Blue Dog healthcare honcho accused of taking bribes

"You can buy half the town for $420,000," said Adam Guthrie, chairman of the county Board of Equalization and the only licensed real estate appraiser in Prescott. -- Marcus Stern, ProPublica, Sept. 22, 2009
Rep. Mike Ross, Blue Dog-AR, is the chairman of the Blue Dog Coalition Healthcare Task Force, which also includes two Californians, representatives Mike Thompson and Loretta Sanchez. Ross is also accused of having taken bribes from a drug-store chain as part of the sale of a pharmacy he and his wife owned in his district.
This story is of interest to Merced and the San Joaquin Valley because Valley representatives Dennis Cardoza and Jim Costa are Blue Dogs. Former Rep. Gary Condit, D- Ceres, was a founder of this group of Boll Weavil Democrats, created when the Republicans took over the Congress in 1994 in the rightwing counter-revolution.
Like Ross' Arkansas district, as we know, Cardoza's and Costa's districts are chronically low-income, high- unemployment districts, where, due to the fiscal collapse of the state, public medical services are being cut back daily. They are also districts, again as we have recently seen, whose politicians are bought and paid for by large landowners at home and lobbyists in Washington. Costa has at least taken a position against a public option for healthcare insurance. Cardoza continues to ride the fence, with palms outstretched to both sides for "balance".
The free market in votes by members of Congress is on full display in the debate on healthcare reform.

Ross on Thursday again defended the sale, which was first reported by the Web site ProPublica. The Democratic congressman called the story part of a "left-wing, special interest conspiracy against me." "Ross sold pharmacy for more than apparent value," Andrew DeMillo, Kelly P. Kissel, Associated Press, Sept. 25, 2009.

Badlands Journal editorial board
 
9-22-09
Propublica.org
Rep. Mike Ross Raises Eyebrows With Healthy Haul
by Marcus Stern
http://www.propublica.org/article/arkansas-rep-sold-family-pharmacy-to-chain-with-stake-
Arkansas Rep. Mike Ross -- a Blue Dog Democrat playing a key role in the health care debate -- sold a piece of commercial property in 2007 for substantially more than a county assessment [2] (PDF) and an independent appraisal [3] (PDF) say it was worth.
The buyer: an Arkansas-based pharmacy chain with a keen interest in how the debate plays out.
Ross sold the real estate in Prescott, Ark., to USA Drug for $420,000 -- an eye-popping number for real estate in the tiny train and lumber town about 100 miles southwest of Little Rock.
"You can buy half the town for $420,000," said Adam Guthrie, chairman of the county Board of Equalization and the only licensed real estate appraiser in Prescott.
But the $420,000 was just the beginning of what Ross and his pharmacist wife, Holly, made from the sale of Holly's Health Mart. The owner of USA Drug, Stephen L. LaFrance Sr., also paid the Rosses $500,000 to $1 million for the pharmacy's assets and paid Holly Ross another $100,001 to $250,000 for signing a non-compete agreement. Those numbers, which Ross listed on the financial disclosure reports he files as a member of Congress, bring the total value of the transaction to between $1 million and $1.67 million.
And that's not counting the $2,300 campaign contribution Ross received from LaFrance two weeks after the sale closed.
Holly Ross remains the pharmacist at Holly's Health Mart under USA Drug. Neither she nor her husband agreed to speak with ProPublica for this story...At the time of the 2007 sale, the county assessor's office valued the pharmacy's building and the land on which it sits at $263,000 -- nearly $160,000 less than the Rosses got for it. Because assessors' valuations don't always reflect true market value, ProPublica hired Guthrie to appraise the property. He placed the current value of the lot and building at $198,000, substantially lower than the county's assessment, which was raised from $263,000 to $269,000 this year. Guthrie explained the difference between his appraisal and the county assessment by saying that county assessments have been running higher than actual market value.
