Mansion 'mistake' piles the pressure on Barack Obama

[GaryC 7]

A British-Iraqi billionaire lent millions of dollars to Barack Obama's fundraiser just weeks before an imprudent land deal that has returned to haunt the presidential contender, an investigation by The Times discloses.

The money transfer raises the question of whether funds from Nadhmi Auchi, one of Britain’s wealthiest men, helped Mr Obama buy his mock Georgian mansion in Chicago.

A company related to Mr Auchi, who has a conviction for corruption in France, registered the loan to Mr Obama's bagman Antoin "Tony" Rezko on May 23 2005. Mr Auchi says the loan, through the Panamanian company Fintrade Services SA, was for $3.5 million.

Three weeks later, Mr Obama bought a house on the city's South Side while Mr Rezko's wife bought the garden plot next door from the same seller on the same day, June 15.

Mr Obama says he never used Mrs Rezko's still-empty lot, which could only be accessed through his property. But he admits he paid his gardener to mow the lawn.

Mrs Rezko, whose husband was widely known to be under investigation at the time, went on to sell a 10-foot strip of her property to Mr Obama seven months later so he could enjoy a bigger garden.

Mr Obama now admits his involvement in this land deal was a “boneheaded mistake”.

Mrs Rezko’s purchase and sale of the land to Mr Obama raises many unanswered questions.

It is unclear how Mrs Rezko could have afforded the downpayment of $125,000 and a $500,000 mortgage for the original $625,000 purchase of the garden plot at 5050 South Greenwood Ave.

In a sworn statement a year later, Mrs Rezko said she got by on a salary of $37,000 and had $35,000 assets. Mr Rezko told a court he had "no income, negative cash flow, no liquid assets, no unencumbered assets [and] is significantly in arrears on many of his obligations."

Mrs Rezko, whose husband goes on trial on unrelated corruption charges in Chicago on March 3, refused to answer questions about the case when she spoke by telephone to The Times.

Asked if she used money from her husband to buy the land next to Mr Obama's house, she said: "I can't answer these questions, I'm sorry."

Asked how long she and her husband had known Mr Auchi, she replied: "I will not be able to answer this question."

Mr Auchi's lawyer, asked whether the Fintrade Services loan was used to buy the land which became Mr Obama's garden, stated: "No, not as far as my client is aware."

Mr Auchi's links with Mr Rezko are a new political headache for Mr Obama, the charismatic Illinois senator vying to become America’s first African-American president.

Hillary Clinton has sought to make Mr Rezko, who has bankrolled Mr Obama's political career since his first run for the Illinois state senate in the mid-1990s, into an election issue by calling him a "slum landlord" in a televised debate. She has repeatedly suggested that Mr Obama has effectively not been "vetted" by media scrutiny and will not withstand "the Republican attack machine".

Bill Burton, a spokesman for Mr Obama, told The Times: “The bottom line is Obama does not recall ever meeting him [Mr Auchi].”

The house-and-garden deal raised questions about whether Mr Rezko, a property developer and fast-food restauranteur, made it possible for the Obamas to purchase a mansion they could otherwise not afford.

Mrs Rezko paid the asking price for the garden but the Obamas bought the house for $1.65 million, - $300,000 less than the asking price. The sellers deny they offered the Obamas a discount on the house because the garden had fetched full price from Mrs Rezko.

Mr Rezko has since been indicted for allegedly scheming to pressure companies seeking business with the state of Illinois for kickbacks and contributions to the governor Rod Blagojevich's campaign. He goes on trial on March 3.

A prosecution document filed last month alleged that a "political candidate" - identified by the Chicago Sun-Times as Mr Obama - received a $10,000 campaign contribution from what is said to be a $250,000 kickback in the corruption case. That means Mr Obama's name could figure in Mr Rezko's trial, although he is not accused of any wrongdoing.

Mr Obama insists he never used his office to do favours for Mr Rezko but admits that, as an Illinois state senator, he once wrote letters to housing officials urging them to provide money in support of a proposed apartment building for elderly people which Mr Rezko wanted to build.

Mr Obama has publicly sought to atone for his closeness to Mr Rezko, paying $150,000 to charity to distance himself from a man accused of political corruption.

