Menendez' bill could have aided donor's investment
Sen. Robert Menendez sponsored legislation with incentives for natural gas vehicle conversions that would benefit the biggest political donor to his re-election, the same eye doctor whose private jet Menendez used for two personal trips to the Dominican Republic, an Associated Press investigation found.
The disclosure reflects the latest intersection between the New Jersey Democrat who is the subject of an ethics inquiry on Capitol Hill and the Florida doctor involved in a federal criminal investigation.
Dr. Salomon Melgen invested in Gaseous Fuel Systems Corp. of Weston, Fla., and joined its board of directors in early 2010, according to the company's chief executive and a former company consultant. GFS, as the company is known, designs, manufactures and sells products to convert diesel-fuel fleets to natural gas. The amount of Melgen's investment is confidential under rules of the Securities and Exchange Commission, but a 2009 document filed with the SEC showed the company required a minimum individual investment at that time of $51,500.
Menendez was a principal supporter of a natural gas bill from 2009 through 2012 that would boost tax credits and grants to truck and heavy vehicle fleets that converted to alternative fuels. The bill stalled in the Senate Finance Committee, and after it was revived in 2012, the NAT GAS Act failed to win the needed 60 votes to advance.
While the bill was under consideration between 2009 and 2011, the former consultant for GFS spent $220,000 lobbying Menendez's staff and other congressional and federal officials on the act's provisions as well as other regulatory issues, according to interviews and Senate records.
There is no evidence that Menendez offered direct help or intervened on behalf of the company or Melgen. Instead, the connection between the two men's interests in natural gas is the latest example of the close symmetry between the senator - who recently rose to become chairman of the Senate Foreign Relations Committee - and his millionaire backer. It illustrates the way Menendez's political clout has at times overlapped with Melgen's financial investments.
In recent weeks, Menendez has acknowledged other dealings with Melgen. Menendez was compelled to reimburse $58,000 for two flights aboard Melgen's private jet that he had previously failed to report, prompting scrutiny by the Senate Ethics Committee. Menendez also acknowledged that his office had contacted U.S. health agencies in 2009 and 2012 to question their billing practices and policies amid a dispute between Melgen, an eye specialist, and federal health authorities. FBI agents in January searched Melgen's offices in Florida and seized files as part of a criminal investigation.
Menendez also raised concerns last year with state and Commerce Department officials about the Dominican Republic's reluctance to enforce a port security contract with a company that Melgen partly owns.
The New Jersey senator won a measure of validation Monday when a woman in the Dominican Republic acknowledged that she had fabricated her earlier allegations of providing Menendez with prostitution services. A Dominican lawyer, Vinicio Castillo Seman, released a sworn statement from the woman denying she had sex with Menendez and saying she had never met him. Castillo had been accused of hosting outings on his yacht where he, Menendez and Melgen had relations with the woman and a second woman.
In Washington, Menendez dismissed the earlier allegations as "smears." "I've always said that these are all false," he said. Melgen's lawyer, Kirk Ogrosky, denounced the allegations as "a campaign of lies."
A Washington-based watchdog group, Citizens for Responsibility and Ethics in Washington, or CREW, had said it received emails starting in April 2012 alleging Menendez used the services of prostitutes in the Dominican Republic.
In the matter of Menendez' support of the NAT GAS Act and Melgen's investment in the GFS natural gas engine conversion company, the senator's spokeswoman told the AP that Menendez personally had no known discussions with either Melgen or others associated with the firm about the legislation or its impact on the company.
"Sen. Menendez has long been a proponent of the increased deployment of natural gas vehicles because they would reduce air pollution, increase energy security, and lower transportation costs," said the spokeswoman, Patricia Enright. "The senator's staff first began working on this issue in early 2009 and introduced the bipartisan NAT GAS Act later that year."
She said it was unclear whether the senator will continue to support the bill he had sponsored.
Melgen's attorney, Ogrosky, told the AP in a statement that "Dr. Melgen has never discussed his involvement with Gaseous Fuel Systems Corp. with either Sen. Menendez or his staff."
An SEC document filed last week by GFS showed that Melgen remains on the company's board of directors. An earlier document filed by the firm in May 2011 was the first to show Melgen as a director. That SEC record showed a $6 million investment in the firm from two unnamed individuals.
The company's top executive, Ken Green, said Melgen is a key investor but has had no influence on the company's decision-making and has not attended any director's meetings since he joined the firm.
