02/20/2004 | Морон

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Lucrative Deals for a Daughter of Politics
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By Ken Silverstein, Chuck Neubauer and Richard T. Cooper Times Staff Writers

WASHINGTON — Karen Weldon, an inexperienced 29-year-old lobbyist from suburban Philadelphia, seemed an unlikely choice for clients seeking global public relations services.


Yet her tiny firm was selected last year for a plum $240,000 contract to promote the good works of a wealthy Serbian family that had been linked to accused war criminal Slobodan Milosevic (news - web sites).


Despite a lack of professional credentials, she had one notable asset — her father, U.S. Rep. Curt Weldon (news, bio, voting record) (R-Pa.), who is a leading voice in Washington on former Eastern Bloc affairs.


She got the contract after he championed the efforts of two family members, Dragomir and Bogoljub Karic, to win U.S. visas from the State Department, which so far has refused them entry.


Intelligence officials warned Weldon that the brothers were too close to Milosevic, who is accused of leading the "ethnic cleansing" in the former Yugoslav federation.


But the congressman has praised the Karics, who own a vast empire of banking, telecommunication and other firms, as model business leaders and humanitarians. He has portrayed them as victims of faulty intelligence reports and, last month, asked the CIA (news - web sites) to sit down with them and sort things out. He has repeatedly pressed the State Department to give them visas.


Karen Weldon said her father "developed a rapport" with the Karics and introduced her to them. But her firm, Solutions North America Inc., won the consulting contract on its merits, she said. Her father declined to answer questions for this article.


The congressman also has gone to bat for at least two of Solutions' other clients, both struggling Russian companies.


Together, the three contracts are worth almost $1 million a year to her firm for services that have included joining her father on congressional trips and in meetings with clients.


The Weldons are the latest example of special interests hiring relatives of important members of Congress as lobbyists and consultants. Over the last year, The Times has identified 11 other House members and 17 senators with relatives who lobby or consult, many of them for clients the members have helped through legislative or other action.


Congressional ethics rules provide few barriers to the practice. They do not forbid members of Congress from helping companies or others who are paying their relatives.


But Weldon has brought his daughter so deeply into his official activities that they sometimes appear to be working in tandem.


For example:


• After a Russian aerospace manufacturer hired Karen Weldon's firm for $20,000 a month plus 10% of any new business it generated, Rep. Weldon pitched the company's saucer-shaped drone to the U.S. Navy (news - web sites), which signed a letter of intent to invest in the technology. And Weldon, who chairs a subcommittee that oversees $60 billion in military acquisitions, has been working to get funding for the project, Navy officials say. A lawyer for Solutions said the firm did not collect the finder's fee and it was later removed from the contract. Federal law bars companies from paying commissions to lobbyists on government contracts.


• The congressman helped round up 30 congressional colleagues for a dinner at the Library of Congress (news - web sites) to honor the chairman of a Russian natural gas company, Itera International Energy Corp., that had just agreed to pay his daughter's firm $500,000 a year to "create good public relations." Records show Solutions North America helped arrange the privately funded affair for the company, which has been trying to improve its image with U.S. officials after questions were raised about its acquisition of vast natural gas fields in post-Soviet Russia.


• Karen Weldon's firm paid for her father's chief of staff to take a "fact-finding" trip to Serbia, where he met with U.S. Embassy officials about the Karics' visa problems. The congressman approved the arrangement, travel records show. House ethics rules bar members or staff from taking official trips paid for by lobbyists or registered agents of foreign companies. The chief of staff, Michael J. Conallen Jr., said he reimbursed Solutions with his own money last week after The Times raised questions about the trip.

Conallen said the congressman's actions on behalf of Karen Weldon's clients posed no ethical concerns.

"I just don't think there's anything strange about it," he said. "If Curt wanted to he could snap his fingers and divert a lot of business to Karen, and that hasn't happened."

Karen Weldon has a partner in Solutions, Charles P. Sexton Jr., 67, the former finance chairman of Rep. Weldon's campaigns. Neither has lobbied Weldon nor asked for his help, Conallen said.

"The fact that they have contracts with these clients hasn't influenced anything Curt has done," he said.

The congressman was advocating for the Karics and other Eastern European business interests long before his daughter opened her firm, Conallen said.

In a written statement Thursday, Conallen added, "The congressman is generally aware of his daughter's company and the work she does for several of her clients. But the congressman has not discussed the specifics of Solutions North America's agreements with their clients or the nature of their representation."

