The fallout continues for Rep. Mike Ross -- the Blue Dog Democrat from Arkansas who has risen to prominence in the health reform debate -- over ProPublica's investigation this week into a suspicious land sale Ross made to a major pharmacy chain.
ProPublica's article follows up on questions Facing South first raised in July about Ross' financial windfalls from his pharmacy business, which he sold in 2007, and how it relates to Rep. Ross' dependence on health care interests for campaign contributions.
ProPublica's investigation centers on the $420,000 Rep. Ross and his wife Holly received for selling the pharmacy's property -- substantially more than the $263,000 it was valued at by the county tax assessor, and the $198,000 estimated by a private appraiser hired by ProPublica. But that's not all:
But the $420,000 was just the beginning of what Ross and his pharmacist wife, Holly, made from the sale of Holly's Health Mart. The owner of USA Drug, Stephen L. LaFrance Sr., also paid the Rosses $500,000 to $1 million for the pharmacy's assets and paid Holly Ross another $100,001
to $250,000 for signing a non-compete agreement. Those numbers, which Ross listed on the financial disclosure reports he files as a member of Congress, bring the total value of the transaction to between $1 million and $1.67 million.
Adding to the appearance of impropriety: Mr. LaFrance of USA Drug gave Rep. Ross a $2,300 campaign contribution two weeks after the sale.
But the controversy is about more than just a shady land deal. Also at issue is the fact that USA Drug has a direct interest in the current health reform debate. If USA Drug's overpayment for the property and generous sales terms are found to be a gift to Rep. Ross, that would constitute a bribe and fraud.
In a letter to the Department of Justice calling for an investigation into the matter, watchdog group Citizens for Responsibility and Ethics in Washington lays out the political implications:
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
"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." [CREW director Melanie] 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."
The CREW statement goes on to point out that 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.
What does Rep. Ross say? The Congressman quickly issued a statement [pdf] dismissing the investigation as "gotcha politics." However, the only substantive response Rep. Ross offers is that he'd originally invested $316,000 to develop the property in 1998, so the sale for $420,000 reflected only a "4 percent annual return." He has also authorized the full disclosure of the terms of his pharmacy's sale.
ProPublica, in turn, argues that this doesn't address the main point of the investigation:
The issue here is not whether Rep. Ross filed the proper disclosure
forms. Nor is it whether Rep. Ross earned a large or small return on
his initial investment in the building. The issue is whether the
Congressman received more on the sale of his building than someone
without his power and influence would have received for selling this
building. As we read his statement, Rep. Ross does not deny that he
received significantly more than an arms-length fair-market price for
the building -- on top of the very considerable sums he and his wife
received for selling and continuing to run the business."