Bonus Chapters On The Way

Starts of coming Bonus Chapters below

      Soon..and by that, I hope by later this week (as in, by April 13 or so), I will publish here or on my web-site (EddieCurran.Com) or both, five chapters that I cut from the book, as well as sections on the administration of Fob James and another section containing  thoughts about journalism and investigative journalism strategies. I'll publish them with photos and copies of various records that are cited in the chapters.
      As those familiar with the book know, each chapter begins with two quotes. Here are the names of the coming chapters and the accompanying quotes.

THE MATRIX MAN

       “He has extensive training in the use of ancient weapons and is an avid practitioner of Escrima and Kendo. He also has had extensive training in the use of light firearms … (He has) run more campaigns for more politicians in Alabama than anyone else.”

      -- Portion of short biography of Joe Perkins on an old Matrix Group web-site.

      “I’d be scared to death.”

      -- Perkins’ friend, Birmingham-Southern College politics professor Natalie Davis, when asked how she’d feel to be opposite Perkins in a political campaign.

The Governor’s Money Pot

     $483,935

   -- Amount of charges by Siegelman, his wife Lori, his "confidential assistant" Nick Bailey and others to a special pot of money called the governor’s contingency fund, and for which state auditors were unable to determine the nature of the expenditures and/or their public purpose.

     “Let me come to the defense of my wife this way: I ran for governor, Lori did not. If you plan to keep kicking someone around, kick me.”

    -- From Feb. 28, 2003 letter Siegelman sent Register publisher Howard Bronson, after our first story on the contingency fund.

The $761,000 Web Page

     “The contract states that Group One will redesign the (ADECA) web page for a cost of over $798,000. Web pages can be done for under $2,000!  What is going on here? The company is not in the phone book.”

     -- Anonymous e-mail from tipster identifying himself as, “Maxwell Smart.”

“$90,000”

-- Amount that former ADECA director Nick Bailey testified he was given by Jim Lane, a Montgomery businessman, Siegelman donor and co-owner of Group One. Bailey said he believed he’d repaid about $30,000 of that sum.

The Gadfly

      “Aside from the outburst, Mr. Andrews said, Mr. Curran had shown bias by ‘editing’ an ethics complaint filed against Governor Siegelman by a political opponent. Seeking comment, Mr. Curran had faxed the governor’s office a draft of the complaint, bearing two scrawled question marks and some highlighting. When the final complaint was filed, the governor’s staff contended that Mr. Curran had edited it.”

      -- From of Oct. 8, 2001, story in the New York Times bearing the headline, “Governors’ Limits on Press Raise Concerns.”      

      "I therefore request not only that Ziegler’s politically motivated allegations be summarily dismissed, but that the Commission consider investigating the circumstances that led to the filing of the complaint, and that it take all appropriate actions against the responsible parties.”

    -- Aug. 1, 2001, letter from Ted Hosp to Ethics Commission Director Jim Sumner, in which the governor’s lawyer asked the commission to consider investigating me for assisting Zeigler with his complaint against Siegelman.

Emelle Enabler Makes Mint

One day.

-- Period between Susan Kennedy’s final day as Revenue Department general counsel and when she started billing the department on contracts she’d helped award to Pam Slate, her law partner upon her departure from state service. The firm of Slate Kennedy was to be paid more than $4.6 million on the contracts.

“… someone, prior to making records available to me, had literally covered over the very portions of those records which they knew to be the subject of my inquiry.”

-- E-mail I sent to Gov. Siegelman's general counsel Ted Hosp and governor's office spokeswoman Carrie Kurlander after discovering that records  provided me by the Revenue Department had been doctored to conceal when Kennedy started billing the state and how much she and her firm had billed.

     Last but not least, in order to encourage "hits" on the blog, I've added what the Brits call a Page Three Lady. For a link to today's, go here.

A column, and something on the way

Chip Drago, the maestro behind, Mobile Bay Times, asked me to write something listing stories I might be working on, or keeping up with, were I still actively reporting.
The column is here: http://www.mobilebaytimes.com/curran032911.html


Also, coming soon I will be publishing, probably on this site and my book's web-site (EddieCurran.Com) some chapters that were excised from, "The Governor of Goat Hill." As anyone familiar with the book knows, it is long as hell as is. It was at one point even longer.
Chapters that will be made available include: "The Marix Man," "The $760,000 Web Page," "The Governor's Money Pot," and more.

Pulling Teeth

So, is the Siegelman administration building two warehouses, and if so, is this Goat Hill Construction company involved?

Simple questions, or so it seemed until you asked them.

The office of G.H. “Goat Hill” Construction -- as empty

 as the company, and how I found it on a visit in late spring 

2001. The door was ajar, but nobody was in.

   This slightly abridged excerpt from the book describes my early difficulty in verifying a tip that the Siegelman administration planned to build two state warehouses at a cost of about $20 million; and that it had hired a newly formed company called G.H. (Goat Hill) Construction for the project. An agency called ADECA -- The Alabama Department of Economic and Community Affairs -- was overseeing the project to build a warehouse for itself and, nearby, one for the state liquor agency. G.H. Construction was secretly owned by administration friend, backer and money-supplier Lanny Young.            
           
In late March 2001, the mayor of Lowndesboro called to suggest that I look into landfill dealings by Young in Lowndes County. His description of the situation sounded interesting, and I began researching Young's landfill business and his relationships with the Siegelman administration and Waste Management.

During this asking around, I received a tip from Claire Austin, then a lobbying partner of Young's, informing me of G.H. Construction and its no-bid job to build the warehouses. The testimony referred to is from Siegelman's 2006 trial, and "Sherrod" refers to a story I'd done about a month before.  Freeman is Dewayne Freeman, the first of several people to serve as ADECA's director during the Siegelman administration. Here is the first part of the excerpt:

Claire, as she testified, first told investigators with the attorney general’s office about G.H. Construction, but they hadn’t moved on it. I don’t say this to make them look bad. Their job is to investigate crimes. The level of wrongdoing needed to justify a news story is far lower than that required to commence a criminal investigation, much less charge someone. In my business, good ole political favoritism is plenty. And that was all I saw. Nothing shown or told me by Claire indicated criminal activity. It looked like another no-bid crony contract in the Sherrod vein.

My initial attraction to G.H. Construction wasn’t its potential as a major story, but an easy one. I’d need only to determine the scope and cost of the project, report the selection of G.H. Construction in the context of the other no-bid contracts, present an overview of the Lanny-Hamrick-Siegelman relationship and, as gravy, ladle on some of what I’d learned about Lanny’s landfill business.
G.H. Construction would be a quick pop, something to buy time until I could finish the landfill story.
The first step seemed obvious enough. Call the two agencies. They’d surely confirm their plans. The alternative was declaring they were unaware of their intentions to spend millions of dollars on warehouses a stone’s throw from downtown Montgomery.

First up was ADECA, which was to be the contracting agency for both buildings. Thus began my rocky relationship with Larry Childers. Over the next two years, we would bicker like an old married couple, me insisting that records had to exist, him invariably saying otherwise, and me always – and I mean always – winning out....
Larry is baby-faced, prematurely grey, and resembles a young Captain Kangaroo. The first time I spoke to him was when I called to ask about the warehouses. “We don’t build warehouses. We issue grants,” he said, matter-of-factly.