Karen Weldon declined to say whether she discussed her clients with her father. But she said her firm's success was not due to his position in Congress.

"Because of who he is, people have questioned me all my life about whether I'm qualified and if I can do the job," she said. "I have nothing to hide. I haven't done anything inappropriate."

Going Into Business

Rep. Weldon, a former school teacher, was first elected to Congress in 1986 from the Republican suburbs southwest of Philadelphia. Over nine terms, he has moved up in seniority on the House Armed Services Committee. He is vice chairman — the second-ranking Republican — and chairman of its tactical air and land forces subcommittee.

Weldon, a Russian studies major in college, also is a noted advocate of closer relationships with the former Soviet Union. He has made more than 30 trips to Russia as a member of Congress. He is the founder and chairman of the Congressional U.S.-Former Soviet Union Energy Caucus and founder and co-chairman of the official interparliamentary exchange between the U.S. and Russia.

Today, Conallen said, "There is nobody in Congress more knowledgeable about Russia than Curt Weldon." That judgment is shared by many of Weldon's House colleagues.

Until she launched Solutions, Karen Weldon had been following a different career path. She had an undergraduate degree in education and a graduate degree in information systems.

She spent six years, she said, working on "learning and training programs" for Boeing Co., which has a helicopter plant at the edge of Rep. Weldon's district. Conallen said Weldon did not help his daughter get the job at Boeing, which is a frequent beneficiary of his work in Washington and one of his top campaign donors.

When she and Sexton opened their business in September 2002, Solutions' office consisted of a cubicle in a suburban Philadelphia office suite that provided a common receptionist and conference room for all 120 of its tenants. A few months later, Solutions opened a similar office in downtown Washington.

Karen Weldon said Sexton "makes a lot of the business connections" for their firm. Her partner is a political power broker in Weldon's district and the former owner of a security guard company, which he recently sold for $6 million.

She described her role as "legwork and project management," including graphics and Web development.

She said she doesn't work on legislation and called Solutions "more of a business consultancy than a lobbying firm," though she and Sexton have registered with the Justice Department (news - web sites) as foreign agents for their three clients. Lobbyists representing overseas clients must file disclosure reports with the department's Foreign Agents Registration Unit.

She would not say who else she and Sexton represented beyond the three clients reported in Solutions' disclosure forms.

Karen Weldon said the idea for Solutions originated with Sexton. He was already talking to Itera, the Russian energy company, she said. Sexton declined an interview request from The Times.

She said they became 50-50 partners, and Itera became Solutions' first client. It paid $170,000 of its annual fee up front — a timely infusion of cash for a start-up firm, especially one that had little experience or presence in Washington.

Russian Relations

Itera needed friends in Washington.

Questions had been raised by Russian energy and investment companies about how Itera had gained title to billions of dollars worth of natural gas resources from a state-controlled conglomerate called Gazprom.

William Browder of Hermitage Capital Management, a large Russian investment fund with a stake in Gazprom, said the conglomerate transferred the assets for little or nothing.

Itera officials declined to be interviewed.

The controversy has been a cloud over Itera's efforts to gain access to Western investment capital and markets. The U.S. Trade and Development Agency withdrew an $868,000 grant to the company in March 2002 after questions were raised about Itera's background, said Leocadia Zak, an agency lawyer. It was a setback to the image of the company, which is seeking to expand its natural gas, timber and real estate holdings in the United States.

Two months later, Rep. Weldon led a congressional delegation to Moscow in connection with a visit by President Bush (news - web sites). Weldon toured Itera's offices and, according to a company news release, praised it as a "strong and well-established company," and recommended it as "a great source" for U.S. energy firms seeking partners for joint ventures.

When he returned home, Weldon blasted the Trade and Development Agency's decision at a news conference and made calls to the State Department on the company's behalf, though to no avail.

On Sept. 5 and 6, 2002, Itera paid for Weldon's lodging in New York so he could do an interview with Russian radio about energy, Conallen said.

A week later, Itera sent e-mails to Karen Weldon telling her the company would complete the terms of a contract with her firm at an upcoming dinner in Washington that her father was co-hosting to honor Itera's chairman.

The dinner took place Sept. 24 at the Library of Congress. That day, Rep. Weldon had introduced a resolution in the House that encouraged U.S.-Russian cooperation on developing energy resources. Two days later, in a floor speech, he gave House colleagues a glowing report on Itera.

