Agreement with state benefits Deal’s firm

U.S. Rep. Nathan Deal, a Republican candidate for governor in 2010, personally intervened with Georgia leaders to preserve an obscure state program that earns his company nearly $300,000 a year.

Deal on three occasions in the past year and a half met with state Revenue Commissioner Bart Graham to question proposed changes Graham wanted to make in the way Georgia inspects rebuilt salvaged vehicles. Deal coordinated his efforts through the office of a political ally, Lt. Gov. Casey Cagle.

Also, Deal’s chief of staff used his congressional e-mail account to contact Georgia Senate and Revenue Department staff to discuss the plans and to set appointments for Deal to meet with officials, including Cagle.

Deal and Ken Cronan own and operate Recovery Services Inc., also known as Gainesville Salvage & Disposal, which for nearly 20 years has enjoyed a lucrative agreement with the state that earned the company $1.5 million from 2004 through 2008, according to state records. The company provides a location and equipment for state inspectors to examine salvaged vehicles. Deal and Cronan never had to compete for the business, state officials said.

Deal personally earns up to $150,000 a year from the enterprise, according to reports he files with the U.S. House.

Graham has tried for years to expand the system through competitive bidding or privatization.

Ultimately, Deal prevailed; the program, which at least two state leaders call a monopoly, remains unchanged — for the time being.

Deal, a top contender to replace Gov. Sonny Perdue, says he has done nothing wrong and has acted as any business owner and citizen would in speaking to state officials about a program he says saves lives and brings revenue to state coffers. He also said he has often worked with state officials on issues important to constituents.

But veteran legislators of both parties said it is unusual to be lobbied by congressmen on issues that affect their personal businesses.

“I’ve tried to be cautious about this,” Deal said in an interview. “I don’t think I have done anything that stepped over the line.”

Cautious or not, Deal’s actions are troubling, said Mary Boyle, spokeswoman for Common Cause, a government watchdog group in Washington.

While Deal has “every right to lobby for his business, you can’t use your congressional office and office resources and office assets to focus on something that is going to personally enrich yourself,” Boyle said.

 

Not ‘an official thing’

Georgia has, since 1982, required any vehicle that is wrecked and rebuilt to pass a safety inspection before the state will issue a title allowing the car to be sold or driven. Inspectors originally traveled to where the vehicle was, making for a slow, inefficient process.

In 1989 the state, in a pilot program, authorized a station in Athens to become a site for inspections. The program was expanded in 1990.

On Feb. 2, 1990, Recovery Services Inc. was incorporated, with Deal and Cronan listed as officers. Their business became one of the first eight regional state inspection stations, according to the Department of Revenue. None of the companies had to bid for the work, and it is unclear how they were selected. Revenue officials said they could find no paperwork that explains how the stations were chosen. Deal isn’t sure either.

“I don’t know there was much of an official thing,” Deal said.

The stations are private businesses whose owners agree to provide little more than a garage bay with a hydraulic lift, and an employee to help move cars. The state provides the inspectors. The station owners charge vehicle owners a fee.

Deal and Cronan charge $100 per vehicle, the highest of any of the stations operating today. Most charge $60 or $75 per vehicle, state records show. Recovery Services, on Athens Highway in Gainesville, hosted more than 2,800 inspections in 2008.

Across the state, Georgia inspectors conducted more than 17,000 safety checks in 2008.

When he became responsible for the inspection system, Graham said a number of questions immediately came to mind.

“How did they get assigned to doing this work?” Graham said. “How does it work? Is there a better way to do it? I thought it was interesting that you had dedicated businesses that had not been [competitively] bid.”

The program is essentially revenue-neutral for the state, Graham said, meaning it costs nearly as much to operate as it brings in.

Graham also thought the locations of the inspection stations made little sense. The nearest one to Atlanta, for example, is Gainesville. The station nearest Savannah is in Hazlehurst, more than two hours away. The stations are essentially regional monopolies, Graham said.

 

‘A constituent issue’

By 2008, Graham was making plans to expand the number of inspection stations and to award the sites through a competitive bidding process.

That’s when he first heard from Cagle’s office. Graham said he was asked to appear in the lieutenant governor’s Capitol office on Jan. 28, 2008, to discuss his plans.

