A small Beaver County development agency has spun into a $10.6 million outfit controlled by a powerful Democratic lawmaker and financed exclusively by Pennsylvania taxpayers.
In the case of the Beaver Initiative for Growth, the power lies exclusively with state Rep. Michael Veon, of Beaver Falls -- the second-ranking Democrat in the House -- and state Sen. Gerald LaValle, of Rochester, another veteran Democrat.
"Jerry and I are the directors," Veon said in an interview.
As board members, Veon, 49, and LaValle, 74, determine how BIG spends its cash. As top-ranking lawmakers, Veon and LaValle influence the distribution of special grants controlled by legislative leaders to outfits such as BIG.
What's more, Veon conceded BIG does not create or retain jobs. Instead, the agency helps create a climate for job creation and lists its involvement in 50 community projects as proof.
"First of all, we don't presume that the Beaver Initiative for Growth itself creates jobs," Veon said. "We are a partner in economic development in Beaver County."
The BIG arrangement is rare: powerful lawmakers sending taxpayer money to a nonprofit organization they control.
It is an arrangement that raises questions from experts. One such expert is Laura Otten, executive director of the Nonprofit Center at LaSalle University in Philadelphia, which advises nonprofits on conflict of interest policies.
"The thing that makes it unique isn't that it is funded solely by state money. There are too many organizations you'd find that are funded 95 percent by state money. But you're not going to find them with a board of two -- and a board of two who are elected officials who have the ability to channel money to this organization," Otten said. "That's what makes this organization stand out and smell bad."
Another critic is former state Rep. John Kennedy, a Cumberland County Republican. He now heads a government reform project for the Commonwealth Foundation.
He called BIG an "outcropping of the arrogance of power and the mismanagement" of the special state grants used to fund the agency.
BIG also has caught the eye of state Attorney General Tom Corbett, whose office regulates nonprofit organizations in Pennsylvania.
"Certainly any time you have board members receive state money and distribute it, it is prudent to have multiple board members as a check and balance and to avoid the appearance of impropriety," said Kevin Harley, Corbett's spokesman.
Mr. BIG
Veon, a career politician, is the public face of BIG.
"Mike Veon has been the consistent driving force behind BIG," said Tom Woodske, the BIG executive director.
Veon said he and LaValle used their political clout to funnel $10.6 million in state money to BIG since 1999. He said BIG went through the same process every applicant follows to win special state grants, which are distributed by the state Department of Community and Economic Development.
Yet records show Veon and LaValle were so confident of approval they announced the receipt of BIG grants long before the state agency approved the applications, suggesting BIG grant applications receive special consideration. In the most recent instance, Veon and LaValle announced Nov. 4 they would bring $1.8 million from Harrisburg back to Beaver County. But the Department of Community and Economic Development did not approve the $1.8 million grant until Nov. 30, according to state records.
The ties between Veon and BIG are deep.
BIG leases office space in a former bank on Seventh Avenue in Beaver Falls, the heart of Veon's legislative district for the past 21 years. Taxpayers pay $1,250 a month to BIG to lease space in the bank for Veon's legislative office, state records show.
What's more, some Veon legislative staffers also work for BIG. His district office manager, Annamarie Perretta-Rosepink, earned $37,000 working part-time as BIG's financial officer between 2002 and 2004, according to federal income tax records filed by the agency.
Corporate records filed in 1998 identified Perretta-Rosepink as BIG's treasurer.
House records show Perretta-Rosepink earned $69,974 in 2004. She also received $20,423 that year from Veon's re-election campaign for consulting services and expenses, elections records show.
Perretta-Rosepink, who declined interview requests, is not alone.
The Pittsburgh Tribune-Review's initial inquiries about BIG were referred to Veon's press secretary, Bob Caton, who earns $65,000 as a legislative employee. Caton is not on the BIG payroll.
"All press inquiries go through Bob Caton," Woodske told the Trib.
More recently, Caton contacted the Trib to provide help with references and contact information for BIG members.
In addition, Veon's newest hire, former KDKA radio talk show host Mike Romigh, works part-time for Veon's legislative staff for $20,000 a year and part-time for BIG at an undisclosed salary.
A BIG family
BIG's connections extend beyond Veon's legislative family.
