An Internal Revenue Service auditor who allegedly accepted an $11,000 loan secretly arranged by Dr. Murdock Head, director of the Airlie Foundation, was indicted yesterday by a federal grand jury on a charge of accepting a gratuity.
Jesse R. Hare, 55, of Woodbridge, was accused of taking the loan in 1970, weeks after he completed a favorable review of the Virginia foundation that allowed it to retain its tax-exempt status.
Shortly after he ended a 14-month audit of the foundation's 1966 and 1967 tax returns, Hare received the Head-arranged loan at favorable interest rates, the indictment said. The indictment did not name the sources of the loan, but said it was arranged so as to conceal the transaction.
Head, who established the foundation in 1963 with the aim of qualifying it for tax-free status, has been implicated in a congressional influence-pedding scheme. Federal prosecutors have said that Head, who holds degrees in medicine, law and dentistry, gave cash to Rep. Daniel Flood (D-Pa.) and former Rep. Otto Passman (D-La.) to win their support for federal contracts for his foundation, which is affiliated with George Washington University.
Head, who has been on leave from a George Washington department he chairs, is the subject of a grand jury investigation in Alexandria. U.S. Attorney William B. Cummings, who is in charge of the investigation, said yesterday the jury's work is continuing and other charges "could well be forthcoming."
Head, who has run the Airlie Foundation since its inception 16 years ago, had repeatedly denied all allegations of wrongdoing.
Head could not be reached for comment last night. A spokesman for the foundation, located on a sprawling farm outside Warrenton, Va., said the foundation also denied any wrongdoing.
A lawyer for Hare, a career IRS employe said to be just days from retirement, said his client will plead not guilty to the charge. Attorney Scott Crampton declined further comment.
The indictment grows out of the year-long investigation of Head and his foundation, which have attracted millions of federal dollars for moviemaking projects and brought numerous conventions to the foundation grounds, about 45 miles west of Washington.
Hare "conducted an audit which should have seen that which was obvious," Cummings said yesterday, refusing to elaborate.
Tax exempt status has long been crucial to the foundation's operations, enabling it to avoid paying federal income taxes and to compete for federal grants outside restrictions that some agencies place on profit-making organizations.
Head had enlisted the help of tax law specialist Mortimer M. Caplin in the early 1960s to draft the foundation's initial charter. Some officials at the IRS questioned the application for tax exemption when it was filed.
Caplin had become IRS commissioner when the initial tax-free ruling finally was made, but Caplin, who has since served as an Airlie director, has said he played no role in the initial IRS ruling.
Cummings declined to say if the loan had been repaid.
If convicted of the offense, Hare could be sentenced to two years in prison and fined $10,000.
Word that the investigation of Head had moved to Alexandria became public in January when a federal judge in Washington refused to grant him immunity in the February bribery trial of Flood.
Although the trial ended Feb. 3 with a hung jury, government witnesses gave a detailed account of Head's supposed method of generating cash: According to testimony, Head would allegedly generate the cash to make payments to Flood and his former aide, Stephen B. Elko, by authorizing phony expense vouchers for the foundation.
After having the currency wiped clean of fingerprints, Head allegedly would pick up the money with facial tissue and hand it to others, one witness said.
IRS spokesman Robert J. Kobel said last night that Hare's status would depend on whether he is convicted.