Mike Ross frequently speaks for a coalition of House moderates known as the Blue Dog Democrats, a group that helped force changes to the version of the health care reform bill drafted by the House Energy and Commerce Committee. The role has lifted him to national prominence in recent months.
Ross, a member of the committee, told reporters on Aug. 5 in Little Rock: “We held the bill hostage in committee for 10 days to make it better. ... We protected small businesses. ... And we ensured that if there is a government option, it will be just that, an option. It will not be mandated on anybody."
Ross bristled at suggestions he was trying to kill the bill.
"I wasn't trying to kill health care reform," he said. "If I was, I wouldn't have been in negotiations for 10 days."
LaFrance has amassed a privately held chain of more than 150 pharmacies operating in fiveSouthern and Midwestern states under a variety of names, including USA Drug. It was the 15th largest drug chain in the country in 2008 with an estimated $906 million in sales, according to Racher Press, which publishes business intelligence reports.
The pharmacy industry is aggressively lobbying Congress in an effort to protect its interests in the health care debate. Ross, who belongs to the 52-member Congressional Community Pharmacy Coalition, has introduced and supported legislation backed by pharmacy trade groups.
On Aug. 1, the National Community Pharmacists Association issued a news release thanking Ross for an amendment to the health care reform bill that would create greater transparency in the operations of pharmacy benefit managers, who act as clearinghouses for insurance company reimbursements for pharmaceuticals.
In June, the National Association of Chain Drug Stores issued a news release thanking Ross for introducing legislation authorizing payments to pharmacists to train patients in how to manage their medications.
Health-related interests have donated $342,475 to Ross since 2007, according to federal campaign data maintained by the nonprofit Center for Responsive Politics. No other business sector has given Ross as much.
LaFrance declined to be interviewed for this story. His son, Stephen L. LaFrance Jr., who helps run the chain, asked for questions to be submitted in writing but didn't respond to them.
Ross's spokesman, Brad Howard, said the real estate deal was "open, honest and by-the-books." He described Ross and LaFrance as "acquaintances" but declined to say whether they have discussed the pending legislation, adding that Ross has discussed health carereform with many of his constituents.
The $157,000 gap between the property's assessed value and the price LaFrance paid wasn't unusual, Howard said, because assessments are done for tax purposes and typically don't reflect the full market value of the real estate.
"The appraisal always differs from the assessment, and you can't really compare the two," Howard said.
In that initial interview on Sept. 2, Howard told ProPublica that the appraised value of the real estate at the time of the sale "was somewhere around where the purchase price was, which was, you know, I think was like $420,000." He said he didn't have a copy of any such appraisal and suggested obtaining it from LaFrance, who did not respond torequests for a copy. On Friday, however, Howard said he could "only assume there was anappraisal done on the property by the buyer in 2007" and that he "never said" the property was appraised at $420,000.
Nevada County, which includes Prescott, hires an outside firm -- Arkansas CAMA Technology Inc. -- to update its assessments every five years. After LaFrance bought Holly's Health Mart in 2007, someone from CAMA called the headquarters of LaFrance's pharmacy chain to verify the sale price for the lot and building, in part because "it was such an expensivesale for that area," CAMA employee Mike Shepherd told ProPublica.
Commercial property values in Nevada County "have stayed flat" in recent years, Shepherd said, adding, "I would say flat or a slight increase, maybe. That would be pretty slight, though."
Brenda Williams of Nevada County Real Estate in Prescott said county property assessments tend to be slightly below market value, but usually "no more than 5 percent."
"Being in the real estate business, I know that I see the tax card every time, and it's usually assessed a little bit less than the actual value or sales price, a little bit less but not that much less," she said. Asked about the value of the lot and building housing Holly's Health Mart, she said: "It might cost $250,000 to build it. I wouldn't have a problem with that two hundred and something thousand. But not over 400."
The Rosses bought the lot in 1999 for $10,000, then constructed a building that the county assessed at $225,000.
Two months after the 2007 sale, LaFrance's concerns about health care reform were spelled out in an article in the Arkansas Democrat-Gazette.
