23. Feinstein’s Conflict of Interest in Iraq

Source

North Bay Bohemian, January 24, 2007
Title: “Senator Feinstein’s Iraq Conflict”
Author: Peter Byrne
http://www.bohemian.com/metro/01.24.07/dianne-feinstein-0704.html

Student Researcher: David Abbott, Amanda Spigut, and Ann Marie O’Toole
Faculty Evaluator: David McCuan, Ph.D.

Dianne Feinstein—the ninth wealthiest member of congress—has been beset by monumental ethical conflicts of interest. As a member of the Military Construction Appropriations Subcommittee (MILCON) from 2001 to the end of 2005, Senator Feinstein voted for appropriations worth billions of dollars to her husband’s firms.

From 1997 through the end of 2005, Feinstein’s husband Richard C. Blum was a majority shareholder in both URS Corp. and Perini Corp. She lobbied Pentagon officials in public hearings to support defense projects that she favored, some of which already were, or subsequently became, URS or Perini contracts. From 2001 to 2005, URS earned $792 million from military construction and environmental cleanup projects approved by MILCON; Perini earned $759 million from such projects.

In 2000, Perini earned a mere $7 million from federal contracts. After 9/11, Perini was transformed into a major defense contractor. In 2004, the company earned $444 million for military construction work in Iraq and Afghanistan, as well as for improving airfields for the US Air Force in Europe and building base infrastructures for the US Navy around the globe. In a remarkable financial recovery, Perini shot from near penury in 1997 to logging gross revenues of $1.7 billion in 2005.

It is estimated that Perini now holds at least $2.5 billion worth of contracts tied to the worldwide expansion of the US military. Its largest Department of Defense contracts are “indefinite delivery-indefinite quantity” or “bundled” contracts carrying guaranteed profit margins. As of May 2006, Perini held a series of bundled contracts awarded by the Army Corps of Engineers for work in the Middle East worth $1.725 billion. Perini has also been awarded an open-ended contract by the US Air Force for military construction and cleaning the environment at closed military bases.

In 2003 hearings, MILCON approved various construction projects at sites where Perini and/or URS are contracted to perform engineering and military construction work. URS’s military construction work in 2000 earned it a mere $24 million. The next year, when Feinstein took over as MILCON chair, military construction earned URS $185 million. On top of that, the company’s architectural and engineering revenue from military construction projects grew from $108,726 in 2000 to $142 million in 2001, more than a thousand-fold increase in a single year.
Beginning in 1997, Michael R. Klein, a top legal adviser to Feinstein and a long-time business partner of Blum’s, routinely informed Feinstein about specific federal projects coming before her in which Perini had a stake. The insider information, Klein said, “was intended to help the senator avoid conflicts of interest.” Although Klein’s admission was intended to defuse the issue, it had the effect of exacerbating it, because in theory, Feinstein would not know the identity of any of the companies that stood to contractually benefit from her approval of specific items in the military construction budget—until Klein told her.

Feinstein’s husband has profited in other ways by his powerful political connections. In March 2002, then-Governor Gray Davis appointed Blum to a twelve-year term as a regent of the University of California, where he used his position as Regent to award millions of dollars in construction contracts to URS and Perini. At the time, he was the principal owner of URS and had substantial interests in Perini. In 2005, Blum divested himself of Perini stock for a considerable profit. He then resigned from the URS board of directors and divested his investment firm of about $220 million in URS stock.1

Citation

1. Peter Byrne, “Blum’s Plums” North Bay Bohemian, February 21, 2007.

UPDATE BY PETER BYRNE

Shortly before my expose of Senator Dianne Feinstein’s conflict of interest was published in January 2007, Feinstein, who had declined to substantively comment upon serious allegations of ethical misconduct as reported in the story, resigned from the Military Construction Subcommittee. I then wrote three follow-ups, including a news column on her resignation, an expose of her husband Richard Blum’s conflict of interest as a regent of the University of California, and an expose of Blum’s business partner, Michael R. Klein. With Blum’s financial backing, Klein, a war contractor, operates a non-profit called The Sunlight Foundation that awards millions of dollars to reporters and government watchdog groups to research government ethics.

