House District Committee Chairman Charles C. Diggs Jr.(D. Mich) is under investigation by a federal grand jury here for a series of alleged payroll irregularities that reportedly include "padding" his employees salaries for his own personal financial gain, The Washington Post has learned.
The probe centers on specific allegations that Diggs falsely inflated the salaries of several members of his staff and that the staff members used the extra money to pay off Digg's personal debts, sources said.
Grand jury subpoenas have been issued for both Diggs' personal financial records and the payroll records of certain Capitol hill staff members according to informed sources in and out of government.
Diggs, an undertaker by profession whose committee handles District of Columbia affairs in Congress, has been in serious personal financial trouble for several years, according to persons familiar with his life-style.
After he was informed that The Post was preparing a story on the federal probe yesterday, Diggs issued a statement, saying he was "aware that certain preliminary explorations are under way concerning my activities.
"At this time I have received no official communication from the investigating authorities concerning these explorations," Diggs added. "I will have no comment until such time as I do receive such notification." Diggs said he had not yet retained an attorney in the criminal investigation.
The probe is being handled by the fraud division of the U.S. Attorney's Office here, which specializes in white-collar criminal prosecutions and has successfully prosecuted payroll padding schemes involving congressmen in the past. U.S. Attorney Earl J. Silbert was not available for comment late yesterday. Members of his staff refused to comment.
Diggs' political and business associates acknowledge that the congressman's personal financial portfolio is a troubled one.
Washington attorney Robert Washington said yesterday that in the past he has informally counseled Diggs regarding his personal debts. A Washington public relations specialist, Olfield Dukes, told The Post that "people in Detroit think he's got it made" but that, in fact, Diggs has not grown wealth as a congressman.
Dukes, who heads the public relations firm of Olfield Dukes and Associates, has been on Diggs' payroll for "special projects." Dukes got a salary of more than $14,000 last year and more than $21,000 in 1975 for working for Diggs.
Among the financial records subpoenaed by government investigators are documents involving a four-year-old, $8,000 loan to Diggs.
Around Christmas of 1972 Diggs borrowed the money from a Salt Lake City lending firm, Gold Crest Service. Four years later, though the total amount of the loan was past due, Diggs had repaid only half the loan. According to a source close to the lending company, efforts to contact Diggs for repayment were unsuccessful.
In June, 1975, the lending firm filed suit against Diggs, but efforts by U.S. marshals to serve a subpoena on the congressman were unsuccessful, a source said.
In September, Diggs' legislative secretary worked out an agreement that would have permitted Diggs to pay back the outstanding portion of the loan, according a source familiar with the transactions. Only one check, the first in what was supposed to have been a series of two years' worth of monthly payments, was received by the lender, the source said.
In February, 1976, the suit against Diggs was filed again. But by the end of last year the lender was still hoping to settle the case out of court, according to the source.
The source said the loan balance now totals approximately $5,400. A representative of the lender's parent company ITT Industrial Credit Co., has been suspoenaed to appear before the grand jury on June 27. The firm has been ordered to supply Diggs' loan agreement and other documents related to the loan.
Diggs became chairman of the House District Committee in January, 1973, in a ceremony that marked the end of the century-old white, conservative dominance of Congress over the District of Columbia.
Although the activities of the committee have decreased greatly since the city was given limited home rule, the committee staff has grown to 43 members. The panel has not voted any major legislation to the House floor this year, amid criticisms that it is spinning its wheels on District affairs.
Although general counsel Stan Brown in the House clerk's office categorically denied having received a subpoena for Diggs' payroll records, he refused to comment on whether the office has received a subpoena for the records of Diggs' staff members.
Once grand jury subpoenas are sent to the House, the body must vote on whether to comply with them.
Under the congressional payroll system, there is no set salary schedule for aides. A congressman is given a blanket amount of money to be divided among his staff as he sees fit.
Former U.S. Rep. James Hastings (R-N.Y.) currently is serving a 20-month to five-year prison sentence for padding the payroll of three employees in his District and having about $40,000 kicked directly back to him for his personal use over a five-year period.
There is no indication that the allegations concerning Diggs involve such direct kickbacks, sources said. Instead, the allegations reportedly involve the use of falsely-inflated salaries being used directly by employees to pay Diggs' personal debts.
Diggs, 54, has been a member of Congress since 1954 and was a founder and past chairman of the congressional black caucus.
As chairman of the House International Relations Subcommittee on International Resources, Food and Energy, Diggs has taken several controversial trips abroad.
In 1976, Diggs took a two-month trip to Africa and Asia. He took two similar trips totalling two months in 1975, as well as trips of up to eight weeks each in the previous few years.
In a post article last year, one House Colleague was quoted as saying, "Charlie can't decide whether he's a congressman or a roving ambassador."
The investigation of Diggs has been proceeding quietly for several weeks, sources said, and Attorney General Griffin Bell's office was aware of the decision to begin the grand jury probe, according to Justice Department sources.