"Dr. Melgen hasn't ever been to our offices, not once," Green told the AP. "He's a passive investor."
Green said the Senate bill that Menendez supported would provide only limited help to his company because most of its provisions are aimed at heavy on-road vehicles like truck rigs and bus fleets. GFS has pioneered an engine conversion system that can be installed on diesel-fueled vehicles, but Green said it is marketed exclusively for off-road equipment, such as massive mining trucks. The tax credits proposed by the bill would do little to offset the cost to buyers of the off-road trucks, which can cost as much as $8 million, Green said.
"This bill won't do much of anything for us," he said.
But in 2010, when Melgen first invested in GFS, the firm was actively considering marketing its natural gas engine devices for on-road vehicles. The bill, both in its 2009 and 2012 versions, authorized changes to IRS rules allowing larger tax credits for on-road, natural gas-supplied trucks and vehicles as well as grants for research. The proposal also urged the Environmental Protection Agency to streamline rules covering the conversion of diesel and gas engines to natural gas and alternative fuels.
GFS said in October 2010 in a press release that its strategy "integrates four related areas of business development," including "on-road coal truck conversions." The release, written by the company's consultant and then-director of strategic projects, Elio Muller, also said that "a vast number of on-road 18-wheeler tractor-trailer trucks hauling coal" in the Appalachian region of Kentucky and West Virginia could be converted to combination diesel-natural gas engines with the GFS system.
Muller, a former Commerce Department official in the Clinton administration involved in several Tampa businesses, said last week that he introduced Melgen to Green and other GFS officials in early 2010. Green also said Muller was instrumental in bringing the company to Melgen's attention. Muller said he has known Melgen from Florida's Democratic political circles dating back to the late 1990s. At one point, Muller drew up plans to start a business, Melgen & Muller Inc., but the men never followed through.
Melgen has made investments in health-related companies since the 1990s, according to SEC reports, but his GFS stake is his only evident natural gas-related investment. Green said he met several times with Melgen and found him to be an "intelligent investor" but could not explain his sudden interest in natural gas.
"I don't know how he found out about natural gas, but he liked what we were doing and thought it was innovative," Green said.
By early 2010, when Melgen formally joined GFS, Menendez had already taken on a key role in backing the natural gas bill, joining Democratic Senate Majority Leader Harry Reid of Nevada and Republican Sen. Orrin Hatch of Utah as out-front sponsors.
The NAT GAS Act quickly drew energy and environmental battle lines. Oil and alternative energy magnate T. Boone Pickens led corporate natural gas industry backers of the bill, aided by the Obama administration and influential environmental groups. Arrayed against the bill were top oil and coal firms and even some green activists, joined by industrialists David and Charles Koch, whose political action group, Americans for Prosperity, harnessed opposition from conservative groups.
Green said he did not authorize or hire any lobbyists on behalf of GFS because he was skeptical about broadening into the markets for on-road trucks. But he did not block the activities of Muller, who in addition to his consulting role with GFS, had also started his own firm, Diesel 2 Gas. It aimed to license GFS technology and use the firm's parts to outfit on-road trucks.
In June 2010, representing both GFS and Diesel 2 Gas, Muller testified before an EPA panel in Ann Arbor, Mich., about what he called "cumbersome and unnecessary" rules that hurt GFS and other natural gas firms. The EPA agreed to alter its regulations in April 2011.
Between 2009 and 2011, Muller also ran an independent consulting firm, Muller Group Inc., which paid $220,000 to lobbyists from Brownstein Hyatt Farber Schreck LLP to lobby for the NAT GAS Act and related issues.
Muller said he accompanied the lobbyists in at least one meeting with Menendez' staff about the bill but could not recall details. Melgen and Muller joined Menendez at a signing ceremony in Miami in January 2010 for the senator's book, "Growing American Roots." And last June, they joined Menendez at the annual U.S.-Spain Council Annual Forum in Jersey City.
Muller said he did not discuss his lobbying activities with Melgen, even though they were both involved with GFS.
Both Muller and Melgen also have fundraising ties to Menendez. Muller gave $5,000 to Menendez' New Jersey Senate re-election campaign in 2011. Melgen has been a staunch supporter, giving more than $14,000 directly to Menendez since the late 1990s and, through his eye clinic, donating $700,000 last year to a "super" political committee that supported Democratic Senate candidates. The committee, in turn, spent $582,000 to back Menendez' campaign.
AP Writers Erica Werner in Washington and Ezequiel Abiu Lopez in Santo Domingo contributed to this report.