James L. Denson, chairman of the D.C. Board of Elections and Ethics, used a forged signature in 1972 to secure a $30,000 federally guaranteed loan on which a Denson company later defaulted, according to a 1979 FBI report and other records.
The forged signature was that of E. A. Daly, 88, of Oakland, Calif., who is the grand uncle of Denson's former wife. Daly's name was forged, the FBI report found, on a deed of trust that used Daly's property as collateral for a 1972 loan to Service Concepts Inc., of Los Angeles. Denson was president of Service Concepts.
Denson, a law school graduate, was a notary public in California at the time. His name in signature form and his official notary seal were affixed to the document, attesting that Daly had "personally appeared" before Denson to sign the document.
Daly, reached by telephone in Oakland, earlier this week, told a reporter he never signed the document and never authorized Denson to sign it for him.
The FBI investigated the forgery in 1978, but determined that the five-year statute of limitations had expired. No charges were brought against Denson. Later, the Small Business Administration requested an analysis from the FBI crime lab of Daly's signature. That analysis concluded that Daly had not signed the document.
Reached for comment earlier this week, Denson said he was not aware of the FBI finding. Without saying he had signed Daly's name, Denson said, "I had his [Daly's] power of attorney."
Denson was asked if he thought a power of attorney permitted him to sign another person's signature. He did not respond, and the telephone connection was broken.
Reached again moments later, Denson would only say: "I am not aware of what you are talking about, and that was a while ago. I will have no further comment on any future questions you have unless it is through my attorney."
He declined to name the attorney.
Law enforcement and legal officials said yesterday that a power of attorney does not authorize a person to represent himself as someone else through the other person's signature.A holder of a power of attorney is obligated to act in the best interest of the person who gave the power.
According to Daly and the lawyer, Daly received no benefit from the SBA loan and was prohibited from collecting the proceeds of the sale of the property mortgaged as security for Denson's company for about five years.
Denson resigned Wednesday as president of the D.C. Chamber of Commerce in face of investigations by a federal grand jury, the District's inspector general and the chamber into whether he misappropriated thousands of dollars in chamber funds, most of which came from public grants.
There were indications yesterday that Denson soon may bow to mounting pressure and resign his post as chairman of the elections board.
Oliver Cromwell, a spokesman for City Council Chairman Arrington Dixon, said Denson told Dixon in a midday telephone conversation that he would resign as head of the ethics board today.
Cromwell said Dixon called Denson to tell him that "in light of the investigations" currently pending, including probes of the chambers finances by both the U.S. Attorney and the D.C. Inspector General, Denson should step aside."
"He [Denson] told Arrington he had already decided that that was what he would do, and he would make an announcement" today, Cromwell said.
Asked about Cromwell's statement, Denson said last night, "I don't know where he got that from." Denson said he did not plan to resign today or announce a decision on resignation today.
"On the advice of counsel, I have nothing to say to the press," he said, and ended the conversation.
Sources close to Mayor Marion Barry said the mayor was aware of attempts by two persons close to both Barry and Denson -- attorney Larry C. Williams and developer Theodore R. Hagans, both past presidents of the D.C. Chamber -- to persuade Denson that he should step down from the ethics post.
The forged deed of trust was dated Sept. 9, 1972 and bound Daly's property as collateral to pay the $30,000 loan debt of Service Concepts Inc. if the corporation stopped making its payments to United California Bank.
Those payments ceased sometime in late 1972 or early 1973, according to an SBA official, and the loan was declared in default in March 1973.
Denson, in biographical literature published about himself, has said that Service Concepts Inc. provided "technical assistance" to the Los Angeles Model Cities program.
Daly until 1976 published the oldest black newspaper on the West Coast, The California Voice. He had joined the paper in 1922 and became its publisher in 1927. Daly said he hired Denson to help operate the newspaper after Denson married into the family in the early 1970s.
Denson apparently controlled the ownership of the paper for a brief period, according to Daly's lawyer, Alan J. Silver. But Daly reassumed control after a falling out with Denson over debts Denson allegedly incurred on behalf of the newspaper.
Daly and his lawyer confirmed that Daly granted a general power of attorney to Denson during a period when Denson was operating the newspaper. But, Daly said, he never authorized the signing of the deed of trust.
Nor was the deed of trust signed using the procedures prescribed under power of attorney rules, according to Silver and SBA officials.
Silver said that Daly began getting demands for payment of Denson's loan from United California Bank officials in 1973, shortly after Service Concepts defaulted.
"We knew he was not involved [in the loan]," said Silver, so the bank's demands were ignored and no action was taken against Daly's property.
Several years later, however, Daly prepared to sell the property and at the same tme the SBA began demanding that Daly satisfy the loan, so the government would not have to absorb the loss.
Silver said that in May 1977, he ordered the first full title search in preparation for the sale and discovered the deed of trust.
"It was obvious to the naked eye that there was a forgery," he said. "Even without schooling [in handwriting analysis] you know something was wrong."
Silver said that as the SBA prepared to take the proceeds of the sale of Daly's property as payment for the loan for Denson's company, he persuaded the agency to seek an FBI opinion on the authenticity of the signature.
Last fall, SBA officials received the FBI report concluding that the Daly's signature was a forgery, but expressing no opinion on who had committed the forgery. SBA officials declined to release a copy of the report, but a letter from an SBA official, a copy of which was provided to The Washington Post, summed up the findings this way:
"It has been established by the Federal Bureau of Investigation (FBI) that the signature of Mr. E. A. Daly on a certain guaranty and deed of trust to secure the same is a forgery."
The Nov. 9, 1979 letter, from the SBA's Everett L. Glenn, released about $18,000 in funds to Daly from the frozen bank account in which they had been held since the mortgaged land had been sold.