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Postal governor resigns amid real estate scandal

Aug. 5, 2011 - 06:00AM   |  
By STEPHEN LOSEY   |   Comments
Alan Keesler's last day on the Board of Governors was July 31. He was 19 months into his second term as a governor, which would otherwise have ended in 2015.
Alan Keesler's last day on the Board of Governors was July 31. He was 19 months into his second term as a governor, which would otherwise have ended in 2015. (U.S. Postal Service)

Former U.S. Postal Service Governor Alan Kessler pressured postal executives to scuttle a planned property purchase that would have cost a friend millions of dollars, according to a report from the Office of Inspector General. The IG also found that the Postal Service general counsel, Mary Anne Gibbons, failed to act as she should have to halt Kessler's actions and report them to the IG.

The Postal Service announced Kessler's resignation July 6, three weeks after the IG completed a report on his involvement in the property deal. His last day on the Board of Governors was July 31. He was 19 months into his second term as a governor, which would otherwise have ended in 2015.

"Through his involvement, Governor Kessler exerted pressure on Postal Service officials to consider settlement proposals from the property owner, instead of exercising their contractual option to purchase the property," the IG report said.

Both Kessler and the person he allegedly helped, Douglas Band, are senior figures in the Democratic Party with close connections to former President Clinton, according to the">IG report, which was obtained by Federal Times through a Freedom of Information Act request.

Band, through his attorney, told investigators that Kessler has been "a friend for many years," according to the report.

The IG report found that Kessler pressed other postal executives to back off a plan to purchase property that the Postal Service was leasing for a post office and vehicle maintenance facility in Sarasota, Fla. The agency had been leasing the property since 1965 and had an option to buy it at any time at a highly favorable price, the IG report said.

In a May 2 statement to Inspector General David Williams, Kessler's attorney said Kessler denied those charges. Kessler received many inquiries from members of the public and forwarded their concerns to the appropriate postal officials, the attorney said.

The statement said Kessler's involvement in the matter was sporadic and limited to a handful of phone calls with Band and emails to arrange those phone calls. Kessler forwarded emails from Band to postal officials and sent follow-up emails, his attorney said.

"There is no indication that Mr. Kessler improperly influenced or even attempted to improperly influence the Postal Service on this matter, nor did he have any reason to do so," the statement said. "Mr. Kessler had no personal, professional or financial interest in the outcome of the dispute."

When reached at his Philadelphia office, Kessler told Federal Times that he tried to assist many people who came to him about the Postal Service.

"Anyone who ever came to me, I tried to be responsive to and make sure that they had a fair and even opportunity to be heard," Kessler said when asked about the IG report. "That's all that was about."

He declined to comment further on the report. Kessler said he left the Board of Governors because he was asked to sit on the boards of other new organizations and because he had already served 11 years. He also said his family needs more of his time. During his tenure, Kessler served as chairman of the Board of Governors for one year and vice chairman for three years.

"It's probably one of the best experiences I've had in my entire life, but it is extraordinarily time consuming, and has gotten far more so" with the challenges and financial difficulties facing the Postal Service, Kessler said.

In a statement to Federal Times, Kessler's attorney, Pamela Marple, said he decided on his own to leave the board.

"His decision was based on the escalating demands and problems of the Postal Service, as well as his increasing family, professional and civic commitments," Marple said. "The timing of the IG review and its puzzling assessment of the facts only served to make his decision an easier one."

Option for a cut-rate deal

In 2008 one year before the Postal Service's long-term lease on the Sarasota property was to expire the agency announced plans to exercise its option to buy the property for $825,000, a fraction of its estimated $12 million market value, the IG report said. The deal would have meant a big loss for the property's owners, Post Office Associates (POA), who bought it in 1988, the IG report said. POA's partners include Band Family Partnership Ltd. Douglas Band, who is Clinton's counselor and top adviser, has a financial interest in POA and is its legal representative, according to the report.

POA objected to the sale and the Justice Department in July 2010 filed a lawsuit on behalf of the Postal Service against POA to force it to sell the property. That lawsuit is still ongoing.

The IG's report said that the Postal Service's vice president of facilities, Tom Samra, "believed Governor Kessler's actions wasted Postal Service time and resources, and potentially weakened [the Justice Department's] litigation position."

The report found that Band enlisted Kessler to help scuttle the deal. Kessler held multiple meetings with postal officials urging them to settle with POA, the report said. Kessler was the only postal official urging a settlement, the IG said.

The IG said that Kessler also worked behind the scenes to help POA come up with a political strategy to fight the Postal Service: POA threatened to get members of Congress to intervene to quash the purchase on the grounds that this leasing program was improper and unfair. Kessler later raised similar concerns with postal officials, the report said.

IG: Possible ethics violations

The IG report said Kessler may have violated the federal government's Standards of Ethical Conduct for Employees of the Executive Branch by trying to influence Samra and other postal officials to back away from the planned purchase of the three-acre property. Those ethical guidelines say an official should not use or appear to use his office for the private gain of himself or his friends, family members or acquaintances.

