The federal prosecutors investigating allegations of bribery involving D.C. mayoral aide Joseph P. Yeldell and millionaire businessman Dominic F. Antonelli Jr. have significantly broadened their probe. The Washington Post has learned.
During the past two weeks, according to several sources numerous officials and workers in Mayor Walter E. Washington's 1974 election campaign have been questioned by the prosecutors about allegations that a secret cash fund was used to pay some expenses of the campaing.
The Post reported last December that at least $1.400 in $100 bills was used by campaign coordinator John Dean to pay some campaign workers. The money which was not reported publicly as required by law, was given to Dean by Mayor Washington's closest aide city administrator Julian R. Dugas according to sources in the campaign.
These sources said the money was part of a larger fund of unreported cash used to pay some campaign salaries, buy campaign literature and pay for other campaign-related services. If this cash had been reported as required according to these sources, it would have raised the campaign above the $200.000 spending limit imposed by Congress.
Federal investigators, according to informed sources, are now trying to determine if this larger fund existed, where the cash came from and whether its contribution to the mayor's campaign involved any improper relationships between donors and city officials.
Both Mayor Washington and city administrator Dugas have denied knowing anything about a secret cash fund for the campaign or any unreported payments to campaign workers. The mayor said through a spokesman this week that he "has no knowledge of any investigation (into the financing of his campaign) and no knowledge of any reason for such an investigation."
The federal prosecutors also have been joined in their investigation of Antonelli. Yeldell and possibly other city officials by FBI agents who have begun what one knowledgeable source described as a separate probe of whether Yeldell violated conflict of interest, banking or other laws while he was director of the D.C. Department of Human Resources.
The FBI has already requested bank records for transactions connected with financial help Yeldell has received from Antonelli and city decisions benefiting Antonelli in which Yeldell participated.
The prosecutors also have expanded their probe of Yeldell's financial affairs and have subpoenaed extensive files concerning a $100,000 federally guaranteed loan Yeldell received from the U.S. Small Business Administration in 1971. Yeldell borrowed the money for his struggling travel agency business. He later defaulted on the loan and had to shut the agency down in 1976. His continuing financial problems connected with the travel agency forced Yeldell to turn to turn to Antonelli for help in finding money.
Prosecutors are now studying the subpoenaed loan material to determine whether Yeldell may have made false statements under oath in various loan and default statements he submitted to the SBA and other financial institutions in connection with the loans for the travel agency.
The prosecutors in the fraud division of the U.S. Attorney's Office here began their investigation of the relationship between Yeldell and Antonelli last December. Their action followed Washington Post disclosure that Yeldell, while DHR director, had awarded a profitable city lease and a hospital building permit that would benefit Antonelli's business interests.
At the time he took these actions, Yeldell had already borrowed $21,500 for himself and six partners in his financially troubled travel business.
He received the loan in 1973 from the Madison National Bank of which Antonelli is a major stockholder, after asking Antonelli for financial help. Antonelli is also an owner of Parking Management, Inc. (PMI), the city's largest parking lot operator, and a wealthy developer who has numerous real estate holdings.
Yeldell has said he again sought Antonelli's help in arranging a $33,000 second trust loan, which was made to Yeldell while he was still DHR director on May 25, 1976. That was shortly before Yeldell asked Mayor Washington to approve a $5.6 million city lease of an Antonelli-owned building at 60 Florida Ave. NE. Antonelli had just purchased the property for $800,000.
Federal prosecutors subsequently determined that most of the $33,000 personal loan to Yeldell was provided by Antonelli through a third party intermediary, which helped disguise the transaction.
According to knowledgeable sources the interest of investigators in allegations of campaign violations during the mayor's 1974 election were increased by Yeldell's public proclamation that other city officials might be implicated if the city disciplined him. He said he was "prepared to let the chips fail where they may."
At the time of this statement early last December, Yeldell had just been suspended as DHR director following allegations of nepotism, cronyism and leasing abuses in his department. Last April after several city investigations failed, in the mayor's opinion, to turn up any hard evidence of impropriety on Yeldell's part, Washington transferred Yeldell to a $47,000-a-year post as a top aide to the mayor.
