The FBI has begun an inquiry into the award of a Small Business Administration contract to the Kansas company owned by a former aide to Senate Minority Leader Robert J. Dole (R-Kan.), a senior SBA official said yesterday.
William A. Powell, regional administrator of the agency's Kansas City office, said an FBI agent and a representative of the SBA inspector general arrived unexpectedly at his office Friday morning and spent the day examining files and asking questions.
He said the investigators gave no hint what laws might have been broken. "I was surprised to see them. Somebody on the outside had to have asked for it. If it had been the SBA, I think I would have known about it."
An FBI spokesman, Greg Jones, said the bureau would have no comment this weekend on the investigation. He would not say who initiated the inquiry.
Scott Morgan, chief counsel for Dole's presidential campaign, said neither the campaign nor the senator's office had been contacted by the Federal Bureau of Investigation.
The company receiving the contract, EDP Enterprises Inc., is owned by John Palmer, who worked for Dole from 1980 to 1982. EDP subsequently entered into a number of financial arrangements with David C. Owen, a Dole political ally in Kansas. EDP also appears to be a partner with Dole's wife, Elizabeth, in owning a $1.6 million suburban Kansas City office building, according to documents released by the Doles Jan. 16.
During the time that Owen was working as a consultant to EDP, he also was investment counselor to Elizabeth Hanford Dole's blind trust and an employee of Owen & Associates, his consulting firm frequently did volunteer work for Sen. Dole's political action committee. In 1986 a tax return filed by Elizabeth Dole's trust reported interest income from EDP. The reason for the interest was not disclosed, but it was presumed to be on a loan from the trust to the Palmer company.
From late 1983 on, Dole's Washington office was in contact with the SBA here about finding business for Palmer. A member of Dole's staff also said last week that Owen "may" have taken the matter up with Dole's office.
In January 1986, EDP received a $26 million, three-year contract to supply food to U.S. Army mess halls at Fort Leonard Wood, Mo. The contract was awarded without competitive bidding, through the SBA's minority set-aside program.
Palmer is a black Republican businessman. He first qualified for the minority program in 1985 after being turned down twice before for lack of financial support, according to informed sources.
The House Small Business Committee has been conducting its own preliminary inquiry into the matter, and has interviewed a number of SBA officials in the last two weeks.
On Friday, Powell received from Palmer's attorney a stack of documentation that the SBA had requested about Palmer's ownership and control of EDP. Powell said the documentation satisfied him that Palmer, not Owen, was the owner of the company.
The SBA minority program has been plagued by white businessmen using black or Hispanic "straw men" to obtain government contracts on highly favorable terms.
"I'm comfortable with what he sent," Powell said. "There isn't anything here that would be seen as unusual if it wasn't an election year. John Palmer has run a model program."
Powell said Palmer had produced evidence that the SBA had approved a consulting agreement between EDP and Owen under which Owen was paid a fee after the Fort Leonard Wood contract was awarded.
Earlier the SBA was unable to locate a copy of such an agreement. Powell said Palmer's attorney supplied a copy that appeared to have notes or suggested changes on it in the handwriting of an SBA attorney who has since left.
Powell confirmed that Owen was a stockholder in the bank that advanced financing to EDP, and that EDP and Owen had "other outside business interest together."
Staff writers Anne Swardson and Philip J. Hilts contributed to this report.