Judd Gregg Walked Thin Ethics Line: Report

WASHINGTON – President Barack Obama's former nominee to become commerce secretary, Sen. Judd Gregg, steered taxpayer money to his home state's redevelopment of a former Air Force base even as he and his brother engaged in real estate deals there, an Associated Press investigation found.

Gregg, R-N.H., personally has invested hundreds of thousands of dollars in Cyrus Gregg's office projects at the Pease International Tradeport, a Portsmouth business park built at the defunct Pease Air Force Base, once home to nuclear bombers. Judd Gregg has collected at least $240,017 to $651,801 from his investments there, Senate records show, while helping arrange at least $66 million in federal aid for the former base.

Gregg said he violated no laws or Senate rules.

But the senator's mixture of personal and professional business would have been difficult to square with President Barack Obama's campaign promise to impose greater transparency and integrity over federal budget earmarks — funding for lawmakers' pet projects. Gregg said that during his consideration for the Cabinet job, the White House did not know about his Pease earmarks, although the administration knew about his investments at Pease.

Under new Senate ethics rules, Gregg had to certify that federal aid he directed to specific projects was not intended solely to enrich him or immediate family, including siblings. Senators are also supposed to avoid even the appearance of a conflict of interest, though the Senate Ethics Committee seldom investigates or disciplines senators when questions are raised about their activities.

"I am absolutely sure that in every way I've complied with the ethics rules of the Senate both literally and in their spirit relative to any investment that I've made anywhere," Gregg told the AP. "These earmarks do not benefit me in any way, shape, manner financially, personally or in any other manner other than the fact that I'm a citizen of New Hampshire."

Gregg abruptly announced earlier this month that he was stepping aside from consideration for the Cabinet post, citing philosophical differences with Obama.

The senator has said his withdrawal had nothing to do with anything the White House uncovered in his background. A White House spokesman, Ben LaBolt, declined to discuss the matter with the AP. AP began looking into the Greggs' activities at Pease before then but had not yet contacted them or the White House before Judd Gregg withdrew.

Obama's administration has wrestled in recent weeks with embarrassing revelations about his choices for the Cabinet and other high-profile jobs, including the treasury secretary's failure to pay $34,000 in income taxes on time. Obama's first choice for commerce secretary, New Mexico Gov. Bill Richardson, withdrew due to the disclosure that a grand jury was investigating the awarding of a state contract to one of his major political donors.

Gregg told the AP the White House expressed no concerns about his involvement at Pease. He said he does not believe his investments there or his role in obtaining federal aid would have affected his consideration for the job.

The Greggs have long been a wealthy and powerful New Hampshire family. Judd Gregg's selection by Obama gave him national prominence, and he was among GOP lawmakers the president invited to a meeting earlier this week on the nation's financial health.

Gregg was governor in the early 1990s when Pease became the first base shut down in closings under then-President George H.W. Bush. Gregg created a state development authority to approve development projects at the former base, and he supported millions of dollars in state-backed bonds and at least $10 million in state roadwork to help transform Pease from a military installation to a business center.

Such efforts to convert defunct bases were encouraged by the federal government. But the personal financial involvement of Gregg and his brother, Cyrus, at Pease sets it apart from other bases' redevelopment.

Cyrus Gregg is a partner in Two International Group, a developer that quickly established itself as a major player at Pease. It has built roughly a dozen office buildings there since the base closed.

Judd Gregg has invested in several of Cyrus Gregg's projects through limited partnerships and limited liability companies: 222 International LP, Say Pease LLC and other LLCs using variations on the "Say Pease" name, according to New Hampshire corporate records and the senator's financial disclosure reports.

The senator said 222 International's and the limited liability companies' only real estate holdings were at Pease. An office building at 222 International Drive developed by Cyrus Gregg and his associates was valued at just under $11 million last year, according to local assessment records. Judd Gregg said he put money into his brother's Pease developments as a passive investor and had no role beyond that.

"I've throughout my entire lifetime been involved in my family's businesses and that's just the way our family works," he said. "We support each other and our activities."

By putting government money into the former base, Gregg helped it become a desirable place for employers to locate, making developments there more valuable.

