The wife of C. McClain Haddow, former chief of staff of the Health and Human Services Department, received more than $30,000 in undisclosed payments from a nonprofit foundation that Haddow helped create while at HHS, foundation officials and other sources confirmed yesterday.
The payments from the T. Bear Foundation, of which Haddow was an unpaid vice president until he was asked to resign last week, were conveyed to Alice Haddow without the knowledge of other foundation officials, these sources said.
The foundation paid $3,400 a month to Michelle Magoon, hired as the foundation's fund-raiser at Haddow's behest, and Magoon passed on 90 percent of the money to Haddow's wife as a subcontractor, the sources said.
Foundation President Leonard L. Silverstein, whose group uses a teddy bear character to publicize a hand-washing campaign aimed at preventing infections among children, confirmed this information yesterday when contacted by The Washington Post. He said he immediately called in the Federal Bureau of Investigation after learning two weeks ago of the payments to Alice Haddow.
Magoon has told the FBI and foundation officials that she did no work for the $37,400 she received from the foundation over 11 months, according to sources familiar with the FBI investigation. She has given the FBI the checks with which she paid Haddow's wife, after deducting 10 percent from the payments for administrative costs, the sources said.
Magoon also told investigators that Haddow suggested the arrangement and told her to report only to him, the sources said. Foundation officials said they do not know whether Alice Haddow did any fund-raising work for the foundation.
Haddow had denied repeatedly in previous interviews that his wife had any role with the T. Bear Foundation or received payments from it. Haddow initially told foundation officials that no such arrangement existed but later confirmed to them that his wife had received the payments, sources said.
Haddow, who resigned from HHS Feb. 1 to open a Washington consulting firm, did not return a reporter's calls yesterday. His attorney, Brian P. Gettings, said he generally does not comment on matters under investigation.
Magoon's attorney, Albert Turkus, said she would have no comment. Romano Romani, her supervisor at the Washington consulting firm of Parry & Romani Associates, said Magoon is "very naive, and anything she did I believe she did quite innocently and without any intent to do anything wrong." He said Magoon is "cooperating with the FBI."
The disclosure adds to questions that have surrounded the altruistic hand-washing campaign since Haddow and Margaret M. Heckler, then secretary of the HHS, elevated it from a tiny federal program two years ago. Under Haddow and Heckler, the department spent $300,000 in federal funds to promote the concept and simultaneously created the private foundation, which raised an additional $350,000 from health-care companies last year.
Silverstein said the work of the foundation, now called the Scrubby Bear Foundation, "is important and will continue." He said that it was launched at Heckler's request and that he agreed to continue only after her successor, Otis R. Bowen, endorsed the program.
"We did generate information that has become material to this investigation by the FBI," foundation attorney Jane M. Eldredge said.
The Post reported Saturday that, at Haddow's request, the foundation had hired several of his former associates, including two ex-assistants at HHS and his media consultant during two legislative campaigns in Utah. Haddow, a former state representative, managed the 1976 campaign of Sen. Orrin G. Hatch (R-Utah) and later headed Hatch's Utah staff.
Haddow has called the hirings "an appearance problem."
Magoon is a secretary and administrative aide at Parry & Romani Associates, whose partners include Hatch's former administrative assistant, Thomas D. Parry. Haddow has said that he worked with Magoon in the past and that the foundation hired her as a fund-raiser at his request.
Magoon formed a one-person firm and was hired for a monthly retainer in December 1984, while Haddow was both HHS chief of staff and foundation vice president. Although sources said she had no fund-raising experience, she was given a formal contract the following April to raise money for the foundation.
Silverstein said he repeatedly had trouble reaching Magoon or finding out what she was doing and eventually had her submit monthly reports to the foundation and appear at a board meeting. Magoon told investigators the reports were prepared by someone else, sources said.
The reports listed contacts with 26 health-care firms, four of which later contributed $85,000 to the foundation, according to foundation officials. One company was cited in the reports as having been "referred to" Haddow at HHS. Foundation officials said they do not know whether Alice Haddow did any of the fund-raising work that Magoon claimed to have performed.
Silverstein said he has asked another law firm to conduct an internal investigation. He said the program has been stymied for months by a trademark dispute over its name and other problems.
While the foundation now sells the promotional teddy bears, instead of donating them to children's hospitals as the HHS program did, he said the group loses money on each bear because of shipping and overhead costs.
The HHS inspector general is investigating whether federal funds were misused to promote the program. HHS documents show that senior department officials reviewed and in some cases questioned expenses charged by the foundation's largest contractor, the Salt Lake City advertising firm of Hurst, Jarrard.
The firm produced television advertisements and other promotional material for the foundation and was paid $149,818. Mark Hurst, Haddow's former Utah media consultant, was hired at Haddow's suggestion.
"I have produced everything I was paid to do," Hurst said. He said HHS may have examined his billings because the T. Bear program was a public/private venture. "It's all very confusing just exactly what the department's role was," Hurst said.
HHS spokesman Charles Kline said yesterday that aides to Haddow had reviewed the advertising firm's expenses because of "continuing concerns" about the program as it was being shifted from the department to the foundation.