In-laws and outlaws

Did the governor give special treatment to the company that employed his brother-in-law?

LET'S SAY YOU'RE Gov. Gary Locke's brother-in-law. You bunk at the governor's mansion. You commute to your nearby job as an executive of a private technology firm.

During your two years with the firm, the governor signs a bill giving your company a tax break, personally intervenes in a dispute involving your company, shows up for a party there, and signs a federal loan application for your company, whose founders—your bosses—pay at least two visits to the mansion.

At the same time, your company rakes in millions in state aid, lands a fat state technology contract, and is allowed to use government credit authority to float new loans (an authority illegally granted, as a state auditor's report will reveal this week).

Are you getting gubernatorial favors that average citizens don't get?

Naaaw, says the governor.

Despite appearances, Locke says there was no ethics conflict when Judd Lee, the brother of first lady Mona Lee Locke, worked as chief financial officer of a company that owes a lot to the governor.

Judd Lee and his company, SafeHarbor Technology, did not directly benefit from Locke's effort, the governor contends, thus there was no wrongdoing.

"The state provided no direct financial assistance, nor can it, to SafeHarbor or the Grays Harbor County PDA," says Locke communications director Pearse Edwards.

State government, however, did pass along federal funds to Lee's company through the Grays Harbor Public Development Agency (PDA), a public corporation.

A PDA, by acting as middleman, enables government agencies to skirt state law prohibiting public funds from going directly to private companies. PDAs were also created to spur economic development and improve government efficiency.

Along with other firms (now numbering 17), SafeHarbor has been located since 1999 at the PDA's Satsop business park, site of an old, half-completed nuclear power plant in Grays Harbor County.

The PDA's 1998 start-up money totaled more than $25 million in public funds. It was handed over by the Bonneville Power Administration to settle a multibillion dollar dispute with the state over dismantling the plant, which was abandoned in the 1980s.

PDA officials have doled out millions in aid and credits to build offices and rent furnishings for No. 1 tenant SafeHabor, a tech support and online assistance provider for Web sites that was founded by three young entrepreneurs from Hoquiam.

Among SafeHarbor's customers are several state agencies, including the departments of Licensing and Social and Health Services. Internet visitors to state sites get 24-hour assistance through SafeHarbor's help screens, e-mail, and toll-free telephone calls.

SafeHarbor's services on the state Web site were unveiled in a press release by the governor last May. His brother- in-law's company landed the contract through competitive bidding.

In a recent investigation of PDA/ SafeHarbor dealings, The Tacoma News Tribune reported that SafeHarbor has so far billed the state $460,000 for online services. The company has also received $12 million in state economic aid and saved $600,000 with tax breaks through Locke's legislation.

Nonetheless, SafeHarbor is steadily losing money, the paper says, and could collapse, leaving the PDA's business park without its prime tenant.

For its part, SafeHarbor last week announced it has raised a much-needed $7.5 million in new venture capital. Chad Waite of OVP Venture Partners in Kirkland says the company "is doing incredibly well" in the wake of the slump and may break even next quarter.

Though Locke told the paper he doesn't recall pushing for SafeHarbor's development, a former PDA official says SafeHarbor was "the governor's poster child" for rural tech-industry development.

Records show Locke drafted legislation for a 100 percent tax break and another smaller tax credit affecting SafeHarbor— a bill that "originated with legislators from Gray Harbor County," notes spokesperson Edwards.

The legislation was proposed by Locke in late 1998 and was to benefit 20 other high-tech companies. It was the cornerstone of the governor's rural-business development plan, says Edwards, who points out that Lee was not working for SafeHarbor at the time.

However, in March 1999, enter the brother-in-law.

Lee began working then for SafeHarbor and moved into the mansion—more than a month before the Legislature passed the bill and Locke signed it into law.

The familial connection was not seen as a conflict of interest, the governor's office indicates. Nor did it deter Locke from staying involved in the company's future.

The governor was apparently aware of how things might look to outsiders, however.

So, living just bedrooms apart for most of two years—at the mansion and in a smaller, temporary gubernatorial residence during a mansion remodeling—Locke and Lee made a sort of ethics pact.

They would never talk business around the house, Locke's office says.

"The governor and his brother-in-law did not discuss SafeHarbor while Mr. Lee was staying at the governor's residence," says Edwards. "They set up a brick wall around any conversation about SafeHarbor.

"He received no help from the governor or the governor's office in obtaining the SafeHarbor position."

Lee stayed at the governor's private quarters during the week from 1999 until the end of 2001, says Edwards. He commuted daily to his job about 25 miles down the road and spent weekends at his Regrade condo in Seattle.

Though Locke and Lee apparently weren't talking shop at home, their fortunes continued to cross.

Locke helped SafeHarbor and the PDA seek a U.S. loan, got involved in a company dispute, and showed up for an open house to laud the company's leadership—which included his brother-in-law, the CFO.

Lee, meanwhile, was bringing company officials around to the mansion for a tour and for a governor's State of State reception.

Edwards, who confirms those events, says none was out of the ordinary.

The loan backing was "routine." And in the midst of the dispute, over a property-siting issue at Satsop, Locke "phoned the [SafeHarbor] CEO to voice his concern [about] the company's opposition," Edwards says, and invited him to a meeting in Olympia. A meeting was held, and the dispute resolved.

Standard gubernatorial attention—like everyone gets, right?

Lee, who did not respond to interview requests, left SafeHarbor this year. He now works for Microsoft.

He leaves behind a company and its overseer who have caught the critical eye of the state auditor, who says the PDA's lackadaisical oversight allowed SafeHarbor to toss its weight around and avoid paying millions in rent and other fees, causing a drain on the PDA's funds.

In a draft of the audit due out Friday and obtained by Seattle Weekly, state auditor Brian Sonntag says the PDA, mostly in conjunction with SafeHarbor's operations, violated state bidding, credit, and expenditure laws.

The PDA was losing money, Sonntag says, while SafeHarbor was tapping the authority for a $3 million building remodel and a $5.9 million expansion into a second building—which it abandoned after five months.

Locke is hopeful the PDA and SafeHarbor will rebound.

"Our work on behalf of such projects in Grays Harbor County and elsewhere," says Edwards, "is an example of what we must do to preserve and create family-wage jobs in rural Washington." No, he didn't mean that family.

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