In August 1983, federal investigators began examining whether a D.C. Lottery Board member received a fur coat as a gift from a private contractor. A year later, chandeliers and electrical fixtures purchased with D.C. Department of Employment Services funds for personal use caught the eye of federal prosecutors.
In each case, what seemed at first to be allegations of petty corruption took investigators down an unpredictable path that ultimately led them to the doors of two of Mayor Marion Barry's most powerful associates: former deputy mayor Ivanhoe Donaldson, the architect of Barry's political career, and Alphonse G. Hill, the deputy mayor for finance.
To some, the intense scrutiny of two of Barry's top lieutenants is the product of a broad-based corruption investigation launched by U.S. Attorney Joseph E. diGenova, Barry's chief nemesis. That perception was enhanced when diGenova declared last month that the Donaldson case exposed "raw corruption" in the city government.
In fact, the probes grew out of a series of unrelated inquiries and have not been merged into a unified investigation of the entire city government, according to sources familiar with the investigations. They are the product of a more aggressive campaign by diGenova and the Washington FBI office, and have been given a higher profile by diGenova's flamboyant, outspoken style.
"There's no blueprint," said an assistant U.S. attorney who has been in the office more than a decade, but "a greater emphasis has been placed on corruption cases than we've had before. It's more organized. There's a different attitude now."
As the Employment Services and lottery cases show, investigators sometimes find that low-level probes lead to the upper echelons and, as investigations multiply, the chances increase that one will dovetail with another, producing new leads.
The unprecedented set of D.C. government corruption probes that have made the administration increasingly sensitive include:
*A review, growing out of the Donaldson $190,000 fraud case, of possible irregularities in the awarding of Employment Services Department contracts.
*An examination of whether Hill received financial incentives from a friend, James Hill Jr., who heads an accounting firm that obtained several city contracts.
*A continuing look at lottery contracts and allegations that lottery officials accepted payoffs from private firms.
*A continuing effort to untangle the suspected misuse of government funds in the Bates Street housing redevelopment project in which three developers have pleaded guilty to tax-related charges.
*A probe of the alleged misuse of University of the District of Columbia funds, which grew out of an examination by D.C. Auditor Otis H. Troupe of travel and household expenditures by former UDC president Robert L. Green.
*A wide-ranging inquiry into the Barry administration's more than $214 million-a-year minority contracting program, including allegations of favoritism and payoffs.
FBI officials say privately that the U.S. attorney's office is more eager to pursue local corruption cases than under diGenova's predecessors. The bureau had to disband a local corruption unit it established in the early 1980s "because they couldn't get cases prosecuted," said one official. "We can't put out resources unless we get a return on it."
He said that the FBI reopened the unit in late 1984 after diGenova convinced FBI officials that he would make its work a top priority and would set up a separate special prosecutions office to concentrate on corruption cases.
The official said that successful prosecutions, aided by improved cooperation with the Internal Revenue Service and postal inspectors, enhance the effectiveness of the investigators' efforts and produce a snowballing effect.
Law enforcement experts say that the corruption probes here are partly a reflection of a decade-old national trend in which U.S. attorneys have taken the lead in prosecuting wrongdoing in state and local governments.
"I think that people ought to realize that [federal] prosecutors . . . all over the country have public corruption as one of their priority items," said Charles F.C. Ruff, U.S. attorney here from 1979 through 1981 and before that a special Watergate prosecutor.
Ruff asserted, however, that corruption has always been a priority of the U.S. attorney's office and suggested that public attention has been heightened recently because of Barry and diGenova's outspoken styles.
Of the highly visible federal cases here, the investigation of Deputy Mayor Alphonse Hill is the most recent.
The roots of that case go to 1981 when, as D.C. controller, Hill recommended the Chicago-based accounting firm of Hill, Taylor & Co. for several city auditing contracts. James Hill, the managing partner of the firm and no relation to Alphonse Hill, was a close friend who opened a branch of Hill, Taylor & Co. in the District in mid-1981.
An investigation in 1982 by then-D.C. Inspector General Joyce Blalock, responding to allegations that Alphonse Hill had given special treatment to the firm, concluded that there was no proof of wrongdoing by Alphonse Hill. Blalock cautioned, however, that the city official should put more distance between himself and James Hill.
