"Let us make sure it is clean."
WASHINGTON–This is a story about an ex-senator, some former colleagues, and an empty office building at the foot of Capitol Hill. It is also a story about power and friends in the right places.
It is an important story, not because of the subject matter itself, an office building whose owners were anxious to either rent or sell it as quickly as possible, but because of what it reveals about the importance of personal contacts in the world of Congress. Briefly, the owners of the building offered to rent part of it to the General Services Administration, which handles housekeeping for the federal government, for $2.8 million. When this fell through, they approached the Senate about renting the entire building for $3.2 million plus some additional expenses. And, when this proposal seemed to be foundering over questions of uncertain jurisdiction, the owners of the building retained former senator George Smathers, now an attorney in Washington, to help push the matter along. What Smathers did for his clients was to cut through the Senate’s general inertia and confusion over specific committee jurisdictions to shorten the legislative process to their benefit. As a result, within a few months, the Senate was on the verge of approving legislation which authorized its Sergeant at Arms to undertake rental negotiations even though no one had actually decided that the Senate should rent the building in the first place. There is little doubt that, had the bill passed as it was reported to the floor, the building would have been rented. That one suspicious senator questioned the proceedings was not lobbyist Smathers’ fault.
Smathers’ role in the whole affair came to light accidentally because he was mentioned in one of the letters which Sen. Ernest Hollings, D-SC, put into the Congressional Record to justify his subcommittee’s handling of the matter. Because of this, there is a public record of a lobbying contact that might otherwise have gone unnoticed. Under legislation now pending in the Senate, Smathers’ contact with key senators would have had to be recorded publicly. Recording them does not mean that they would not continue to be made. Nor does it mean that they would have immediately become public knowledge since anyone seeking information about these contacts would still have to have known where to look for them. But had the affair been a matter of public record from the very beginning, the Senate would not be in the position it is now in of having to write a record on the transaction after the fact.
The story of 400 North Capitol Street begins with a brand new glass and concrete building next to the Securities and Exchange Commission and a short distance from the U.S. Capitol itself. The building, which was begun three years ago and now stands nearly completed and completely unoccupied, is owned by a general partnership called 400 North Capitol Associates. The partners are Myron Behrman, a Florida developer; S. Peter Volpe, principle stock holder in the Volpe Construction Company, the firm begun by former Transportation Secretary John A. Volpe, now U.S. Ambassador to Italy; Glen H. Ballowe, an official of the Volpe Construction Company; and Joseph Tauro, a federal judge in Boston. 400 North Capitol Associates is represented by Smathers, Merrigan & Herlong, the law firm in which former Sen. Smathers of Florida is a partner. The owners of 400 North Capitol Street have extensive Florida connections. The Volpe Construction Company has offices in Miami and Behrman, although originally a New York attorney, has been active in Florida real estate for twenty years.
The building at 400 North Capitol Street was originally constructed with the intention that it would be used, at least in part, by the overcrowded SEC next door. Behrman was involved in the construction of the present SEC building. 400 North Capitol Associates approached the GSA about renting the new building but were turned down because the GSA had already made plans to move the SEC to a site along the Anacostia River, plans which subsequently fell through because of SEC resistance. The owners of 400 North Capitol Street offered to rent three-quarters of the building to the federal government for $2.8 million, including taxes, maintenance, utilities and some underground parking.
When the GSA rejected 400 North Capitol Street, the partners turned to Capitol Hill. The new building is located at the foot of the hill itself, on the same side as the Senate office buildings. It is separated from them by about a third of a mile of park, much of which covers an under-ground garage for Senate employees.
To understand why the Senate might be interested in an office building the GSA had already rejected, one must understand the logistics of office life on Capitol Hill. No one has enough space. Late last year there were twenty-six requests for office space pending before the Senate Rules and Administration Committee which handles the parceling-out of this precious commodity. Most of these requests were made by senators on behalf of their own or committee staffs.
Senators’ offices are crowded. The Architect of the Capitol George M. White estimates that, not counting the actual offices of the senators themselves, Senate employees occupy an average of 65 square feet per employee. By comparison, typists in the GSA secretarial pool occupy 100 square feet per employee, he said. Furthermore, because of the exigencies of public transportation in the District of Columbia metropolitan area, parking space on Capitol Hill is also at a premium.
Some Members of Congress have begun to question the inexorable proliferation of staff and automobiles which has caused both the Senate and the House of Representatives to encroach steadily upon the neighborhood of post-Civil War rowhouses that surrounds the Capitol. At this writing, the House is looking hungrily at a nearby residential block and the Senate is renovating apartment buildings for temporary use until an extension to one of its present office buildings can be completed.