Federal prosecutors are known to be focusing on the timing of Yeldell's financial transactions with Antonelli and other actions taken by Yeldell as DHR chief that may have benefited Antonelli financially. Public officials are prohibited by criminal statutes from accepting gratuities in any form for their public acts.
In addition to the leasing of the Florida Avenue building - which stood vacant for nine months while the city paid about $200,000 in rent to Antonelli - Yeldell approved as DHR director a controversial building permit to construct a replacement facility for Doctors Hospital, in which Antonelli had a financial interest. He also later approved a shift in the hospital's proposed location to property owned by Antonelli and unsuccessfully helped lobby for congressional funds so that the District could buy the downtown Metropolitan Hotel in which Antonelli also had a financial interest.
Yeldell has repeatedly denied that his personal loan transaction with Antonelli ever influenced any of his DHR decisions. Antonelli had consistently refused to comment publicly about the federal investigation or his dealings with Yeldell.
With expansion of the Yeldell Antonelli probe, federal prosecutors are expected to begin examining the involvement of other city officials and private donors in the mayor's 1974 election campaign.
City administrator Dugas has well-established ties with the business community here and was regarded, according to some sources as the principal liaison between the mayor's campaign and the city businessmen who publicly provided the cornerstone of the mayor's financial support for the election.
"He was the go-between" one campaign source said of the Dugas link with members of the business community. "Whenever they wanted anything they would contact Julian and the word would filter down. They didn't even talk to the mayor."
Dugas has said he is a Republican (while the mayor is a Democrat) and that he did not involve himself in the mayor's campaign because of the Hatch Act, which forbids active participation by city officials in partisan political campaigns. But sources have said that campaign coordinator Dean was summoned to Dugas' office in the District Building on at least three occasions to pick up $100 bills that Dean then secretly distributed to selected workers.
The D.C. election law, which provided that a total of no more than $300,000 could be spent in both the primary and general elections for mayor, also mandated that no more than 60 per cent of that amount - $120,000 - could be spent in any one of two elections. In addition, the D.C. election law also required that all campaign expenditures of $10 or more be reported and itemized in regular campaign reports to the D.C. Board of Elections and Ethics.
During the 1974 campaign, knowledgeable campaign sources said, some campaign items - among them T-shirts and 400 fancy black and white posters - mysteriously "popped up" at campaign headquarters and elsewhere without the knowledge of top campaign officials and apparently without being paid for by expenditures recorded in the campaign reports.
Other sources have said that exceeding the campaign limit concerned the Committee for Washington because a great deal of money was spent in the early stages of the campaign while polls showed the race between Washington and his Democratic primary challenger Clifford Alexander to still be close.
One technique used by the campaign committee to hold down expenses and spending was to encourage creditors to accept less money in payment than they had billed the campaign, according to sources. This was done in several instances, including the payment of rent for the main campaign headquarters.
The D.C. Board of Elections and Ethics, through its Office of Campaign Finance, investigated allegations of abuses in the mayor's campaign and reported finding no evidence of secret cash payments to any workers.
However, the board did recommend that federal prosecutors investigate other reports that the mayor and his top campaign officials had incurred a debt of $5,400 in campaign-related equipment rental supplies and legal expenses that were not reported in his spending reports. Mayor Washington and the campaign officials agreed last year to pay the debt in order to settle a suit that had been filed by the Xerox Corp. for collection of the over due bill.
Knowledgeable sources said the Xerox costs resulted from a littleknown alternative campaign on behalf of the major run by Maurice A. (AI) Lockhart. But the mayor has said Lockhart was never authorized to perform any campaign functions on his behalf.
When The Post initially began making inquiries into alleged campaign abuses, sources said mayoral aides and certain campaign workers were called by the mayor personally and asked about the reporters' questions. In some instances, aides were instructed not to talk to reporters.
In addition to ongoing federal probes into Yeldell-Antonelli ties and Mayor Washington's 1974 campaign, the city's Office of Campaign Finance is conducting its own investigation of possible conflict of interest abuses by Yeldellwhile he was director of DHR.