A chance meeting 10 years ago of two early backers of Ronald Reagan led to a relationship that is now the subject of a major criminal investigation of contract kickbacks at the U.S. Postal Service.
The two figures in the investigation, disclosed last month, are Peter E. Voss and John R. Gnau Jr. In 1976, they challenged the Republican establishments of Ohio and Michigan, respectively, and came to the GOP convention in Kansas City as Reagan operatives -- political outsiders pressing the conservative cause of a long-shot challenger to President Gerald R. Ford.
The intervening years have treated Voss and Gnau differently. But now both are chest-deep in trouble in a case involving a classic mixture of political ambition, government connections, a former White House official, a kickback scheme and a multimillion-dollar government contract.
Voss pleaded guilty May 30 to accepting kickbacks and padding his travel vouchers as vice chairman of the postal board of governors. Gnau's lawyer indirectly confirmed that Gnau is under investigation by federal authorities, who have subpoenaed his business records.
For Voss, the 1976 campaign was the high point in his political career; in 1980, Reagan operatives shunted him aside, refusing him power and granting him only a token seat on the national steering committee.
Even more painful, Voss, a man who had built a successful steel supply business, saw his family corporation crumble in the 1981-82 recession. The financial crunch hit at a time when Voss and his wife faced a succession of bills for their children's educations from exclusive eastern schools -- Ethel Walker and Choate, Harvard and Smith.
"Major customers weren't paying bills, they were going bankrupt," Voss said in an interview. "I had to lay people off. Things started getting bad in late 1979, '80, '81." In the first of two interviews, Voss broke down in tears repeatedly.
Gnau, in contrast, made a place for himself among Washington's influence-peddlers. In 1980, he served as Reagan-Bush Michigan finance chairman, and soon after the election, he set up shop in Washington and Michigan, declaiming that he had the connections to help clients get federal government contracts. By 1984, Gnau's firm had at least 29 clients, almost all small- to middle-sized firms seeking to do business with the federal government.
In material for prospective clients, Gnau and his associates boasted that Gnau has "enjoyed a personal relationship and friendship with the president of the United States and his key aides and advisers." They cited as references Edwin Meese III, then counselor to Reagan and now attorney general; Central Intelligence Agency Director William J. Casey, and former deputy White House chief of staff Michael K. Deaver.
But Gnau's current difficulties arise from different relationships -- his ties to two people generally unknown to the public, Voss and William A. Spartin.
Spartin was a Washington Post vice president in the mid-1970s and later became a management recruiter.
He went to the White House as deputy personnel director in 1981-82, then returned to private management recruitment as head of a firm called MSL Inc. He also assumed presidency of Gnau Associates, of which Gnau remained chairman.
Of these three, only Voss was willing to talk to a reporter about the case; Gnau and Spartin declined to be interviewed.
Spartin and Voss are cooperating with the U.S. attorney's office here. Voss pleaded guilty to accepting a kickback on a Postal Service contract and to putting in for $70,022.51 worth of first-class airline tickets after spending only $26,204.54 for cut-rate coach flights. Federal prosecutors have given Spartin immunity from prosecution in return for his testimony.
For his part, Gnau -- whose records have been subpoenaed -- has hired two well-known criminal lawyers, David DuMouchel in Detroit and Earl Silbert, former U.S. attorney, here.
"It is certainly clear that the investigation is widespread, and I certainly wouldn't be in a position to deny that the investigation would be looking at Mr. Gnau's relationships with these people Voss and Spartin ," DuMouchel said.
Voss' connection to the Postal Service began in 1981, when he received what he described as an unexpected White House offer to accept a seat on the Postal Service Board of Governors.
This was not a lucrative appointment. It pays $10,000 a year plus $300 for every meeting, and travel expenses. However, the board of governors wields tremendous power over one of the basic services of government, the delivery of mail.
The board has the authority to hire and fire the postmaster general and decides what companies are going to get substantial computer and automation contracts worth $100 million or more.
One of the most controversial and lucrative of these contract proposals involves high-technology "optical character reader" machines. Manufacturers of these machines claim that they are capable of reading four lines of an address and automatically assigning the correct nine-digit zip code to the piece of mail, saving time and money.
A leading company seeking to persuade the post office to go to "multiline optical character readers" (MLOCR) is a Dallas firm, Recognition Equipment Inc. (REI).
