Did Feinstein's spouse get a sweetheart deal?

April 21, 2009 12:00:00 AM PDT
Senator Dianne Feinstein is fending off allegations her husband's company got a sweetheart deal at taxpayers' expense. The story was a front page exclusive in the Washington Times and it spread fast.

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The Washington Times printed a front page story Tuesday morning saying Sen. Feinstein's husband was cashing in on the housing crisis by getting a lucrative deal from a federal agency, right after Sen. Feinstein proposed giving the FDIC, or Federal Deposit Insurance Corporation, $25 billion in taxpayer dollars.

According to the Washington Times investigation, the deal involves foreclosed homes the government acquired when it took over failed banks.

The FDIC wants those properties resold and it gave a contract to CB Richard Ellis Group, a real estate firm with offices on the 44th floor of a San Francisco hig-rise. CB Richard Ellis' chairman is Richard Blum, husband to Sen. Feinstein.

The newspaper says right after Blum's company got that contact, Sen. Feinstein sought $25 billion for the agency that gave the contract to her spouse. On Tuesday, Sen. Feinstein called the story "unfair and inaccurate" and denied that her legislation had any connection to her husband's business.

"No action was ever taken on my legislation, no votes were ever taken on it," said Sen. Feinstein.

Sen. Feinstein says at the time she knew nothing of her husband's contract with the agency.

"Now this contract was competitively bid and judged by non-political government employees so there is no conflict of interest, there is no appearance in my view," she said.

Andrew Gray, a spokesman for the FDIC told ABC7, "There was absolutely unequivocally no quid pro quo... contract decisions was made by career employees who had signed confidentiality agreements." They also said that the FDIC board of directors didn't know who was getting the contact, until it was announced. Still, there is the appearance of impropriety says the executive director of an ethics watchdog group in Washington D.C.

"It has the appearance of impropriety and members are also directed to avoid even appearance problems. But this is the kind of problem that you see when members of Congress are married to people who have interests before the federal government. So it's the kind of balance they often have to deal with," said Melanie Sloan, the director from Citizens for Responsibility and Ethics.

The Washington Times suggests Blum's company got a sweet deal above the industry standards for selling homes.

ABC7 ran the particulars of the deal past Mark Choey, a senior associate at Vanguard Properties whose division handles foreclosures.

"Knowing how many foreclosure properties we've done and pre-foreclosure, it's a lot of work to do and it's not particularly outrageous in my opinion," said Choey.

Sen. Feinstein blames the reporter and the conservative Washington Times paper.

"I mean this is a reporter that's been out there trying to go from one thing to another," she said.

But Sloan says the paper has recently been fairer in its coverage.

"It's worth noting that the reporter who actually wrote this story, Chuck Neubauer, used to be a Los Angeles Times reporter until recently," said Sloan.

The bottom line is this was not a violation of the Senate ethics rules and the ethics committee is not going to investigate.

Sen. Feinstein's press office asked that ABC7 News make it clear that the $25 billion request for FDIC money was intended to be spent on stemming the rise in foreclosures. Feinstein's package was superseded by President Obama's stimulus package which tripled the amount of relief that Feinstein had requested for mortgage relief.

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