The favoritism charge was resurrected last year when federal investigators working on an unrelated track turned up new allegations -- this time after investigators discovered that the firm had received a lottery auditing contract without submitting a formal proposal for it.
It was at this point that the probe of the lottery board, in progress since the summer of 1983, dovetailed with the moribund Alphonse Hill investigation. In June 1985 the U.S. attorney's office began to subpoena the deputy mayor's bank and credit records.
Alphonse Hill, who was promoted from controller to deputy mayor in early 1983, has strenuously denied all allegations that he received payoffs or other financial considerations from his friend. James Hill, who went to graduate school with the deputy mayor and shared an apartment with him in 1967, has termed the inquiry a "fishing expedition."
Along with the lottery contract, the U.S. attorney's office and the FBI have been reexamining the earlier contracts first scrutinized by Blalock. These include some of the more than $200,000 in auditing contracts received by Hill, Taylor & Co. within a year of the firm'sing establishment of its branch office here.
Blalock said in an interview last week that after probing the various allegations against Alphonse Hill, she referred the case in 1982 to the U.S. attorney's office. The only result was a civil suit brought by the office on behalf of the Small Business Administration.
The SBA matter, another spinoff investigation, grew out of the discovery by Blalock of substantial assets held by Hill at a time when he was defaulting on a $123,000 loan from the SBA. The deputy mayor in 1983 settled the suit for $80,000 without admitting any liability.
Another facet of the Alphonse Hill controversy involves allegations by Alvin C. Frost, a D.C. senior cash management analyst, who on Friday announced his intention to resign and who has been placed on administrative leave by his supervisors.
The Frost claims are not connected with the questions surrounding Hill, Taylor & Co., but instead are tied to other finance-related contracts awarded by the city. Frost has outlined his allegations to the FBI, but the federal investigation is concentrating on Alphonse Hill's relationship with James Hill in awarding contracts, federal officials said.
The cash management analyst first came to public attention in the spring of 1985 when he delivered dramatic testimony at a D.C. City Council hearing on the city's investment of $100 million with Bevill, Bresler & Schulman Inc., a New Jersey securities firm that later went bankrupt. Frost had argued against investing with the firm but went unheeded.
Alphonse Hill has noted that the city recouped its investment with BB&S Inc., and he recently discounted Frost as a "nerd and an imbecile."
The lottery investigation began in the summer of 1983 after allegations were made that two lottery board members may have received favors in return for supporting a group of business persons, led by Willian N. (Billy) Suter, that got the lion's share of contracts for tickets, advertising and management of the instant lottery game.
The investigation initially focused on whether a lottery board member, Lillian C. Wiggins, received a $4,000 fur coat from Suter's wife in return for supporting the Suters' efforts to win lottery contracts. Wiggins has denied any wrongdoing and has told federal officials that she paid for the coat with her own money. The investigation subsequently focused on possible tax violations involving Suter and Wiggins. No charges have been filed.
The investigation was widened in 1984 after it was disclosed that the wife of another lottery official, Alex Exum, had been loaned a 1984 Honda by the president of a firm that leased office and warehouse space to the lottery board. The grand jury investigation of Exum, who resigned from the lottery board, is still pending.
The FBI's investigation of the awarding of some city contracts is partly an outgrowth of allegations that contracts were being steered to political allies of the mayor. Agents have paid particular attention to sludge and other contracts awarded in connection with the District's waste-water treatment facility at Blue Plains, but no criminal charges have been brought.
The Donaldson investigation came to light as a result of a totally unrelated grand jury investigation into the city's Employment Services Department that began in July 1984.
That investigation was triggered by a complaint of the sister of the then-Employment Services director, Matthew Shannon, who told police her child had been assaulted by her boyfriend. The boyfriend turned out to be at the center of an illegal scheme involving the purchase of chandeliers, lamps and other electrical fixtures with department funds.
It was the unraveling of that scheme that eventually led to Donaldson's guilty plea on fraud and cover-up charges. Last month, Donaldson, who was once considered the second most powerful official in D.C. government, began serving a seven-year sentence in federal prison.