"Universal health care will ruin our health care in America," LaFrance told the reporter."There'll be long lines, they won't be able to get treated, potential doctors will be afraid to go into medical school, there will be an outflux of doctors -- in my opinion. It's not broke and don't fix it."
Describing the drug industry as "very big business," he said the high prices charged for prescription drugs are possible only because insurance companies and the government underwrite about 95 percent of the cost.
"So when the customer pays $7, $10, $15, $20" for a prescription co-pay, "it doesn't hurt him. They don't realize that the insurance company is paying the other $125. That's kind of a double-edged sword; if it wasn't for insurance, the American pharmaceutical industry wouldn't be able to charge the prices it charges today, because the public wouldn't put up with it," LaFrance told the Democrat-Gazette.
"Our sales are higher, because it affects the top line of sales," he added. If the government doesn't interfere, there's "nothing but good days ahead."
ProPublica research director Lisa Schwartz and researcher Kitty Bennett contributed to this report.
9-22-09
ProPublica.org
Rep. Mike Ross Responds to ProPublica-Politico Investigation of Pharmacy Sale
http://www.propublica.org/article/rep-mike-ross-responds-ro-propublica-politico-
In response to our story of this morning..., Rep. Mike Ross issued a statement...today. Here it is in its entirety; some important qualifications follow:
"This style of gotcha politics is why many folks are fed up with Washington and it is a shame serious debate on reform has, once again, fallen off course. Instead of having civil dialogue over true and substantive disagreements about reforming our broken health care system, outside groups are trying to taint a completely legal and respected small business that my wife and I worked hard for 14 years to establish. When we sold our family business, Holly's Health Mart, over two years ago, we reportedand disclosed all the transactions required by the House Ethics reporting requirements. I also accurately reported the property on my personal financial statement in 2007, when I sold the business. I sold it for the amount that I have indicated it was worth on every personal financial statement since 1999. I spent $316,000 in 1998 constructing the building that houses the pharmacy and sold it for $420,000 in 2007 – the annual return on investment is less than four percent. I would have made more during that time period if I had invested in a certificate of deposit (CD).
I have never done a favor for the buyer, who I have only met a few times in my life. The buyer did not just buy brick and mortar; he bought a successful, trusted, centrally-located and profitable pharmacy in my hometown. In two of my closest races, the buyer supported my Republican opponent in both of them. He has since supported my campaign.
I welcome any debate and review on my voting record and my positions on the issue. I have said all along that we need health care reform in this country; in fact, I ran for Congress to address our broken system. It is for these reasons why I supported health care reform legislation in the Energy & Commerce Committee in order to ensure that we could move forward with the legislative process and give Members of Congress time to read the bill and talk it over with their constituents. We need common sense health care reform that reduces costs, increases access, forces insurance companies to cover pre- existing conditions and protects patient choice. My ultimate goal has always been to pass a health care reform bill that will offer the kind of reforms I can support – a common sense plan that reflects Arkansas values.”
Responding to the congressman’s statement, Paul E. Steiger, editor-in-chief of ProPublica, said:
"The issue here is not whether Rep. Ross filed the proper disclosure forms. Nor is it whether Rep. Ross earned a large or small return on his initial investment in the building. The issue is whether the Congressman received more on the sale of his building than someone without his power and influence would have received for selling this building. As we read his statement, Rep. Ross does not deny that he received significantly more than an arms-length fair-market price for the building -- on top of the very considerable sums he and his wife received for selling and continuing to run the business."
Rep. Ross states that the buyer bought more than “brick and mortar” for their $420,000, that they also bought "a successful, trusted, centrally-located and profitable pharmacy in my hometown." But, as the story noted, the buyer paid an additional $500,001 to $1 million for the business, as well as between $100,001 and $250,000 for agreement not to compete against the new owners. Those payments brought the total value of the transactionto between $1 million and $1.67 million.
