DIGGS INDICTED IN $101, 000 PAYROLL FRAU[D]

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81M00980R002000090018-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 16, 2016
• Document Release Date: October 4, 2004
• Sequence Number: 18
• Publication Date: March 23, 1978
• Content Type: NSPR

By Toni House
and Diane Brockett
Washington Star Staff Writers
pp v l FolrBelEase 2004110112: CIA-RDP81M00980R002000090018-2
Palge
Indicted
0 Ao""
Payroll FraU
indictment do not prove guilt, and I
Profile of Rep. Diggs, A-7 am confident that due process of law
Rep. Charles %. Diggs Jr., chair-
man of the House District Committee
ind the most senior and powerful
Mack member of the House, was in-
dicted today on charges that he de-
frauded Congress of $101,000 by pad-
ding his payroll with non-existent
employees and taking kickbacks
from three staff members, appar-
ently to pay off personal debts.
The 35-count indictment alleges
that from 1973 through last March
the Michigan Democrat received
money from three staff members
who turned part of their salaries over
to him.
lic relations man who worked part-
time for Diggs.
According to the federal grand
jury indictment, Diggs has increased
and decreased the salaries of se-
lected staff members over the last
four years, allegedly skimming off
the difference for his personal and
business use.
The 55-year-old congressman -
who told The Washinton Star last
June he had no idea how much he
really owed - has been in severe
financial difficulty for several years,
both in Detroit and Washington.
According to the indictment, Diggs
used the difference between his staff
members' regular pay and their in-
flated salaries to pay off various per-
The indictment also alleges that he will vindicate me."
charged his congressional payroll for A press release accompanying the
employees - including his personal statement said, "The timing of the
attorney, accountant and an em- indictment shows an unfortunate sen-
ployee of his Detroit funeral home - sitivity ... to the nature of the con-
who never worked for him, gressman's mission to Africa. He is
Under the the technical language in Africa today as a representative of
of the indictment. Diggs is charged the United States Congress .. gand
with 14 counts of mail fraud and 21 will join President Carter in Nigeria
counts of making false statements, during a meeting with the leaders of
Diggs, who is in Mozambique, said. that country."
in a prepared statement released by THE STAFF members named in
his office here, "I am innocent of the the indictment for returning to him
charges being leveled against me. part of their salary included a former
"I do not believe that I have vio- office manager, a field representa-
lated any federal law or any House tive in his home district of Detroit,
rule or precedent. Allegations in an and Afield Dukes, a Washington pub-
sonal, business and congressional
debts. Sources close to the investiga-
tion said the staff members person-
ally paid Diggs' bills during those
time periods.
The indictment alleges that be-
.Aween July 1, 1973, until about March
1977, Diggs inflated the salary of his
then-office manager Jean G. Stultz
from a base of between $14,600 and
$22,700 up to $33,600 and $37,300. Dur_
ing the same period his field repre-
sentative, Felix Matlock, received
salary variations from $12,800 to $37,-
000.
The indictment also alleges that
Dukes received salary variations be-
tween $12,000 and $37,000. Dukes, who
See DIGGS, A-7
REP. CHARLES DIGGS
Approved For Release 2004/10/12 : CIA-RDP81 M00980R002000090018-2
 LH1. rages
Approved For Release 2004/10/12 : CIA-RDP81 M00980R002000090018-2
Thursday, March 23, 1978
Chairman Diggs
ar
y
e c o um
Washington Star Staff Writer
To the people of his Michigan Con-
gressional district, Charles C. Digs
is the man who made good, fulfilling
a father's life-long dream.
To black politicians, Diggs is the
man with the power, the nation's sen-
ior black elected official and the one
with the most clout.
To the people of the District of
Columbia, Diggs is the man, who -
even after home rule - wields as
much power over District affairs ac
legislature refused to seat him. When
a special election was called to fill
the vacancy, it was his 29-year-old
son - fresh from stints in the Army
and the family kusiness - who step-
ped forward to win the Senate seat.
Diggs served two terms, while
completing his law degree. In 1954,
however, his father started counting
heads in Michigan's 13th. Congres.
sional district and realized `there was
a majority of, black voters. With his
father's organizational skills, Diggs
irir, 55-YEAR-OLD Diggs was
born into the public life. In 1936 his
father, Charles C. Diggs Sr:, par-
layed his position as the,the leading
mortician In the Detroit black com-
munity and one of its wealthiest men
into a seat in the Michigan Senate.
Diggs Sr. served until 1948 when he
was convicted of ,bribery charges
that led to a 16-month term,in Jack-
son State Prison,
Upon his release, the .elder Digs
.was re-elected to his seat, but the
Behind all the power, though, -is'
Charlie Diggs, man in trouble.