On Sept. 30, Itera signed the $500,000-a-year contract with Solutions, which agreed to work on creating "good public relations so in the future Itera may sell goods and services to U.S. entities," according to foreign agent disclosure filings. They show the Library of Congress dinner as one of the firm's first efforts on Itera's behalf.

When Rep. Weldon led a congressional delegation to Eastern Europe two months later, Itera paid for Karen Weldon to join him. Father and daughter met with the president of Georgia, and the congressman helped Itera resolve a costly commercial dispute with the government. During a stop in Moscow, Rep. Weldon called for increased U.S. imports from Itera and other Russian energy corporations.

By January 2003, Itera had enough confidence in its prospects here to open an expanded U.S. headquarters in Jacksonville, Fla. The company flew the congressman down for the gala marking the event, according to his travel records.

"I can think of no other company that represents what Russia is today and offers for the future," the congressman said, according to a local news report.

'Flying Saucer'

Karen Weldon said she found her second client, a Russian aerospace company, through a family friend.

The friend was Philadelphia lawyer John J. Gallagher, who has worked with her father to foster U.S.-Russian business ties.

Gallagher said he introduced Solutions to Saratov Aviation Plant in December 2002, because the company needed help promoting its products in the United States. One of its most promising creations was a drone that could deliver supplies to war zones, a device the company sometimes called its "flying saucer."

Karen Weldon, or her partner Sexton, in turn sparked Rep. Weldon's interest in the company's technology, according to chief of staff Conallen.

A Saratov official recalled hearing from Rep. Weldon "quite unexpectedly" in early January 2003. The congressman expressed "an acute interest" in the unmanned vehicle, said company director Alexander Ermishin.

Weldon visited Saratov's plant later that month, accompanied by his daughter, who by then was negotiating a deal to consult for the company, according to Solutions' disclosure reports.

It was an official trip for Weldon, who had congressional business in Russia and Austria. Karen Weldon's travel was paid through Solutions.

They each attended meetings with Ermishin and other company officials. The congressman expressed enthusiasm about the saucer technology, Ermishin said. Within weeks, Saratov sealed a contract with Solutions to promote the company's products, according to foreign agent disclosure filings.

Ermishin described the congressman's assistance on the project as "really invaluable." He declined to discuss why he hired Karen Weldon's firm.

According to the contract that Solutions filed with the Justice Department, Saratov agreed to pay Solutions $20,000 a month with two contingencies: The cash-strapped company did not have to start paying until Solutions attracted new business. And Saratov would pay a 10% finder's fee if the company "strikes a deal from a lead supplied" by Solutions.

After the Weldons returned from Russia, the congressman took steps to get a deal going. He contacted the Naval Air Systems Command, or Navair, which is based near Washington, about the Saratov saucer, Conallen said.

Robert Carullo, a Navair staff member, said Weldon asked him to arrange for Ermishin to meet with Navair. The meeting took place in March. Solutions' disclosure reports say the firm also helped set up the meeting.

Karen Weldon also helped arrange a follow-up meeting between Navair and Saratov in Russia in September, disclosure reports show. At the conclusion of that visit, Navair and Saratov signed a nonbinding letter of intent that called for Navair to seek funding to develop the saucer technology and fly a prototype by 2005. Ermishin said the technology needs between $10 million and $14 million as initial capital.

John Fischer, Navair's director of research and engineering sciences, who led the delegation to Saratov, said he was impressed with the company's technology.

In an interview, Fischer credited Rep. Weldon for bringing Saratov to Navair's attention, calling him "a very proactive member of Congress."

He said Weldon was looking for money for the project. "The money is a sensitive question, but we are confident it will come," Fischer said.

Conallen said Weldon had not yet taken steps to get the funding authorized by Congress.

Asked later about Karen Weldon's involvement, Navair provided a written response saying that Fischer met with her twice during the discussions with Saratov but did not realize she worked for the company.

"Dr. Fischer was aware that Ms. Weldon was Rep. Weldon's daughter, but he was not aware that she had a business relationship with Saratov," the response said. "She did not identify herself other than by her name, and Dr. Fisher [sic] assumed her to be doing staff work for Congressman Weldon."

Solutions' attorney, Joseph M. Fioravanti, on Thursday said the firm's finder's fee was eliminated under a new contract with Saratov signed in November. That contract was transferred to a new firm that Sexton and Karen Weldon formed last year. Fioravanti declined to provide more information on the new firm, Solutions Worldwide Inc. He said Saratov began paying the new firm $20,000 a month in December.