Gregg took in at least $240,017 and possibly as much as $651,801 from the investments between 1999 and 2007 in rent and capital gains, according to his Senate filings. He said it was too soon to say whether the real estate deals will be profitable: "That's obviously why you invest your money. You do hope to make money."

Gregg said he was proud to bring development and jobs to the former base.

"When it closed as an air base it was a devastating event," Gregg said. "It's been the most successful redevelopment of a closed military base in the country."

In the Senate, Gregg has repeatedly won federal money for Pease's redevelopment:

• At least $24.8 million for a new federal building. The senator said the city of Portsmouth wanted to move an unattractive federal building out of its picturesque downtown. The new building hasn't been built yet, he said.

• At least $24.5 million for other New Hampshire National Guard projects at the base, including a new fire and crash rescue station, a new medical training facility, repair to an aircraft parking ramp and the upgrade of an aircraft parking apron.

• $8.9 million for a new wing headquarters operations and training facility at Pease for the Air National Guard.

• At least $8 million to help Pease's airport transition from military to civilian use, including improving terminal security, buying snow removal equipment, building an aircraft deicing area and adding a parking lot.

• $475,000 to shield office buildings at Pease from noise from the former Air Force runway, which is now used by private planes and the New Hampshire Air National Guard. Earlier, Gregg lined up $25,000 in federal money for noise monitoring equipment at Pease.

• $400,000 for development of a photonics and laser technology program at the New Hampshire Community Technical College campus at Pease. Earlier, Gregg and then-Sen. John Sununu, R-N.H., won federal money to develop the college's biotechnology lab, and education and training center at Pease.

Gregg leases a former guard post at the Pease entrance and uses it as one of his Senate offices.

Gregg listed the real estate investments in his Senate financial reports, identifying the dollar values in broad ranges as ethics rules allow rather than giving specific totals. He declined to tell AP exactly how much he has invested there. Gregg's Senate reports do not include the addresses of all the Portsmouth properties where he invested; AP pored through local real estate records to identify the Pease developments.

Gregg's investments in the partnerships date back at least to 1999, when he had $15,001 to $50,000 invested in 222 International Drive LP, according to his Senate reports.

By 2007, Gregg had a total of $465,000 to $1.05 million invested in four businesses: 222 International Drive LP, Say Pease LLC, Say Pease II/IV LLC and Say Pease VII LRC, according to his most recent Senate report.

Gregg has sometimes officially sought his brother's expertise on development.

As governor in 1989, he appointed Cyrus Gregg to a panel considering the future of state land in Laconia, N.H., that had been the site of a home for the developmentally disabled. The lakeside parcel eventually was used for a prison.

State records that might show what, if any, other interactions Cyrus Gregg had with his brother's administration no longer exist. New Hampshire does not require governors to turn over their records to the state archives when they leave office and Judd Gregg didn't, State Archivist Frank Mevers said. Gregg's Senate office told AP that Gregg hasn't kept papers or other materials from his previous elected positions.

In all, Gregg had $5.6 million to $12.8 million in assets in 2007, including those cited in his Senate reports and the $2.5 million home in Rye, N.H., that he owns with his wife. Judd and Cyrus Gregg have been involved in various businesses in New Hampshire and elsewhere, as was their father, Hugh, before his death.

Cyrus Gregg is less known than his father and brother, though he has been active in Republican Party politics and seems to have made no secret of his involvement at Pease. His name appears in numerous corporate filings and local real estate records.

Besides its activities at Pease, Two International also develops properties elsewhere in Portsmouth, recently selling a $1 million-plus condominium at its One Harbor Place development to J. Bonnie Newman, Judd Gregg's former chief of staff. Gregg agreed to become commerce secretary if the Democratic New Hampshire governor named her to succeed him.

The senator said he had no involvement with the sale or the Harbor Place development. Newman said she has known Cyrus Gregg for years and approached him about the condo.

"We see one another on a pretty regular basis socially, so I think I may have said, `Let me know what you're doing with the apartments. I could be interested,'" Newman said. She used to have an office in the building, and it was well-known around Portsmouth that one floor was being converted to condos, she said. Newman negotiated the purchase through the fall and said she signed the purchase agreement in November, long before there was any indication Judd Gregg might be a Cabinet pick.

"It's a wonderful old building in a very special waterfront area," Newman said.

The condominium hasn't been built yet.