A House subcommittee yesterday voted a contempt of Congress citation against the chairman of American Invsco, the giant nationwide condominium converter that has mounted a fierce lobbying campaign in a showdown over business records that the company contends are confidential.
In a rare use of one of its most powerful tools, Rep. Benjamin Rosenthal's (D-N.Y.) subcommittee agreed that Invsco chairman Nicholas Gouletas was in contempt for failure to produce records subpoenaed last month in the subcommittee's sweeping investigation of condominium conversions.
A lawyer for Invsco (pronounced Invesco) said the company will continue to fight the contempt citation in a battle that could reach the floor of the House of Representatives in this, the final week of the 96th Congress. The contempt citation must be ratified by a full congressional committee and the House before moving to federal court, where a guilty finding could carry fines and a term in jail.
Though Congress and private businesses have wrangled often over the production of records, the Invsco affair appears to be the first time in recent years that a battle between these two forces has reached the critical contempt stage, according to a legal expert.
The Chicago-based Invsco firm became the focus of controversy in the Washington-area last summer with its conversion of the giant Promenade apartments in Bethesda to a cooperative, a form of housing similar to condominiums. The conversion sparked a tenant-versus-developer battle so fierce that it landed in court. Bomb threats and prayer rallies punctuated the frantic struggle, with tenants charging that Invsco's selling tactics were high-pressure and unfair. Meanwhile, the company continued selling the luxury co-op apartments at prices expected to bring a total of $100 million -- twice the $50 million Invsco had paid for the building.
In August, Rosenthal announced that his Commerce, Consumer and Monetary Affairs subcommittee would investigate Invsco and the Promenade deal as a "case study" of the growing conversion trend. Rosenthal has said the trend must be studied because it is displacing low- and moderate-income tenants, causing speculative buying that may fuel inflation and using hugh chunks of the scarce pool of mortgage money available to home buyers.
Two weeks ago the subcommittee staff, in a preliminary report, said that Invsco insiders and others were speculating heavily in the company's converted buildings, thus contributing to the high housing inflation rate. The report also implied that Invsco had given favored treatment in a Maryland conversion to a former Chicago tax assessor -- an allegation Invsco has denied.
Though Invsco has complied with portions of the subpoena the subcommittee issued last month, it has adamantly refused to turn over records detailing its costs and profits in dozens of conversions nationwide. Invsco attorney James F. Fitzpatrick said the records are "the most important competitive data a corporation possesses" and that the committee has "no legitimate purpose" in asking for them.
But at a hearing yesterday packed with a standing-room-only crowd, Rosenthal said the company simply had failed to comply with the subpoena and that the "integrity of the congressional oversight process itself is at stake."
Two members disagreed, with Rep. Joel Deckard (R-Ind.) arguing that Invsco should not be singled out and asked to turn over its most closely held records.
The subcommittee, however, voted 5-to-3 that Gouletas was in contempt, and Invsco immediately issued a statement, charging that Rosenthal had "misled the other members" on the merits of the issues.
The battle now moves to the full Government Operations Committee, which is expected to take up the issue today. Invsco, which has carried on a fierce lobbying campaign to fight the contempt in the past two weeks, said it will continue its battle before the 39-member committee.
The lobbying campaign has included calls from influential politicians, visits from high-powered lawyers and expensive full-page advertisements in newspapers in New York City, Chicago and Washington. These ads have called on Congress to "defend each individual in both the private and business sectors from unwarranted government harassment."
Rep. Jack Brooks (D-Texas), chairman of the Government Operations committee, refused to say yesterday how he will vote on the issue. But he added that he has been contacted by several people on the issue and has seen the company's advertisements. "We will see just how impressed the full committee is tomorrow," he said.
Committees and the House customarily go along with a subcommittee's contempt citations, experts said. But the tool is used rarely, probably about two or three times each session. Among those cited for contempt in the past are Watergate figure G. Gordon Liddy and Korean businessman Honcho Kim.