I told him, polite as could be, that I had it on good authority that ADECA was in fact preparing to build two warehouses, one for itself, the other for the liquor board.
Couldn’t be, Larry said. ADECA doesn’t build warehouses. It issues and manages grants.
I might as well have told him that ADECA was developing a space program so Siegelman could become the first governor hurled into orbit.

Could he pass on my question to his superiors? You know, in the highly unlikely chance that ADECA had strayed from its mission?
He hemmed and hawed, said he’d ask, didn’t convince.
The next call was to the ABC board. From a straight news standpoint, that agency’s plans were a bigger story. Alabama was one of a handful of states still in the liquor business, and many wished it would get out. Scandalous or not, if the Siegelman administration was contemplating a new warehouse, it reflected a long-term commitment by the state to remain the primary source of all hard spirits sold in Alabama.

I was put through to staff attorney Bob Hill. He sounded genuinely perplexed when I asked him about ABC’s plans for a new warehouse. “I’m not aware of any project,” he said.
Bob said if there was such plan, he would know about it. As the board’s lawyer, it was his job to draft or at the very least review all its contracts. Then as now, I believe that Bob, a short, easygoing man in his 60s, was telling the truth. He really didn’t know. As I would come to see, the plans to build and finance the warehouses were to an amazing degree concealed from merit system employees, the so-called bureaucrats who remain in place administration after administration.

When I called Larry back a day or so later, the response was the same. Grants, not warehouses. He seemed to waffle when I asked if he had passed my question up the food chain.
I concluded my first trip to Montgomery since Claire’s tip with an unannounced visit to Larry’s office. I introduced myself and asked if he’d learned anything about the warehouses. Larry said he remained unaware of any plans for new warehouses. That wasn’t a definitive no, so I asked if the director was in.

I was able to ask this with a straight face, as I didn’t yet know that Nick Bailey almost never darkened ADECA’s halls. He had been elevated from “state budget officer” to ADECA director in May 2000, after Freeman returned home drunk from a night out and got in an ugly row with his family. His wife called the police. Though the charges were dropped, Freeman’s political career was over. He was out at ADECA, and Bailey in, though not really.

Larry said Bailey wasn’t available, so I asked who served as ADECA’s number two man. Chris Pitts, said Larry. The name rang a bell from my Lanny studies. Pitts, who is black, had written black leaders in Lowndes County on Lanny’s behalf, urging them to cease blocking his landfill.

I took the elevator a few floors up and entered Pitts’ office. I told him I was all but certain that ADECA was planning to build a pair of warehouses, but that Larry had indicated otherwise. Did he know anything about this?
Pitts, unconvincingly, said he did not. But if there was such a project, the folks at ADECA’s surplus property division would be the ones to know. Surplus property is a little-known ADECA sub-agency that warehouses all manner of used state and federal government merchandise before it’s sold at auction.
I asked Pitts if he could call over there.
I sensed reluctance, but recognition that he couldn’t very well say no to what was, after all, not an unreasonable request. So he called, and soon I was talking with Shane Bailey, who was – and by then the connections were piling up so fast I needed a chart – Nick Bailey’s younger brother. 

The Siegelman administration had bypassed the merit system of using competitive means to employ state employees and made Shane, at 28, director of the surplus property division.
After a pause, Nick Bailey’s brother said that, yes, his division was overseeing a project to build the two warehouses, for itself and the ABC board.
Confirmed, finally. What a pain in the rear that had been.

NOTE: Later in the chapter I describe how I learned that G.H. Construction had submitted false bills to essentially steal more than $90,000 from the state; that I presented this evidence to the administration; and that they were unable to explain the bills or provide work product supporting them. Throughout this period I was repeatedly requesting a copy of G.H. Construction's contract, and was told, time and time again, that it could not be located. I argued that the as-yet unsigned contract should be a public record at that point because payments had been made pursuant to its terms. The following excerpt is from the end of the, "Goat Hill Construction" chapter. The afternoon in question is April 26, 2001, after a meeting about the warehouse project with Nick Bailey and others.

Mabry is Henry Mabry, the state Finance Director at the time; Rip is Rip Andrews, the top assistant to press office director Carrie Kurlander Blount Parrish is the investment banking firm led by Bill Blount.

Late that afternoon I sent an e-mail not just to the press office but Mabry and Siegelman as well. I complained about the administration’s continued failure to provide the G.H. Construction contract and other records and summarized what I intended to report in Sunday’s paper. I made particular note of the rush to sell the bonds. I had, as I told them, become aware that the administration was racing to sell the bonds before publication of our story. And then:

“I put the source’s tip in the back of my head and didn’t think too much of it until today, when Nick opened the meeting by apologizing for his cell phone ringing, and explaining the apparently frantic attempt to sell the bonds that was going on. I should have thought to ask then what was on my mind: Why Friday? What’s the rush? Why not, say, next Wednesday?

“Rip has on several occasions sought to sway me from running the story on Sunday, using the argument that if I wait until the bonds are sold, then all the contracts and such will be public record and I’ll ‘have everything.’ I haven’t decided whether or not my story will reflect those requests on the part of the administration to hold the story until after the bond sale, but am considering doing so.”

Bonds are of course sold to investors. A seller of bonds, same as a publicly traded company, must disclose risks to securities bearing its name. What might happen if investors learned that the contractor overseeing the project they were funding had already submitted fraudulent bills? Might they cut and run?

Could I do it over again, I’d be more businesslike, more judicious in my choice of words and phrases, less of a smart-aleck. But I wasn’t and here it is, where I connected their refusal to provide the contract to their rush to sell the bonds:

“I’m led to believe there’s only one copy (of G.H. Construction’s contract) and that no one can find it or something like that. I take that explanation as an insult to my intelligence. Since I have no other choice but to accept this explanation -- this being Alice’s Wonderland -- I’ll play along and assume there’s just one copy. Now, I propose a novel solution: Stick it on a copier and make another copy. To clarify – maybe that’s been the problem – I don’t actually need the ORIGINAL, but a COPY OF THE ORIGINAL.
So I ask: Is the failure to provide this public record motivated in part to keep me from writing the story by Sunday, or to prevent readers, and possibly investors in the bonds, from learning things which might possibly appear unfavorable to the people running this bond deal, and by extension, raise doubts about the bonds themselves?

From talking to Rip, I believe he would call it a conspiracy theory. I present it merely as a question that I’m hoping will be answered.

The purpose of the e-mail was to pry free the G.H. contract. I wasn’t trying to kill the bond issue and the warehouse project. Couldn’t imagine such an outcome. It was, then, with amazement that I read a fax sent us the next morning and dated the day before – written, it would seem, within hours of reception of my e-mail.
It was a one-page memo from Mabry to Bailey, as ADECA director, and to ABC boss Randall Smith. Siegelman was cc’d. The chief bits are as follows:

After considering financial questions raised by The Mobile Register in relation to this project, I am ordering that all work on the project by G.H. Construction and others cease until an independent review of this matter can be completed.

Former Chief Justice C.C. “Bo” Torbert, Jr., has agreed to conduct this independent review on behalf of my office. All financial records relating to this project should be delivered to Judge Torbert with all deliberate speed so that he may begin his review as soon as possible.

G.H. Construction, the warehouse project, the $393,870 fee that was to be Blount Parrish’s upon the sale of the bonds -- that and more, vaporized. And before we’d written the first word.