Graham said he arrived to find Cagle, his then-chief of staff Brad Alexander, and Deal, the congressman’s chief of staff, Chris Riley, and Cronan.

Asked whether he requested the meeting, Deal said, “I probably did.”

Cronan, Deal’s business partner, said it was his idea to request the meeting. He said he does not remember whether he suggested that Deal call Cagle’s office.

Cagle and Deal are both from Gainesville and represented the same district in the state Senate. Deal and Cronan’s business contributed $1,000 to Cagle’s campaign in 2005. Deal also gave Cagle’s campaign $5,000 in 2006.

Cagle refused to be interviewed for this story. In response to questions via e-mail, his chief of staff, Bart Gobeil, replied that Deal’s office contacted them and asked for help with “a constituent issue. The lieutenant governor’s office arranged, as it has done for hundreds — if not thousands — of his constituents, a meeting between a constituent and a department.”

Cagle, Gobeil said, never asked Graham “to do anything other than listen to Congressman Deal’s position.” Gobeil did not attend the meetings.

Deal and Cronan said they wanted to know Graham’s intentions.

“My best recollection was we were trying to find out about the changes in the inspections,” Cronan said.

Deal said he wasn’t concerned for his business. Instead, he said he wanted assurances that inspectors would be qualified and chosen properly.

“We ought to know when vehicles are being titled and put back on the road after being wrecked and rebuilt that somebody in an objective fashion, like the state inspectors, is actually looking at it,” Deal said. “And not just somebody paying their next-door neighbor to certify they did it right.”

Graham doesn’t dispute the need to ensure the inspectors’ competency, but said the system can be run more efficiently and economically by the private sector.

A former banker hired by the Republican Perdue in 2003, Graham has a reputation as a straight-shooting reformer who has aggressively gone after Georgians delinquent on their taxes. Perdue staffers nicknamed him “Sheriff Bart.”

However, he has rubbed some politicians the wrong way. Cagle once said of him, “Bart’s a great guy, but he sees things in black and white. He’s not seeing the gray, and I think in politics, that’s tough.”

Graham said he does not care if the work is done by Deal or anyone else, “as long as they won it in a competitive environment. If somebody can establish a business and do it more competitively and better than anybody else, people are better served.”

Deal said he is not opposed to putting the inspection process out to competitive bidding. He said he and Cronan would bid for the business if necessary.

He said he hadn’t intended to pressure or intimidate Graham.

Asked if he felt pressured or intimidated, Graham demurred.

“I’m not going to answer that,” he said.

‘Discuss ... your intentions’

In June 2008, Graham was called to another meeting with Deal, Cronan and the others.

Although he said Deal did not influence his decision, Graham said he decided after the meeting to try a different approach: privatize the system and open it up for more competition.

By late 2008, Graham proposed eliminating funding — $1.7 million a year — for the inspection program in the state budget. The money mostly pays the inspectors’ salaries and expenses, including mileage. Perdue agreed and the money wasn’t included in his budget proposal in early 2009. Graham intended to use the regulatory process to privatize the inspections and expand the number of inspection stations.

His plan was adopted by the House in its version of the state budget and sent to the Senate.

Riley, Deal’s chief of staff, e-mailed state officials around this time from his U.S. House e-mail account about Deal’s business, in an apparent attempt to keep the money in the state budget, according to copies of the e-mails obtained by the AJC through the state Open Records Act.

On March 20, Riley e-mailed Mack Chandler, deputy revenue commissioner: “We would like to discuss with DOR [Department of Revenue] your intentions regarding inspections, but the House version of the budget is pretty clear, never the less, we would like to work with you. We have to be in Atlanta next Friday, does that work for you?”

On March 23, Cagle aide Brian Knight e-mailed Riley: “I just wanted to clarify that you are asking the DOR Salvage Inspection Program be fully funded at the previous continuation budget of $1.7M.”

On March 27, Graham again met with Deal and Cronan and Senate staff. But this time, Graham said, he insisted on neutral ground. The group gathered in Perdue’s conference room.

Graham wouldn’t discuss what was said in this final meeting, but he said the point was clear: Deal and Cronan did not want the inspection system changed.

