WASHINGTON -- Ashford Farms, a secluded mansion used for years as a CIA hideaway for spies and Soviet defectors, was a choice piece of real estate in late 1976 when declared surplus by the federal government.
It seemed certain the General Services Administration, charged with disposing of excess government properties, would cash in for taxpayers by selling the plush, 26-room house enveloped in the mystique of espionage.
More than five years later, the GSA instead is faced with an embarrassing debacle, on the Eastern Shore of Chesapeake Bay just two hours from downtown Washington.
Although a Washington investment group submitted a valid offer of $407,900 for Ashford Farms and then raised it to $437,500 in 1979, a former acting GSA administrator and the government's top property disposal official rejected it.
Their decision has left the government with a loss of perhaps the entire half million dollars the property was expected to bring to the Treasury.
Worse yet, the GSA, which has poured $200,000 into maintaining the property and into advertising five different sale attempts, still is trying to get rid of Ashford Farms.
The best offer at the most recent sale, on Dec. 15, was $236,000 - and GSA officials were contemplating accepting it to cut the government's losses.
UPI and the Better Government Association, a civic watchdog group, spent five months examining the fate of Ashford Farms and hundreds of other surplus federal properties to see how the government performs as a real estate agent.
The results indicate that even in GSA's seldom used, but purest form of disposal -- the public auction -- things can go awry. Broad discretionary powers allow GSA officials to overrule agency real estate specialists, sometimes to cater to the requests of politicians or special interests.
In one instance, Hawaii Gov. George Ariyoshi and members of the Hawaiian congressional delegation intervened at the last minute to engineer cancellation of a public sale of a 53-acre surplus Nike missile site on Oahu.
Bids already had been submitted for the Sept. 25, 1979, sale of the property with a panoramic view and a value, by one estimate, of $600,000. But the day before the bid opening, the politicians hastily asked GSA Administrator Rowland Freeman to cancel the sale because the state was interested. Freeman obliged.
In the two years since, the state and other public agencies have put forth various proposals for use of the property. None has met GSA standards. The GSA now is exploring several disposal alternatives -- the most likely, a sale.
In another instance, meddling in the sales process proved unsuccessful. The Gloucester, Mass., Life Boat Station was declared Coast Guard surplus in July 1975, but GSA had been thwarted in six years of efforts to negotiate a sale of the property to a public agency. A public bid sale was scheduled for June 18, 1981, and GSA officials looked forward to dumping the property off their inventory.
Ten days before the sale, an aide to Rep. Nicholas Mavroules, D-Mass., called GSA's Boston regional office to inquire how to get the sale canceled. According to a GSA file memo, the aide said 'this was a wrong time for a sale because local residents were concerned that the Unification Church would be the highest bidder.'
The GSA realty specialist responded that 'GSA had no alternative to a public sale in this case, and that GSA could not control the competitive bidding process.' The aide noted his congressman would contact the regional administrator about the matter.
The sale went off as planned, with the property going not to the Unification Church, but to local resident Anna Weld, for $125,000.
In fiscal 1981, only $8.1 million of the government's $46 million in surplus property sales were generated through competitive bids or public auctions, most of them involving small properties.
The rest of the sales were negotiated with cities, counties, states and in some cases, private firms.
GSA's inspector general's office, in an audit last year, recommended more properties be sold by competitive sale -- noting that land offered for bidding returned an average of 26 percent more than its appraised values. Negotiated sales brought 12 percent more than the appraised values, the report said.
'Advertised competitive sales are the best assurance that the optimum price was received for the property,' it said.
GSA policies require that the government accept a price of no less than 90 percent of a property's appraised value unless the agency administrator uses discretionary authority to declare an exception and okay a lower bid.
The administrator also has power to reject an acceptable bid, a move that can leave him open for serious second-guessing. Agency officials cite the case of Ashford Farm. - -- --
For as long as 25 years ago, the red-brick building overlooking Chesapeake Bay was used by the CIA for cloak-and-dagger intelligence operations. It was at Ashford Farm that CIA officials interrogated U-2 pilot Francis Gary Powers in 1962 following his capture and subsequent release by the Soviets.
The mansion also was used as a safehouse for key defectors Heinz Barwich, an East German atomic scientist, KGB official Peter Deriabin and Reino Hayhanen, the chief witness against Soviet spy Rudolph Abel.
In 1976, the CIA conceded it was no longer using the property, and the estate was declared excess and put up for 30 days of routine screening to see if any other federal agency might have a use for it.
Government officials say CIA real estate specialists were well aware that the property's shoreline was eroding from the waters of the Choptank River and that the problem needed attention. Presumably, so were GSA officials.