NOTE: The above is the end of the chapter called, G.H. Construction. What follows is a slightly abridged version of the start of the next chapter, called, "The Warehouse Stories." It describes, among other things, the start of the investigation into the Siegelman administration. Beginning in 2002 and continuing to this day, Siegelman and his supporters have blamed Leura Canary(and later, Karl Rove and others) for pursuing Siegelman for political reasons. In May 2001, when the investigation began, Canary had not yet been named U.S. Attorney in Montgomery. She had no role whatsoever in the decision to open the investigation.
Vaughan is Roland Vaughan, at the time the president of Sherlock Smith & Adams, the firm that designed the warehouse site and was to oversee construction because G.H. Construction, though due more than $2 million for the job, was deemed incapable of the task and was not to be permitted to work on the project for which it was to be paid that princely sum.



“We’ve received several requests to open an investigation into the matter of G.H., or Goat Hill, Construction.”
-- Attorney General Bill Pryor, on May 1, 2001, announcing the start of what became not just an investigation into Lanny Young’s company, but much else as well.

“Finally, I want to thank the Mobile Register for bringing this issue to my attention. Public officials and the press often seem at odds, but both serve the public in different ways. It’s the job of reporters to uncover problems and find things that are wrong. When they do, it’s the job of elected officials to solve the problems, and set things right. That is exactly what I am doing today.”
-- From statement issued by Siegelman on May 4, in conjunction with release of the report on G.H. Construction deal by former Alabama Supreme Court Chief Justice C.C. “Bo” Torbert Jr.

We naturally had to report Mabry’s memo, meaning I had to write a story explaining that a project the public didn’t know about was being canceled because of a story that hadn’t yet been written. We quoted the memo and summarized the warehouse project and the findings to be reported in detail in the next day’s paper.

Carrie told readers the state expected to build the warehouses, though possibly without G.H. Construction. She said the bond sale was cancelled in part because Nick “had some tremendous discomfort because your questions could not be answered.”

To which I did not add: “Actually, Nick’s discomfort wasn’t due to a lack of answers, but a failure on the part of the reporter to fall for them.”

The warehouse deal smelled in many ways, but the silver bullet was the $90,058 payment to CDG. There was just no explaining it away. At the last minute, a final effort was made. The administration sent a courier to Mobile to deliver a stack of paper three pounds heavy but practically speaking, weightless. The cover page declared it to be the, “Engineering Report: Proposed Warehouse Building Site,” by CDG Engineers. The document was composed almost entirely of pages yanked off the Internet, a bundled together glop of state laws and geological information unrelated to the North Ripley site.

I called Carrie and, part bluff, told her I wasn’t buying it and wouldn’t be mentioning it in the story. She didn’t put up fight, as she would have had the report been genuine. To my knowledge it was never again offered, such as to law enforcement, as evidence of actual work done by CDG.

It’s rare for a story to establish beyond question that a crime has been committed. Our Sunday story did that. It didn’t prove bribery, since that would have required access to banking records, but theft from the state. That was plenty.

Here are the opening paragraphs of the story that started the investigation into the Siegelman administration. There’s one error – reporting the bond sale at $16 million, rather than $20.7 million. That was their fault for failing to provide me with the correct numbers and the documents.

Tomorrow morning, officials in the Siegelman administration were to meet with members of the Montgomery Downtown Redevelopment Authority, a passel of lawyers and investment bankers with the firm of Blount, Parrish & Co.

The purpose: To sign the many documents required for the proposed sale that day of more than $16 million in bonds to investors. The proceeds of those bonds were to finance construction of two massive state warehouses on a 256-acre site just north of downtown Montgomery.

That meeting has been canceled. The bond deal, which almost certainly will go through at some point in the future (it never did), is on indefinite hold.

The reason involves questions raised by the Mobile Register about a fledgling two-man company, G.H. Construction of Montgomery, chosen by the state to act as “construction manager” over the project, state Finance Director Henry Mabry stated when he halted the project Thursday evening…
Though Mabry cited concerns about the entire project, the primary factor in his decision involved questions about two bills -- one for $90,058 submitted by G.H. Construction on behalf of CDG Engineers and Associates of Andalusia; and another, for $5,200 by Denton, Ponder & Edwards, a Roanoke, Ala., accounting firm.
“As of right now, we do not have a work product document, nothing,” Siegelman spokeswoman Carrie Kurlander said of the CDG bill. “There may be a perfectly reasonable explanation for that. That’s exactly what we hope Judge Torbert will find.”

Like many of my Siegelman stories, it demanded considerable space, as there was much to tell. Readers had to be introduced to the warehouse project, Lanny Young, CDG, our discovery of the two boundary surveys, the administration’s failed efforts to explain it away, and much else. There was, for example, the omnipresent Ellis Brazeal. I had called him to ask about CDG since he was listed as the firm’s lawyer in the dubious bankruptcy filing by Lanny’s landfill company, and CDG wasn’t returning my calls.

“My understanding is that they’ve done substantial work on the (warehouse) project and that there is substantial work ongoing at this point,” Brazeal told readers.

I couldn’t let that go uncontested. Brazeal’s statement was followed thusly: “Asked for comment on Brazeal’s claim that CDG is presently doing substantial work on the project, Vaughan and state officials repeated earlier statements that they’re unaware of any work by CDG on this project, ever.”

I slept in Monday and was awakened mid-morning by a call from Tim Fuhrman, then the number two man at the FBI’s Mobile office. Fuhrman said that some Montgomery-based agents and Jack Brennan, a much-respected former FBI agent then with the attorney general’s office, wanted to talk to me. Soon. As in that afternoon.
He said it was clear from Sunday’s story that I’d gathered all manner of records. The FBI wanted to move fast and it would save them a bunch of time if they could talk to me and copy those records. If it was okay with me, he would tell them to get in the car and come on.

I knew Tim, if not well, and liked and trusted him. But I’d never had a request like that, and it came with me in bed, groggy with sleep.

Pluses: The chance to meet with FBI agents, get a first-hand taste of how they operate, and, what the heck, get my ego stroked by a bunch of pros wanting my stuff. Also, did I have an obligation as a citizen to provide investigators with evidence of a crime if I possessed it?

Minuses: I wasn’t supposed to actively participate in the prosecution of someone I was writing about.
But: Reporters can and should try to develop a rapport with prosecutors and investigators. There’s almost no such thing as a national political scandal story that doesn’t cite un-named, “Justice Department sources,” and such relationships inevitably involve some give and take.

Was I on the verge of developing such sources for what promised to become a criminal investigation into the Siegelman administration? And if so, wouldn’t this benefit our readers by availing me of information and insights?
Tell them to come on, I said. I’d meet with them.

And started having second thoughts after coffee and a shower. I arrived at work and knew I had one option. Tell Paul Cloos, my editor. I suspected he would scotch the meeting on the grounds cited above. If not, and the meeting went ahead, I’d at least have covered my ass.

Paul was against it and I made no attempt to change his mind. I called Fuhrman, apologized, and said I couldn’t meet. He tried to change my mind, and I sought refuge in the reporter’s trick known as “blame the editor,” the most common variant being, “I hate to have to ask this next question, but my editor says I have to.”

The meeting, which I would have enjoyed, was off, the advantage being I could focus on the next day’s story. The night before I called Torbert to get a sense of what he was thinking. He said that on Friday, shortly after his appointment, the administration had provided him with all manner of documents. Among them: The G.H. Construction contract, located, he said, at Blount Parrish.