In the Senate, jurisdiction over additional office space is not a clear cut matter. It is the Rules Committee which divides up available space among Senators and committees. There is also a Senate Office Building Commission whose role is fuzzy. The Public Works Committee has a subcommittee which plays a role in evaluating available buildings. The nitty-gritty of office planning and expansion is handled by the Architect of the Capitol. And the Appropriations Committee is responsible for setting aside funds for the rental or construction of additional offices.
The first contact between the owners of 400 North Capitol Street and Congress came in February of last year when the real estate agent representing 400 North Capitol Associates wrote a letter to Architect White advising him that the building would be available should the Senate be interested. In March, White replied that he would keep the offer in mind. And there the matter rested for a while.
Then, in late July, White received a visit from one of the partners, Glen H. Ballowe. Ballowe and White talked about the possibility that the Senate might want to rent the building, and the following day, after consulting with his partners, Ballowe submitted a firm proposal to White.
The owners offered to lease 400 North Capitol Street to the Senate for five years with an option to buy. The annual rent for 570,164 square feet of space (553,513 square feet of office space) and three and a half floors of underground parking.(948-parking spaces valued by the owners at $400,000 a year) was to be $3,218,750. The annual rent did not include taxes, insurance, utilities or operating and maintenance expenses. In addition, the Senate would have to pay for what is known as “tenant work”, that is, partitions, doors and hardware. There is no estimate in Ballowe’s letter of what this would cost but, a few days later in a letter to Sen. Howard Cannon, D-NV, chairman of the Senate Rules Committee, White placed this cost at $3 million.
These figures require some careful examination because they later became a point of controversy. Ballowe and his partners offered to rent the building to the Senate for $3.2 million, exclusive of taxes and operating expenses, after having failed to rent three-quarters of the same building to GSA for $2.8 million including taxes and operating expenses, Except for the question of who pays the operating expenses and how much the tenant work would cost, the price for which three-quarters of the building was offered to the GSA is three-quarters of the price for which the whole building was offered to the Senate.
“I hope you will agree with us as to the extreme attractiveness of this proposal and that you will be able to discuss this with the Rules Committee and/or the Building Commission before the Recess (Congress’ annual August vacation),” Ballowe wrote White. “I realize there may not be enough time left this week for a final decision to be arrived at, but at least if you can obtain an indication of interest, you and I can be working together during the Recess to determine the extent, type and cost of the desired Tenant Work, the changes (if any) you may desire to make in the retail space and the cost thereof, and generally work out all the details so that our proposal may be presented in final form to the Rules Committee and/or Building Commission upon their return in September for an early decision.”
Things did not move along this quickly, but White got in touch with Cannon and, on August 6, just before the recess, sent him a letter in which he outlined what he considered to be the attractive points of the 400 North Capitol Street proposal.
White’s interest hinged upon an as-yet unauthorized underground garage that some members of the Senate would like to have built in a block on C Street NE which includes an old office building now used by Senate staff, the Monocle Restaurant, and the apartment buildings the Senate is presently renovating. No underground garage can be started there until these buildings are demolished and they cannot be demolished as long as the Senate needs the office space they provide. Until 400 North Capitol Associates approached Architect White, there was no place for Senate employees working in this block (referred to in discussions as Square 724) to move into until the extension to the present Dirksen Senate Office Building is completed in 1978 at the very earliest. White saw 400 North Capitol Street as an answer to his dilemma about what to do with the Senate employees who work in Square 724 in order to start construction of the underground garage.
“If…the people occupying those buildings were to be moved now to another location, such as 400 North Capitol Street,” White wrote Cannon, “we could proceed immediately to demolish the existing buildings and to design and construct the underground garage facility.”
Therefore White proposed to Cannon that the Senate consider renting one-half of 400 North Capitol Street (including one-half its parking spaces) for five years at an estimated total rental of $8 million plus $1.5 million for tenant work on half the building.
When Cannon returned after Labor Day, he took up the matter with some of his colleagues. On September 5, he wrote Sen. John Sparkman, D-AL, chairman of the Building Commission, and sent along copies of White’s and Ballowe’s letters. Sparkman replied noncommittally that he thought the building could be useful.
There the matter rested until Sen. Robert Morgan, D-NC, chairman of the Buildings and Grounds Subcommittee of the Senate Public Works Committee, received a visit from Ballowe, accompanied by former Sen. Smathers “who is now representing North Capitol Associates,” as Morgan described it later to Cannon. Morgan was interested but cautious and suggested that it was probably up to Cannon’s committee to initiate any action on the building.
“Should Rules decide that there is a need for additional space for the Senate, then we would be glad to consider any request or proposal submitted by the Rules Committee as expeditiously as possible,” he told Cannon in October.
However, nothing happened and, in November Morgan wrote Cannon a letter in which he bewailed the lack of adequate office space. “For this reason it might be wise for us to explore the offer made by North Capitol Associates for the lease or purchase of the North Capitol Plaza building located just at the foot of Capitol Hill,” Morgan said. He offered to hold a public hearing on the proposal.
