Legal Filings

Legal Filings
Sep 23, 2009

CREW Files Department of Justice Complaint Against Rep. Mike Ross

Congressman Mike Ross

Washington D.C. – Today, Citizens for Responsibility and Ethics in Washington (CREW) asked the Department of Justice to investigate whether Rep. Mike Ross (D-AR) engaged in bribery and honest services fraud by selling a piece of commercial property for more than its worth to a pharmacy chain with an interest in pending legislation.

According to a story appearing in the September 22, 2009 Politico, in June 2007, Rep. Mike Ross sold Holly’s Health Mart in Prescott, Arkansas to USA Drug for $420,000. In addition, the owner of USA Drug, Stephen L. LaFrance, also paid Rep. Ross and his wife, Holly, between $500,000 and $1 million for the pharmacy’s assets and Ms. Ross was paid between $100,001 and $250,000 for signing a covenant not to compete with Super D Drug Acquisition as part of the sale. In addition, just two weeks after the sale, Rep. Ross received a $2,300 campaign contribution from Mr. LaFrance.

At the time of the sale, the county assessor’s office valued the pharmacy’s building and the land on which it sits at $263,000, $157,000 less than the Rosses were paid. ProPublica hired a licensed real estate appraiser in Prescott, Arkansas to assess the property, and he valued it at $198,000, less than the county’s assessment, which was raised from $263,000 to $269,000 this year. Another Prescott real estate professional said county property assessments tend to be slightly below market value, but usually not more than 5% below. Nevada County, which includes Prescott, also questioned the purchase price. A contractor hired by the county to update property assessments every five years contacted USA Drug to verify the purchase price, finding it inconsistent with commercial property values in the area.

Even assuming a price of 5% above the assessment, the building and property would have had a value of no more than $276,150. Therefore, at a minimum, it appears the Rosses received at least $143,850 more than the property’s value -- and perhaps as much as $222,000 more, excluding the additional money paid for the non-compete clause -- when they sold it to USA Drug.

In 2008, USA Drug was the 15th largest drug chain in the country with an estimated $906 million in sales and the pharmacy industry is aggressively lobbying Congress regarding proposed health care reform legislation. Two months after the purchase of the Ross property, Mr. LaFrance was profiled in the Arkansas Democrat-Gazette. He opined if the government does not interfere, there are “nothing but good days ahead” for the pharmacy business.

As a member of the Energy and Commerce Committee and the Blue Dog Coalition, Rep. Ross has been integrally involved in the debate over health care reform. This past June, the National Association of Chain Drug Stores thanked Rep. Ross for introducing legislation authorizing payments to pharmacists to train patients how to manage their medications.

Rep. Ross receives significant financial support from the health care industry. According to OpenSecrets.org, this campaign cycle Rep. Ross has so far received $81,100 from those in health-related industries, $23,850 of which is from the pharmaceutical/health products industry. In the 2008 cycle, Rep. Ross received $261,275 from the health care interests, $50,600 of which was from the pharmaceutical/health products industry.

CREW executive director Melanie Sloan stated, “With the sale of his business and the high priced non-compete covenant, Rep. Ross has gone from accepting campaign contributions from those with legislative interests before him to accepting significant personal financial benefits of dubious legality.” Sloan continued, “The situation is reminiscent of that in which former Rep. Randy “Duke” Cunningham sold his house to a defense contractor for an amount above its value in return for legislative assistance – a sale that ultimately resulted in Rep. Cunningham’s conviction on criminal charges.” Sloan explained, “Given that Rep. Ross received a personal financial benefit conservatively valued at no less than $143,850 and probably a great deal more, both the sale of the property for $420,000 and payment of no less than $100,001 for the covenant not to compete certainly merit criminal investigation.”

Federal bribery law prohibits public officials from directly or indirectly demanding, seeking, receiving, accepting, or agreeing to receive or accept anything of value in return for being influenced in the performance of an official act. Honest services fraud prohibits members of Congress from depriving their constituents, the House of Representatives, and the United States of the right of honest service.

At a time when health care reform legislation is a matter of pressing concern and heated debate, it is particularly important for Americans to have faith that their government officials are making decisions based on the best interests of the nation rather than their own financial interests. As a result, it is imperative for law enforcement authorities to thoroughly investigate Rep. Ross’s conduct.

 

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