The Small Business Administration has awarded Felipe de Diego, once a member of the Watergate "plumbers" unit, $1.5 million to invest in minority businesses, and government auditors say he used some of the money to cover his yachting expenses, buy a De Lorean car, join the Playboy Club, buy jewelry and clothing and visit South America.
De Diego, who admitted breaking into the office of antiwar activist Daniel Ellsberg's psychiatrist under orders from the Nixon White House, has spent $132,000 under the SBA program for a variety of improper and personal expenses for himself, his friends and family, according to the SBA inspector general's report.
The auditors say the Cuban-American businessman from Miami also made $200,000 in questionable loans under the program to the companies of two convicted Watergate burglars, Frank Sturgis and Virgilio Gonzalez.
Asked at a Senate Small Business Committee hearing yesterday whether he admitted the auditors' allegations, de Diego replied, "No, I don't."
He then huddled with his Watergate lawyer, Dana Brigham, during a short recess. The attorney announced that, under the Fifth Amendment, his client would not answer further questions.
De Diego has admitted helping to break into Democratic headquarters at the Watergate on two occasions, but he missed being among those arrested during the third burglary on June 17, 1972, because he was at his daughter's wedding. He was indicted on conspiracy charges for the Ellsberg break-in in 1974, but charges were dropped after he agreed to cooperate with prosecutors.
De Diego, 53, appeared yesterday before another familiar face from that era, Sen. Lowell P. Weicker (R-Conn.), once a member of the Senate Watergate Committee. Weicker subpoenaed de Diego as his prime witness in a hearing on SBA's $160 million program to raise venture capital for small companies. Weicker said he would recall de Diego for questioning in February.
De Diego, who met the other Watergate burglars during the 1961 Bay of Pigs attack on Cuba, is president and chief owner of Feyca Investment Co., one of 413 firms licensed by SBA as a Small Business Investment Company. The Coral Gables, Fla., firm has received $1.5 million in SBA funding from 1980 through this year.
The SBA helps finance these companies by purchasing their debts and securities, and they, in turn, are supposed to invest their public and private funds in small and minority businesses. But SBA officials say that 42 percent of these firms have been cited for violating agency rules, and that SBA expects to write off more than $105 million in bad investments.
De Diego told the auditors that some of the expenses they challenged were personal, but that "he had trouble keeping himself and Feyca apart in his mind," according to the SBA report. Feyca had listed the expenses as advances or loans to employes, the report said, but de Diego said he had received no loans and that the firm had misclassified the expenses.
Feyca agreed to lend $60,000 to a firm half-owned by Sturgis that sells video recorders, the report said. Feyca also made $154,000 in loans to a discount store partly owned by Gonzalez. The auditors questioned "whether these are arms-length transactions and to what extent special consideration was given Sturgis and Gonzalez because of their prior relationship with de Diego."
According to the auditors, de Diego used $16,735 in company funds for several personal trips to Venezuela, New York, San Francisco and a Republican convention in Los Angeles. He also spent $14,933 on hotel bills and $10,386 on restaurant and nightclub charges, although he had no records showing the business purpose of the trips, the report said.
De Diego spent $3,327 to dock and equip his yacht and $2,438 for yacht insurance, the auditors said. He also spent $1,800 for contributions to the Republican Party.
In addition, the report said, de Diego spent $7,252 for a Ford Fairmont placed in the name of his wife, $25,018 for a 1982 Cadillac and $8,852 for a Corvette, driven by his son, that was later traded in for a $27,000 De Lorean. More than $4,500 in gasoline bills for his wife and son were charged to the firm, the auditors said.
Feyca made $15,000 in payments to de Diego's wife, Coralia, that he said was to repay a loan she made to the firm, according to the report. De Diego also spent $4,289 to pay off a personal loan and $8,500 for a private parking-lot deal that fell through, the report said.
Other expenses charged by de Diego, the report said, include $656 for a Browing Automatic pistol, $2,402 for clothing, $1,104 for jewelry, $769 for liquor, $220 for an exercise bike, $1,317 for flowers, $2,704 for eight place settings and $500 for membership in the Pan Am Clipper Club.