Rep. Ross declined numerous requests for interviews over a two-month period to discuss the transaction in question. He still has not disclosed whether he has discussed the pending health care reform legislation with the buyer, who owns a large chain of drug stores and has a clear and pointed interest in the outcome of the health care legislation
 
9-24-09
ProPublica.org
Drug Store Chain Releases Some Details About Its Transaction With Rep. Mike Ross
by Marcus Stern
http://www.propublica.org/article/drug-store-chain-releases-some-details-about-its-transaction-with-ross-924
The drug chain that bought a pharmacy from Rep. Mike Ross, D-Ark., in 2007 has released a two-page summary [1] (PDF) of the transaction, revealing for the first time the exact amount that Ross and his wife, Holly, received -- $1,254,420.10.
Previously, public documents had only provided a range: $1 million to $1.67 million.
Ross asked USA Drug to release the information in response to a story published Tuesday by ProPublica and Politico [2] that raised questions about the real estate portion of the sale. Ross declined to be interviewed for that story.
"This should certainly clear up any misunderstanding the press may have about our transaction," Joe Courtright, president and CEO of USA Drug, wrote in the two-page summary of the business arrangement, which was published on a business Web site.
However, the summary offered no new information about the central question raised by the ProPublica story: How did USA Drug and Ross arrive at the $420,000 price for the building and lot that house the pharmacy at a time when the county estimated the value of both at a combined $263,700?
Ross paid $10,000 for the lot in 1997, and on Tuesday he said in a news release...that he had spent $316,000 in 1998 to construct the building. But the county, taking stock of the building materials and the size of the building, valued it at $225,000 in 1999 and $237,700 in 2004. A recent reassessment by the county...set the current market value for the building and the lot at $269,000. An independent appraisal...paid for by ProPublica found the current market value of the property to be $198,000.
Real estate professionals in Prescott say property values in the economically depressed community, about 100 miles southwest of Little Rock, have been flat over the past decade, largely unaffected by the wild market swings seen elsewhere in the country. A sawmill that for some 50 years provided many of the town's jobs has closed, and a Firestone plant, the other major local employer, has cut its work force in half.
Courtright's summary did provide new information about the other two components of the pharmacy sale -- the valuation of the business assets and a non-compete agreement benefiting Holly Ross.
USA Drug paid $724,420 for the assets of the business and $110,000 as part of an agreement by the Rosses not to compete in the future against the business being sold, Holly’s Health Mart.
Courtright is on the board of the National Association of Chain Drug Stores, which represents pharmacy interests...in Washington, including during the current health care reform debate. Calls to Courtright at his office in Little Rock were not immediately returned.
 
9-23-09
Citizens for Responsibility and Ethics in Washington
CREW FILES DEPT. OF JUSTICE COMPLAINT AGAINST REP. MIKE ROSS
Contact:
Naomi Seligman // 202.408.5565
http://www.citizensforethics.org/node/42490
Related Documents
9/23/09 - CREW Complaint to DOJ (Rep. Mike Ross)
// 4.9 mb
Related News Coverage
Ross sold pharmacy for more than apparent value // 25 Sep 2009
Associated Press, as seen on WashingtonPost.com
Inquiry is sought in Ross deal // 24 Sep 2009
Arkansas Democrat-Gazette
The Early Word: Ross Pharmacy // 24 Sep 2009
New York Times' "The Caucus Blog"
 
Washington D.C. – Today, Citizens for Responsibility and Ethics in Washington (CREW) asked the Department of Justice to investigate whether Rep. Mike Ross (D-AR) engaged in bribery and honest services fraud by selling a piece of commercial property for more than its worth to a pharmacy chain with an interest in pending legislation.
According to a story appearing in the September 22, 2009 Politico, in June 2007, Rep. Mike Ross sold Holly’s Health Mart in Prescott, Arkansas to USA Drug for $420,000. In addition, the owner of USA Drug, Stephen L. LaFrance, also paid Rep. Ross and his wife, Holly, between $500,000 and $1 million for the pharmacy’s assets and Ms. Ross was paid between $100,001 and $250,000 for signing a covenant not to compete with Super D Drug Acquisition as part of the sale. In addition, just two weeks after the sale, Rep. Ross received a $2,300 campaign contribution from Mr. LaFrance.