The OIG on June 14 forwarded the report to Louis Giuliano, chairman of the Board of Governors, to determine whether Kessler did violate those rules. Giuliano could not be reached for comment and did not respond to emails.

Kessler had a responsibility to get the Postal Service the best deal it could, the OIG said. But he instead helped Band and POA come up with a legal and political strategy to force the Postal Service to settle, the report said.

And when Band sent Kessler draft legal documents on POA's strategy, Kessler allegedly did not pass them on to postal officials, the IG report said.

Kessler told investigators he advised Band to share those documents with the Postal Service, and said Band told him he did so, the IG report said.

In a statement to Federal Times, Sen. Susan Collins, R-Maine, expressed dismay at the IG's findings. Collins is the ranking Republican on the Senate Homeland Security and Governmental Affairs Committee, which oversees the Postal Service.

"It is disappointing that a member of the Postal Service Board of Governors allegedly attempted to use his position for the financial benefit of a longtime friend and political crony," Collins said. "The Postal Service has enough trouble without a presidentially appointed leader appearing to act in a way that violates the public trust. At all levels, the Postal Service must responsibly steward every single dollar."

Gene Del Polito, president of the Association for Postal Commerce, which advocates for businesses and advertisers that rely on the Postal Service, said the IG's findings are outrageous.

"You cannot tell me when a governor turns around and says, ‘I think you need to do this,' that is not exerting influence on someone else," Del Polito said. "As a governor, other than suggesting you contact someone else, he should have no involvement whatsoever."

"He says he didn't do anything for financial gain, but there are other forms of gain not least of which is political influence," Del Polito said.

Kessler's involvement

The IG report said that on Nov. 30, 2009, Kessler took part in a conference call with Band's brother, Gregory, POA attorney Steve Hurlbut, and their team. An email sent two days later showed Kessler had reviewed a letter he recommended POA prepare, the report said. In that letter, the company threatens to seek congressional intervention to block the deal, the report said.

In his statement to investigators, Kessler said he did not review a white paper Band sent him, which was to brief lawmakers about concerns about the lease program that forced the sale. Kessler said he asked Band to send it to the Postal Service, and was told that he did so.

The IG report said that in an interview with investigators, one unnamed postal employee described a March teleconference on the deal as "an argument" between Kessler and the employee.

Another unnamed attorney told investigators his conversation with Kessler about the property was adversarial, and said "Kessler was testing our position" with facts and arguments that were similar to POA's position, according to the report.

The report said the assistant U.S. attorney representing the Postal Service in the lawsuit "was irritated with Governor Kessler because he was interfering with their case."

The report said Kessler told investigators that he treated the Sarasota matter the same way he treated other requests from outside parties, and said he was not knowledgeable with the facts of the dispute.

At one point, former Postmaster General John Potter sent an email to officials telling them to continue pursuing the property, the report said.

"The Postal Service is not a charity," Potter reportedly wrote.

The IG said Kessler also repeatedly reached out to Samra, Postal Service General Counsel Gibbons and other officials, expressing his concern that the Postal Service's case was shaky and suggesting the agency settle. Samra and Postal Service attorneys were confident they were on solid legal ground, the IG report said.

Gibbons told investigators that Kessler cited Band's political connections with the Obama administration and "implied the Band family ‘could run up to Capitol Hill and thwart the Postal Service.' "

She was worried Band could influence lawmakers to pass a bill that would stop the Postal Service from pursuing similar purchase options in the future, the report said, though she said she didn't think Kessler intended to influence her to do something for Band.

Emails and other records show Gibbons warned Kessler in July 2010 that he may be violating ethical guidelines and told him to stay out of the dispute, the report said. Kessler reportedly told investigators that Gibbons never told him to remove himself, and said sheinstead told him to continue participating.

Failings by postal general counsel?

Investigators also found that Gibbons knew Kessler continued acting as an intermediary between Band and the Postal Service after she warned him. But the report said Gibbons did not remind Kessler not to and did not report Kessler's ongoing actions to the IG.

This is not the first IG report that concluded Gibbons failed to report ongoing improper actions by an executive. Another IG report issued last year, into questionable sole-source contracts issued by former Postal Service marketing executive Robert Bernstock, also found that Gibbons did not report her knowledge that Bernstock was using postal staff for his personal business.

That report said Gibbons physically covered her ears and said she didn't want to talk about it when she found out Bernstock was improperly using postal staff.

A Postal Service spokesman said the agency and Gibbons would not comment on the report.

Kessler is the finance chair of the Pennsylvania Democratic Party. He has also served as finance vice chair of the Democratic National Committee, Hillary Clinton's national finance chair during her 2008 presidential campaign, and Al Gore's national finance vice chair during his 2000 presidential campaign.

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