Delta Development Group of Mechanicsburg, Cumberland County, hired the lawmaker's brother, Mark Veon, 46, of Cranberry, Butler County, several months after the company signed a $222,000 deal in 2004 to become a BIG consultant.
Mike Veon said he has never discussed his brother's employment with Delta officials. Mark Veon did not respond to interview requests.
Delta President LeRoy Kline told the Trib he has known Mike Veon since the lawmaker's first days in the state House. Kline worked in the House Democratic policy office at the time.
Kline said Delta has done work for BIG since 1992, including writing the original plan for the organization. He said any contracts won by Delta Development were awarded after public solicitations for proposals.
Nor has Mark Veon been involved in Delta Development's relationship with BIG, Kline said in a written response to questions from the newspaper.
Principals from Delta Development contributed $6,000 to Veon's campaign in 2004 and 2005, campaign records show.
In a separate transaction shortly after it hired Mark Veon, Delta Development signed a $450,000 contract with the House Democratic Caucus. Mike Veon, the House minority whip, is the second-ranking member of the Democratic Caucus.
Although that contract bears the signature of a senior house staffer, Kline said it was Mike Veon who first approached him about the work.
BIG publicity
Mike Veon and LaValle insist BIG is strictly for the public good. According to federal tax records, Veon works 20 hours a week for BIG, while LaValle works five hours a week for the agency. They told the Trib they accept neither compensation nor expense reimbursement.
"No, not one penny. That's our job to do what we have to do for economic growth in our district," Veon said.
BIG certainly promotes the two politicians behind it. In BIG literature, photos of Mike Veon and LaValle and accounts of their legislative prowess are prominent features.
No fewer than 11 photos in BIG's annual reports for 2003-04 and 2004-05 featured one or both lawmakers.
More recently, BIG's October-November 2005 newsletter, aimed at more than 400 civic leaders, featured Veon touting a proposal to add $600 million to this year's capital budget and vowing to ask for "more than our fair share of the funding." It also included two photographs of Veon at the groundbreaking for a New Brighton fishing park, as well as laudatory comments from local officials about the legislator.
BIG recently paid $40,000 to buy recreational fields in Beaver Falls from a bankrupt steel company.
But that purchase was an exception, records show. Most of the $10.6 million won by BIG is yet to be spent. More than half is earmarked for operating costs, equipment purchases, salaries, public relations and consultants' fees, records show.
BIG officials said the consultants' studies have helped community groups lay the groundwork to snare more taxpayer money from state agencies.
Executive director Woodske and financial officer Cynthia Vannoy said BIG projects encourage economic growth.
"BIG staff, and our consulting team, has the expertise to coordinate local groups, facilitate meetings and studies, and work with state agencies and officials to assist businesses and municipalities to build the framework necessary for positive economic and job growth," they said in a letter to the Trib.
Little oversight
The very structure of BIG causes some critics to wince. Most nonprofit organizations operate with more than two directors.
Although having only two directors is permissible, it raises eyebrows at the IRS.
"By having three unrelated board members, it gives additional assurances that the organization is being operated for the benefit of the general public and not an individual," said IRS regional spokesman David Stewart.
Added attorney Carolyn Duronio, a tax specialist with the Downtown law firm Reed Smith, who specializes in nonprofit organizations: "Best practices tell you have to have more than two ... to ensure sufficient oversight of the organization and to provide various viewpoints."
Unlike most nonprofits that receive state money, BIG was not organized under chapter 501c3 of the federal tax code. That designation covers tax-exempt, charitable nonprofit organizations. It also bans such charities from participating in politics.
Instead, BIG was organized under chapter 501c6 of the federal tax code. The designation allows BIG to remain tax-exempt and engage in politics and form political action committees.
That relationship between the lawmakers and BIG shocked Frances Hill, a University of Miami, Fla., law professor who consults with the Washington, D.C.-based Campaign Legal Center as its tax program director.
"It seems to me that (Veon) is using this to enhance his political career," Hill said. "In a sense, he's turning his 501c6 into an old-style political machine, but instead of handing out turkeys, he's handing out state money."
Pittsburgh tax lawyer Jack Owen said the concept of lawmakers controlling a nonprofit board with no outside members raises serious questions.
"With the (now-repealed legislative) pay grab and all the surrounding questions, it still begs the question: Are they acting in the public interest?" Owen said.
"I still think the IRS or probably the (state) attorney general ... I think they are going to want to see more public participation."
