Three House members yesterday asked the Justice Department to review a General Accounting Office report that "raises questions" about the handling of $60,000 in loans arranged for White House counselor Edwin Meese III by a presidential appointee.
The report said Meese owed $20,000 in interest on the loans as recently as last month, including $7,500 that he failed to report as a "gift" on his latest financial disclosure statement.
The loans were arranged in 1981 by his personal accountant, John R. McKean, while Meese and another McKean client, White House deputy chief of staff Michael K. Deaver, were getting McKean a $10,000-a-year presidential appointment to the U.S. Postal Service board of governors.
Meese said yesterday that the GAO report showed that there was "no wrongdoing" and that the $60,000 loan and $20,000 in interest were paid within the last month, after he took out an $80,000 bank loan.
"The important thing is that the loan has been paid back, as was intended. That was always the case," Meese said. He said he will work with White House counsel Fred F. Fielding, if necessary, to amend his financial disclosure statements.
McKean could not be reached for comment.
In their letter to Attorney General William French Smith, three members of the House Post Office and Civil Services Committee said the GAO report "raises questions concerning the circumstances surrounding the nomination and confirmation of Mr. McKean." Meese and McKean have said there was no connection between the loans and McKean's appointment.
A Justice Department spokesman said Smith had no comment because he has not seen the report.
McKean arranged a total of $60,000 in loans to Meese in July and December, 1981, from an office "investment pool" of other clients' money, the GAO report said. Meese's financial disclosure statements show that he put up no collateral for the loans in 1981, that the principal was not due until McKean demanded it and that the interest, from 18 to 21 percent, was payable annually.
McKean was nominated in November, 1981, to fill a five-year opening on the Postal Service board. The report noted that McKean made no mention of his "fiduciary" relationship to Meese when asked about such responsibilities during his confirmation process.
The report also said McKean told GAO investigators that he began thinking in mid-1982 that he would like to have a full nine-year term on the Postal Service board and discussed it with Meese and Deaver that fall. During the same period he was sending Meese bills for the overdue loan interest, but did not press for payment, the report said. McKean later received the nine-year appointment.
McKean, who said he served as a "trustee" for the loan pool, told The Washington Post in July that Meese had not paid any of the principal on the $60,000, but was "doing all right" on the interest. White House counsel Fielding said then that it was his understanding that the interest payments "have been made in timely fashion."
The GAO report shows that Meese did not pay any interest until Aug. 20, 1983, three weeks after The Post ran an article on the Meese loans. He then paid McKean $100 and signed an application for the $80,000 bank loan, which the report said was to be secured by a second deed of trust on Meese's McLean home.
Meese insisted yesterday that he was never behind in the interest payments because he and McKean had an agreement that he should pay the interest this year. The GAO report said, however, that McKean sent Meese bills for the interest on at least three occasions. The report quoted the notes as providing that "payments of interest are to be made not less than annually."
The GAO report said that Meese did not pay $7,500 in interest that was due July 1, 1982, and said McKean's "forbearance" of the money due should have been reported on Meese's 1983 financial disclosure form. It added that Meese probably was unaware of the requirement.
McKean told The Post in July that Meese had "a negative cash flow, a deficit" in early 1981 and needed the personal loans for his children's tuition and living expenses because he hadn't been able to sell his California home. His disclosure statements show that he is not a wealthy man.
Land records in California and Virginia show that when Meese went to McKean in June, 1981, he was carrying $423,000 in outstanding loans on his homes in San Diego and McLean.
The McLean house, which Meese bought in February, 1981, had a $150,000 mortgage. He had borrowed $273,000 against his San Diego house and didn't sell it until August, 1982, nearly 20 months later.
The interest rates on the various housing notes aren't recorded, but if they averaged 10 percent, his debt service would have been more than $40,000 a year, not counting the personal loans he got through McKean. Meese made $60,000 a year at the time.
The GAO report said McKean sent Meese a bill for $3,900 in interest on the first personal note in June, 1982--six months after it was due--but received no payment.
Land records show that Meese sold his house in San Diego two months later for $307,500, but had to use most of the proceeds to pay off the four deeds of trust totaling $273,000.
Last November McKean sent Meese three more bills, totaling $12,000, for interest due on the personal notes, the GAO said. No payment was received.
Land records and interviews show that Meese listed his home in the suburb of La Mesa unsuccessfully with Coldwell-Banker and then sold it without a broker's help in August to Lucy Ann and Irv Howard.
Howard, 57, a contractor, and his wife got a $246,000 loan to buy the house from Great American Federal Savings and Loan Association, which held Meese's mortgages. Howard never moved into the house, and sold it last June for $275,000, taking a $32,500 loss. The bank let the new buyer assume the 11 percent loan for five years.
Howard said in a brief telephone interview that he bought Meese's house "as an investment" and sold it at a loss. He said he had planned to build another house on the property, but "there were a lot of easements I didn't know about. It cost me some money."
Howard said he has never met Meese and didn't recall how he learned that the Meese home was for sale.
The GAO report also said McKean arranged a $58,889 loan from an Idaho business partner to Deaver's wife in 1981 so the Deavers could defer taxes on a lump-sum payment from his consulting firm. The loan was used to buy a truck, which was then leased back to a firm owned by McKean and his partner, and then released to another firm. Deaver's financial statement on the transaction was complete and accurate, the GAO report said.
Rep. William D. Ford (D-Mich.), chairman of the Post Office Committee, and two of his subcommittee chairmen, Reps. Robert Garcia (D-N.Y.) and Mickey Leland (D-Tex.), also sent copies of the report to Fielding, the Senate Ethics Committee and the Office of Government Ethics, which reviews executive branch disclosure forms, and asked each of them to review the matter.