Soon as we said our goodbyes I was e-mailing Carrie. I told her what Torbert told me – that the contract had been found, and at Blount’s office, where I’d been telling them to look for weeks. I told her I expected to be provided, immediately, with a copy of the contract.

The next morning she delivered a response: The administration would not be releasing the contract – not now, not ever.
Not ever? As in, never ever?
Like hell!

---------------------------------------

I’m not fond of the old saying, “Never pick a fight with people who buy ink by the barrel,” though will acknowledge some truth to it.

As on this occasion. It was time to pour a few barrels on their heads.

The refusal of government agencies to turn over records bothers me more than the activities I’m seeking to uncover. I recognize that Lanny Young’s theft from the state is a worse act than the administration’s decision to hide, lie about and withhold the G.H. contract. But it’s the denial of records that makes my blood boil.
We needed the contract. They could deny us, but at their peril.

The purpose of the next day’s story was less to provide new information as to warn readers that if their paper couldn’t get its hands on the contract, they would never learn the truth about G.H. Construction. Their paper was trying, but their governor was playing keep away.

We reported that the contract had been found late Friday, “where the newspaper had suggested the state look in the first place: with a firm handling bonding for the project.”

Here is some of what followed:

Siegelman spokeswoman Carrie Kurlander said Monday that the administration was truthful during the past weeks when it reported, almost daily, that it couldn’t locate the G.H. contract in any form ... Kurlander was reminded that the Register had suggested several times that the Blount firm be contacted, since it seemed logical that the investment banking firm handling the bond sale would have the proposals or contracts involving G.H. Construction.

Asked Monday why the administration hadn’t contacted Blount, Parrish to locate the records for the Register, but had done so for Torbert, Kurlander did not respond. 
I didn’t take pleasure in putting Carrie on the spot. She was an innocent in this. But she was the governor’s spokesperson and well compensated for it. If they were going to stick her out there to get run over, that was their call, not mine.

Scrushy's Concealed Donations, Revealed

1. 
           

What follows is the last of three chapters from my book, "The Governor of Goat Hill," that recounts most of the elements of what later became the prosecution of Richard Scrushy in the larger case against Siegelman. This chapter, as the previous one, tell about the reporting I did to uncover the substantial efforts made by Siegelman, Scrushy and others to conceal forever a pair of $250,000 donations to the Alabama Education Lottery Foundation. Siegelman and those in the national media who get their facts from him are forever characterizing the money as being normal campaign contributions. Among the many aspects of the "contributions" that separate them from the norm is that, well, they were not reported to the state (Alabama Secretary of State, Elections Division) and federal (Internal Revenue Service) agencies to whom such reporting was required by law.
         This chapter, like the last one, is long. Midway through I've included one of the e-mails I sent to HealthSouth spokeswoman Kristi Gilmore -- and described in the chapter -- in which I ask if HealthSouth had made any contributions to the foundation. At the end of the chapter I've attached another e-mail -- one sent to Gilmore after the foundation was compelled to reveal its donors.
;
        As with all chapters in the book, this one, called, "A Scrushy Surprise," starts with two quotes. You may wish to read the preceding chapter first. It is below this one.





                  I have checked with several people here and none of them are familiar with the

foundation. If I find out more, I’ll let you know.”

            -- July 2002, e-mail from HealthSouth spokeswoman Kristi Gilmore after being

asked if the company contributed to the foundation.

            “The best we can come up with is that it was used with helping education in the

state, and to pay off some debts of the lottery, and that it had to do with the governor’s

education initiatives. We donated money for the fund. Whatever it was used for is fine.”

            -- Scrushy, in interview two weeks later, after the foundation was forced to

disclose more than $730,000 in donations, including a March 2000 contribution of

$250,000 from HealthSouth. Scrushy said he couldn’t recall who solicited the money

on the foundation’s behalf.

            I returned from vacation in late June to find that neither the party nor the

foundation had located the records promised by both nearly two months before.

I don’t think it’s a stretch to suggest that, had I transferred to writing features for

the Living Department, neither would have ever disclosed what they had long

succeeded in hiding.

            I immediately resumed my real avocation – writing, not stories, but letters

and e-mails. Pitt said he was waiting on Colonial Bank to provide the party with

its own bank records. Why this should have taken more than five minutes was

beyond me. The party was a client of long-standing, it was seeking the record of

a single transaction involving more than $700,000, and the bank’s chief lawyer,

Jack Miller, was Pitt’s predecessor as party chairman.

            Does the following sound so unreasonable?

            “Jack, Redding here. We can’t locate any records showing how that money

y’all spent for Don on the lottery vote got repaid. We have to know so we can

correct our report to the secretary of state, which as it stands, is wrong by, my

guess, more than $700,000.”

            “Can’t find it? Why, we need to fix that, Redding. Let me call Fred over at

the bank. Heck, just stay on the line and we’ll do a quick conference call. Won’t

take a sec.”

            Fiction, yes, but not fantasy.

            Over at the foundation, the various unidentified minions were not burning

the midnight oil either.

            On July 1, the Siegelman campaign made another stop in Mobile, and as he

had five weeks before, Bill Barrow used the occasion to ask Rip when we could

expect to see the foundation records. “We’re working on it,” said Rip. Asked to

provide a time frame, he gave a no-comment comment. “I can tell you that we’re

closer than the last time you asked,” he said.

            The next day I drafted an e-mail letter for Paul to send. It asked the

administration to produce the foundation’s campaign records. Team Siegelman

was reminded that we knew the boss participated in the reincarnated foundation;

that Nick Bailey signed the tax return; and that Ted served as its lawyer.

            “Given those facts, and others, it is difficult to separate the activities of the

foundation and the Governor’s Office, and we believe the Governor’s Office is the

entity that should, under state law, respond to Open Records Act requests related

to the foundation.”

            That and another letter, sent to Vicki Balogh at the secretary of state’s office

and Bill Pryor, were faxed on July 9. I cc’d the Balogh/Pryor letter to Hosp, Pitt,

and Richard Dorman. Yes, guys, we’re going to the top. We’re tattling on you to

the attorney general.

            As in March when trying to learn more about Sterne Agee’s filing, I asked

the powers that be to intervene on behalf of proper public disclosure. The letter

reviewed our findings up through our last story six weeks before; stated what Pitt

said in mid-May about the party working to put its records in order; and how,

going on two months later, this still hadn’t been accomplished. Also summarized

was the evidence supporting our position that both the party and the foundation

had violated the state’s campaign laws.

            The letter concluded:

            It remains unclear why both entities – the foundation and the Democratic Party –

don’t maintain accurate records of transactions that could involve in the neighborhood

of $1 million, or, lacking such records, why they can’t simply contact their banks and

ask that they quickly produce those records.

            I believe that a significant amount of money has been raised, probably from

individuals, corporations and perhaps PACs, and that has never been disclosed. I hope

you agree that the entities identified above should be required to provide these disclosures,

and, given the time that has already expired, to be directed to do so promptly.

           

            It worked. That afternoon, at ten ‘til five, the Democratic Party filed a one page

amendment to its spring 2000 campaign report with the secretary of state.

            It revealed that on March 9, 2000, the party received a check for $730,789 from

the foundation, which it immediately used to repay a loan from Colonial Bank. It

had taken bank and party two months to locate this single, very large transaction.

