Wright’s Ties to Developer Key Focus of House Probe

WASHINGTON —  Beginning with their first chat over coffee in 1963, the friendship of House Speaker Jim Wright and developer George A. Mallick Jr. has been predicated upon their mutual drive to be successful.

“He was a young congressman; I was a young businessman,” Mallick told The Times last week, recalling how he and Wright liked each other from the moment they met. “He was ambitious in politics and public service; I was ambitious in business. We both had dreams. We talked about our dreams--you know, how young lions talk.”

A quarter-century later, both men have achieved their dreams. Wright, 66, holds the nation’s third-highest office. Mallick, 54, a wealthy entrepreneur, has both made and lost millions of dollars in the boom and bust economy of the Texas real estate market.

But the complex financial and social relationship that has grown up between these two men over the years is now a central issue of a House ethics investigation that threatens to tarnish much of their success and perhaps even deprive Wright of his speakership.

It is estimated by the House Ethics Committee conducting the investigation that Wright and his wife have received at least $100,000 in direct personal benefits from Mallick--including the use of a Cadillac and a condominium. That is in addition to substantial profits that the Speaker has reaped over the years from their joint investments.

A key question that congressional investigators are now trying to answer is whether Wright, in his gratitude for Mallick’s largesse, ever used his power in the House to win legislation or government action that would benefit his friend. House rules strictly prohibit members from accepting gifts in excess of $100 from persons with an interest in legislation.

Deny Using Influence

Both men staunchly deny that Wright tried to use his influence to benefit Mallick on two occasions at issue--once when the federal government was about to foreclose on a $2-million loan backed by the developer and another time when he was trying to raise funding for the restoration of the old Ft. Worth stockyards. Mallick noted that the loan ultimately went into default and that he never found funding for the stockyards project.

“If I benefited, I want to know where?” Mallick said in a lengthy telephone interview from his office in Ft. Worth. “I don’t see where I have monetarily profited by this relationship. I don’t see where I socially have profited. I have never gotten a government contract. I have not had a HUD grant for more than 20 years. I’ve never asked him, his staff or any member of Congress for anything.”

After nine months of inquiries, the Ethics Committee is expected to issue its findings on Wright’s financial affairs soon, perhaps as early as this week. Many in Congress have concluded that, if the report is very critical, Wright’s leadership in the House could be weakened, perhaps so much that he would lose his top-ranking post.

Met at Dedication Ceremony

As both Wright and Mallick remember it, they first met 26 years ago when the congressman attended a dedication ceremony of a shopping center developed by Mallick in suburban Ft. Worth. Afterward, they went for coffee, hit it off and talked for more than two hours.

From the start, Wright seemed drawn to Mallick because of the developer’s notable success at making money. At the time, the young congressman was weighted down by an enormous personal debt that he had incurred in an unsuccessful bid for the Senate in 1961.

Mallick, the son of a wealthy wholesaler and grandson of a Lebanese immigrant who made a fortune after starting out as a peddler, already was well established as a real estate developer when he met Wright. By 1967, he would be hailed as Ft. Worth’s “outstanding young man” of the year.

According to Mallick, Wright asked him during their first chat if he could invest some money in one of the many land deals that Mallick was putting together. “I sure would like to make an investment in real estate,” he recalls Wright telling him.

Their conversation led to Wright’s first business deal with Mallick in 1965--a $5,000 investment with nine others to purchase a piece of property near Ft. Worth. Even after Wright sold his share a few years later, he continued to ask Mallick frequently about it--”how’s our investment doing?” he would say.

Other members of Congress who know Mallick characterize him as typical of many wealthy hangers-on that they encounter in their home districts.

Seen Drawn to Politics

“He’s one of the innumerable people you see out there who just like to be a part of politics,” said Rep. Martin Frost (D-Tex.), who--like Wright--has received many campaign contributions from Mallick. “There are thousands of these people around the country.”

While Mallick clearly likes being identified as the Speaker’s friend, Frost and others insist that the Texas developer has never sought to trade openly on his relationship with Wright.

“George is a 100% teetotaler, all-American, a good man and a good citizen,” said Carlos Moore, another one of Wright’s business cronies. “He’s not a liar or a conner. I’ve never known him to drop Jim Wright’s name in his life. Everybody knows he and Wright are friends, but you lower yourself when you flaunt it. If people want to draw their own conclusions, fine.”

Mallick acknowledges that his friendship with Wright is an unlikely one.

“It is a bit of an odd couple,” he said. “If you look at it, you wouldn’t think we would fit. He’s Protestant, Irish and red-headed; I’m Lebanese, Catholic and black-headed.”

Both Intensely Private

Yet despite their many differences, Wright and Mallick both have reputations as loners and intensely private men. Like Wright, who has few close friends among his colleagues in the House, Mallick is known in Ft. Worth as a man who would rather spend time with his wife and five children--ages 22 to 30--than socialize with the city’s other wealthy folks.

Mallick said that he was drawn to Wright initially out of admiration for the congressman’s controversial stand in favor of civil rights. In 1958, when Mallick was building homes for middle-class blacks, he attended a public meeting at which he said Wright defended his civil rights stand after a woman in the audience demanded: “What are you going to do about these niggers?”

Indeed, Mallick himself has experienced considerable discrimination during his life. His dark complexion has often been misunderstood in a town where there are few other people of Lebanese heritage.

As a boy, he recalls, he was ostracized by his teacher and other children after his family moved into the wealthiest neighborhood in town. “The teacher actually segregated me in the classroom,” he said.

