Date: Mar 31, 2007 Author: By MOLLY BALL and DAVID KIHARA Source: Associated Press (
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The scandal involving Gov. Jim Gibbons' ties to defense contractors broadened Friday with revelations that his wife was paid consulting fees by a company he helped to obtain federal contracts while in Congress.
While Gibbons was helping Sparks-based Sierra Nevada Corp. get millions of dollars in no-bid federal contracts, the company was paying his wife about $35,000 to serve as a consultant, according to a report published Friday.
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Dawn Gibbons, herself a former politician and a businesswoman, received the fees from Sierra Nevada Corp. in 2003 and 2004, according to The Wall Street Journal.
Also in 2004, then-Rep. Jim Gibbons was trying to steer $4 million in federal dollars to the company, according to congressional records.
The $4 million Gibbons sought for technology to help helicopters land in Middle Eastern sandstorms was reduced to $2 million by the time the appropriation passed. Gibbons touted the funding in a June 22, 2004, news release from his congressional office.
That release also touts $3 million for eTreppid Technologies, the Reno-based federal defense contractor whose relationship with Gibbons is the subject of an FBI investigation.
"Nevada has become home to not only some of our nation's premier military bases and personnel, but to leading scientists and engineers, working for companies that are ushering in the weapons systems to protect America in the years ahead," Gibbons said in the release.
According to Friday's Journal article, Sierra Nevada is linked to eTreppid: The two companies shared some business between 2003 and 2005, including a subcontracting relationship on a classified project, according to internal company documents reviewed by the Journal.
A Washington, D.C., federal grand jury is issuing subpoenas in the eTreppid investigation, a source familiar with the civil dispute said on condition of anonymity Friday.
While a congressman, Jim Gibbons allegedly took cash, gifts and campaign contributions in exchange for securing secret no-bid federal contracts for the company, according to accusations contained in civil lawsuits between the company's founder, Warren Trepp, and a former partner, Dennis Montgomery. Gibbons has said the charges are false.
The issuing of subpoenas signifies that the Gibbons investigation is proceeding and evidence is being collected and preserved for a possible criminal case, experts on federal criminal law said. However, it does not necessarily signify that an indictment is coming.
Dawn Gibbons did not return phone calls seeking comment.
Jim Gibbons told the Review-Journal on Friday that his attorney has been contacted by the FBI and asked questions regarding Gibbons' relationship with Warren Trepp. Gibbons said his attorney has been candid and forthcoming with the FBI.
But Gibbons said he has not received a target letter.
Further questions about the matter were referred to Gibbons' Washington lawyer, Abbe Lowell, who also would not answer questions.
Lowell issued a statement Friday saying there was no connection between Jim Gibbons' efforts in Congress on behalf of the company and the company's employment of his wife.
Dawn Gibbons knew the company and its owners "long before her husband became a congressman," the statement says.
"Based on that relationship and Mrs. Gibbon's (sic) state contacts, the company came to Mrs. Gibbons and asked her to help launch a pilot project in Nevada to promote one of the company's crime and security technology products. ... Mrs. Gibbons had no knowledge about, or influence on, the company's federal contract."
That another relationship between Gibbons and a contractor is under scrutiny doesn't bode well for the governor, said Melanie Sloan of Citizens for Responsibility and Ethics in Washington, a congressional watchdog group.
"The fact is that this is yet another contractor that was apparently given consideration in exchange for gifts," Sloan said. "It's another nail in his coffin. He'll say his wife was paid for legitimate work, but it's very suspicious when you're pushing for a federal contract, and at the same time your spouse is being paid by the contractor."
If investigators can show, in this or the case of eTreppid that Gibbons traded his influence for money, he would be subject to federal bribery statutes, Sloan said.
"It is against the law for a member of Congress to earmark or create an appropriation or help someone get a federal contract in return for gifts," she said.
