- The Washington Times - Monday, March 3, 2003

The U.S. Agency for International Development has awarded nearly $170 million in contracts to manage health programs, including those designed to curb sexually transmitted diseases, to a company founded by a man who has since become one of America's largest purveyors of pornography.
The contracts, according to USAID records, went to Population Services International Inc. (PSI), a nonprofit corporation founded in 1971 by Philip D. Harvey, who also created and operates a $70 million-a-year pornographic mail-order distribution business in North Carolina known as Adam & Eve.
Mr. Harvey serves as a PSI board member.
He also is a founder and board member of DKT International, a District-based charitable organization that manages social marketing programs in nine countries mainly involving the distribution of condoms.
DKT International reported $40 million in operating revenue last year, with $39 million in program and administrative expenses, according to Internal Revenue Service documents.
Officials at USAID, an independent agency funded by taxpayer dollars to provide economic development and humanitarian assistance around the world, told The Washington Times on Friday that Andrew S. Natsios, the agency's administrator, has "ordered an immediate review of the PSI contract."
"He was not aware of Mr. Harvey's business activities outside of PSI," a USAID spokeswoman said.
A spokesman for Sen. Richard G. Lugar, Indiana Republican and chairman of the Senate Foreign Relations Committee, which oversees USAID, did not return a call for comment.
Mr. Harvey created Adam & Eve in 1974 as the country's first mail-order condom distributor. Since then, the firm and its parent company, Phil Harvey Enterprises Inc., offers a wide range of products, including X-rated videos and photographs, lingerie, sex toys and "love dolls" all available through the Internet, a wholesale branch, three retail stores and at-home parties.
Last year, 1.5 million customers bought nearly $70 million worth of Adam & Eve merchandise.
Mr. Harvey told The Washington Times there was no conflict of interest concerning his ownership of Adam & Eve and his involvement in PSI, saying he was "simply serving as a board member."
While his PSI responsibilities included oversight of the firm's financial accountability, he said he has no managerial role and is paid "absolutely nothing" as a board member.
"I don't see any conceivable conflict in being a businessman with serving nonprofit organizations. Indeed, the confluence of interests seems to have worked well over the last 30 years," said Mr. Harvey, who served as PSI's chief executive for seven years after its 1971 founding.
PSI President Richard A. Frank said that while Mr. Harvey founded the nonprofit organization and remains on its board of directors, he has not had management responsibilities for decades.
"He is not involved in PSI nor is PSI involved in whatever you just mentioned, whatever it's called," Mr. Frank said when asked about Adam & Eve. "We have nothing to do with what he does in his private life and I don't know much about his private life but it has zero to do with us."
PSI contracts include a June award of $90 million over five years to curb the spread of HIV/AIDS and other sexually transmitted infections in Africa and other countries, and a December award of $3 million over four years to increase the capacity of local health organizations in Burundi in HIV/AIDS prevention.
Also, a $75 million 1997 contract to begin an HIV/AIDS prevention program in 29 countries, and a $1.4 million contract in November for a health communication program in Afghanistan to combat life-threatening childhood illnesses.
A Justice Department anti-pornography task force targeted Mr. Harvey for seven years.
"There's no doubt he was violating federal obscenity laws when we targeted him in the mid-1980s," said a former federal prosecutor. "He was distributing and selling obscene materials and was under indictment in several jurisdictions.
"But he knows how to use the system, how to delay the process and when he brought a lawsuit against the Justice Department in our case in 1993, [Attorney General Janet] Reno dropped the case in exchange for him dropping the suit," the former prosecutor said. "That's what happened, pure and simple."
Mr. Harvey, who said he has a "long-standing interest in international family planning and the social marketing of condoms and other contraceptives and related products," has since emerged as a sex business icon, joining Hustler founder Larry Flynt on stage for a keynote address before the Free Speech Coalition in November 2001.

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