In fact, Mallick believes that he is still the target of discrimination. He said he was particularly upset recently when he heard that an investigator had referred to him in private as “a short, overweight, olive-skinned man of Lebanese descent.”

In time, the Wright and Mallick families grew close, creating an even firmer bond between the two men. Mallick’s wife, Marlene, talks by telephone almost daily with Wright’s second wife, Betty. In addition, Betty and Mallick’s daughter, Angela, like to go shopping together, and the Wrights frequently socialize with Mallick’s sons, who are neighbors at the Ft. Worth condominium where they stay when the Speaker returns to his home district.

According to Mallick, he and his wife frequently dine with the Wrights when they are in Ft. Worth--either going to a restaurant or gathering at Mallick’s sprawling ranch home.

It was out of this friendship that the idea first arose to put Wright’s wife on the Mallick payroll. After resigning from the House Public Works Committee staff when Wright became majority leader, she received salaries of $18,000 annually from Mallick in 1979 and 1980 before switching to a position at Mallightco--a closely held company that blends the names of the two families--for the years 1981 through 1984.

Mallightco, which recently was dissolved, was formed in 1979 when the Wrights put up $58,000 in stocks and the Mallicks kicked in an equal amount of assets--creating a pool of money from which they made investments in everything from stocks to gems.

Mallick portrays Mallightco as nothing more than “an investment club” among friends. “On its best day, it wasn’t worth a half-million dollars,” he said. “There was nothing to hide or we wouldn’t have put our own names on it.”

Acted as Adviser

Both Wright and Mallick insist that Betty earned her salary from Mallightco. Wright refers to his wife as “a career woman,” and Mallick added: “This was a serious job. She watched the stocks. She went to numerous meetings with me. She gave me some very good advice.”

Although he denies that he created Betty’s job simply to funnel money to the Wright family, Mallick acknowledges that consideration was given at the time to how Wright’s wife could best earn outside income without creating a conflict of interest for her husband.

“When she went to work for me, we thought it was perfect--a local firm with no interest in legislation,” he said. “This was so far removed from Jim Wright’s job, it seemed very proper.”

Mallick said that Mallightco hired Betty primarily to avoid a 70% tax surcharge imposed on the earnings of personal holding companies that have no apparent business activity. “We needed an employee; Betty was that employee,” he said.

In addition to her salary, Betty received the use of a brown 1979 Cadillac, which the family still drives, and the use of a condominium owned by Mallick’s son, Steven. Before buying the condo in 1988, the Wrights paid $21.67 a day to use it whenever they were in Ft. Worth.

Calls It Strictly Business

Mallick justified Wright’s use of the condo by noting that he has always provided rent-free apartments for his employees. “That’s the way I do business,” he said. “It was Betty Wright’s use of the apartment through the employ of the Mallick company. Jim Wright was merely her spouse.”

While insisting that their arrangement violated no rules, Mallick conceded that he made a mistake in not dissolving Mallightco in 1987 when Wright ascended to the position of House Speaker. He said he did not realize that Wright’s finances would be scrutinized so closely as Speaker.

Despite his insistence that he has no interest in legislation, Mallick did provide Wright with a 25-page report on Texas’ troubled savings and loan institutions in 1987 as the thrift industry was unraveling in that state. Wright asked him for the report after a meeting attended by about 125 Ft. Worth business people who were complaining about foreclosures.

In response to the concerns, Wright pressed House Democrats in early 1987 to amend legislation recapitalizing the Federal Savings and Loan Insurance Corp. to require federal regulators to show “forebearance” in dealing with the troubled thrifts.

Mallick’s role as adviser to Wright came into question as the result of a current lawsuit against Mallick, his wife and son, Michael, stemming from a $2.2-million loan that they received from the now-defunct Interwest Savings Assn. in 1985 to develop a shopping center.

‘Fire Sale Prices’

When they made no payments on the loan, the property was liquidated for $1.2 million by the FSLIC and the agency is seeking the additional $1 million from the Mallicks. The Mallicks have countersued on grounds that the property was sold at what Mallick describes as “fire sale prices” and that more should have been gotten for it.

Committee investigators are reportedly investigating whether Mallick stood to gain directly from the forebearance clause that Wright sought in the savings and loan legislation. But Mallick noted that the savings and loan did foreclose on his loan. Moreover, he said, the shopping center loan was not facing foreclosure until more than six months after he completed his report.

Likewise, Mallick insisted that his efforts on behalf of the stockyards development occurred long after Wright had already secured $11.8 million in federal grants for the project in the years between 1974 and 1986. He said that he would have earned an interest in the stockyards project if he succeeded in raising enough money to refinance the debt of the private developers but that he failed to do so.

Trouble is nothing new for a man who by his own admission has made and lost at least two fortunes in his career. In fact, Mallick suffered a much worse setback in the economic downturn of the early 1970s, when he found himself overextended on loans and was forced to sell much of his property, including Mallick Tower, his 10-story showcase building in Ft. Worth.

Sued by Bank

Mallick subsequently was sued by a New Mexico bank for failing to repay a $1-million loan and, although he proved that the bank had failed to credit payments to his account, the lawsuit prompted an investigation by federal bank examiners and the FBI. The investigators found nothing, and Mallick’s finances rebounded.

According to court records, Mallick and his wife also have been cited or sued repeatedly by state, local and federal officials for not paying taxes. In the last six months alone, Mallick was sued by Ft. Worth for $8,640 in delinquent taxes, was hit with a federal tax lien for $2,250 and subjected to a state tax lien for $2,722.

Staff writers J. Michael Kennedy and Bob Drogin in Ft. Worth contributed to this story.