The spotlight fell on Mr Rezko's ties to Mr Auchi last month when the Chicago businessman was thrown in jail for violating his bail terms by failing to declare a different $3.5 million loan from the British billionaire, made in April 2007. Prosecutors feared Mr Rezko, who travels widely in the Middle East, might flee to a country without an extradition treaty such as his birthplace of Syria.

Mr Auchi was convicted of corruption, given a suspended sentence and fined £1.4 million in France in 2003 for his part in the Elf affair, described as the biggest political and corporate scandal in post-war Europe. He, in a statement from his media lawyers, claims he is appealing against the sentence.

Mr Auchi founded his Luxembourg-based General Mediterranean Holding (GMH) in 1979, a year before he left Iraq. He says that he did business with his native country when it was considered a friend of the West but ceased to trade with the late Saddam Hussein's regime once sanctions were imposed after the invasion of Kuwait.

Mr Rezko has told a court that Mr Auchi is a "close friend." Mr Auchi's lawyer told The Times: "It is untrue that my client and Mr Rezko are 'close friends'. Mr Auchi first met Mr Rezko after the 2003 Iraq war and they have a business relationship."

Mr Rezko and Mr Auchi have been partners in a pizzeria business in the Mid-West and a major 62-acre land development in Riverside Park in Chicago.

According to court documents, Mr Rezko's lawyer said his client had "longstanding indebtedness" to Mr Auchi's GMH. By June 2007 he owed it $27.9 million.

Under a Loan Forgiveness Agreement described in court, Mr Auchi lent Mr Rezko $3.5 million in April 2005 and $11 million in September 2005, as well as the $3.5 million transferred in April 2007.

That agreement provided for the outstanding loans to be "forgiven" in return for a stake in the 62-acre Riverside Park development.

A posting last week on a GMH-owned website, middle-east-online.com, portrayed Mr Auchi as a Middle Eastern "Donald Trump" with a global business construction empire.

Mr Auchi visited the United States in 2004. Pictures show him meeting Emil Jones, the president of the Illinois state senate, an ally of Mr Obama, a former state senator.

Both Mr Auchi and Mr Obama say they have no memory of meeting each other. But, according to a source, the two may have had a brief encounter at the Four Seasons Hotel in Chicago where Mr Auchi’s visit was being honoured with a dinner attended by the Governor when Mr Obama, coincidentally in the hotel, dropped in.

An aide to Mr Obama said he did attend an event at the Four Seasons at which Mr Rezko was present but does not remember meeting Mr Auchi. "He shook a lot of hands and met a lot of people," the aide said. "We do not remember individual people."

Prosecutors say that, after Mr Auchi was unable to enter the United States in 2005, Mr Rezko approached the US State Department to get him a visa and apparently asked "certain Illinois government officials to do the same." Mr Obama denies he was approached. Mr Auchi's lawyer has emphasised to The Times that it would be entirely false to imply that money had been lent by GMH to Mr Rezko in return for Mr Rezko seeking to assist Mr Auchi to obtain a visa. The two men's relationship, the lawyer stressed, was a busines s one.

Mr Auchi's lawyer said the purpose of the Fintrade Services loan was to "assist the financial position" of a pizzeria company called AR Pizza, in which GMH held a shareholding. He said the loan had since been repaid in the form of a greater stake in the Chicago 62-acre land project.

AR Pizza has since become a defendant in a civil lawsuit by the Papa John's pizzeria chain, which alleges that it continued to operate a string of former Papa John's franchises under the name "Papa Tony's" without permission.

Mr Auchi's lawyer said: "My client played no part in the management and/or day to day running of AR Pizza, the GMH Group being an entirely passive investor in the company. Further, there was no need as a mimimum return on the investment was guaranteed. As to the court proceedings, my client is not a party to these. He denies any wrongdoing in relation to his involvement in AR Pizza."

Mr Rezko was also a major fundraiser for Governor Blagojevich. The governor's chief fundraiser Christopher Kelly, who also served as his gambling adviser, is fighting tax charges related to betting losses. The Associated Press reported that last month Mr Auchi's conglomerate also gave a loan to Mr Kelly secured on a Nevada land deal which the governor’s bagman was involved in.

http://www.timesonline.co.uk/tol/news/worl...icle3433485.ece

[Mr. Big Dog 10,747]

So McCain can sleep a bit easier having been provided with some counter ammunition - if it really is any - when his shady S&L involvement re-surfaces. And it will. Actually, it already has.

