A caption under a photograph of former Virginia governor Linwood Holton in yesterday's editions incorrectly stated that he has not commented on a recent grand jury report that criticized his administration. As the accompaning story stated, Holton has defended his actions.
A special grand jury here has blamed mismanagement and corruption in Virginia's scandal-ridden purchasing system on a pattern of cronyism and neglect in the hiring practices of two Republican governors and the state's tight-fisted system of government.
In a politically charged report, the special panel accused former Govs. Linwood Holton and Mills E. Godwin of appointing political cronies with no training or experience in public purchasing to head the troubled state Division of Purchases and Supply.
Combined with a dramatic increase in the volume of state spending during the last 10 years, the result was gradual deterioration of the agency's expertise and morale to the point where bribery, fraud and bid-rigging were inevitable, according to the report released last week.
"There was no time for rational decision-making," stated the report, "There was no time to develop and institute safeguards against vendor fraud and employe misconduct.
"The staff became dispirited and management became mired in confusion . . . (and) acts of bribery occurred in part because nothing in the organization or operation of the division prevented them."
The panel was more complimentary to Gov. John N. Dalton, praising the management team he appointed last year to reorganize the agency. But it warned "serious problems remain," charging that the division was under staffed and employes underpaid and that the agency was in desperate need of new computerized equipment.
"Unless serious attention is given to these problems, we will have gone through another fruitless reorganization," said the report.
The panel also recommended the indictment of two men: Daniel H. Reichard, a Lynchburg printer accused of bribing a former state printing manager in the division, and Robert S. Maitland Jr., a former furniture purchasing manager who the grand jury alleged aided his son in obtaining work paid by state funds.
Both were indicted here, today by a regular grand jury, bringing to five the number of division personnel and businessmen indicted during the special panel's year-and-half-long probe. The panel has issued four written reports on its findings.
Reaction has been curiously muted to the latest report, although it is the most controversial and critical of the four. Attorney General J. Marshall Coleman, whose antitrust section has directed much of the investigation and who previously has held press conferences to announce new developments in the case, has refused comment on the report's criticism of fellow Republicans Holton and Godwin.
"He's just not going to talk about that," said Toni Radler, Coleman's press aide. The accusations could prove politically embarrassing to Coleman as he attempts to unite party elders such as Godwin and Holton behind his expected bid for the GOP's 1981 gubernatorial nomination.
Reliable sources say some members of Coleman's staff felt the criticism of the former governors in the grand jury report were inapporpriate and encouraged its deletion. They were unable to convince assistant attorney general Joseph W. Kaestner, an adviser to the panel who assists in the drafting of the reports, to ask for the deletions, according to sources. Kaestner recently was demoted by Coleman following a dispute both men contend was unrelated to the purchasing probe.
Dalton's office also has refused comment on the report. Holton and Godwin both have defended their actions, saying their appointees were successful businessmen who had the management skills necessary to run the agency.
The special grand jury disagreed. Its report traces the beginning of the decline of the agency, which handles more than $100 million a year in state purchasing, to Holton's firing in 1970 of division chief Lloyd Nunally, a professional purchasing officer. In his place, Holton appointed Benjamin P. Alsop Jr., Holton's former campaign chairman.
"Mr. Alsop undid much of Mr. Nunnally's work," the report alleges. "The procedures manual was discarded. Unqualified people were brought into the division and, in the hope of saving money, staff training was eliminated . . . As a result the the division's capacity to make good decisions deteriorated."
The report said the politicization and accompanying decline of the agency continued under Alsop's successor, Phillip R. Brooks, a top GOP fundraiser in 1973 who was appointed to the post by Godwin the following year.
"Mr. Brooks had the humility to profess his ignorance [of public purchasing] and relied on his staff to run the division," the report says. "Since they were, for the most part, unqualified, the management of the division continued to decline."
It was Brooks who first told state police in 1976 that some printing and furniture companies were receiving favored treatment from the agency's purchasing staff. The investigation that followed produced no prosecutions. It was not until charges were renewed two years ago by businessmen who felt they had been cheated by the agency that a special grand jury was impaneled and indictments were returned.
The grand jury's work so far has resulted in the bribery conviction of former state printing manager James A. Padgett and the indictment of two Virginia Beach furniture salesmen on charges they defrauded the state of more than $104,000. The state also has recovered more than $100,000 from five companies in out-of-court settlements.
The probe which is expected to continue at least until next month, also has resulted in a bill before the state legislature to provide for a comprehensive purchasing law outlining procedures to be followed by both state and local governments in buying products and services from private businesses.