Cannon’s response was to send Morgan copies of the White and Ballowe correspondence along with a quote from Sparkman’s lukewarm endorsement of the idea, But, on the same day he wrote Morgan, Cannon contacted Hollings, chairman of the subcommittee on legislative appropriations, which is responsible for actually appropriating money for additional office space.
“As you know,” Cannon wrote on November 13, “it is the responsibility of the Committee on Rules and Administration to allocate whatever space is made available to us for Senators and committees. As Chairman of the Committee I can report to you that I see no way we can comply with the requests coming in almost daily (between now and the time the Dirksen extension is completed some several years hence) if we have to rely on the structures now in existence.”
Hollings’ subcommittee took up the matter and within a short time reported a supplemental appropriations bill which authorized the Sergeant at Arms, subject to approval from both the Rules and Appropriations Committees, to lease 400 North Capitol Street for no more than $3,375,000 a year. The bill did not obligate the Senate to enter into any such arrangement, it is true. In fact, the report on the bill noted that more information was needed before the Senate entered any such arrangement and asked the General Accounting Office to look into it. But, by passing it, the Senate would forfeit any further opportunity to approve or disapprove the final decision.
Hollings’ defense of his subcommittee’s action is based upon expediency. The building was available, he said. It might not be available six months later. ‘We wanted to make certain the door was kept open so that we could negotiate if it were in the best interests of the U.S. Senate,” he said.
The whole matter might have gone unnoticed when the appropriations bill came to the floor on December 10 had not Sen. James A. McClure, R-Idaho, questioned it. McClure’s attention was first called to the legislation because he thought that the building was going to cost the Senate more than it would have cost the GSA. It appeared that, if the Senate did rent the building for $3.2 million plus assorted additional costs, it would indeed cost more per square foot than the GSA would have had to pay for it.
McClure also wanted to know who had made the determination that the space was necessary or that this particular space was desirable. In the end, he insisted upon amending the bill to require the lease’s approval by formal Senate resolution.
McClure was perfectly correct. The process by which the authorization got into the appropriations bill was irregular, to say the least. What Smathers had done was to convince his former colleagues to bypass the usual authorization process and quietly insert an authorization in an appropriations bill.
The Senate is now retracing its steps in an attempt to write an adequate legislative history for the whole affair. F. Nordy Hoffman, Sergeant at Arms met with the owners of 400 North Capitol Street in January, determined that the rent they wanted was too high, and finally came to the conclusion that, considering annual taxes of $660,000 on the property which the Senate would have to pay, it would make more sense for the Senate to purchase the building than to rent it. In mid-March, discussions over the lease of the building were suspended since Hoffman was not authorized to discuss buying the building. At this writing, the Senate is considering buying the building. There have been no formal negotiations about its sale. The owners reportedly want between $31.5 and $35 million for the building. Since they claim that it cost them $31.5 million to build, the whole business raises some questions about why the owners are so anxious to get rid of it. They claim to have other parties who are interested in renting space there, including Time-Life Books. However, the building was begun three years ago and is still unoccupied. Hollings indicated that the interest payments on the $26.5 million mortgage are burdensome.
The story of 400 North Capitol Street underlines the reason one hires a knowledgeable Washington lawyer and particularly one who is familiar with the idiosyncrasies of Congress. Former Members of Congress have special advantages as lobbyists. Not only are they lobbying their former colleagues and friends but they also have access to inner sanctums such as the gymnasium and the floors of both houses (in the House, former members must leave the floor if they have an interest in the matter under discussion there but this is not true in the Senate). There are many former Members of Congress who are now successful Washington lobbyists. Smathers ranks high on a list which includes Craig Hosmer (American Nuclear Energy Council) Frank Ikard (American Petroleum Institute), Andrew J. Biemiller (AFL-CIO), Earle Clements (Tobacco Institute and several major tobacco companies), and lawyers like Emanuel Celled (Weisman, Celler, Spett, Modlin & Wertheimer). Among the clients whom Smathers’ law firm represents as attorneys and lobbyists are such diverse organizations as the American Horse Council, the Association of American Railroads, the National Hockey League and the Pennzoil Company.
Smathers never intended that his footsteps should show, nor would they have if Hollings had not felt it necessary to defend his actions in the Congressional Record. But there they are for everyone to see. As a result, When Morgan did hold a hearing on 400 North Capitol Street not long ago, one of the questions he asked Behrman and Ballowe was the name of the attorney who represented them.
“Sen. Smathers is representing the owners,” replied Behrman. The lobbyist-lawyer had not accompanied his clients to Capitol Hill that day.
Received in New York on April 16, 1976
©1976 Mary Clay Berry
Mary Clay Berry, a freelance writer, is an Alicia Patterson Foundation Fellow. With this newsletter she begins her study of the lobbying process in Washington, DC. The views expressed by the author in this newsletter are not necessarily the views of the Foundation.