Future automation is a subject of intense debate in the Postal Service. In 1983, during this debate, Voss renewed his acquaintance with Gnau. Soon, Voss agreed to become a "representative" of the Gnau lobbying firm by steering clients to Gnau. Under the agreement, Voss would get "one-third of any revenues generated from business referrals," according to documents accompanying Voss's guilty plea.
In August 1984, the documents say Voss met with officials of a "Dallas manufacturing corporation," REI. At the meeting, Voss, then a member of the Postal Service board, "recommended" that REI hire Gnau Associates to represent REI in its attempt to sell MCOLRs to the Postal Service.
In January, REI made a deal with Gnau Associates to pay the firm $30,000, all expenses and "1 percent of the finalized contract price." The contract REI is seeking could be worth $230 million to $380 million, so the 1 percent fee would be $2.3 million to $3.8 million.
During early 1985, the Gnau firm was paid $30,000 and expenses, and it paid $10,500 to a company run by Voss, Decision Systems Inc. At the same time, according to court documents, Voss arranged meetings between Gnau, the postmaster general and other postal officials to discuss the REI proposal.
These meetings, along with Voss' efforts among his colleagues on the board of governors, contributed to a key decision to competitively test REI's equipment. The test began earlier this month.
In separate but related developments, Voss in 1985 assumed chairmanship of a committee delegated to find a new postmaster general. As part of the search, Spartin of MLS Inc., the management recruitment firm, was hired on Voss' recommendation for $30,000 to help find candidates.
At the time, Spartin was president of Gnau Associates. So, while he was publicly being paid $30,000 to find a new postmaster, who would presumably play a key role in the decision on acquiring REI's equipment, Spartin, unknown to officials of the Postal Service, was participating with Gnau and Voss in planning the lobbying in behalf of REI.
"On May 10, 1985," for example, court documents describe a meeting in Michigan of Voss, Spartin and Gnau where they discussed "the distribution of a fee to be received by Gnau Associates" from REI. In late 1985 and early this year, according to the document, Spartin gave Voss airline tickets.
As a management "head-hunting" consultant, Spartin successfully proposed to the board of governors that Albert V. Casey, who had recently retired as chairman of American Airlines, serve as interim postmaster general.
In business circles, the hiring of Casey, which followed the firing of Postmaster General Paul N. Carlin, was viewed as a major boost for REI. In the Jan. 9 editions of the Dallas Times Herald, business columnist Irwin Frank wrote:
"It didn't take stock market investors long to run up the trading volume and the price of REI on the guess that Albert Casey's appointment as postmaster general will be good" for the company. On the day of the Casey announcement, sale of REI stock increased eight-fold, and the value grew by three-quarters of a point, to 15 1/4, according to the column.
Frank pointed out that "investors probably don't mind that Robert Crandall, chairman and CEO chief executive officer of American Airlines -- the airline Casey ran until last year -- is on the board of REI."
(Earlier this week, the Dallas Morning News reported that the House Post Office and Civil Service Committee is looking into the relationship between Casey and the president of REI. The panel has scheduled hearings to start today.)
Two chance events attracted attention of federal investigators to Voss' and Spartin's activities. Indications of Spartin's dual relationships to the Postal Service surfaced early this year when David Harris, secretary of the board of governors, noticed that letters from Spartin's MSL Inc. and Gnau Associates Inc. had the same address. Spartin was promptly fired, and the criminal inquiry began.
The second incident occurred on a cut-rate People Express flight out of Washington. A postal inspector noticed Voss in a nearby seat, and wondered why Voss was not flying first class, as board members normally do. The inspector later checked records and found that Voss had, in fact, filed an expense account with the service claiming reimbursement for a first-class flight.
The People Express charge was just an indication that Voss was desperately trying to stay afloat financially. Confronted by investigators, Voss immediately agreed to tell what he knew, including details of the REI negotiations and a system of billing first class for coach fares that netted him $44,000 over four years.
Last week, Voss, in a telephone interview from his home in Canton, Ohio, read a long feature story about him in the Akron Beacon-Journal.
Facing the possibility of jail and forced separation from his children when he is sentenced on July 24, Voss recounted a story about disciplining his then-5-year-old son about 15 years ago. He ordered his son to sit on the stairs, "not his room because I think the room should always be a sanctuary."
In this case, however, Voss went to work, forgetting to tell his son that the punishment was over. Later in the morning, he got a frightened phone call from his son asking if it was all right to leave the stairs. "I told him that from then on, he could decide himself how long his punishment ought to be," Voss, who was intermittently sobbing, said. Then, looking at the present, Voss said, "If this is hell on Earth, I don't want anything to do with the real thing."