Rep. Ross faces charges of bribery and fraud in controversial land sale

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 $100,001to $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 withan estimated $906 million in sales and the pharmacy industry isaggressively lobbying Congress regarding proposed health care reformlegislation. 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 DogCoalition, Rep. Ross has been integrally involved in the debate overhealth care reform. This past June, the National Association of ChainDrug Stores thanked Rep. Ross for introducing legislation authorizingpayments to pharmacists to train patients how to manage theirmedications [...]

"With the sale of hisbusiness and the high priced non-compete covenant, Rep. Ross has gonefrom accepting campaign contributions from those with legislativeinterests before him to accepting significant personal financialbenefits of dubious legality." [CREW director Melanie]  Sloan continued, "The situation isreminiscent of that in which former Rep. Randy "Duke" Cunningham soldhis house to a defense contractor for an amount above its value inreturn for legislative assistance - a sale that ultimately resulted inRep. Cunningham's conviction on criminal charges."

The CREW statement goes on to point out that federal bribery law prohibits public officials from "directly orindirectly" demanding, seeking, receiving, accepting, or agreeing toreceive or accept anything of value in return for being influenced inthe performance of an official act. Honest services fraud prohibitsmembers of Congress from depriving their constituents, the House ofRepresentatives, 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 disclosureforms. Nor is it whether Rep. Ross earned a large or small return onhis initial investment in the building. The issue is whether theCongressman received more on the sale of his building than someonewithout his power and influence would have received for selling thisbuilding. As we read his statement, Rep. Ross does not deny that hereceived significantly more than an arms-length fair-market price forthe building -- on top of the very considerable sums he and his wifereceived for selling and continuing to run the business."