A powerful Chicago congressman dropped a good word about his corporate constituent to a House colleague. The mayor of Atlanta mentioned to his congressman what great guys the company owners were. And a steel executive placed a long-distance call to a Pittsburgh area congressman to suggest he vote in the corporation's favor.
In these, the final days of the 96th Congress, one of the most frantic lobbying efforts on Capital Hill does not involve legislation but a powerful subcommittee's investigation of a real estate firm that is the largest converter of condominiums in the nation.
The lobbying by Chicago-based American Invsco (pronounced Invesco) to avoid turning over what it contends are private and highly sensitive corporate records to the subcommittee has been intense even by Washington standards, with calls from powerful politiians, visits from a bevy of high-powered lawyers and, yesterday, the appearance of expensive full-page advertisements in newspapers in New York, Chicago and Washington. But just as intense is the zeal with which Rep. Benjamin Rosenthal, a tenacious and publicity-conscious subcommittee chairman, has taken on Invsco in a sweeping investigation of conversion practices.
What began as a routine look at the problem, using the Promenade apartments in Bethesda as a case study, is now a titanic struggle between Rosenthal, a liberal Queens Democrat who heads one of the most aggressive subcommittees in Congress, and Nicholas Gouletas, a one-time encyclopedia salesman who heads one of the most aggressive real estate outfits in the nation.
In its simplest terms, it involves paper -- documents on Invsco's costs and profits in dozens of conversions throughout the country. Rosenthal says the investigation requires them, his subcommittee has subpoenaed them but the company refuses to turn them over to Congress.
Today the battle is expected to take it's most crucial turn, with Rosenthal asking his subcommittee to recommend that Invsco be cited for contempt of Congress, a rarely used sanction that could ultimately carry heavy fines and a term in jail.
"It has turned into a real battle of egos," one congressional staffer said of the Invsco affair. And little wonder, with Rosenthal and Gouletas as the men involved.
The gangly, bespectacled Rosenthal is known in Congress as a dogged consumer advocate, an irascible questioner who sometimes shoots from the hip and a politician who knows how to play the press. And the 57-year-old chairman of the subcommittee on commerce, consumer and monetary affairs is not afraid to use the powerful tools at hand, like contempt of Congress.
Condominim conversions must be studied, Rosenthal believes, because the growing trend is displacing low- and moderate-income tenants, causing speculative buying that may be fueling inflation and using huge chunks of the already scarce pool of mortgage money available to home buyers.
Rosenthal's adversary this time around is Gouletas, a man who turned a storefront family real estate venture into a multimillion-dollar business in less than a decade. Gouletas, who shrinks from publicity, sees his business as someday becoming the "General Motors of real estate." But right now he must be satisfied with being the largest condominium converter in the nation, and one whose sales tactics have sometimes been called high pressure and controversial.
Rosenthal first became interested in condominium and cooperative conversions nearly two years ago and ever since then he had been searching for a way for Congress to dig into the problem.
He found it at a backyard barbecue last August, when another guest mentioned that the giant Promendade apartment complex in Bethesda was being converted by Invsco into a cooperative, a form of housing similar to condominiums.
By then the Promenade conversion, begun last July, had set off a tenant-vs.-developer battle so fierce that it was already in court. Bomb threats and prayer rallies had been part of the frantic struggle and tenants were charging that Invsco's tactics were "high pressure" and unfair. Meanwhile, Invsco, denying all allegations, was planning to sell out the building for $100 million -- twice the $50 million it had paid for the twin towers.
Late in August Rosenthal, with a chairman's prerogative to open an investigation, announced that his subcommittee would scrutinize the Promenade conversion and Invsco. Rosenthal would later say that he saw the Promenade as a "classic case of the evils of conversion."
Rosenthal immediately wrote to Invsco chairman Gouletas, asking for hundreds of documents dealing with the Promenade conversion and dozens of others across the country that Invsco had handled.
Thus began the monumental tug-of-war over paper, and it soon became clear just what kind of invluence Invsco could wield.
