Former Virginia attorney general J. Marshall Coleman called today for state Sen. Peter K. Babalas of Norfolk to "step aside" until the completion of an investigation into possible conflicts of interest by the Democratic legislator.
In a letter to Gov.-elect Gerald L. Baliles, Coleman, a Republican, said Babalas "seems to be more interested in finding loopholes in the law than confronting the charges against him."
He urged Baliles to "use your influence" as head of the Democratic Party to see that Babalas, who has been accused of killing legislation that would have adversely affected a law client, plays no role in the 1986 General Assembly session that begins Jan. 8.
Baliles' press secretary, Chris Bridge, said that although the governor-elect had not seen the Coleman letter, he believes a current investigation by the ethics commission, is the "appropriate process."
Neither Babalas, who has maintained he did no wrong, nor his attorney could be reached for comment. Babalas did not testify before the ethics commission at its first hearing Monday, but submitted an affidavit. He listened impassively as his attorneys argued before the three-member panel that his action was no different from that of many lawyer-legislators in the Virginia Assembly, who frequently vote on issues of importance to their clients.
Coleman, a Northern Virginia lawyer who has been mentioned as a possible Republican candidate for governor in four years, said Babalas "seems to be saying that his paying clients can be given preferential treatment because 'everyone else does it.' "
At issue is Babalas' Feb. 11 vote, along with two proxies he cast, that killed legislation that would have regulated the state's second-mortgage industry.
Three days after that vote, the now-bankrupt Landbank Equity Co. of Virginia Beach authorized a $3,000 payment to Babalas. According to records filed in U.S. Bankruptcy Court in Norfolk, a voucher, initialed by Landbank officials, contained the notation: "This was one we agreed to pay after he stopped legislation in Richmond."
Until its collapse three months ago, Landbank was one of the largest second-morgage lenders on the East Coast.
Babalas, the fourth-ranking member of the state Senate, served as its legal counsel, and in that role received a total of $61,480 in legal fees from the Virginia Beach-based firm.
In addition to the bankruptcy proceeding, Landbank is being investigated by federal and state prosecutors, and is the defendant in 100 lawsuits in half a dozen states, brought in behalf of borrowers, many of whom are poor and uneducated. They have said they got their loans from Landbank at exorbitant interest rates.
Coleman said that while he was "not implying guilt," Babalas has "serious explanations to make, and until there is a decision, he should not be able to affect the outcome of legislation."
Coleman, in a telephone interview, said that even if the ethics commission makes its decision before the opening of the legislature, Babalas, as chairman of the Committee on Local Government, already has the power to "make unilateral decisions on hundreds of prefiled bills and the makeup of important subcommittees."
Coleman said it is "not appropriate [for Babalas] to exercise legislative responsibility while ethical and legal clouds are over him."
Coleman, the 1981 GOP nominee for governor who lost a bid for his party's nomination for lieutenant governor this year, is generally believed to be positioning himself for another campaign for state office.