The principal owners of Blake Construction Co., one of the largest builders of federal buildings, are now the subject of a grand jury investigation into allegations of income tax evasion and payoffs to obtain construction contracts, according to informed sources.
The investigation is being conducted by FBI and Internal Revenue Service agents under the supervision of the U.S. attorney's office in Baltimore. It began last summer after the U.S. attorney's office received allegations of payoffs made to obtain the $13.6 million contract to build Baltimore police headquarters, a 10-story structure completed in 1972.
The sources said the investigation has expanded since then into a major grand jury tax probe of the financial empire of Blake's owners, Morton, Stanley, and Howard Bender. Besides owning Blake, the Washington area's second largest construction firm, the three Bender brothers have extensive Washington real estate holdings.
Morton Bender, Blake's president, listed his net worth last year as $24 million, and Stanley Bender, Blake's treasurer, had a net worth of $23 million, according to banking records and court testimony. The net worth of Howard Bender, the firm's executive vice president, was not available.
Asked for comment on the grand jury investigation Friday, Stanley Bender said, "I've got nothing to say about it." Morton and Howard Bender did not return telephone calls last week.
The Bender brothers, with partners, own radio station WWDC-AM and FM, the International Inn on Thomas Circle, 4 percent of Madison National Bank, and 11 other Washington office buildings, including five leased to the General Services Administration (GSA).
Blake does most of its $80-million-a-year business with government agencies and has built more major federal buildings in Washington for GSA than any other construction firm.
The company's projects include the J. Edgar Hoover FBI Building, the James Forrestal Building, several National Institutes of Health buildings, one of the major Health, Educationand Welfare Department buildings, the U.S. Court of Claims building, and the new Executive Office Building.
Although contracts to build federal buildings are awarded to the lowest bidder, construction firms frequently have large cost overruns that allow government officials considerable leeway in deciding how much a contractor ultimately should be paid.
Federal investigators are examining these overruns and change orders that were authorized for Blake work and the leases GSA awarded to Bender buildings. At the prosecutors' request, GSA's internal investigators and auditors have been probing lease awards to the Benders and others to determine if there have been any irregularities.
The investigation is now focusing on allegations that the Benders concealed some of their income. In the past two months, subpoenas have been served on Blake for its corporate records and on banks for checks written by the Benders.
James J. Donohue, a Blake employe who represents the Benders' interests before congressional committees with jurisdiction over GSA, has testified before the grand jury, sources say. Donohue did not return telephone calls last week.
The grand jury hearing evidence in the investigation, which is being supervised by Assistant U.S. Attorney David D. Queen, is the same one that has indicted 40 people in the GSA scandal, 32 of whom have pleaded guilty.
An individual with knowledge of the Benders' financial transactions said he was interviewed by FBI agents in Washington and asked a range of questions about the business and personal finances of the Benders and the Blake Construction Co.
The U.S. attorney's office is also known to be looking into a $12 million early payment by the U.S. Army Corps of Engineers to Blake when it constructed the new Walter Reed Hospital in Washington.
Blake invested the money, most of it at Madison National Bank, and earned interest at $1.4 million, according to previous news accounts.