Within days the subcommittee staff received calls from former congressman Wilbur Mills, former senator Wendell R. Anderson of Minnesota and the prestigious law firm of Arnold & Porter, all saying they were representing Invsco, Rosenthal recently recalled. Arnold & Porter and another influential Washington firm ended up with the job.
But by early October the subcommittee had seen a lot of lawyers and a lot of promises, "but not a shred of paper" from Invsco, a staffer said. On Oct. 2, Rosenthal asked his nine-member subcommittee to vote a subpoena demanding that the documents be delivered. By a 7-to-0 vote, the subcommittee members gave their chairman what he wanted.
Boxloads of documents began to fill up the cramped subcommittee offices in a corner of the Rayburn office building. They included copies of the fat prospectuses Invsco handed out to its clients and, after much wrangling, a completed list of 11,000 Invsco customers. But the boxloads also included the kind of documents that made one aide to a subcommittee member observe that "Invsco was trying to bury the staff in paper."
Among the 26,000 pages of documents were blank stationery from one Invsco project, a copy of a tennis magazine once delivered to the Promenade, blank forms of all sorts and copies of a 1973 security guard's report noting a "suspicious vehicle" parked in the Promenade's driveway.
James F. Fitzpatrick, Invsco's lawyer here, said those papers must have been inadvertently included and said that his client was just "responding to the subpoena [as] written."
But the one thing Invsco adamantly refuses to turn over is its cost and profit figures for individual projects. "That's the most important competitive data a corporation possesses," Fitzpatrick asserted last week, adding that the committee has no "legitimate purpose" to have that information. a
Committee counsel Ted Jacobs disagrees."We have a right to know how the company operates in the market-place. You can't understand that without understanding its costs, its expenses, its building sell-out prices. If we're going to do anything about inflation, housing costs and displacement, we've got to know this."
And Rosenthal says simply that the "integrity of the committee and Congress" are at stake. "People do not have the right to arbitrarily decide not to respond to a congressional subpoena."
In recent days, as Rosenthal's determination grew in intensity, so did Invsco's lobbying effort.
When the subcommittee memeber to be contacted was Rep. Eugene Atkinson (D-Pa.), who had been a staunch suporter of Sen. Edward Kennedy's presidential aspirations, an Invsco lawyer was sure to mention how much support Gouletas and company executives had given the Kennedy campaign. Indeed, corporate executives from around the country had poured about $25,000 into that effort.
When the target was Republican Joel Deckard of Indiana, Patrick O'Donnell, a lawyer who is also part of the Reagan-Bush transition team, made the contact. O'Donnell asserts that he was not calling on behalf of the transition team. But on Capitol Hill, where perceptions of influence are often as important as the real thing, the word went out that the team was somehow interested in the Invsco affair.
On Nov. 20, Rosenthal held his first hearing on the Invsco matter, with his staff reading a blistering report implying that Invsco had given favored treatment in a Maryland conversion to former Chicago tax assessor Thomas Tully. Those allegations hit the front pages, and last week, in a final effort to stop, the contempt of Congress vote, Invsco's Fitzpatrick delivered his own stinging rebuttal of the report to each subcommittee member.
He argued that the Nov. 20 meeting was nothing more than a vehicle for Rosenthal and his staff to "air a concoction of allegations and innuendos." These, he said, were an effort to "prejudice" the subcommittee's vote on contempt.
Staff lawyer Jacobs dismissed the rebuttal as "a lot of table-thumping."
Yesterday, in its final shot before the Monday showdown, Invsco took out full-page advertisements, some costing more than $20,000, in Washington, New York and Chicago newspapers. The ads, though never naming Rosenthal, stated, "We believe that no one man, not even a Congressman, should be allowed to claim that he has the combined powers of the Constitution, the Congress and the Supreme Court . . . to unwarrantably harass, abuse and usurp the constitutional rights of any one individual or business. . . ."
Rosenthal called the ads a "very amateurish attempt by Invsco to wrap themselves in the flag and try to intimidate Congress. It won't work, period," said the congressman.
"And I think the hearing Monday will be a very, very interesting one indeed."