At least four laws prohibit companies that receive federal contracts from paying contingency fees to lobbyists, according to Tom Susman, chairman of the ethics committee of the American League of Lobbyists.

"We realized that with government contracts you're not supposed to get a percent, so we revised it," Karen Weldon said. "We were worried that it might look inappropriate."

A Family Affair

Clearing the Karic family name in the United States has become something of a crusade for Rep. Weldon.

Their relationship dates to 1999, when he led a congressional delegation to Vienna that tried to broker a deal to end the war between Yugoslavia and the province of Kosovo.

By then, Milosevic's record of atrocities had been thoroughly documented. NATO (news - web sites) had gone to war with the Belgrade regime, and U.S. bombers had pounded the capital to force the Yugoslav leader to withdraw from Kosovo.

In public statements about the trip, Weldon has said that he and his colleagues met Dragomir Karic, who was introduced as a confidant of Milosevic who could negotiate a deal with the United States. His brother, Bogoljub, was a member of Milosevic's cabinet.

Weldon later told Congress that he had received a report on the Karics from U.S. intelligence officials that said a family member had bankrolled Milosevic's election, and that the family's bank had tried to finance a missile sale to his regime.

Because of evidence that the Karics had supported Milosevic, the Treasury Department (news - web sites) placed them on a list of Serbians banned from doing business in the United States. They all had been removed from the list by last year, as the United States normalized relations with Serbia, but they still cannot get visas.

In a written statement, a spokesman for the Karics said, "Regarding the alleged links of the Karic Group or family to the Milosevic regime, we can only reiterate that these allegations are the product of groups or individuals from our country who have been themselves profiting from ties with the former regime."

Rep. Weldon came to adopt the view that the Karics, whose businesses thrived under Milosevic, were being unfairly portrayed as sympathizers of the former leader. "The story we get from the Karics is that Bogoljub was from the pro-democracy side, and Milosevic said your life and business depends on your working with me … and he did," Conallen said. "Curt believes in these guys and that their support for Milosevic was the result of innuendo and threat."

On Oct. 8, 2002, Weldon sent a letter to Dragomir Karic inviting him to Washington to discuss the "extensive humanitarian and charity projects" sponsored by the family's Karic Foundation. The letter praised the Karics' business group and commended it to "U.S. companies seeking to establish business relationships in Serbia."

Weldon's invitation was signed by 18 colleagues. According to Conallen, it was an effort to pressure the State Department to grant visas to the Karics.

In March 2003, the Karic Foundation hired his daughter's firm on a renewable one-year contract paying $240,000. In disclosure forms, Solutions said it would assist the foundation in "establishing and developing a U.S. presence."

"I did a proposal for them," Karen Weldon said. "I worked my butt off, and they liked it."

The Karics' written statement said that they hired Solutions on the strength of its proposal and that "no American member of Congress" influenced their decision.

In August, Weldon led a congressional delegation to Serbia. An association of Serbian businessmen headed by Bogoljub Karic helped plan the trip.

In November, Solutions paid for Conallen to travel to Belgrade. He said he went on the invitation of Karen Weldon's partner, who received an honorary degree from a private university owned by the Karics. While there, Conallen said he met with U.S. Embassy officials to discuss the Karics' visa problem. His airfare, lodging and meals came to $2,403.30.

Conallen said he did not know at the time that Solutions represented the Karics. He said he consulted the House Ethics Committee after The Times raised questions about the payment and was told that he needed to reimburse Solutions. He said he has done so.

In December, Conallen said he called State Department officials again about the Karics. He appeals so frequently on behalf of the Karics, he said, that State Department officials know why he's calling without asking.

The Karic brothers sent Weldon a letter Jan. 13 to thank him for his support and assure him of their "lasting friendship." The letter requested a meeting with intelligence officials "in the hope that this will finally clear our good name."

Weldon delivered the Karics' request to the CIA. Conallen said the congressman has not heard anything from the agency. The CIA declined comment.

Weldon invited the Karics to the National Prayer Breakfast on Feb. 5. Since the State Department would not grant them visas, they were unable to attend. The congressman's efforts for the Karics, Conallen said, are "ongoing."

So are Karen Weldon's efforts for the Karics and their foundation. "It's one of my main projects," she said two weeks ago.



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Researcher Mark Madden in Washington and staff writer Sergei L. Loiko in Moscow contributed to this report.
To read previous Times articles from this series, go to latimes.com/senators.