Art Metal-USA Inc., which sells $25 million worth of office furniture a year to the General Services Administration, has been payig bribes to GSA inspectors so they will certify that the furniture meets government standards, a former Art Metal exploye has acknowledged.
Statements from the employe have been obtained by the Senate Government Affairs federal spending subcommittee. The panel has been trying to determine why Art Metal has consistently received multimillion-dollar GSA contracts despite repeated, formal complaints about the substandard quality of the company's metal furniture.
The subcommittee has developed evidence that Art Metal has been siphoning off $100,000 to $200,000 a year in cash during the last several years from its operations and hiding the payments in its books, according to government sources.
After obtaining the new evidence, investigators for the subcommittee, healed by Sen. Lawton Chiles (D-Fla.), confronted a former Art Metal employe, who had worked in Art Metal's comptroller's office. He acknowledged that some of the money was used to bribe GSA employes and that he played a role in handling the cash, the sources said.
He named at least two GSA inspectors who allegedly were recipients of the money, according to the sources.
Art Metal, the government's largest supplier of metal office furniture, repeatedly has been the subject of complaints from government agencies that its products arrive with tops peeling off, rusty or peeling finishes and drawers and locks that do not work. GSA officials have maintained that the furniture meets government standards and buy from Art Metal because it invariably submits the lowest-and frequently the only-bid.
The findings of the Senate subcommittee are the first indication that GSA's regular purchases of office furniture from Art Metal might be explained by anything other than bureaucratic indifference.
Because Art Metal's contracts require high-level approvals within GSA, the subcommittee's finding are regarded by those investigating GSA as one of the most significant developments to date in continuing GSA investigations.
"The presumption is that the evidence obtained so far will lead to higher-ups in the agency," one investigator said. "It's the break we've been looking for."
Concealing cash payments in a company's books could be a violation of tax laws, securities laws, and a 1977 criminal law that requires firms to keep accurate financial records.
Officials of Art Metal, a Network company whose stock is publicly traded, did not return telephone calls made by a reporter over the past several days. Touche Ross & Co., which issued a favorable report on Art Metal's books for the firm's 1977 fiscal year, said it could not comment on the subcommittee's findings.
In previous news accounts, Arthur S. Lowell, Art Metal's chief repersentative with GSA, has been quoted as attributing many of the complaints about Art Metal products to alleged resentment by GSA employes about his close relationship with Arthur F. Sampson, GSA's administrator in the early 1970s.
Last year, Lowell formed a local reclamation company with Dr. Laszlo N. Tauber, a Washington developer who leased his building at Buzzard Point to GSA at Sampson's direction when Sampson was GSA administrator. The two men then hired Sampson as the president of the new company.
Last fall, GSA's internal investigators had technicians examine some of Art Metal's products. They reported they did not meet the GSA specifications that other bidders were required to follow.
Subsequently, Philip J. Kurens, Art Metal's persident, asked to appear before a hearing of the Chiles subcommittee. Kurens said Art Metal had been maligned by "innuendoes, rumors, and half-truths" appearing in the press.
He invited Sen. Chiles or his representatives to visit Art Metal's plant and inspect its books, so they could determine for themselves that the company was doing nothing wrong.
Chiles accepted the offer and assigned Peter F. Roman, who has headed the subcommittee's investigations into the GSA scandals, to form a special task force.
The task force, operating in secrecy, rented an office in Rosslyn. it obtained the services of several General Accounting Office auditors, a GSA internal investigator, and a former assistant U.S. attorney from Miami.
The investigators visited Art Metal's plant and looked at its books. Last December, the subcommittee subpoenaed the financial records of Art Metal and Spiegel Trcuking Co., a Harrison, N.J., company that delivers some of Art Metal's products to GSA.
The subcommittee's auditors, by tracing checks issued by Art Metal, found that $100,000 to $200,000 a year in checks written to Spiegel never ended up at that firm. The investigators found no evidence that Speigel had ever billed Art Metal for the services allegedly paid for, according to sources.
Instead, the auditors determined that the checks had been cashed rather than deposited in a bank account.
In its 1977 fiscal year, Art Metal reported a profit after taxes of only $75,187 on revenues of $31.5 million. Of those revenues, $25.5 million came from GSA.The company has not paid dividends to stockholders for a number of years.
Judah Best, a Washington lawyer who represents Art Metal in the subcommittee's investigation, did not return telephone calls. Isadore Spiegel, president of the trucking company, also did not return calls. Palto Cacheris, Spiegel's lawyer in the probe, said he could not comment.
The subcommittee is continuing its investigation and plans to hold hearings in the near future. The findings could be turned over to William S. Lynch, who heads a special Justice Department task force on GSA corruption, for possible prosecution.