Federal grand jury is investigating DRPA spending

POSTED: April 04, 2013

A federal grand jury in Philadelphia is investigating millions of dollars of politically connected “economic-development” spending by the Delaware River Port Authority, The Inquirer has learned.

The DRPA’s chief attorney and inspector general sent a memo to DRPA employees last Thursday warning them to preserve all documents related to the agency’s economic-development projects.

DRPA chief executive John Matheussen said Wednesday, “I can confirm that we have been served with a subpoena by the U.S. Attorney’s office.”

He declined to discuss the timing or the scope of the subpoena issued last week by the office of eastern Pennsylvania U.S. Attorney Zane David Memeger.

DRPA spokesman Tim Ireland said that the DRPA “will cooperate fully” and that “we will make certain our compliance with this subpoena demonstrates a renewed commitment to transparency” by the agency.

The DRPA, which operates four toll bridges and the PATCO commuter rail line between Philadelphia and South Jersey, spent nearly $500 million over 15 years to underwrite museums, sports stadiums, a concert hall, a cancer center, the Army-Navy football game, and other non-transportation projects.

Much of the money went to politically influential recipients, as the Pennsylvania and New Jersey delegations on the DRPA board got equal amounts to spend. Fourteen of the 16 board members are appointed by the governors of New Jersey and Pennsylvania (two Pennsylvania members, the state treasurer and state auditor general, are on the board by virtue of their elected offices).

Last year, New Jersey state comptroller Matthew Boxer issued a report critical of political cronyism and mismanagement at the DRPA, saying that “in nearly every area we looked at, we found people who treated the DRPA like a personal ATM, from DRPA commissioners to private vendors to community organizations. People with connections at the DRPA were quick to put their hand out when dealing with the agency, and they generally were not disappointed when they did.”

A spokeswoman for Memeger declined to comment on the grand jury investigation.

Sources close to the probe, however, said it appeared to focus on economic development spending in Pennsylvania.

The federal investigators were said to be particularly interested in spending that was funneled through the Philadelphia Industrial Development Corp., a development lender created by the city and the Greater Philadelphia Chamber of Commerce.

The PIDC, which is governed by a board appointed by the mayor and the president of the chamber, received more than $13 million from the DRPA in 2010, ostensibly to help “small, emerging and new businesses.”

In fact, most of the money was directed by DRPA officials to well-established tourism groups or nonprofits, some with close ties to DRPA board members. In one case, $500,000 was given to a multibillion-dollar commercial real estate developer.

The Philadelphia Orchestra, the National Constitution Center, public broadcaster WHYY, the Pro Cycling Tour, the Variety Club, the Independence Visitor Center, and other organizations collected $13.3 million in DRPA funds in 2010.

John Grady, president of the PIDC, said Wednesday that he could not comment other than to say that the PIDC “cooperates with all investigations” by law enforcement agencies.

He said the PIDC’s role as agent for the DRPA’s economic-development funding ended at the end of 2011, when the money ran out.

Economic-development spending by the DRPA has long been controversial, as it contributed to a $1 billion debt that now consumes more than 40 percent of the agency’s revenue. Motorists and some board members complained that the DRPA should not spend money on non-transportation projects, while borrowing hundreds of millions to maintain its bridges and rail line.

The DRPA allocated the last of its economic-development money in December 2011. Its then-chairman, Gov. Corbett, said the DRPA would no longer be involved in economic-development spending.

The scope and duration of the federal investigation was not clear Wednesday.

However, sources close to the investigation said DRPA general counsel Danielle McNichol and inspector general Thomas Raftery issued a memo late Thursday, just before the three-day weekend, telling employees not to destroy documents related to DRPA economic-development spending.

Contact Paul Nussbaum at 215-854-4587 or pnussbaum@phillynews.com

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