Facing charges of receiving kick.
backs from his own staff, Diggs is
about to see his often complex pri-
vate life revealed to the public.
It is a life filled with broken mar.
riages and bad debts, circumstances
politicians would normally like to
keep out of sight and out of voters'
minds.
DIGGS
Continued From A-1
has his own public relations firm,
Ofield Dukes and Associates, today
denied that he ever paid Diggs' bills
for him. That isn't true, that's ab-
surd," he said.
DUKES EXPLAINED that he had
been reimbursed for advertising he
placed in behalf of Diggs' congres-
sional work, but denied he had ever
received a salary higher thann $21,-
000 in any given year.
Dukes said he was reimbursed for
payments to the Michigan Chronicle,
a weekly black newspaper in Detroit
and for Sunday morning airtime on
radio station WJLB for Diggs' re~u-
lar show, "A Congressman Speaks. '
Dukes said he later discovered
both the newspaper and the radio sta-
tion carried a single account for
Diggs' congressional work and his fu-
neral home. He said he is not certain
if he accidentally paid for advertis-
ing for the House of Diggs.
"At no time was there any involve-
ment of the congressman in this
process," Dukes said. "And at no
time did any money go directly to
The indictment also charges that
Diggs placed three persons on his
congressional staff who only did per-
troit field representative for the con- exclusive of home mortgages - was
gressman. $36,000 in 1959 and $45,000 in 1971. His
The grand jury also subpoenaed exact current indebtedness is un-
Diggs' financial records from several. known.
Washington banks.
DIGGS, THE first black sent to
Congress from Michigan, the dean of
that state's delegation and now the
most senior and powerful black con-
gressman, was first elected in 1954.
He represents an inner-city Detroit
district, where he has been consid-
ered virtually unbeatable and often
had no opposition.
There was no immediate reading
on what Digg's indictment would do
to his power on Capitol Hill. He is not
required either by law or House rule
to resign even if convicted and. sen-
t
enced to prison.
By a two-thirds majority vote, the
.House could decide to expel him, but
historical precedent `make?. that
highly unlikely. c,.
The House could vote to reprimand'
or censure Diggs, but neither action
would affect his status as a commit-
tee chairman or a voting member of
the House.
Nor would Diggs be barred-' from
running for re-election.'In 1956 Rep.
Thomas J.' Lane, D-Mass., served
four years in a federal prison for,
federal income tax evasion, was
NWMMMML~ 2d
ovem er.
Congress charged with , receiving
kickbacks from employees. In 1976
former Rep. James F. Hastings, R-
N.Y., was convicted of taking payroll
kickbacks from two employees. He is
serving a 20-month to five-year
prison term.
The mood in Diggs' office was sub-
dued but busy this morning as staff
members..pursuedtheir, regular tasks
while trying to cope with constantly
ringing telephone.
"We've been expecting it," ex-
plained one secretary. The door to
the ccongressman's office was open
when a .visitor arrived but was soon
closed by a staff member who said,
"The camera crews will be here
wanting to fill it."
sonal or business work for him. The
indictment charges Diggs billed Con-
gress approximately $20,000 for the
salary of Jeralee Richmond, who in
fact was an employee of his Detroit
undertaking firm, the House of
Diggs.
The indictment also alleges that
his attorney, Hallison Young, was
paid approximately $35,000, while his
personal accountant, George G.
Johnson, was paid approximately
$19,000.
All three of the non-staff members
were paid with U.S. Treasury checks.
None of the six persons named as
particpants in the. kickback scheme
was indicted. A source close to the
investigation said the probe was
begun last June after a person made
an anonymous telephone call to the
U.S. Attorney's Office suggesting it
look into Diggs' payroll practices.
Sources said the indictment was
reviewed extensively by the Justice
Department and was personally ap-
proved by Attorney General Griffin
B. . Bell.
DIGGS DEFAULTED on a
Federal Housing Administration
home improvement loan in 1975, has
had continuing troubles with the
Internal Revenue Service and re-
cently had a $28,770 judgment lodged
against him by Woodward & Lothrop.
Court records in Washington and De-
troit indicated that last year he was
being sued for more than $66,223.
The 23-year veteran of Congress
arrived in Mozambique yesterday as
part of his annual spring trip to
Africa as chairman of the Interna-
tional Relations subcommittee on
Africa.
Diggs visited in Dar es Salaam,
Tanzania, earlier this week and plans
further stops in Zambia and several
other African countries before travel-
ing to Havana, Cuba.
As part of the investigation, the
grand jury subpoenaed payroll, tax,
and personnel records since 1972 for
several members of Diggs'. staff, in-
cluding former office manager Jean
G. Stultz and Felix R. Matluck, a De-
DIGGS HAS a history of deep and
sustained debt dating back 20 years.