At the time of the sale, the county assessor’s office valued the pharmacy’s building and the land on which it sits at $263,000, $157,000 less than the Rosses were paid.
ProPublica hired a licensed real estate appraiser in Prescott, Arkansas to assess the property, and he valued it at $198,000, less than the county’s assessment, which was raised from $263,000 to $269,000 this year. Another Prescott real estate professional said county property assessments tend to be slightly below market value, but usually not more than 5% below. Nevada County, which includes Prescott, also questioned the purchase price. A contractor hired by the county to update property assessments every five years contacted USA Drug to verify the purchase price, finding it inconsistent with commercial property values in the area.
Even assuming a price of 5% above the assessment, the building and property would have had a value of no more than $276,150. Therefore, at a minimum, it appears the Rosses received at least $143,850 more than the property’s value -- and perhaps as much as $222,000 more, excluding the additional money paid for the non-compete clause -- when they sold it to USA Drug.
In 2008, USA Drug was the 15th largest drug chain in the country with an estimated $906 million in sales and the pharmacy industry is aggressively lobbying Congress regarding proposed health care reform legislation. Two months after the purchase of the Ross property, Mr. LaFrance was profiled in the Arkansas Democrat-Gazette. He opined if the government does not interfere, there are “nothing but good days ahead” for the pharmacy business.
As a member of the Energy and Commerce Committee and the Blue Dog Coalition, Rep. Ross has been integrally involved in the debate over health care reform. This past June, the National Association of Chain Drug Stores thanked Rep. Ross for introducing legislation authorizing payments to pharmacists to train patients how to manage their medications.
Rep. Ross receives significant financial support from the health care industry. According to OpenSecrets.org, this campaign cycle Rep. Ross has so far received $81,100 from those in health-related industries, $23,850 of which is from the pharmaceutical/health products industry. In the 2008 cycle, Rep. Ross received $261,275 from the health care interests, $50,600 of which was from the pharmaceutical/health products industry.
CREW executive director Melanie Sloan stated, “With the sale of his business and the high priced non-compete covenant, Rep. Ross has gone from accepting campaign contributions from those with legislative interests before him to accepting significant personal financial benefits of dubious legality.” Sloan continued, “The situation is reminiscent of that in which former Rep. Randy “Duke” Cunningham sold his house to a defense contractor for an amount above its value in return for legislative assistance – a sale that ultimately resulted in Rep. Cunningham’s conviction on criminal charges.” Sloan explained, “Given that Rep. Ross received a personal financial benefit conservatively valued at no less than $143,850 and probably a great deal more, both the sale of the property for $420,000 and payment of no less than $100,001 for the covenant not to compete certainly merit criminal investigation.”
Federal bribery law prohibits public officials from directly or indirectly demanding, seeking, receiving, accepting, or agreeing to receive or accept anything of value in return for being influenced in the performance of an official act. Honest services fraud prohibits members of Congress from depriving their constituents, the House of Representatives, and the United States of the right of honest service.
At a time when health care reform legislation is a matter of pressing concern and heated debate, it is particularly important for Americans to have faith that their government officials are making decisions based on the best interests of the nation rather than their own financial interests. As a result, it is imperative for law enforcement authorities to thoroughly investigate Rep. Ross’s conduct.

ProPublica.org
Marcus Stern bio
Marcus Stern had worked for Copley News Service in Washington, D.C. since 1983. In 2006, he shared the Pulitzer Prize and George Polk Award for his role in breaking the story of former Rep. Randy "Duke" Cunningham's wide-ranging corruption. Stern has also, in recent years, reported extensively from Iraq and other conflict zones. He spent most of the 1990s covering immigration issues for Copley.