Gibbons could also be charged with honest services fraud, defined as depriving the public of an official's honest services for financial gain, Sloan said. That's what former Clark County Commissioners Mary Kincaid-Chauncey, Dario Herrera and Erin Kenny were charged with for taking bribes from strip-club owner Michael Galardi.
"I'd be surprised if Jim Gibbons doesn't find himself indicted," Sloan said. "These excuses that they're trying to give, that they're friends (with the owners of eTreppid and Sierra Nevada), are not likely to wash with a federal prosecutor."
DAWN GIBBONS' COMPANY
When Dawn Gibbons left the Nevada Assembly after the 2003 legislative session, she founded Politek Inc., a political consulting firm.
"Someone has to make some money in this family," she told the Reno Gazette-Journal in August 2003, when the company's papers were filed with the Nevada secretary of state. She noted that as a congressman, her husband took home only $7,400 a month.
According to a financial disclosure record filed with the U.S. House of Representatives in 2005, Politek paid Dawn Gibbons a salary of $40,069 in 2004.
She got business from her husband's campaign, from Reno lobbyist and consultant Pete Ernaut and Sierra Nevada, according to the record.
According to Jim Gibbons' campaign filings, Politek got $93,424 for Dawn Gibbons' services in 2003 and 2004, including $391 in reimbursed expenses.
The company was also paid $18,000 by the Education First initiative championed by Jim and Dawn Gibbons.
Ernaut said Friday that his company, R&R Partners, paid Dawn Gibbons $50,000 to organize tenants of a Northern Nevada industrial park into a grass-roots campaign protesting the presence of a brothel in a neighboring industrial park.
He said Dawn Gibbons was hired because she knew the park's owner, developer Michael Dermody, and because of her perceived skills.
"She and Dermody had prior business arrangements on a number of different issues and were personal friends," Ernaut said. "And Dawn had proven to be a very organized, aggressive grass-roots organizer."
Dawn Gibbons was one of several consultants hired for the project, which resulted in a settlement arrangement that allowed the brothel to operate under restrictions.
"She did a very good job," Ernaut said. "She earned the money we paid her. She did exactly what we hired her to do."
He said there was nothing in the project that could have involved Jim Gibbons; the highest level of government it reached was the Storey County Commission.
Dawn Gibbons' work for Sierra Nevada started in November 2003, ended in December 2004 and paid her $2,500 a month, according to the Journal article. The company refused to confirm the amount Friday.
Dawn Gibbons' financial disclosure describes her work for the company as "consulting/media/public relations."
She was hired to "accomplish a market survey through a technology demonstration in Las Vegas to determine the feasibility of application of some SNC technologies by major casinos, municipalities and law enforcement agencies in case of emergencies to provide communications and security for their protection," Sierra Nevada executive Renee Velasco said in an e-mail.
Velasco claimed Politek was retained only "after the appropriations process involving the helicopter project was completed," but refused to provide the date Politek was hired or the date the appropriations process could be considered to have ended.
If the Journal article is correct and Politek was paid throughout 2004, Dawn Gibbons' work for the company would appear to overlap with her husband's work that finished in June on the appropriation.
Velasco also disputed that Sierra Nevada's federal contract for the helicopter technology was a "sole source contract," a government contract that is awarded without competitive bidding to a particular company.
"The contracts were awarded by the Department of Defense to Sierra Nevada and other contractors based on the technology developed within the corporation," Velasco said.
However, the congressman's news release on the proposed appropriations specifies that the money is to go to Sierra Nevada.
As for Dawn Gibbons, who holds a bachelor of general studies degree from the University of Nevada, Reno, and whose former ventures include two wedding chapels, a photography studio and a flower shop, she soon abandoned political consulting to go back into politics.
In August 2005, the company was dissolved, according to the Nevada secretary of state. In October 2005, Dawn Gibbons announced she was running to replace her husband in Congress.
She came in third in the August 2006 Republican primary.
SIERRA NEVADA CORP.
Sparks-based defense contractor Sierra Nevada Corp. gives lavishly to politicians.
