The New York Times
December 11, 2005
Lawmaker Adds More Vegetables to Amtrak Load
By MATTHEW L. WALD
and GLEN JUSTICE
WASHINGTON, Dec. 10 - Amtrak certainly knows how to lose money, but the railroad says it can lose less if only it can get out of the business of hauling cars of "premium" freight like perishables behind its cross-country trains.
Instead, Congress has told Amtrak to increase sharply the number of carloads it hauls or forgo $8.3 million in additional federal money.
The order, contained in the transportation bill signed by President Bush last month, was inserted late in the process by Representative Joe Knollenberg, an appropriations subcommittee chairman from Michigan. The Detroit businessman who owns the only company that supplies such rail cars happens to be a large donor to Mr. Knollenberg, a Republican, and other Michigan lawmakers.
Mr. Knollenberg acknowledged that the order, known in Washington as an earmark, was likely to help the businessman, Anthony Soave, and his company, ExpressTrak. But he said the main goal was to help Amtrak make money by hauling freight.
Until Friday, he aggressively defended the provision.
"If you do it right, you are not just throwing money at the wall," he said in an interview on Wednesday. "It gives this idea some push to make it produce some profit. I think there is some possibility of this succeeding."
But Mr. Knollenberg changed course Friday afternoon. After documents obtained by The New York Times raised questions about lobbying by ExpressTrak and its lawyers to obtain the $8.3 million for Amtrak, Mr. Knollenberg released a statement saying he would work to reverse the legislation.
"I have decided to repeal the provision and rescind the funds in question," he said.
For now, however, the provision remains in place. Critics blasted it this week as exactly the type of behavior that has left Amtrak famously dependent on federal handouts. Congress established the railroad in 1971 as a private, for-profit corporation and has intermittently promised company managers a free hand to run it like a business. But lawmakers continue to exercise influence because Amtrak must curry political favor to maintain its subsidy.
"You can't have this type of micromanagement when they're trying to get Amtrak to run itself more like a business," said Thomas A. Schatz, president of Citizens Against Government Waste, which tracks federal spending, referring to the $8.3 million.
There are also other problems. ExpressTrak, which is in bankruptcy, and Amtrak, which will get about $1.3 billion from Congress to keep it out of bankruptcy, have been jousting in court for years over a 15-year contract they signed in 1999 requiring the railroad to haul premium freight like fruits and vegetables. Amtrak says ExpressTrak defaulted on lease payments for cars the railroad provided, which ExpressTrak denies.
ExpressTrak now has only 56 cars for premium freight. Amtrak repossessed 55 others in the lease payment dispute, and they are now sitting on a siding in Pennsylvania. It would take years for ExpressTrak to complete the number of shipments Congress wants with the cars it still has.
ExpressTrak's lawyers say the federal financing enables the two companies to continue a venture that advocates say can one day be profitable, but Amtrak says it has not decided whether to take the money and increase the shipments.
The $8.3 million is notable for another reason: it is almost precisely the amount that ExpressTrak's lawyers seem to have identified as a minimum target figure it wanted from Amtrak for settling the company's lawsuit against Amtrak, records show. A 2003 agreement between ExpressTrak and the law firm Foley & Lardner, which handled the company's dispute with Amtrak and also lobbied for the $8.3 million earmark, called for a sharp reduction in the law firm's fees if ExpressTrak received less than $8.2 million.
Robert P. vom Eigen of Foley & Lardner, a lawyer representing ExpressTrak, said that the similarity was "absolutely coincidental" and that it was "misleading to juxtapose the two numbers." Mr. vom Eigen played down the benefit to his client, noting that the money would go to Amtrak and not ExpressTrak.
However, Representative Knollenberg changed his position after learning of the fee agreement, which he said may have presented an "inappropriate financial incentive." Mr. Knollenberg said neither he nor his staff knew about the agreement during the appropriations process.
"The actions by Foley & Lardner make me unable to support it at this time," he said.
Mr. Knollenberg said he first became involved in the issue several years ago, when ExpressTrak officials contacted him about their dispute with Amtrak. Later, Mr. Knollenberg said, he had discussions with Mr. Soave, whom he described as a supporter he has known for years.
Mr. Soave owns Soave Enterprises, a privately held conglomerate that owns ExpressTrak and businesses including car dealerships, taxi fleets and scrap-metal operations, some of which are in and around Detroit. The company posted $1.6 billion in revenues last year, according to Forbes Magazine, making it one of the country's largest private firms.
Mr. Soave, his companies and his employees have contributed hundreds of thousands of dollars to Republican candidates and causes since the 1980's, and smaller amounts to Democrats.
Mr. Knollenberg, a seven-term congressman, is one beneficiary. During the 1998 and 2000 elections, employees at Soave Enterprises were his second-largest contributor, beating out major companies like General Motors, according to the Center for Responsive Politics.
Mr. Knollenberg has received roughly $46,000 from Mr. Soave, his family and employees at Soave Enterprises since 1997, according to PoliticalMoneyLine, which tracks campaign finance. He also said Mr. Soave had helped him raise money.
The ExpressTrak earmark is the latest chapter in a drama that has played out over a half dozen years. The idea to haul freight was embraced by Amtrak in the late 1990's in one of its intermittent, unsuccessful attempts to break even. Amtrak hoped it could carry mail and perishable freight at premium rates on passenger trains that had the capacity to pull more cars.
The contract was signed with ExpressTrak, which trucks fruit and vegetables from groves and farms to the trains and, at the other end, to food distributors. But there were difficulties. Fully loaded passenger trains sometimes had to sit in rail yards waiting for freight cars to be attached. While the original idea was to make freight move as fast as passengers, the result was that passengers were slowed by the freight.
Amtrak hauled about 1,200 carloads in the 12 months ended in April, down from about 1,800 a year at its peak. The $8.3 million would pay for 5,500 carloads over about three years, according to Congressional aides. Amtrak says it is losing millions of dollars a year on ExpressTrak, because of extra expenses for labor, fuel and maintenance. One main problem is the contract, which specifies that Amtrak gets no revenue until total shipments rise to a level they have never achieved.
"I couldn't believe anybody would sign a contract like that," said David L. Gunn, who was president of Amtrak from 2002 until he was fired by the railroad's board last month in a dispute over restructuring the company.
Mr. Gunn, who was widely credited with improving Amtrak's operation during his tenure, called the contract "outrageous."
Robert Walker, the chairman of ExpressTrak, said that Amtrak agreed to help finance a fleet of 350 such cars, and that the contract was written to induce the railroad to increase the fleet. He accused Amtrak of reneging on its commitment and trying to put his firm out of business, calling the railroad's management "dysfunctional."
Amtrak said it had promised to help ExpressTrak find financing, and that it had, indeed, tried.
Amtrak supporters argue that the earmarked money could have been used more productively by the railroad, to improve service and generate more revenue. But Mr. Knollenberg said the $8.3 million was added to Amtrak's appropriation for just this purpose.
The National Association of Rail Passengers discussed the earmark in its November newsletter, observing, "So much for the grand talk on Capitol Hill about the need to reduce Amtrak's losses."
* Copyright 2005The New York Times Company
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