A licensed mortician, he inherited
his father's lucrative funeral home
chain, the House of Diggs. But he
sold the firm in 1975 when it report-
edly was on the.brink of foreclosure
by a Detroit bank.
The chain was in financial trouble'
after defaulting on a Small Business
Administration loan when James A.
Stinson, a Detroit funeral home
owner who has known Diggs all his
life, bought him out, Stinson said in
an interview last July.
Stinson bought Diggs out with the
aid of a $250,000 SBA loan. Stinson
said Diggs has reaped nothing finani.
cially from the sale, however. He got
no money from the transaction and,
although he received 20 percent of
the stock in one Diggs-Stinson Funer-
al Home, it has only recently re-
opened after renovations. No divi-
dends have been paid.-
The only child of the prominent
Detroit family, Diggs had a more
favored childhood than many, black
children. But, based on financial
records which were revealed at his
father's death in 1967, the family
may not have been as wealthy as
their neighbors thought.
Some of those who knew Diggs Jr.
have suggested that the debts which
have characterized his adult life -
and may have contributed to his in-
volvement in the alleged payroll
kickback scheme - may have come
from his attempt to keep up public
appearances, however erroneous
they might always. have been.
Diggs personal indebtedness
The Washington Star A-7
?t.
substantial settlement`but defaulted
after the; first $1,844 payment.
He re parried--38 days later to an
lawyer by whom he had two more
children. He divorced her in 1971,
adding child support payments for
two yyoungg. children,.to the reduced
monthly alimony and other. payments
he had resumed paying to his first
family.
..?
Nonetheless,. he married again
? 1within' days .to 28-.year=old Janet
Hall, a foreign service. officer with
the State Department. The couple
bought a fashionable Capitol` Hill
townhouse five years ago. Part of a
$28,770 debt they ran up at Woodward
& Lothrop came from redecorating
it.
was able to easily unseat the white,
Irish incumbent.
Since that November in 1954, Diggs
has not had a hard rd-election fight.
In his last two campaigns, he re-
ceived 90 and 89 percent of the vote
against nominal Republican opposi-
tion.
rsTU tile senior elected ac in Con-
gress when Congressman William
Dawson died and Adam Clayton Pow-
ell was stripped of his seat. Diggs im-
mediately helped to form the Black
Caucus, becoming its first chairman.
TWO YEARS later, he suddenly -
and surprisingly - became chair-
man of the House District Committee
when long-time chairman Rep. John
McMillan of South Carolina, the next
ranking Democrat, retired.' He is
credited with helping push through
the Home Rule Act after an extended
fight.
Around the same time, Diggs be-
came chairman of the House Interna-
tional Affairs Subcommittee on
Africa. The job takes him frequently
- critics say too frequently - to that
continent, adding to a voting and at-
tendance record that is one of the
worst in the House.
Behind the scenes, Diggs has had
personal and financial problems. He
has been married three times, has fa-
thered six children and currently
makes mortgage payments on three
different homes. , ,.
His father's funeral business fell
on hard times, with Diggs eventually :?.?< -
selling out to a friend in 1975 just; bg.
strait awl 1-y U , __
Described by friends as a man
with few vices, Diggs has neverthe-
less
run up scores of personal debts.,,
over the years. According to court
records, the debt grew from $36,000 _ . ;:
- exclusive of mortgage - in 1959 to,
more than $45,000 in 1971. The cut-
rent figure is undetermined.
In recent years, however, the Con =
gressman has been sued by - among,
others - the Internal Revenue Serv ,;
ice, Hertz Rent-A-Car, Wood ward- $c
Lathrop, the National Capital Bank k=a
and Raleigh Stores.
In one case, he was threateifed.
with arrest for failing to comply wati.
a court order. In several others; he
paid up debts only under strong pres-
._;
sure.
Friends say that Diggs is too proud.,
a man to seek help - a characteris-
tic which may have further compli
cated his alreadv__rn~tplicated life.
t `
C
Approved For Release 2004/10/12 : CIA-RDP81 M00980R002000090018-2
DIGGS HAS -married three times
and fathered six children, the most
recent born Jan. 20, 1977, Inaugura-
tion Day, and named Cindy Carter
Diggs in honor;of,the president. .
Diggs' first married' in 1947 to a
secretary in his father's House of
Diggs funeral homes. That marriage
ended, three children later, in 1959.
The $36,000 personal debt Diggs had
then included overdie payments on
fur insurance, payments on a 'new
Cadillac and. clothing bills including
a. $770 tab at, Saks. He agreed to a
Problems
Life of Power and