In March, right-wing bloggers by the thousands started linking to and commenting upon these stories—agitating for a Congressional investigation of Feinstein. In just two days, the stories got 50,000 online hits. Michael Savage and Rush Limbaugh did radio segments on my findings. I declined to appear on their shows, because I do not associate with racist, misogynist, homophobic demagogues. Fox News’ Bill O’Reilly invited me to be on his national TV show, but quickly uninvited me after I promised that the first sentence out of my mouth would frame Feinstein as a neoconservative warmonger just like O’Reilly.

As the storm of conservative outrage intensified, Joe Conason, from The Nation Institute, which had commissioned the Feinstein investigation, asked to have the tag thanking the Nation Institute for funding removed from my stories because, he said, Katrina vanden Heuval, The Nation’s editor and publisher, did not want the magazine or its non-profit institute to be positively associated with Limbaugh. I told Conason that not only was I required to credit The Nation Institute under the terms of our contract, but that The Nation’s editors should be proud of the investigation and gratified by the public reaction.

The back story to that encounter is that, in October, vanden Heuvel had abruptly killed the Feinstein story, which had been scheduled to run as a cover feature before the November 2006 election in which Feinstein was up for reelection. The Nation’s investigative editor, Bob Moser, who worked closely with me on the project from start to finish, wrote that I had done a “solid job,” but that the magazine liked to have a political “impact,” and since Feinstein was “not facing a strong challenge for reelection,” they were not going to print the story. Moser added that there was no “smoking gun,” which amazed me, since Klein’s admission that he was funneling defense contracting wish lists developed by Feinstein’s husband’s company directly to the senator, who was in a position to make those wishes come true, was a hot and smoking fact pointing toward corrupt practices. Subsequently, vanden Heuval wrote an editorial praising women leaders of the newly-empowered Democratic Party, including Feinstein: go figure.

I then sold the story to Salon.com, who abruptly killed it right before publication, too. This time the editor’s explanation was that “someone talked to the Sunlight Foundation” and that Salon no longer saw the matter as a serious conflict of interest. So, I pitched the story to Slate, The NewRepublic, Harper’s, the Los Angeles Times and, by way of experiment, to the neoconservative American Spectator and Weekly Standard. Most of the editors praised the reporting, but turned down the story. I cannot help but believe that, considering the precarious balance of power in the post-election Senate, some of these editors were not eager to critique the ethics of a Democrat. As for rejection by the neoconservatives, I theorize that they secretly adore Feinstein, who has consistently supported Bush’s war and homeland security agenda and the illiberal Patriot Act.

So I sold the tale to the North Bay Bohemian, which, along with its sister papers in San Jose and Santa Cruz ran it on the cover—complete with follow-ups. After it appeared, the editors and I received a series of invective-filled emails from war contractor Klein (who is also an attorney) but, since he could show no errors of fact in the story, he did not get the retraction that he apparently wanted. In March, the story crested a Google tidal wave generated by left- and right-wing bloggers wondering why the mainstream media was ignoring the Feinstein scandal. After two dozen newspapers ran a McClatchy wire service article in April observing that no one had found any factual faults in my reporting, the lefty group Media Matters attacked me on its Web site as a right-wing pawn, without even calling me for comment, nor finding any errors in my reporting. I parried their fact-free insults with facts and they were compelled to correct the inaccurate rant.

On April 30, The Hill newspaper in Washington D.C. ran a highly-visible op-ed by a conservative pundit quoting from my story and comparing Feinstein (unfairly) to convicted felon and former Congressman, Duke Cunningham. As the Feinstein investigation gained national traction, mostly outside the realm of the mainstream media, one of Klein’s employees at the Sunlight Foundation posted a “critique” of my story, which was loaded with personal insults, but contained no factual substance. Not coincidentally, Feinstein’s press office distributes, upon request, a similarly-worded “rebuttal,” which insults my personal integrity, finds no factual errors, and does not address the damning fact, reported in the story, that four non-partisan ethics experts based in Washington D.C. found the senator had a conflict of interest after reviewing the results of my investigation.

Also, in April, CodePink and The Raging Grannies held a demonstration in front of the Feinstein-Blum mansion in San Francisco demanding that she return her war profits to the Iraqi people. That was my proudest moment.

Five months after the story was printed, opinion-floggers across the political spectrum continue to loudly ask why the mainstream media has not reported on Feinstein’s ethical problem. Some say that the hurricane of opinion raised by the investigation has killed Feinstein’s chance for a spot on the Democratic Party’s presidential ticket in 2008. Klein has continued to send me e-mails full of verbal abuse, misspellings, and implied threat of lawsuit.

Blissfully, I delete them.