            Attached was a brief letter from Pitt stating that the party didn’t obtain the

information from the bank until the day before. Vicki Balogh faxed me the goods

in the morning and I went to work on the next day’s story.

            Was it a surprise that the party had borrowed hundreds of thousands of

dollars to assist the foundation with the lottery campaign? No. We’d already

reported it. Nor was it stunning news that the foundation was the source of

the loan repayment. But with the filing, the foundation’s debt to the party and

proof of that debt’s repayment was now part of the public record – official and

incontrovertible. Most importantly, by its very nature – a filing with the secretary

of state – the disclosure was a declaration by the party that the $730,789 payment

by the lottery foundation was campaign related.

            The filing rendered the ledger down at the secretary of state lopsided. Imagine

a football statistician, post-game, counting passes caught by a team’s receivers and

those completed by its quarterback, and finding that the totals didn’t match. He’d

know something was missing, say, an additional completion by the quarterback.

            In football-speak, the records showed the party catching a $730,789 pass from the

foundation but didn’t show the foundation throwing any such pass.

            That, minus the bit about passing and catching, was the case we made in

again asking the administration to disclose the foundation’s records. But this mule

wasn’t budging. Logic, the law, the right thing to do – none of that mattered, not

with Siegelman in the midst of one of his quadrennial life or death struggles to

remain in public office.

            At trial, Grainger testified that he took copies of the party’s amended disclosure

to Hosp’s office. “We’ve got a problem because they (the Democratic Party) have

filed now,’” Grainger told the governor’s lawyer.

            It didn’t do any good. These people just fl at out did not want to disclose the

foundation’s donors.

-----

           

            In addition to letters we had another form of leverage at our disposal, that

being our raison d'être. That’s French for writing a story about it. On July 14 we

published the seventh foundation story since March, and the first in almost two

months. It began:

            Within weeks after declaring it had no money, no debt and no more reason to exist,

the nonprofit foundation formed to fund the 1999 lottery campaign paid $730,789 to

satisfy bank loans made to the Alabama Democratic Party, the party revealed this week.

The revelation, made in a letter from party chairman Redding Pitt to the Alabama

Secretary of State’s office, confirms Mobile Register reports that previous financial

disclosures by the Democratic Party were incomplete.

            The new disclosure also suggests that the Alabama Education Foundation -- formed

by Gov. Don Siegelman to pay for the ultimately failed lottery campaign -- may have

significantly under-reported its contributions and expenses to the Secretary of State.

            Readers were told about the administration’s previous, unfulfilled pledges to

disclose the records. Also noted was our continued inability to locate a single

human willing to accept responsibility for the foundation’s actions. I took some

pleasure in using the following Pitt quote, as it scratched our back: “When

your paper pointed out the existence of these loans, and when we received the

information, we reported it. Our commitment was to determine the donor, to

amend our report, and for the present, that’s as far as I’m able to go with it.”

            After the story I called Chuck Grainger, the secretary of state’s lawyer, and

offered to fax him various foundation-related records, including the Pool memos.

With the party’s disclosure, there was no longer any question that the foundation

was in violation of the campaign reporting laws. It was equally clear that the

phantom had no intention of coming clean just because some reporter in Mobile

was asking him to.

            On July 17, Grainger wrote a letter to Assistant Attorney General Richard

Allen, with the subject heading, “Request of the Mobile Press Register concerning

Alabama Education Foundation.” He told Allen about the Democratic Party’s

report that the foundation gave it $730,749 in March 2000. “We have received no

disclosure filings from either the Alabama Education Lottery Foundation or the

Alabama Education Foundation since February 29, 2000 which would reconcile

with the disclosure of the Alabama Democratic Party,” Grainger informed Allen.

            Allen responded by calling Ted Hosp, the lawyer for the governor and, or so

it seemed, the Foundation Phantom too.

            I imagined a distraught Siegelman calling the contributors and breaking the

news that those donations that were never to see the light of day, well, he was

being told that the damn things would have to be disclosed.

            I could almost hear him add, “It’s that damn reporter!”

-----

            Harold, recognizing it was going to come out sooner than later, said the

foundation reports would show several sizable donations, but from reputable

corporations. Yes, they should’ve been disclosed, but otherwise, there was nothing

criminal in all of this. Sloppy and duplicitous, sure, but nothing prosecutable,

far as he could tell. He gave me two names – HealthSouth and Alfa, and said he

believed they were on the list.

            Arch-conservative Alfa seemed the least likely because of its oil and water

relationship with Siegelman and its fierce opposition to the lottery. I called and

was told by a spokesperson that Alfa didn’t donate to the foundation, nor would

it have even considered doing so.

            HealthSouth was more plausible. Despite its support of Fob James and right-leaning

candidates nationally, Scrushy and company had enjoyed fine treatment

from Siegelman, primarily through the latter’s support for HealthSouth’s

planned $300 million “digital hospital,” which Siegelman could have delayed to

death had he chosen.

            When I called HealthSouth the company was six weeks away from its

duplicitous if still disastrous announcement that it was slashing revenue

projections by $175 million due to changes in Medicare reimbursement levels. As

subsequently developed, those revenues hadn’t existed in the first place, and for

reasons unrelated to Medicare.

            I gave company spokeswoman Kristi Gilmore both of the foundation’s names,

with lottery and without, asked if HealthSouth had contributed to it, and suggested

she research the years 2000 and 2001. She called back and left a message that my

notes reflect was a no, but not definitively so. I e-mailed back and politely expressed

what I sensed to be a lack of certainty in her response. This time I told her that it was

possible that contributors donated the money indirectly, such as to First Commercial

Bank or Colonial.

            “I heard what I can only call a rumor that HealthSouth was among the companies

that donated to the foundation, in some form or another. But if you assure me this isn’t so,

then I’ll trust that it didn’t occur,” I wrote.

            Kristi responded, “I have checked with several people here and none of them

are familiar with the foundation. If I find out more, I’ll let you know.”

            I didn’t consider that definitive, either. Had she checked with the janitor, or

Richard Scrushy? But I didn’t see how I could push it further without seeming rude,

and besides, I didn’t have it 100 percent that HealthSouth gave to the foundation.

            So I e-mailed back, “Thanks ton, Kristi. That’s good enough for me.”


            (Below is one of the e-mails I sent to Gilmore prior to the revelation that HealthSouth had contributed to the foundation, to the princely sum of, $250,000. The handwriting at the bottom is mine.)

-----

            The charades ended on July 24. That morning Richard Allen called Hosp and

told him that the attorney general’s office, acting on a request from the secretary

of state, had drafted a letter to the foundation asking it to comply with the law

by disclosing its contributions and expenditures. To what address should he mail

the letter, Allen asked. Hosp called back to say there was no need to send it, and

shortly thereafter, the governor’s office delivered a letter to Allen.

            “Based on our discussion today, it is my understanding that the Secretary of

State’s Office has indicated to the Attorney General that the Alabama Education

Foundation likely needs to file additional or amended reports under the Alabama

Fair Campaign Practices Act,” Hosp wrote. “As I mentioned to you when we

spoke, based on conversations I have had over the last couple of weeks about this

matter, it is my understanding that prior to today, the Foundation had decided to

file additional reports.”

            Hosp’s letter served as the basis for a story the next day reporting that the

foundation had pledged to identify its donations by Monday. The piece quoted

            Mike Marshall explaining that we’d sought help from the secretary of state and

attorney general because we had been requesting the records for months and “our

reporter has been stonewalled.”

