Former Portland Labor Leader Pleads Guilty To Taking Payoffs
Wednesday, February 28, 2001
THE ASSOCIATED PRESS
PORTLAND -- A former union chief has pleaded guilty to taking almost $195,000 in payoffs to keep a failing financial consulting firm afloat with protected pension money.
John Abbott admitted taking the cash and other favors in exchange for helping to steer funds from five union pension and welfare trust plans to Capital Consultants.
A federal organized crime strike force has been investigating Capital Consultants Chairman Jeffrey Grayson and his son Barclay after union trust funds gave Capital Consultants more than $400 million to invest before the firm collapsed in September.
As part of a plea bargain with federal prosecutors, Abbott promised to cooperate in the investigation.
Abbott, the former chief of the Oregon, Southern Idaho and Wyoming District Council of Laborers, also pleaded guilty to filing a fraudulent income tax return.
Capital Consultants loaned about $130 million of that union money to Wilshire Credit Corp. -- loans that proved nearly worthless after the 1999 bankruptcy of Wilshire Credit's affiliate, Wilshire Financial Services Group.
Wilshire Credit's relationship with Capital Consultants is also under investigation.
At the Monday hearing in Portland before U.S. District Judge Anna Brown, Abbott acknowledged leaving Jeffrey Grayson's office on a number of occasions with his pockets stuffed with cash.
Assistant U.S. Attorney Lance Caldwell said the government had witnesses who could testify that Jeffrey Grayson sent trusted employees to the bank to cash checks for between $500 and just under $10,000 and return with the money to Capital Consultants.
Caldwell said the cash would be placed in a basket attached to Jeffrey Grayson's wheelchair, and he would disappear into his office to await a visit from Abbott.
"Mr. Abbott would show up in a short time and go into Mr. Grayson's office, and in a few minutes he'd come out," Caldwell said.
On several occasions, he said, employees noticed "what looked like a wad of cash on Mr. Abbott's person."
Records of Abbott's visits to Capital Consultants and records of the check cashings coincided in most cases, Caldwell said.
According to Caldwell, Mustafa Arooni, Jeffrey Grayson's driver and personal assistant, told investigators that Grayson tried to get him to furnish an alibi by saying Grayson got the cash so that Arooni could send $175,000 to his family overseas. Arooni said Grayson actually gave him about $10,000, Caldwell told the judge.
Norm Sepenuk, Grayson's criminal defense lawyer, had no comment on Abbott's plea.
Abbott pleaded guilty to accepting a gratuity, which is similar to a bribery charge except that the payments were for "general influence" rather than for a specific action.
He admitted accepting $194,940 in "cash and other secret payments."
Abbott also pleaded guilty to omitting $76,560 in gratuities from Grayson from his 1997 federal income tax return.
The maximum penalty for each of the counts is three years in prison and a $250,000 fine.
But in the plea agreement, the government promised to seek a lighter sentence of just 15 months in return for his testimony against Jeffrey Grayson and others.
Abbott promised to make restitution of $195,000 to the Laborers union.
But Brown also cautioned the former official that she could decide to make him pay an amount equal to the damage he caused the five trust funds.
Forrest Rieke, Abbott's lawyer, said his client is broke and living with his mother-in-law in the Portland area.
"He's out of money; he's in pretty dire straits," Rieke said.