San Diego Union Tribune

July 1, 2007

Feinstein denies helping husband's firms

Review cannot find evidence to contrary


WASHINGTON – During much of the time that Sen. Dianne Feinstein was a leader on the Senate subcommittee overseeing the Pentagon's military construction budget, her husband was heavily invested in companies holding hundreds of millions of dollars in contracts generated by the subcommittee's activities.

The California Democrat denied that she helped her husband's companies in any way with contracts and said the Senate ethics committee approved the arrangement. But she declined to discuss the value of the contracts or release the ethics ruling. Feinstein also declined to be interviewed on the subject, relying instead on a spokesman.

These questions arose in January after freelance investigative reporter Peter Byrne reported that Feinstein's committee assignments overlapped with her husband's business interests between 2001 and 2005. Byrne quoted several ethics experts who described the arrangement as a conflict of interest.

During the five years that Feinstein was either chairwoman or senior Democrat on the subcommittee, her husband, financier Richard C. Blum, held substantial interests in URS Corp. and Perini Corp., whose military construction contracts during that period were worth a combined $1.5 billion.

Specifically, URS had $792 million in military construction and environmental cleanup contracts, and Perini had contracts worth $759 million. The figures came from Eagle Eye Publishers, a commercial provider of federal procurement data. Feinstein and Blum have not disputed the figures.

However, the military construction earnings accounted for a fraction of the two companies' earnings during those years. In 2005, Perini reported revenues of $1.7 billion and URS reported almost $4 billion.

Nonetheless, the disclosure in January of the couple's overlapping interests set off a furor on conservative blogs and radio talk shows. They compared Feinstein's activities to those of former Rep. Randy “Duke” Cunningham – who was sent to federal prison after admitting taking $2.4 million in bribes – and wondered why newspapers and TV news programs weren't reporting what they saw as a comparable Democratic scandal.

A Copley News Service review found no evidence that Feinstein had intervened in any clearly meaningful way on behalf of the two companies.

But it also found that the Senate appropriations and military procurement processes are so opaque there is little the public can do but trust Feinstein when she denies helping her husband's companies. Secrecy and a lack of documentation make independent confirmation impossible.

This year, Feinstein moved from the appropriations subcommittee that funds military construction to the one that funds interior and environmental programs.

In 2005, Blum's investment firm sold its stake in the two companies. Feinstein's 2005 financial-disclosure report shows that the couple realized between $500,000 and $5 million in capital gains from the sale of their URS and Perini stock. The couple's net worth is said to be $40 million, making Feinstein one of Congress' richest lawmakers.

While a review of the public record turned up no evidence that the senator used her legislative leverage to direct projects to her husband's companies, ethics experts expressed concern about the propriety of a lawmaker making spending decisions in a contracting arena where her spouse is heavily invested.

“You get into complicated issues any time you have a spouse who is in a business that deals with government contracts and a government official,” said Melanie Sloan, executive director of the nonpartisan Citizens for Ethics and Responsibility in Washington, D.C. “That always raises complicated issues that I think can be troubling, and it is imperative for government officials to avoid even the appearance of impropriety in those kinds of situations.”

Jennifer Gore, a spokeswoman for the Project on Government Oversight, observed, “There are a lot of shades of gray on this one.”

The potential for abuse is compounded by the fact that the subcommittee does not make its spending decisions openly. Instead, the decisions are made through informal brokering generally handled by staff without any paper trail or other public record, according to students of the process and subcommittee aides.

“It seems to me that all of these kinds of decisions that are about public money being spent and about actions of Congress should be on the public record,” Sloan said. “There ought to be transcripts.”

Scott Gerber, Feinstein's director of communications, said the senator had nothing to do with contracts when she was on the military construction subcommittee. The panel approves money for programs, and the Pentagon chooses contractors and manages contracts.

As Cunningham's case illustrates, the wall of separation between Congress' appropriations process and the Pentagon's procurement process is not without holes. An investigation found that the Rancho Santa Fe Republican bullied, threatened and badgered Pentagon officials to steer contracts to defense firms that had bribed him.

Bill Frenzel, a Republican who represented a suburban Minneapolis House district, recalled that during his years in Congress, staffers routinely contacted Pentagon officials in an effort to influence procurement decisions.

“Nobody knows about the telephone calls and little whispers in the hallway,” said Frenzel, who retired from Congress 16 years ago.

Gerber maintained that Feinstein and her staff have never communicated with any military officials to influence any contract.

“Senator Feinstein never sought to influence which entities were awarded any military construction contracts,” he said. “Neither she nor her staff ever wrote, spoke to or influenced in any way Defense Department officials in charge of determining which entities were awarded any military construction contract.”

This is not the first time Feinstein has had to juggle difficult questions involving the meshing of her husband's commercial interests with her political responsibilities.

In 1980 Feinstein, then mayor of San Francisco, failed to report on a financial-disclosure statement that Blum had an investment in the Marriott Corp. when the hotel chain was successfully bidding for a piece of the $3 billion city redevelopment contract. Blum acknowledged the oversight but blamed it on bad advice from a member of Feinstein's staff.

Blum's investments in China also grew after Feinstein entered the Senate in 1992. He accompanied Feinstein on her travels to the country both in her capacity as mayor and later as senator. Her stature assured him access to Chinese officials.

One of his investment vehicles was Newbridge Capital, a $105 million joint venture formed in 1994 with the Texas Pacific Group targeting mainland China.

With critics raising conflict-of-interest claims, Blum liquidated his Chinese investments in 1999 and formed a charity to funnel the profits to Tibet and Nepal.

Marcus Stern can be reached at and Finlay Lewis can be reached at

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