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Ack-Ack Over Washington

As a former fighter pilot, Daryl Jones knows about rocky landings. During routine exercises several years ago, Jones twice in one day scraped the tail of his F-16 along the runway at Homestead Air Force Base, causing thousands of dollars in damage to his aircraft. On another occasion, Jones lost track of his fuel and barely made it back.

Those incidents may well serve as a metaphor for Jones's current difficulties before the Senate Armed Services Committee, which is reviewing his nomination to become Secretary of the Air Force and which held an initial confirmation hearing for the South Dade state senator last week.

There is still a strong likelihood that Jones will be confirmed by the Senate, but his descent into Washington will not be smooth -- despite the Miami Herald's rosy prediction that his nomination would "sail to the Senate floor" thanks to the endorsement of Strom Thurmond, who chairs the Armed Services Committee. Jones is facing renewed attacks on his character and additional questions over his role in a Miami-Dade County bond deal.

Three former air force officers now claim that Jones lied to members of the committee when answering questions about his military service. All three men say they are willing to testify if the committee is interested in hearing from them.

In addition, New Times has learned that some senators are concerned about new allegations that Jones continued receiving bonus flight pay for four years after he stopped flying with his air reserve unit. According to sources familiar with this issue, Jones received at least one letter from an air force official asking him to refund the money -- believed to be several thousand dollars -- but he refused. Eventually a senior air force officer determined that Jones would not have to return the funds. Committee members are expected to scrutinize that officer's decision more closely when they meet with Jones during an unusual private, closed-door session, which has yet to be scheduled.

That hearing is designed to give senators a chance to press Jones on several controversial and potentially embarrassing topics, as well as to delve into the contents of a confidential FBI background report on Jones.

This past Monday senators received a private briefing from Securities and Exchange Commission officials who have been reviewing Jones's involvement in a $200 million county bond deal. The outcome of that meeting was not known at press time.

Last week, after waiting nearly eight months for his confirmation hearing, Jones finally went before the Armed Services Committee. As expected, it proved to be a bumpy ride.

Jones's Flying Record
SEN. JOHN WARNER (R-VA): On the question of your flying status, I thought that you have very forthrightly stated to the committee that you recognized that there came a period in your life when you were possibly stretched in more directions than time and family commitments permitted. Is that correct?

JONES: (Nods in agreement)
WARNER: And your statement to the committee was, "I decided to relinquish the flying status." Is that correct?

JONES: That is correct.
WARNER: Now, prior to that decision, did any of your commanding officers or those who had responsibility to supervise you tell you that it was their decision that you were going to be relieved of flying status?

JONES: No, sir.

"That's a lie," retorts Jack Connelly, a retired lieutenant colonel who spent 24 years in the air force and air force reserve and who served with Jones in Homestead. From his home in Houston, Connelly recalls that he was present during an August 1991 meeting between Jones and their squadron's commanding officer, Col. Thomas Dyches, in which Dyches told Jones that he had made the decision to ground the flyer because he had become a danger to himself and others.

"Colonel Dyches wanted a witness when he confronted Daryl, so he asked me to be there," Connelly explains. "Colonel Dyches told him, 'Daryl, you are no longer going to be able to fly my planes.' He told him, 'Daryl you are not flying any more.'"

According to Connelly, Jones had two choices: He could either accept the decision (in which case Dyches would arrange a transfer to a ground-support unit), or Dyches would initiate a "flight evaluation board," known as an FEB, which would almost certainly lead to Jones having his wings taken away from him permanently. If Jones's flying record had gone before the FEB, Connelly predicts, his military career would have ended in disgrace. Jones agreed to the transfer, Connelly says.

Connelly allows that he is not surprised Jones would lie to the Armed Services Committee. "Daryl is a politician from the word go," he remarks. "He would do anything to make himself look good. He is an opportunist."

 

Colonel Dyches, who remains in the Air Force and is stationed in South Carolina, was contacted this past weekend for comment but referred all questions about Jones to the air force press office. Dyches, however, was interviewed by the FBI several months ago for its background report on Jones; according to one source familiar with his responses, Dyches corroborated Connelly's version of events.

Also contradicting Jones's testimony before the committee is David Eastis, a retired lieutenant colonel who was second in command of Jones's squadron. "Jones was given a choice of either hanging up his G-suit or facing an FEB," says Eastis, who lives in Coral Gables. "He was told he was never going to fly. He was going to be grounded in that squadron."