            Two days later, on a Friday afternoon, I was wrapping up the story reporting

Waste Management’s $500,000 payment to Lanny after the Revenue Department

slashed the taxes at Emelle. Much of the information in that piece showed up

three years later in the Siegelman indictment, as did elements of another story in

that Saturday’s paper.

            At quarter past five our fax machine churned out 45 pages of freshly minted

foundation records sent from the office of Siegelman lawyer Bobby Segall. There

were two 990s, for 1999 and 2000, and annual reports to the secretary of state for

1999, 2000 and 2001. I called home to deliver what had long since become the

routine if not pain-free message that I’d be awhile and possibly longer.

            Here, finally, were the identities of the donors concealed by the phantom for

more than two years. Topping the list were two payments of $250,000, each of an

amount more than twice as large as any of the more than 300 previously disclosed

contributions. Donating that lofty sum were HealthSouth – a surprise given the

company’s recent denial – and Integrated Health Services Inc., a company I’d

never heard of.

            Integrated Health gave on Nov. 5, 1999. I had assumed all the secret money

arrived after the foundation’s February 2000 reincarnation, but the Integrated

Health donation and two others on the same day showed that the phantom

commenced his sneaky ways earlier than thought, and revealed that the original

annual report for 1999 was a sham.

            Google and Nexis told me that Integrated Health was a publicly-traded

Maryland-based company that had operated about 400 nursing homes throughout

the country, including one in Alabama. Most interesting was the company’s fate:

four days after the foundation contribution, the business press had reported the

company’s failure to make a $7.7 million interest payment due on a loan – a very

bad sign indeed for a publicly traded company.

            Three months later, Integrated Health filed for bankruptcy. Why would

an upside down Maryland firm give $250,000 to a secret foundation run by

Alabama’s governor? Hmmm. I stuck that in my imaginary “Subjects Bearing

Further Scrutiny” file, right next to Alfa Mutual Insurance, which was shown

donating $100,000 in February 2000.

            The other undisclosed contributors were: forest-products company Kimberly-

Clark Corp., $25,000; steelmaker IPSCO, which had recently built a plant in

Mobile, $25,000; Japanese electronics company Hitachi, $17,000; a Birmingham-based

company called SCT Software & Resource Management Corp., $15,000;

Oracle, which did business with the state and HealthSouth, $10,000; Tuscaloosa-based

Bama Concrete Products, $12,500; Donald Leeburn, a long-time Siegelman

benefactor and liquor distributor from Georgia, $10,000; and something called

Skillsutor.com, which gave $5,000.

            Last but not least was that little seedling. As we’d reported four months and

nine stories earlier, Alabamians for Economic Development had given $13,500

in January 2001.

            The final tally: 13 donations from 1999, 2000 and 2001, totaling $733,000.

Accompanying the reports was a letter from Segall to Pryor and Secretary of

State Jim Bennett that purported to explain why the foundation was only now

filing the reports.

            “Although I cannot state with certainty the reason for the failure

to file these reports sooner, it appears that following defeat of the lottery in October

1999, those involved with the campaign gradually moved on to other pursuits, and

inadequate attention was given to filing requirements associated with winding up

the affairs of the foundation,” wrote Segall, the erstwhile, “Mr. Trustworthy.”

            Here again was the old “everybody was busy and forgot” mantra presented

months earlier by Cromwell Johnson. It was even less credible now. Segall couldn’t

present these excuses to Bennett and Pryor “with certainty” because, as was obvious,

his client the governor had paid enough attention after the lottery loss to raise more

than $730,000; seek legal opinions designed to avoid disclosure; and take other

measures to ensure that everything about the reborn foundation remained secret.

            Segall signed the disclosures. This, he told Pryor and Bennett, was because the

foundation ceased being a political committee soon after the referendum so it no

longer had a chairman or treasurer to sign them. This contradicted the documents

provided two months before by the governor’s office, and which showed that the

reincarnated foundation had both a chairman (Dorman) and a treasurer (a north

Alabama sheriff and Siegelman backer).

             I supposed neither was willing to loan their John Hancocks to the cause, and

Segall, whose service for Siegelman in this and other matters seemed to have no bounds,

stood in for his client, aka, the Foundation Phantom.

            For the record, Segall’s letter did not state the following: “I signed it because

we couldn’t find Nick.”

            The governor’s name didn’t appear once in the new filings. Not anywhere.

Plausible deniability, no matter how implausible, remained the name of his game.

The next morning’s lead read: “Records produced late Friday by the Alabama

Education Foundation, formed by Gov. Don Siegelman to promote a state lottery,

reflect that previous reports by the foundation to the Alabama Secretary of State

and the Internal Revenue Service were incorrect.”

            Incorrect? Fraudulent was more like it, but caution prohibited use of that word.

Because of the late hour, there was no way to even try to reach representatives of

All the donors, but I gave HealthSouth and Alfa a shot because of their prominence

and the size of their contributions. I had no luck with the first, but was able to

get Alfa spokesman Paul Till on the phone. I told him about the foundation’s

disclosure showing Alfa donating $100,000. He called higher-ups, then called me

back. “Alfa Mutual Insurance has never given money to the Alabama Education

Foundation for the lottery or any purpose,” Till said, in a quote used in the story.

            “If such a report has been filed it is either an intentional or unintentional error

and we would like for it to be corrected.”

            As little faith as I had in the foundation I could not imagine why Siegelman

would falsely report a $100,000 donation from Alfa. Any fool could anticipate an

angry denial from the company. On this occasion I placed my complete faith in

the governor, but for the story, Alfa had the last word.

            Near the end, and only because I was so fair-minded, I wrote, “What the

disclosures don’t reflect is who sought contributions for the foundation, or who

managed its affairs after the defeat of the lottery.”

-----

            I was back at the paper the next morning to work on a follow-up for Sunday.

            In going back over the disclosures, comparing the old with the new, I saw to my

horror that I’d made a goof. The new 1999 filing contained all the donations

that year, not just the three previously unreported ones, from Integrated Health,

IPSCO and SCT Software. When racing through the reports the night before I’d

seen two $100,000 contributions from the Alabama Education Association that

for whatever reason registered in my brain as not being previously reported. I’d

included them with the three other new 1999 donations, thus suggesting they’d

been made in secret.

            Now I saw that the donations from the state teachers union were properly

disclosed on the foundation’s original 1999 year-end report. When Paul came in I told

him about my mistake and we reported the error prominently in the next day’s story.

Because it was a weekend, reaching corporate donors was all but impossible.

But one matter – the Alfa dispute -- demanded immediate attention. I had two

big dogs – Alfa and the governor – in conflict on a substantial issue. Either Alfa

gave $100,000 to the foundation or it didn’t.

            Company officials apparently remembered something in their sleep, because on

Saturday morning, Alfa about-faced. “The bottom line is, we sent people this morning

to our office in Montgomery, and after checking records, we verified that Alfa Mutual

donated $100,000 to the Alabama Education Foundation,” Till said, and I quoted.

Most importantly, for the first time I had someone saying what I’d always known

had to be the case: That Siegelman solicited the unreported contributions.

“The governor personally came out and met with our president (Jerry Newby)

to request the donation,” Till said.