S&L role discomforts McCain

By Susan Taylor Martin, Times Senior Correspondent

Published February 24, 2008

One day in 1990, when John McCain was still a new U.S. senator from Arizona, I found myself in Phoenix warily sampling hors d'oeuvres of rattlesnake meat at a luxurious resort.

Its real name was the Phoenician, but it was known locally by another moniker: Club Fed.

Just a year earlier the Federal Deposit Insurance Corp. had seized the Phoenician, built by developer Charles H. Keating Jr. at the height of a savings and loan boom that had gone spectacularly bust. I was in Phoenix to do a story coinciding with the start of Senate hearings on whether McCain and four colleagues - "the Keating Five" - had improperly intervened with federal regulators on Keating's behalf.

McCain's role in the S&L debacle had received curiously little attention in the current presidential race until the New York Times mentioned it last week in a piece about his more recent ties to a female lobbyist. And there has been almost nothing to remind Americans of just how big a deal the S&L collapse was at the time or how much it cost U.S. taxpayers.

In Keating's case alone, more than $2-billion.

Like hundreds of S&L's nationwide, Keating's California-based Lincoln Savings & Loan took advantage of a dramatic loosening of regulations that was intended to help traditionally conservative S&Ls better compete with banks. The inevitable result: risky loans and extravagant ventures, perhaps none more so than the Phoenician.

"There has not been a hotel built like this in the world in the last 50 years," Keating bragged of his showpiece, sprawled across the base of Camelback Mountain on land leased from Charles Alberding who also owned St. Petersburg's Vinoy Park hotel.

With Keating supervising every aspect of the work, progress came neither cheap nor easy.

"Monday was always hell because that was after Mr. and Mrs. Keating toured the property over the weekend and got a lot of ideas," Gerry Murphy, the main contractor, told me.

On one occasion, workers laid expensive vinyl on the beauty salon floor only to rip it all up two days later when Mrs. Keating decided she preferred clay tile. The first architect was canned after he balked at the Keatings' demand to install bidets in every guest room at an added cost of $3,000 a room. He was followed out the door by five interior decorators.

The Phoenician was supposed to cost $200-million and open in 1985. Instead it opened in late 1988 at an estimated cost of nearly $300-million. The palm trees alone were $2-million.

Even as Phoenix celebrated its newest luxury hotel, which boasted seven swimming pools and a nightclub called Charlie Charlie's, critics warned that a white elephant had been born.

Keating "is getting the credit for the Phoenician resort, which opens Saturday while taxpayers take the risk," the Phoenix Gazette said in a prescient article on Sept. 28, 1988. Indeed, court records showed that the Phoenician increased the strain on Keating's financial empire, which was built on high-risk bonds backed by shaky ventures financed with Lincoln loans. As an incentive to peddle yet more junk bonds, salespeople were wined and dined at the Phoenician.

During the years Keating was planning his fabulous resort, he and associates contributed $112,000 to McCain's campaigns, paid for travel by McCain and his family (which McCain later reimbursed), and let the McCains vacation each year from 1983 through 1986 at Keating's home in the Bahamas.

Most controversially, McCain was among the five senators who in 1987 met with Ed Gray, chairman of the Federal Home Loan Bank board, and, a week later, with regulators in California.

Despite its worsening condition, the feds didn't seize Lincoln for another two years. The bailout cost $2.6-billion while thousands of Lincoln investors lost almost $200-million. All told, the S&L crisis cost taxpayers $160-billion.

In 1991, a Senate ethics commitee concluded that McCain showed "poor judgment" but violated no laws or rules in his dealings with Keating.

McCain, who claimed he was only helping a major Arizona employer, went on to back sweeping campaign-finance reforms.

The Phoenician - whose huge price tag caused concerns in 1990 that it couldn't survive - is today part of the Starwood chain and a AAA Five Diamond resort. And what about Keating, who served four years on fraud charges and called McCain a "wimp" for testifying against him?

At 84, Keating insists he could have saved Lincoln and paid investors if the government hadn't seized his property and sold it for dimes on the dollar. In 2006, he told the Cincinnati Enquirer he was again developing real estate. In Phoenix.

St. Pete Times