Earlier this year New Times obtained a copy of a memo dated August 6, 1991, and titled "Removing Maj. Daryl L. Jones from flying status." In that memo Eastis wrote that Jones's flying performance over the previous 22 months had been substandard, that he "does not take constructive criticism of his flying deficiencies well," that he "refuses to admit that he has made a mistake" and is "quick to blame other sources for his poor performance."

"In summary," Eastis wrote, "Major Jones's lapses in performance and his inability or refusal to recognize same is a formula for disaster. As a squadron supervisor I cannot ignore my obligations to Major Jones, his family, other members of the squadron, and to air force property. Therefore I recommend that Major Jones be removed from flying status with the 93 [tactical fighter squadron] effective immediately."

A short time later Dyches and Connelly met with Jones to say his flying days were over.

Amway
SEN. DIRK KEMPTHORNE (R-ID): The issue is whether or not you had used your position of leadership, of influence, to pressure others to somehow have a business venture with Amway. Can you tell me, of those enlisted personnel who may have been subordinate to you, how many of those used you as a distributor of the Amway products?

JONES: None that I'm aware of.

In his opening statement last week, Jones declared: "I have never knowingly pressured any enlisted person to purchase these products."

"That's a flat lie," charges Tom Massey, a retired air force major who served with Jones in the early Eighties. "I watched him do it. Everyone knew what he was doing." At the time, both he and Jones were air force captains on active duty, stationed at Homestead. "A number of the enlisted men came to me and asked me if I could get Daryl off their backs," says Massey, who now lives in Clemson, South Carolina. "Several of us talked to Daryl about it. We told him that it was a court-martial offense. I was speaking to him officer to officer, captain to captain."

Massey says Jones refused to listen. "He just dismissed it," he recounts. "He gave us the impression that he didn't think the rules applied to him. I couldn't understand what he was doing."

Time may not have improved Jones's judgment. Although selling Amway to enlisted men might seem trivial, the real issue is the inappropriateness of placing subordinates in the position of having to refuse a request by a superior officer.

Last month, while Jones's nomination was stalled in the Senate, a member of his legislative staff, Colleen Sullivan, faxed a memo to various people asking them to send letters of support to members of the Armed Services Committee. New Times obtained a copy of the memo, which suggested several "talking points," including "unwavering support" for Jones's candidacy and the need for the Senate to "act upon this nomination as expeditiously as possible." The memo included Jones's resume and the names, addresses, and phone numbers of all committee members.

Contacted at Jones's South Dade district office, Sullivan declined to discuss the memo, but New Times has learned that copies were distributed to members of Jones's Homestead air reserve unit. According to one source at the air base, personnel in the unit were made to feel they were obligated to write letters of support.

The Bond Deal
SEN. STROM THURMOND (R-SC): Did you violate any federal or State of Florida laws?

JONES: No, Mr. Chairman, to the best of my knowledge I did not. It was certainly not my intention.

Michael Lissack has never met Daryl Jones, but he's hoping to play a role in Jones's future. On Tuesday, June 16, Lissack returned home to his New York City apartment, turned on his computer, and checked that evening's headlines on one of the Internet news services. He soon came across a story about Jones's confirmation hearing, which had taken place earlier that day, and discovered that Jones had been grilled by senators about a Dade County bond deal.

 

Jones's actions in that deal were first chronicled in a New Times cover story titled "Flying High" (February 26). The story detailed the county's selection of Douglas James Securities as an underwriter to sell $200 million in bonds to help finance expansion at Miami International Airport. The county's professional staff and financial advisers had recommended against using Douglas James, arguing that the small Miami Beach-based company had neither the experience nor the capital to guarantee successful completion of the deal.

To counter these concerns, Craig James, founder of the securities firm, hired Jones to help persuade county commissioners to award the deal to Douglas James. During a New Times interview this past February, Jones admitted he had been retained by James solely to lobby commissioners. "I'm a consultant," Jones declared. "I'm not an employee, I'm a consultant." He repeated the assertion several times.

The county commission eventually sided with Jones and selected Douglas James. The bonds were sold in October, and Douglas James earned nearly $300,000 in commissions, from which Jones was paid $90,000. The incident raised questions regarding the possibility that Jones traded on his name and political office for personal financial benefit.

Sitting at his computer, Lissack read that several senators had also questioned whether Jones and his firm violated SEC rules governing bond transactions. Under those rules, companies that hire consultants and lobbyists are required to disclose that fact. Douglas James never listed Jones on any of the required documents as a lobbyist or consultant. Recalls Lissack: "My reaction was, 'Good questions, wrong jurisdiction.'"

Few people understand the arcane laws and regulations governing the world of municipal finance as well as Lissack, who worked as a senior banker in Smith Barney's public finance department for thirteen years. Outspoken and brash, Lissack now bills himself as a professional whistle blower in the bond industry.

