Rep. Donald J. Albosta (D-Mich.), who is leading the congressional investigation into possible wrongdoing in President Reagan's 1980 election campaign, tried five months ago to intervene in a Justice Department case in which his brother-in-law had an interest, according to government documents.
The case involved a troubled Michigan gasohol enterprise that had defaulted on a federally guaranteed $7.3 million construction loan. Albosta's brother-in-law, Robert Wasmiller, was one of 19 rural Michigan farmers who put the project together in the congressman's district.
The company wanted the Economic Development Administration (EDA) to guarantee an additional loan to complete the gasohol plant.
Internal Justice Department documents obtained by The Washington Post indicate that, after being told to "stay out of the case," an aide to Albosta warned the Justice Department in March that unless a satisfactory outcome was reached a House subcommittee on which Albosta served would accelerate its investigation of the Environmental Protection Agency.
At that time the Justice Department was locked in a struggle with the subcommittee over access to EPA documents.
Albosta acknowledged in an interview that he wanted to meet with the Justice Department regarding the case of Michigan Agri-Fuels. He also said he knew that his administrative assistant, Charles Erlich, had made repeated calls to the department in March. But he said he sees nothing wrong in the attempted intervention.
Despite the calls and warnings, the Justice Department rejected Albosta's requests and advised the EDA to pay off the $7.3 million loan guarantee and put the Michigan firm into receivership.
Albosta is chairman of the House Post Office and Civil Service subcommittee on human resources, which is investigating how the Reagan organization obtained campaign materials from the Carter White House in 1980. He also is a member of the House Public Works and Transportation subcommittee on investigations and oversight, which has jurisdiction over the EDA and the EPA.
Albosta previously acknowledged that he interceded personally with the EDA in 1980 to obtain the $7.3 million construction loan guarantee for Michigan Agri-Fuels, as well as a $2.9 million loan guarantee from the Farmers Home Administration that would be available once the plant was operational. Albosta did not inform those agencies that his brother-in-law was involved, and says he did not know about it himself at the time.
In addition, federal officials have confirmed that the EDA loan was processed out of Washington, bypassing the Chicago regional EDA office. Edward Jeep, head of the Chicago office, said, "The proposal was prepared and developed in Washington. I had no input." Erlich said the loan was approved in Washington because EDA officials here were particularly interested in gasohol projects.
By this March, Michigan Agri-Fuels had gone into default in its payments to the National Bank of Detroit, and the bank demanded that the EDA make good on its guarantee to pay off 90 percent of the loan.
The company, according to its president, John C. Leach, wanted the EDA instead to guarantee an additional loan for completion of the gasohol plant. Leach said that Albosta's brother-in-law and the other investors could lose $2.3 million in personal funds they invested as well as $1.5 million in personal loan guarantees.
But Justice, which was representing the EDA, advised that agency to pay off the loan and put the project into receivership. The case was settled on March 16, about a week after Erlich's telephone calls, when the government paid the $7.3 million.
The National Bank of Detroit, as receiver for the government, is attempting to sell the project. The proceeds would be divided proportionately between the bank and the government.
The Justice memos indicate that Erlich called the department a number of times around March 10 demanding a meeting. When lawyers turned him down, he warned that "The congressman would be upset, that someone would have to explain it to him."
Erlich went on to say, according to the memo, that "although 'this was not a threat,' if the settlement indicated that the farmers and the government had been sold out, then we at Justice haven't seen anything yet with that committee's investigation of EPA." Erlich told the lawyer that the Public Works oversight subcommittee would "get to the bottom of it."
According to a Justice memo, Erlich "mentioned that Albosta had met on pending cases with a number of officials including, for example, Rita Lavelle," who had headed the EPA's hazardous waste cleanup program until Feb. 7, when she was fired by Reagan.
(Lavelle was indicted last Thursday on five counts of perjury and obstructing a federal investigation in connection with testimony and statements to the Public Works subcommittee, a second House subcommittee and a Senate committee.)
Erlich said in an interview that he tried to set up the meeting with Justice because it was the agency representing the EDA. But he said he does not remember whether he made the reference to the EPA investigation.
"All we can remember is that we were concerned that nobody's interests be sold out . . . . We had very strong concerns as to why the bank was being made the agent . . . . We weren't threatening anybody . . . . I'm not going to confirm I said those words."
He added that he was suspicious of the EDA's handling of the loan because of the Reagan administration's desire to do away with the EDA program.
"This is a deliberate pattern not to do projects and to try to make projects look bad . . . . The administration wants to get rid of the program, but Congress continues to enact funds," he said.
Albosta said he didn't know whether Erlich brought up the EPA investigation in his conversations with Justice: "I don't know why Charlie would have said that . . . . I don't know what took place there."
Albosta said he sees nothing wrong with intervening with the EDA to obtain the loan, even though he is on the subcommittee with oversight jurisdiction over the EDA.
Nor did he see anything wrong with asking Justice about the case, he said.
"I think if we can open a door a bit, a crack, and try to help somebody . . . . Heck, I'm going to do it. But I want to observe any kind of conflict or anything that might be unethical," he said.
Albosta also said he did not consider it improper to become personally involved in lobbying for a project from which his brother-in-law could benefit. Albosta said he did not learn Wasmiller was an investor until he read about it in his home-town newspaper.
"I don't think it's improper. My mother if she was alive would qualify for Social Security. Does that mean I can't vote on Social Security?" he said. "It's always been my position that I have a responsibility to assist my constituents with anything that will help the economy of the state."
Meanwhile, Leach is convinced that the project is still viable. He said it got into trouble only because interest rates suddenly soared as high as 22.5 percent during construction.
"I think we could finish up construction in three or four months and repay the government completely . . . . I want to repay them in full," Leach said, adding that he has a bank ready to provide the money if he can get a new loan guarantee.
In order to do that, the company plans to ask the EDA not only to reinstate the $7.3 million loan guarantee, but also to add another $5 million, according to Erlich.
Albosta, asked if he will personally intervene with EDA again for a new loan guarantee for Michigan Agri-Fuels, replied, "Absolutely."