            Siegelman had told Newby that the funds were to be used in some undefined

manner to improve education in Alabama. “We oppose the lottery as much today

as we opposed it then, and we are outraged that our donation apparently was

diverted to pay off the debt of the lottery campaign,” the Alfa spokesman said.

            As it had many times in the past, and so graciously, the Birmingham News

editorial page put things in a perspective that I was prohibited from doing in a

straight news story. On Aug. 1 the paper published an editorial under the heading,

“In denial.” The piece ridiculed Alfa’s claim that it had been “hoodwinked” by

Siegelman into giving the $100,000, and was now “outraged” to discover that the

donation was connected to the lottery vote.

            “Alfa is hardly known for political naivete. The powerful insurance/farmers

organization is a masterful player in politics, one of the state’s largest sources of

campaign cash and one of its most formidable lobbies. Suffice to say, Alfa doesn’t

get surprised by much that occurs in the state capital. Yet the company claims this

lottery contribution was an exception.”

            The piece credited the Register, stating, “It was because of this months-long

reporting effort that Alfa’s donation came to light.”

            I hoped to find, especially through Alfa and HealthSouth, if donors to the

re-formed foundation had sought charitable deductions. The idea was suggested

to me by the Pool memos, which in addition to exposing Siegelman’s efforts to

secretly re-form the foundation, taught me a few things about a type of

nonprofit – the 501(c)4 – with which I was largely unfamiliar. Contributions to the

vastly more common 501(c)3s, such as the United Way and for that matter, most

foundations, are tax deductible. You give, and at tax time, lower your bill to the

government. With the federal corporate tax rate of about 35 percent, corporations

can decrease their taxes by about one dollar for every three given to a 501(c)3.

            The foundation, as I knew from the Pool memos, was a 501(c)4 in its first

incarnation as well as its second. That’s a classification for non-profits that engage

in the political process, such as through issue advocacy. Well-known 501(c)4s

include the American Association of Retired Persons (AARP) and the National

Rifle Association (NRA). A 501(c)4 doesn’t have to pay taxes on money it receives,

but contributions to this type of non-profit – like campaign contributions – are

not tax deductible for donors.

            What I wondered – and this goes back to my suspicion of all things Siegelman –

was whether he had, in making his spiel, told contributors they could take a charitable

deduction. If so, this angle of inquiry might further solidify Siegelman’s fund-raising

role, such as with the sort of tax record thank you letters that non-profits routinely

provide donors, and which I supposed might be signed by the governor.

            Early the next week I asked Till if Alfa took a deduction on the $100,000; and

if so, had the foundation provided the company with such a letter. By this point,

Till was becoming feisty, taking the position I had no right to ask such questions.

            Because of what had transpired I felt the company owed me an extra level of

truth. In an e-mail, I reminded Till that I’d asked him about this donation weeks

before the foundation disclosures and was told that the company made no such

donation; that on Friday night he’d again denied that the company contributed

to the foundation; and on Saturday, when Alfa finally acknowledged the gift, he’d

blasted Siegelman for deceiving Newby.

            “Alfa made some fairly serious charges against the governor – it could well be

construed as accusing him of criminal fraud. I’ve simply asked Alfa to back this

up,” I wrote, in pressing my case for a copy of the receipt donors get when they

give $10, to say nothing of $100,000.

            Alfa either was unable to dig up such a record, or did and just didn’t give it to me.

The company was under no obligation to give it to me, but it didn’t hurt to ask.

-----

           

            I was making similar inquiries with HealthSouth. I assumed that Kristi Gilmore

might be embarrassed, considering that two weeks before she’d told me the company

hadn’t contributed to the foundation. I didn’t blame her. I assumed she’d asked

someone who should know, and was lied to. Testiness did ensue, though, after Kristi

told me that HealthSouth’s no-donation answer had not been definitive. I couldn’t

let this have-our-cake-and-eat-it-too response go unchallenged.

            I told her in an e-mail that I had ceased pressing for a definitive answer

because I’d felt to do so would “be rude” and “reflect a lack of faith in your efforts

and your word.”

            “Certainly I did everything that I could to ensure that you, and by extension,

HealthSouth, knew exactly what I was asking. If you have any suggestions as to

what I should have done differently, by all means, pass them on.”

            And proceeded to the matter at hand:

            I have the following questions about this substantial donation:

            Who authorized this donation for HealthSouth?

            Who contacted the company on behalf of the foundation, seeking this donation?

            Can HealthSouth provide any documentation, such as correspondence to or from

the foundation, about this donation? If HealthSouth declines to provide such records,

could you/the company state that it has the records, but has chosen not to provide them,

or, other possibility, that it has never had any such records?

            Did HealthSouth seek a tax-deduction as a result of this donation? If not, why

not, since such a large gift would appear to have generated a nice-sized deduction?

For accounting and tax purposes, how did HealthSouth classify this expenditure?

           

            The second to last question was borderline disingenuous. I knew why the

company wasn’t eligible for a deduction, but was hoping to draw them into

telling me they’d taken a deduction if they had. And if so, under whose direction?

            Two days later, Kristi e-mailed a statement confirming that HealthSouth made

the donation “with the understanding that it would be used to help with the

education system in the state.”

            “There is no paperwork indicating who requested this funding for the

Foundation. HealthSouth claimed a tax deduction for this charitable donation,

believing that the Foundation was a 501(c)3. We at HealthSouth would be upset

to learn that these funds were used for anything other than education.”

            The statement was mildly helpful, but not enough. The “no paperwork”

bit was just a dodge. In my response I told them about Alfa’s revelation that

Siegelman had personally visited the company’s chairman. My guess is that

something similar happened here: that the governor visited with or spoke with Mr.

Scrushy and requested the donation…. Is that how it happened? And if so, could

HealthSouth/Mr. Scrushy provide some details of the conversation/request.”

            I also asked when the company first contacted Siegelman about its wish for

special legislation to let HealthSouth circumvent the CON board process (and

the years of lawsuits that can entail) and begin construction of its so-called digital

hospital. I wondered if the timing of that request coincided with the donation.

Lastly, I wanted to know if HealthSouth was contemplating legal action. After all,

Kristi Gilmore had said the company “would be upset” to learn that the funds were

used in some way other than to benefit education and it was, after all, $250,000.

            The next day Gilmore called to say that Scrushy wanted to speak with me.

Well, that was an interesting development. Scrushy was a household name in

Alabama and on Wall Street, but I’d never met him.

            By then regulators and the business press were nicking away at his company.

Questions were being raised about its accounting practices and a $25 million

company loan to Scrushy. I had no interest in those matters, can’t recall if I was

even aware of them, and of course had no way of knowing that HealthSouth’s

share price was three weeks from a nose dive.

            I was put through to a speakerphone and told that an assistant, Brooks

Adams, was also participating in the call. I hoped Scrushy would confirm that

Siegelman personally solicited the HealthSouth contribution. Alfa’s Newby had

placed Siegelman in his office. If the same occurred with HealthSouth, why not

just say so? I figured Scrushy would. I was wrong.

            Scrushy said that while he would have had to sign off on donation of such

size, neither he nor anyone else at HealthSouth could remember who contacted

the company on the foundation’s behalf. I wasn’t dumb enough to believe this,

but was without evidence to contradict him. I had no way of knowing, for

example, about the meetings between the pair in 1999 and 2000, during which

the donations were discussed and checks passed hands.

