D.C. Democratic Party Chairman Ivanhoe Donaldson, the chief political adviser to Mayor Marion Barry and a former deputy mayor, is under investigation by a federal grand jury for his handling of city funds as head of the Department of Employment Services, sources said.
According to District government officials and other sources familiar with the investigation, the grand jury is focusing on about $30,000 in city government checks issued during Donaldson's tenure as head of the department. Two of the three people in whose names the checks were made out are longtime friends of Donaldson.
The U.S. attorney's office and the FBI are investigating whether the proceeds of the checks went to the persons in whose names they were issued and whether any of the money went to Donaldson.
One of the two friends, Charles E. Cobb, a freelance journalist, has told the grand jury that he never worked for the city and never received city money, sources said.
A city government check for $4,500 was issued in Cobb's name in mid-October 1981, sources said. Cobb said in an interview that the check in question, shown to him by federal prosecutors, was signed on the front with Donaldson's name. Cobb said that his own name was on the back of the check as an endorsement, but he said he told the grand jury that the signature was not his.
Cobb said he has been told he is not under investigation. Sources said Cobb was called to testify before the grand jury as a government witness.
The checks were issued in the names of Cobb; Judy F. Richardson, another longtime Donaldson friend, and a third person whose identity could not be confirmed, sources said. The city government has turned over the checks to federal prosecutors, sources said.
Richardson and her attorney, Lloyd Moore, declined to comment yesterday.
Donaldson said yesterday he knew there was an investigation, but he declined to comment. "I'm aware of bits and pieces of it," he said.
Assistant U.S. Attorney Daniel J. Bernstein, who is presenting the case to the grand jury, declined to comment yesterday.
Donaldson has managed Barry's political fortunes for a decade. He ran Barry's successful 1974 campaign for City Council and was the architect of both of his successful campaigns for mayor.
Donaldson held a variety of key posts in Barry's two administrations, including his stint as the head of the Department of Employment Services from fall 1980 through May 1982. Most recently he served as deputy mayor for economic development, before resigning in October 1983 to become a vice president in the Washington office of E.F. Hutton & Co. Inc., the investment and brokerage firm.
Barry, who is on a three-week tour of Africa, could not be reached for comment yesterday. Annette Samuels, Barry's press secretary, said yesterday, "I have no knowledge at all about any of this."
Sources said the federal investigation of Donaldson was triggered by information developed in a separate investigation of the Department of Employment Services by the office of city Inspector General Joyce Blalock. Blalock turned over what she found to the U.S. attorney's office.
Barry asked Blalock to examine the department's financial controls after the mayor said two department employes and a private contractor were found to have used city funds to purchase ligthing fixtures and other items for their homes, not during Donaldson's tenure. All three officials have been fired, and one has pleaded guilty to a theft charge.
During Blalock's review of the department, her staff examined checks issued from a special administrative account connected to the unemployment compensation fund, according to Alphonse G. Hill, the deputy mayor for finance.
Hill said that the account, which probably has about $50,000 in it at any time, was one of the few in the city government that was outside of the city's central financial management system. He added that Donaldson had the power to authorize checks from the account when he was head of the department.
Hill said that as a result of Blalock's investigation, the city this year transferred the account to the city controller's office as part of an overall effort to tigthen control of expenditures by the employment services department.
Hill said that he was aware that Blalock reviewed checks Donaldson authorized against the account. He said the effort was a routine auditing practice.
"I knew she was verifying some checks that Ivanhoe authorized and signed off on," Hill said. "It was nothing alarming that I'm aware of. If she has found evidence that they did not hold up, I am not privy to that." Hill added that he was unaware that the matter had been referred to the U.S. attorney.
Sources in the employment services department said yesterday that the grand jury has subpoenaed department records for the special account.
Another high-ranking Barry aide yesterday confirmed that Blalock had referred issues relating to Donaldson to the U.S. attorney's office. "She found stuff that she thought ought to be referred . . . and it was handled just like anything else," the aide said.
The aide said that Donaldson says that he did not do anything wrong and that others have supported his account.
According to sources, Cobb told federal investigators that he learned only recently that a check had been issued in his name in 1981, and that he was out of the country on business when the check was written.
In an interview, Cobb said: "I didn't sign the check. I didn't work for the D.C. government, and I didn't receive the money."
Frederick A. Douglas, one of Donaldson's two attorneys, yesterday declined to comment except to say that he is representing Donaldson along with attorney Willie L. Leftwich Jr.
Douglas said he has not talked to Cobb and is unaware of what Cobb has told investigators. "If there is an investigation looking into what Mr. Cobb has said, I would never comment on that and my client wouldn't," Douglas said, adding that he has a policy of not discussing continuing investigations.
Richardson, Cobb and Donaldson have been friends since their days in the civil rights movement. All three were involved in a now-defunct bookstore in Washington called the "Drum and Spear."
Richardson works in New York City for the United Church of Christ Commission for Racial Justice, an organization headed by Cobb's father. Donaldson and Cobb met in the early 1960s while working for the Student Non-Violent Coordinating Committee (SNCC), a civil rights organization.
In 1983, Cobb wrote and narrated a segment for "Frontline," a Public Broadcasting Service documentary show that focused on how effective Donaldson, Barry and other former civil rights activists were in running the D.C. government.