It began in 1997, when the company's president, Fatih Ozmen, made his first donation, $2,000, to then-Rep. Jim Gibbons.
Since then, Ozmen and Eren Ozmen, his wife and the company's chief financial officer, have given $143,200 to federal candidates and campaigns.
They also gave $20,000 to the company's federal political action committee, Sierra Nevada PAC, which gave $351,100 to candidates and other committees starting in 2002.
On the state level, until Jim Gibbons ran for governor the Ozmens had contributed to only one candidate: Dawn Gibbons, a member of the state Assembly from 1999 to 2003.
Eren Ozmen gave $5,000 to Gibbons' Assembly campaign in 1999 and 2000. Fatih Ozmen gave $5,000 to Gibbons' Assembly campaign in 2002.
In March 2002, then-Assemblywoman Dawn Gibbons nominated Eren Ozmen for the Women's Role Model of the Year award, bestowed by then-Attorney General Frankie Sue Del Papa.
The Ozmens each gave $5,000 to Jim Gibbons' gubernatorial campaign. Sierra Nevada gave $10,000, and the political action committee gave $7,500, according to campaign records.
According to county records in Reno, the Ozmens are Turkish, married in Reno in 1988 and live in a Reno home valued at $2.7 million.
Reached at home Friday, Fatih Ozmen referred questions to the company's offices, where they were addressed by Velasco.
The company was formed in 1963 and acquired by the Ozmens in 1993. According to Velasco, it employs 1,000 people nationwide.
In 2006, the $27.4 billion defense spending bill passed by the House earmarked $2 million to the company for improvements to submarine radars. The company makes landing gear for Predator drones and a variety of communications and computer systems.
A 2005 Review-Journal story reported that Sierra Nevada had received more than $42 million in 2004 in Defense Department contracts. The same story reported that eTreppid received almost $14 million in Pentagon contracts in 2004.
WIDENING SCANDAL
The eTreppid accusations are the most damning for Jim Gibbons, but the Sierra Nevada matter will add fuel to the fire, Sloan, of the Washington ethics group, said.
Federal investigators will want to know whether Dawn Gibbons can prove she earned the money she was paid, Sloan said. "Did she do anything? Was the fee reasonable? How legitimate was that consulting fee?"
Dawn Gibbons told the Associated Press Friday that she "worked my butt off" for her political consulting clients.
Sierra Nevada, she said, "got a bargain for the work I did. ... Believe me, they got their money's worth."
But if it can be proven that the "fee" was in fact a kickback to the congressman, it won't be the first time a company has tried that tactic, Sloan pointed out.
As part of the corruption investigation involving convicted lobbyist Jack Abramoff, the FBI is examining whether former House Majority Leader Tom DeLay's wife was paid $3,200 by a lobbying firm, money she might not have done anything to earn, according to news reports.
"You can't directly pay the member, so you hire the wife," Sloan said. "Then the wife gets paid and it's both of their money."
Gibbons' alleged improper ties to defense contractors mirror other recent Washington scandals. It was defense contractors whose bribes to former California Rep. Randy "Duke" Cunningham led to his indictment and eventual guilty plea.
California Rep. Jerry Lewis is being investigated in connection to similar charges, as is his former top staffer, Letitia White, who was eTreppid's lobbyist.
Plenty of other lawmakers might not be breaking the law, but they take thousands of dollars in contributions from interests for which they later secure funding.
And that sordid Washington cycle of corporations giving to politicians who then get government money for the corporations is especially bad in defense contracting, she said.
Because military equipment and technology companies make a product they can only sell to the government, they are especially zealous contributors and employers of pricey, well-connected lobbyists to secure business for them.
"There's not supposed to be a connection" visible between a contribution and an appropriation, Sloan said. "When there are campaign contributions in return for earmarks, they're usually careful that there's no close proximity to avoid the appearance of impropriety. Jim Gibbons apparently wasn't smart enough to do that."
Review-Journal Washington bureau chief Steve Tetreault contributed to this report.