During screening, the Maryland Department of Natural Resources applied for the property for wildlife conservation purposes, and in July 1978, after 19 months of review, the Interior Department donated the 79-acre site to the state. No sooner had it won the right to the property than the Maryland agency withdrew its proposal, apparently because it was unable to afford the upkeep.
Finally, in early 1979, more than two years after the CIA evacuated the premises, GSA officials armed with an appraisal of the property of about $450,000, advertised it for sale to the highest bidder.
Bayview Associates Inc., a small Washington investment group, submitted the high bid of $407,900,a figure acceptable under GSA's guidelines requiring the price to be 90 percent or more of the estimated market value.
But with the support of acting GSA administrator Paul Goulding, Markon rejected the bid and offered Bayview a chance to raise it.
Two weeks later, Bayview upped the ante to $417,500.
To the dismay of the investment group and the surprise of several GSA officials, Goulding and Markon rejected the bid again. Neither gave a reason for his decision, according to detailed GSA file memos.
In a phone conversation on April 6, 1979, Bayview lawyer William Hoyles offered $437,500 as a final bid. Markon said 'no.'
'We were terribly disappointed,' Hoyles said in an interview. 'We thought we'd made a fair bid.'
Markon says, 'I felt the property should have brought more money and I thought that another sale effort would have brought a higher price.'
But he concedes he overturned his real estate experts without ever viewing the property. 'I looked at the appraisal and some pictures of it (the safe house),' Markon said. He said he also talked to 'real estate developers on the Eastern Shore.'
He said he could not remember which developers.
Before the next sale offering, GSA memos reveal Goulding phoned the regional Real Property Division asking that a bid proposal be mailed to John Dorment, a developer from Towson, Md.
Dorment, however, did not participate in the second round of bidding. When the offers came in, Goulding and Markon's decision to go to a second sale looked brilliant. Brunswick, Ga., developer Arnold G. Proctor offered a high bid of $550,000. But before Proctor could close the deal, Hurricane David hit the Chesapeake, ripping trees off the shoreline and leading to the quick erosion of 17 acres of the Ashford Farm estate. Proctor defaulted on his $55,000 bid deposit, saying the erosion problem made it a much more costly deal.
GSA since has spent about $125,000 to cover 1,000 feet of the property's shoreline with rip-rap -- rock to prevent further erosion. The agency estimates it would cost another $225,000 to protect the remaining 2,500 feet still exposed.
With the property shrinking and the real estate market crashing since the first two sales, the appraised value of the property dropped.
Early last year, GSA again screened the property with federal agencies for a possible donation. When the Department of Education proposed giving it to the National Association of Towns and Townships for a nationwide training center for small town officials, GSA balked on grounds the plan's public benefit was not great enough. It decided to try a fifth sale.
At about the same time, UPI and the BGA have learned, federal investigators were called into the case to see if there may have been improper motives for Goulding's and Markon's decision to reject the first bid.
Carlton Brooks, until recently the head of real property in GSA's regional office, said of their decision to override his recommendation to accept Bayview's bid, 'No reason was given. I'm sure of that.'
Bob Irwin, a realty specialist under Brooks, said of the case, 'I've been in the real estate business all my life, and if there's one thing I've learned it's that you never turn down an offer when you get what you're asking.'
At the three most recent bids, high offers were $256,000, $227,777 and $236,000.
Besides spending a total of about $200,000 on protection and maintenance for the property and administrative costs, GSA has: lost the use for the government of the original $437,500 for three or more years; seen the value of the property decline perhaps by $200,000; heightened chances it will have to sink more money into saving the shoreline; and prevented local Talbot County officials from collecting property taxes on the estate.
John Zachai, president of the Talbot County Taxpayers Association Inc., said in a letter last summer to GSA administrator Gerald Carmen that 'this once magnificent estate has deteriorated substantially.
'It is absolutely incredible that a valuable piece of real estate was really useless to the U.S. government perhaps as much as 10 years ago, and even today that U.S. government is running around trying to peddle it to some well-meaning charity or non-profit organization for the sum of one dollar. At one time, the U.S. government probably could have netted between $600,000 and $1 million by selling 'Ashford.''
Last summer, two and a half years after the initial sale offering, GSA's inspector general's office wrapped up an internal investigation with a report that the agency 'has lost substantial profit ... because of Markon's insistence on reoffering the property for a better price.'
Investigators found no connection between Markon and Proctor, who jumped Bayview's bid by more than $100,000 in the next round.
Proctor, who said he is thankful the hurricane allowed him to learn of the erosion problem before he closed the deal, says flatly of Markon's decision:
'If they had a good bid, and they did not let it go, somebody made a bad mistake. Somebody's probably lost their job over there.'