He is also highly controversial. Several years ago, while working at Smith Barney in New York, he was accused of misleading Dade County about how much money it would save on a particular bond transaction. As a result, Smith Barney was forced to refund to the county nearly six million dollars; Lissack was slapped with a $30,000 fine by the SEC and barred from working in the finance industry for five years.

Lissack may be out of the business, but it is never very far from his mind. After reading the stories about Jones, he called several high-ranking staff members on the Senate Armed Services Committee, including Peter Levine, Democratic counsel for the committee, and Les Brownlee, Republican staff director. Rather than dwelling on SEC rules, which are administrative, Lissack suggested that they look at Florida law, specifically statute 218.386, which makes it a third-degree felony for a bond firm to pay someone who is not a "regular employee" for helping drum up municipal bond business. (Joe Centorino, head of the Miami-Dade State Attorney's public corruption unit, says he is aware of the allegations against Douglas James Securities. "We are reviewing the information that's available," he notes without elaborating.)

If the firm violated this statute, Lissack contends, then Jones could be accused of violating federal money laundering laws because he received the proceeds of a felonious act. Lissack says the staff members he talked to were taken aback by this prospect and claimed it hadn't been covered in the original FBI background report. "I was reassured that the info would be referred to the FBI and that committee members would take this into account when they questioned Jones in executive session," Lissack says, adding that he could even imagine a scenario in which a federal independent counsel would need to be appointed to investigate Jones if he is confirmed.

Sources on the committee acknowledge that Lissack spoke at length to Levine and Brownlee and that his information is being reviewed. They caution, however, that senators are unlikely to give much attention to the possibility that Jones could be guilty of money laundering. Two former federal prosecutors also thought it highly unlikely that Jones could be prosecuted for receiving his $90,000 fee.

Lissack, though, remains undaunted. On Monday he launched a Website in opposition to Jones's nomination: www.rtheycrooks.com.

Rule G-37
JONES: I was actually trying to be too honest.
WARNER: I beg your pardon?

JONES: I was actually trying to be too honest. What I was trying to do was create a distinction.

During his confirmation hearing, Jones told senators that he made a mistake when he told New Times he was a lobbyist and a consultant for Douglas James Securities, not an employee of the firm. "What I had done in speaking to a reporter was use a common-sense word," Jones said. "Instead of that word [employee], I used the word consultant. I apologize for not using the right term."

 

Jones now contends he was an "employee" of the firm, and therefore the firm did nothing wrong in hiring him and not disclosing his fees. As he tried to explain to Warner, he was attempting to distinguish between his most recent stint with Douglas James in 1997 (when he was hired to secure the $200 million county bond deal) and his original tenure with the firm, when he worked there from 1994 to 1996. "When I was with the firm the first time, I was certainly an employee," he told the committee. "I received a regular paycheck, taxes and SSI were taken out." He said he received a W-2 tax form each year.

But when he came back for the bond deal, things were different. "I wasn't present at the firm on a regular basis," he told the senators. He also did not have taxes or SSI withheld from his check. And instead of a W-2, he received a Form 1099, which is used for people who work on a contract basis.

Jones told the committee he is still uncomfortable calling himself an employee of the firm but claims that under SEC rules, he was an employee.

Assuming that Jones is correct -- and the SEC has yet to make that determination -- his testimony before the Armed Services Committee could spell additional trouble for him and for Douglas James Securities.

If Jones was indeed an employee, then his firm may be liable under a separate SEC rule, known as Rule G-37. That rule bars securities firms from doing business with any local government if any employee of the firm has donated to the political campaigns of any elected official of that government within the previous two years.

Jones admitted during his confirmation hearing last week that in 1996 he gave political contributions of $250 to County Commissioner Dennis Moss and $500 to then-county mayoral candidate Art Teele. Since those contributions fell within two years of the date that the county commission awarded Douglas James Securities the role of lead underwriter on the $200 million airport bond issue, it would appear that Jones's actions violate Rule G-37. If true, the SEC could punish Douglas James Securities by forbidding the company to take part in upcoming Miami-Dade County bond deals for two years. It could also force the firm to forfeit the $300,000 it made from the airport bond issue and presumably could require Jones to return his cut of $90,000.

Daryl Jones did not return calls requesting comment. SEC officials refused to say anything while their review of the transaction is still under way. Craig James did not return phone calls either. Miami-Dade County finance director Rachel Baum says that while the SEC review is taking place, Douglas James Securities has taken itself out of the county's bond rotation and will not handle any future deals until the matter is resolved.


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