“Without a doubt,” Graham said.

Within days of their final meeting, on March 30, the money was slipped back into the budget by the Senate Appropriations Committee.

Barely an hour after the vote, after the program’s continuation was all but guaranteed, Riley sent Cagle’s office an e-mail saying it was OK if the money was left out of the budget after all.

“Following our meeting with Commissioner Graham, we would like to withdraw our request to fully fund the DOR Salvage Inspection Program and accept the House’s language,” Riley wrote in his e-mail.

Riley’s e-mail ends with an electronic signature and notes that he is Deal’s chief of staff and gives phone numbers for Deal’s congressional offices in Washington and in the district. U.S. House rules bar the use of congressional resources for anything other than official business.

Deal argued Riley’s actions were not improper. Riley, he said, “is on 24 hours” and was coordinating his schedule.

“He’s responsible for setting up meetings for me,” Deal said. “That’s part of what he does. If you want to segment that out, I suppose you could argue that.”

Deal said he did not contact anyone in the Senate to ask that the money be left in the budget. How it was restored is a mystery.

Senate Appropriations Chairman Jack Hill (R-Reidsville) said he doesn’t remember. Hill said it probably would have been handled by the subcommittee that reviews the Revenue budget. But the subcommittee’s chairman, Sen. Mitch Seabaugh (R-Sharpsburg), said he didn’t know, either.

Gobeil, Cagle’s chief of staff, would not say whether Cagle asked to restore the money to the budget. Cagle serves as Senate president. Graham and the Department of Revenue never demonstrated “how cutting this program would save the state money, which typically is the catalyst for privatization initiatives,” Gobeil said in an e-mail.

‘A personal interest’

Asked whether a business owner who is not a U.S. congressman would be able to command an audience at the Capitol with the lieutenant governor and the head of the Department of Revenue, Deal said one should be.

“I don’t know why the commissioner would take offense if any citizens of the state of Georgia would have the right to ask him a question and find out the answer,” Deal said.

Deal said that while it’s true he has a personal interest in what happens to the inspection program, it’s an important state function that affects his constituents, including his business partner who lives in his district.

“The fellows who work in the office are constituents. The inspectors who are potentially going to lose their jobs, some of them are my constituents,” he said. “I suppose you can try to parse words on that. But there was a meeting where, yes, I had a personal interest in the meeting.”

Deal said this isn’t the first time he’s intervened in state matters. Asked to provide examples, his staff offered several from 2005 through 2009 to show he worked with Revenue, the Department of Transportation and the Department of Community Health, among others, to facilitate action on behalf of local governments or businesses.

None of those efforts, however, involved businesses that earn him money.

Deal’s efforts on his own behalf are — at best — a conflict of interest, said state Sen. Nan Orrock (D-Atlanta), who voted against the budget that included the money for the current inspection system.

It is “indefensible,” Orrock said, for state officials to hold a “closed door meeting to continue a sweetheart deal.”

“It’s these sorts of things that really undermine the public’s confidence in elected officials,” she said

In the end, Deal could still face increased competition. Graham used his regulatory powers to increase the number of stations and allow private inspectors to perform the safety checks. The new rules, which took effect Thursday, cap the fees station owners may collect for use of their facility at $50, half of what Deal and Cronan are paid now.

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How We Got the Story

Working on a tip, AJC reporters requested documents from the Department of Revenue on the salvage inspection program, on U.S. Rep. Nathan Deal’s company and on contacts his office made with DOR and other state officials. Reporters also reviewed Deal’s congressional disclosure reports, Secretary of State corporation records, video of budget committee meetings, and campaign finance reports. Reporters interviewed Deal, Revenue Commissioner Bart Graham and numerous other state officials for the story and visited the site of Deal’s Gainesville business.

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Check Our Sources

Department of Revenue’s list of inspection stations:

http://motor.etax.dor.ga.gov/motor/salvage/InspectionStations.asp

Recovery Services Inc.’s corporate record with Georgia secretary of state:

http://corp.sos.state.ga.us/corp/soskb/Corp.asp?794752

Nathan Deal’s financial disclosure filed with U.S. House:

http://clerk.house.gov/public_disc/financial-search.html

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