according to the source, or more than $8,000 for each minute of film finally produced.
The industry standard for color films of that nature is about $4,000 per minute, or less than half of what Airlie charged, the source said.
"Most companies shoot about three of four times more film than they need. But Airlie sometimes shot more than 40 times more film than they needed," the source said. CAPTION: Picture, MURDOCK HEAD . . . Airlie Foundation director