            Scrushy said the company assumed the foundation was a 501(c)3 and had

taken a tax deduction. HealthSouth planned to contact the IRS, report the error

and pay the government any money it had saved as a result of the deduction.

Contrary to the company’s statement a day before, Scrushy said he wasn’t

troubled to learn that his company’s $250,000 was used, not to promote education

in the state, but to pay off the lottery’s debt.

             “The best we can come up with is that it was used with helping education in the state,

and to pay off some debts of the lottery, and that it had to do with the governor’s education

initiatives. We donated money for the fund. Whatever it was used for is fine,” he said.

            We parted with pleasantries. Later that afternoon, Adams called to report that

he’d just received a call from Scrushy, who had remembered something. Scrushy,

said Adams, seemed to recall that Elmer Harris, then still president of Alabama

Power, had called to solicit the $250,000 donation to the foundation. Did Scrushy

suppose I’d just accept this tale without checking it? If so, he was wrong. I called

Harris and left a detailed message on his answering machine. I told him what

Scrushy had said and asked if he could call me just to confirm this was the case.

            Harris called back. I missed him, but he left the following message, which I

transcribed verbatim: “During that period of time, I did not give any monies to

the lottery foundation, nor did I solicit any monies for the lottery foundation.”

Scrushy’s recollection that Harris called him for the money and Harris’s

response were included in an Aug. 11 story that carried the headline, “Foundation

a Taxing Issue for Alfa, HealthSouth.”

            The story examined the tax situation, which I thought significant though I

may have been alone there. It also addressed Alfa’s relationship with Siegelman

at the time of its donation. The arch-conservative insurance company/farmer’s

association had been one of if not the top donor to Fob James’ 1998 campaign,

and was, as the story reported, “known to be on the governor’s bad side.”

            News reports at the time told of a major legislative defeat suffered by Alfa after

Siegelman personally became involved in the successful effort to pass a law requiring

mandatory car insurance. The new law was seen as a major blow to Alfa, which

along with its sister organization, the Alabama Farmers Federation, had long opposed

mandatory insurance.

            In late 1999, Siegelman allies in the Legislature were promising to push legislation

that would eliminate a tax credit used by Alfa to cut the insurance premium taxes it pays

the state by millions of dollars each year. The bill was filed, but never went anywhere.

Till did not respond to questions about Alfa’s tenuous position with the governor

at the time it gave the $100,000, and whether concerns about losing the premium tax

exemption factored into the company’s decision to give when Siegelman came asking.

            The final subhead, “Mystery surrounds other $250,000 gift,” described my

findings or lack thereof regarding the Integrated Health donation. “In some ways,

the company’s $250,000 gift is the most peculiar of the 13 donations,” I wrote,

without knowing the half of it.

            Integrated Health’s failure to make a loan payment days after the donation

was reported, as was its subsequent bankruptcy. A spokesman for what was left

of the company confirmed that the donation had been made but said it was

authorized by people no longer with the company. I located a former executive,

Taylor Pickett, but he brushed me off . (Almost four years later, Pickett’s testimony

helped prosecutors convict Scrushy and Siegelman.)

            My next best bet was the company’s bankruptcy filing. Debtors must

disclose expenditures made in the 12 months prior to seeking bankruptcy

protection, including charitable and political contributions. Because of the size

of the foundation donation and its date – three months before the bankruptcy

-- I was certain it would show up. I hoped to find that a creditor challenged the

contribution, and that the court record would solve this mystery.

            As with most large corporate bankruptcies, Integrated Health had a web-site

for creditors and claimants to get the latest information on the case. On it was a six page

list of the company’s charitable and political donations in the year preceding

its bankruptcy. Most were less than $100, but the foundation gift – which would

have been by more than five times the largest on the list – wasn’t there. I contacted

two New York lawyers shown as representing the company’s creditors. Neither

recalled coming across a $250,000 check to the Alabama Education Foundation.

            I called three state agencies – the Department of Public Health, the CON board,

and the Medicaid Department – to see if either had any serious issues with the one

Alabama nursing home operated by Integrated Health. “Representatives of all three

agencies said they were unaware of any significant or unusual issues pending with

them in 1999 and related to Integrated Health Services,” readers were told.

            Lastly, Nexis revealed a past relationship between HealthSouth and Integrated

Health. Scrushy had been on the company’s board in the mid-1990s, and in 1997,

HealthSouth sold its nursing home business to the Maryland company for $1.2

billion. This was a coincidence worth asking about, and I did in an e-mail to

HealthSouth’s Gilmore that received no response. I elected not to report the link

because Integrated Health did business in Alabama, the HealthSouth ties were

severed years before, and I’d nothing concrete connecting the companies.

            In early August someone – my recollection was that it was mailed anonymously

– sent me a memo from Hosp to Siegelman and dated Feb. 15, 2000. That was

two weeks after the foundation filed its 1999 annual report reporting a zero

balance and no debts.

            The memo served as the basis of a story that refuted, once and for all,

Siegelman’s professions of ignorance about the continued operations of the

foundation. Here is the key portion of the story:

            The memo, more than any other record previously produced, indicates that

Siegelman was in charge of the quietly formed, post-1999 version of the foundation

that had been created to fund the campaign to pass a state lottery.

            In the memo, legal adviser Ted Hosp reported to Siegelman that, “as requested,”

changes had been made to the foundation’s bylaws, and all reference to a lottery had

been removed…. As a result of the changes, the foundation “may accept contributions

without limitation from individuals as well as corporations.”

            “Neither the Foundation, nor an entity making the donation to the Foundation,

will be subject to federal or state disclosure requirements,” Hosp wrote.

            A footnote at the bottom of the letter states that the Internal Revenue Service

requires non-profit organizations to file tax returns and make those returns public. On

those returns, (Hosp told Siegelman that) “the organization is not required to disclose

the names or addresses of any contributors.”

           

            One final story, in late August, reported that someone with the attorney

general’s office – Pryor himself, I heard – had gone to Alfa to question officials

about the $100,000 contribution. It was the 13th story about the foundation in

more than five months. Had the administration been forthcoming from the start,

it might have been three stories over a week or two, instead of death by a thousand

cuts. I was later criticized by Siegelman and his supporters for writing “more than

100” stories” about the administration.

            This was their fault on two fronts: for being unethical and frequently crooked;

then lying about it. Thus, lots of stories.

            As Harold put it in one of his e-mails: “I have been urging a complete and

accurate disclosure, since it is the piecemeal nature of releases and the various

mistakes or omissions which fuel the appearance of impropriety and keep the

story alive.”

            To which I replied, tooting my own horn: “Not to toot my own horn, but

if they don’t realize I don’t buy bullshit and slink away by now, I just don’t know

that they ever will realize it.”

            I called all the donors, but to the extent I got anything, it was confirmation

that, yes, we gave. A guy at Bama Concrete Products hung up on me, which

piqued my interest. I requested highway department files related to the company

and looked for payment disputes at the time of its donation, but nothing jumped

out. Then again, a concrete company was likely to conduct state business as a

sub-contractor, not directly with the state. I could have asked to review files on

every project in which Bama Concrete supplied product, but they’d only donated

$12,500, so I gave up that goose chase.

            I was busy on other fronts. If someone with subpoena power wanted to take

a run down the foundation trail, all the power. I’d given them a pretty good

head start.


Below, the e-mail to HealthSouth's spokeswoman after the Siegelman/the foundation was compelled to reveal its donors.