So Who Was That Guy?

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By Mark Hosenball

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THEIR CONVERSATION--A BRIEF exchange that appears to have been recorded accidentally--shows up on the videotape of a White House coffee on Dec. 13, 1995. ""I have five checks for you,'' Ruben Velez says, trying to hand over campaign donations in the White House. Don Fowler, chairman of the Democratic National Committee, sidesteps the offer. ""As soon as this is over, I'll call you,'' Fowler says. ""I'm sorry. I can't take this. I apologize to you and we'll get it done.''

In Washington, where the White House tapes are being minutely analyzed, nobody could figure out who the guy with Fowler was--probably because Velez's name does not appear on the guest list for the Dec. 13 fund-raiser. But back home, he's a player. Ruben Velez Lebron, 68, is a self-made millionaire from San Juan who owns Rexach, Puerto Rico's largest construction company. He has been actively involved with the Popular Democratic Party, which is aligned with the mainland Democrats, for years, and he was a major backer of former governor Rafael Hernandez Colon. In 1995-96 Velez was both a contributor and fund raiser for the Clinton-Gore campaign. All of this appears to have been legal--a simple case, as Velez said in a statement, of an American citizen exercising his ""constitutional right to support the Democratic Party and its candidates.''

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The story, however, is more complicated than that. Velez was working hard to cultivate ties to the White House and the U.S. Department of Housing and Urban Development, then under the command of Secretary Henry Cisneros. Velez needed friends in high places because he was trying to protect two controversial deals he had won in 1992, during the waning days of the Colon administration. One was $23 million in contracts to operate 22,000 units of Puerto Rico's public-housing program. The other, which also involved HUD, was known as ""the Santa Claus deal.'' On Christmas Eve 1992 Velez got an agreement to buy 52 acres of government-owned land in San Juan for $8.3 million, less than half its market value according to a subsequent appraisal. That sale was never consummated, although Velez, the commonwealth and the Feds continued to wrangle about the price for several years. In 1996 HUD tentatively agreed to let Velez pay for the land over a five-year period, which in effect meant the government would act as his mortgage banker. HUD officials now say that was unacceptable.

Both deals became highly controversial in Puerto Rico, where the New Progressive Party, which is aligned with mainland Republicans, had swept Colon from office and taken control of the legislature. Alleging ""deficient performance'' on the public-housing contract, the new administration moved to cut funding to three Velez-related companies. In early 1995 Velez hired lawyer Susan Thomases, Hillary Clinton's close friend, to represent him with HUD. Thomases won a meeting with Cisneros's chief of staff, Bruce Katz, to plead Velez's case. Katz then got a follow-up call from Harold Ickes, deputy White House chief of staff. Katz said Ickes wanted only a status report; Ickes did not respond to requests for comment. The contracts expired. But Puerto Rican legislators issued a highly critical report and in mid-October accused Velez and a former Colon administration official of being ""mainly responsible'' for ""irregularities'' in the bidding process on the contracts. (Velez's lawyer says there is ""no evidence'' of impropriety.)

Velez also got high-powered help to save the Santa Claus deal--Michael Brown, 32, son of the late Commerce secretary Ron Brown. Brown, who recently pleaded guilty to campaign violations, took Velez to HUD on Oct. 1 for last-ditch negotiations. But new HUD Secretary Andrew Cuomo is taking a tougher stance. ""If this is such a good deal, why should the federal government pay for it?'' a HUD attorney demanded. NEWSWEEK has learned that HUD intends to kill the deal with Velez and put the land up for bid. But would the outcome have been the same if he hadn't been caught on videotape?

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