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Probe of Airport Funds Puts Pena Under Scrutiny : Inquiry: While he was mayor of Denver, city may have diverted money from federally subsidized facility.


WASHINGTON — The Transportation Department's inspector general is conducting an inquiry of special sensitivity for the agency's secretary, Federico Pena: Investigators are eyeing whether officials in Denver, where Pena was mayor for eight years, improperly diverted revenue from the city's federally subsidized airport to pay for other civic services.

Interviews and public records show that the expenditures being reviewed include city payments to the firm of Ronald H. Brown, the current commerce secretary who in the late 1980s and early 1990s was then-Mayor Pena's lobbyist in Washington.

Brown and his firm--Patton, Boggs & Blow--were paid $240,000 during 1991 and 1992 from airport funds, according to records provided last month to the inspector general by city auditors in Denver. Copies of the records were obtained by The Times.

"They asked for several documents that went back into the middle of Pena's (mayoral) Administration," said a Denver auditing official who spoke on condition of anonymity.

This official and others familiar with aspects of the inspector general's inquiry said millions of dollars in spending for legal services and lobbying under Pena's successor as mayor, Wellington Webb, also are under review.

Federal law generally holds that, as a condition of accepting aviation funds from the government, cities are prohibited from using revenue generated by their airports for anything other than the airports' "capital or operating costs."

An intent of the law, according to experts, is to prevent local governments from drawing on the federal government for an airport's costs while directing the money the airport actually earns, from landing fees or other rentals, to unrelated civic projects.

The federal government provided funding during the 1980s and 1990s for Denver's Stapleton International Airport. It also helped pay for the new $4.9-billion Denver International Airport, which opened on Feb. 28 to replace Stapleton.

Denver's contract with Brown's firm was for general-purpose lobbying for the city "under the directive of the mayor."

Pena, through a spokesman, said that he "was not specifically aware" of how city funds were used to pay for the lobbying services while he was mayor.

The question about use of the funds in Denver is delicate, if only because of Pena and Brown's ascension to prominence in the Clinton Administration. But the matter is further complicated by the ramifications it could pose for Pena's department in Washington:

If Transportation Department Inspector General A. Mary Schiavo concludes that airport revenue in Denver has been diverted in violation of federal law, the department will have the option of withholding part or all of the remaining $117 million of federal money that otherwise has been pledged for further expansion of the city's new airport.

Thus, Pena's department would be weighing action against a project that most defined his tenure as mayor, from 1983 to mid-1991. Indeed, President Clinton cited Pena's championing of the airport--the first such facility to be built in North America in 20 years--when he nominated the former mayor as his top transportation policy-maker.

Pena, according to a spokesman, has and will continue to recuse himself from participating in decisions directly affecting the Denver airport.

According to people familiar with the matter, preliminary findings by the inspector general's staff threatened to postpone delivery late last month of $35.7 million in federal funding for Denver International Airport. The money was delivered days before the controversial airport opened.

If delivery of the money had been delayed just another few days--until after the airport opened--by law the funds could have been spent only to repay the facility's bond debt. Instead, the city was able to use the money for urgent expenses, including paying contractors for paving and grading at the 53-square-mile complex.

"The inspector general's office did say that (withholding at least part of the $35.7 million) was something that they would certainly, I won't say recommend, but they would understand if I wanted to do something like that," said Cynthia Rich, an associate administrator of the Federal Aviation Administration. "This was a preliminary discussion of a revenue-diversion audit. This was not something where we were getting to final conclusions."

Rich said she apprised "the office" of Pena's chief of staff, Ann Bormolini, of the decision last month, but did not confer with Pena.

Rich, a presidential appointee, said she has applied a consistent policy regarding alleged diversions of airport revenue during her one year in office: She will not consider withholding any airport's grant money until the inspector general's findings are in final form and the airport has been given time to repay any money spent inappropriately.

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