Alexander Exum was erroneously identified in an article in yesterday's Metro section. He is a former executive assistant of the D. C. Lottery. In a headline on the same article, Frank S. Borris also was incorrectly identified; he is a former deputy director of the D.C. Minority Business Opportunity Commission. (Published 11/6/87)

A former District government economic development official, Hugh D. Mason III, was indicted yesterday by a federal grand jury on charges that he funneled gratuities to a D.C. lottery board member and conspired to bribe an official of the D.C. Minority Business Opportunity Commission.

In a second indictment returned yesterday, Mason was charged with bank fraud, bank larceny and theft in connection with an alleged scheme in which he picked up nearly $25,000 in government checks owed a company he represented, deposited the money in a secret company bank account and later withdrew the funds for his own use.

Mason, 43, who served as an assistant director of the D.C. Office of Business and Economic Development until he resigned the $45,000-a-year post in June 1983, was identified last year by sources as the person who allegedly helped former D.C. Lottery executive assistant Alexander Exum obtain thousands of dollars in payoffs from a lottery board contractor.

Neither Mason nor his attorney Nicholas A. Balland could be reached for comment yesterday.

Exum pleaded guilty in April 1986 to accepting $5,500 in payoffs and the use of a 1984 Honda valued at $12,877 from Han Yong Cho, owner of a wholesale distribution company, in return for Cho's receiving two lottery board contracts. According to the indictment against Mason and the earlier charges against Exum, Cho gave Mason $5,000 to deliver to Exum, but Exum received only $500 of the payment.

Cho subsequently made three cash payments to Exum totaling $5,000. At the time of Exum's guilty plea, Balland said the $5,000 was a payment to Mason for consulting services Mason performed for Cho after Mason left the District government.

The indictment of Mason is part of a flurry of legal activity by a federal grand jury -- whose 18-month term expires Nov. 16 -- that has been investigating contracts awarded by the lottery board and expenditures from Mayor Marion Barry's discretionary funds.

Last week, former University of the District of Columbia president Robert L. Green was indicted on charges of theft, fraud and five counts of lying to the grand jury. Robert B. Robinson, a former aide to Barry, pleaded guilty Tuesday to two misdemeanor theft charges.

The main investigation of D.C. contracting practices and of alleged hush payments to convicted cocaine dealer Karen K. Johnson is being conducted by a separate grand jury, which began work in late May.

Mason had been charged earlier in D.C. Superior Court in connection with the theft of a $12,800 D.C. government check from Pace Setters Management Inc., a local minority janitorial supply and maintenance company now known as Maintenance Pace Setters. The federal indictment returned yesterday includes the $12,800 check among those Mason allegedly stole.

The indictment charges that Mason, who at the time was PSMI's vice president for marketing, also took $1,000 from PSMI President Samuel Lewis that was to be paid to a commission official to speed up the firm's application for certification as a minority business enterprise. Certified minority businesses are eligible for "sheltered market" contracts that comprise at least 35 percent of the dollar volume of all D.C. government contracts.

The indictment does not state that the money was actually paid to the commission official. PSMI's certification was approved Feb. 14, 1985, two weeks after the firm applied. The usual processing time is 30 to 90 days.

Sources identified the official mentioned in the indictment as Frank S. Borris, a former deputy director of the commission. He was transferred to the planning and development division of the D.C. police department early this year.

According to the sources, Borris has told prosecutors in interviews that he never solicited or received any money from Mason and acted properly in his handling of PSMI's application for certification.

The sources said Borris received a call from Mason asking for his help on PSMI's certification application. Borris reviewed the application and recommended that commission members approve it, the sources said. They said Borris has told prosecutors that he believed the firm qualified under the commission's regulations.

Borris' 22-year-old son, Frank Borris II, has testified before the grand jury three times in the past two weeks and was questioned about whether he had channeled any funds to his father, sources said.

Sources said bank records show that the younger Borris sent his father a check for $1,000 about the time PSMI was certified. But the younger Borris has told the grand jury that the check was to repay his father for his college tuition, according to sources.

The elder Borris has given a similar explanation to prosecutors, sources said. Anthony Stewart, attorney for Frank Borris and his son, said neither is guilty of wrongdoing.

According to the second indictment, Mason picked up at least four checks for PSMI from the D.C. government and the Washington Convention Center -- both PSMI clients -- between Aug. 13 and Sept 25, 1985. Some of the checks were actually owed to PSMI, and some were duplicated checks Mason allegedly persuaded the District to issue even though PSMI had already received its proper payment.

In each instance, the indictment alleges, Mason deposited the checks for PSMI in a bank account in the firm's name that he had opened at the Riggs Bank branch on Columbia Road, two blocks from his home. In opening the account, Mason claimed that he was the president of the firm and each of the checks was endorsed with his signature and the firm's name, according to the indictment.

The charges against Mason are punishable by a maximum of 87 years in prison and fines of $75,000.