McCain's own Tony Rezko
LINCOLN S&L | Arizona senator received rebuke by ethics panel
Amid crumbling bungalows on Chicago's South Side or ranch-style homes in the Phoenix suburbs, an ambitious politician can still get too close to a wheeler-dealer developer.
Democratic presidential candidate Barack Obama admits it "was a boneheaded move" for him to buy property from his friend and donor Tony Rezko's wife after headlines proclaimed federal investigators were looking into Rezko's manipulation of state pension boards for his own profit. Rezko was later convicted on 16 fraud counts.
(AP)
Republican candidate John McCain admitted he made a "serious error" in not reporting free trips to the Bahamas he took on friend and donor Charles Keating's private jet. McCain was one of the "Keating Five" senators who met with federal regulators to ask them not to crack down on Keating's failing Lincoln Savings and Loan.
Keating's political hardball bought him an extra two years. During that time, the cost to tax-payers of bailing out his thrift grew from $1.2 billion to $3.4 billion.
Both Obama and McCain, as up-and-coming office-seekers, attracted the attention of these friend-mentor figures early in their careers.
Which candidate was more naive? Did Obama and McCain show poor judgment by getting close to multi-millionaire businessmen accused of collecting office-holders to advance their interests? Which candidatešs alliance with a donor hurt taxpayers more?
Obama was a Harvard Law student in 1990 when Rezko, a Syrian immigrant building low-income housing, offered him a job Obama never took. They stayed friends, and Rezko gave him his first donation when Obama ran for the state Senate in 1996. Over the years, Rezko and his associates gave Obama $250,000 in campaign contributions.
"He was an immigrant who had sort of pulled himself up by his bootstraps," Obama told the Sun-Times earlier this year. "I think he saw me as somebody who had talent, but he was probably also intrigued by my international background and the fact that I had lived in Asia, and that I knew something about his culture in the Middle East."
At the same time he was having lunches and breakfasts with Obama, Rezko was courting other politicians, including Gov. Blagojevich. Blagojevich let Rezko choose appointees for state boards -- and Rezko chose people willing to approve contracts for those who would give him kickbacks, according to federal prosecutors.
Obama said Rezko never tried to rope him into any schemes.
"He never asked me for anything," Obama said. "He never did any favors for me, other than obviously supporting my campaigns. He never gave me any gifts. He gave me no indication he was setting me up to ask for favors in the future."
State Sen. Obama's signatures appear on letters asking city and state officials to approve $14 million for Rezko's low-income senior housing near Obama's state Senate district. But Obama denied it was a "favor" for Rezko, who made $855,000 in development fees with his partner, Obama's former law partner Allison Davis.
"I wasn't even aware that we wrote the letter," Obama said. "This was one of many form letters or letters of recommendation we would send out constantly for all sorts of projects."
While some of Rezko's housing projects, including one Obama worked on as a lawyer, wound up in foreclosure, leaving residents without heat, the project for which Obama wrote the letters reported no problems.
In 1981, at a Navy League dinner in Arizona, McCain met Keating, an Ohio transplant who had become the state's largest home-builder.
The two former naval aviators hit it off. Keating began donating to McCain's campaigns and lending him his company's private jet to vacation at Keating's home in the Bahamas.
As a congressman, McCain voted for a Keating-backed measure to delay restrictions on risky investments of the kind Keating's S&L was making.
Helped by a $50,000 donation from Keating, McCain won a seat in the U.S. Senate in 1986. Within three months, Keating asked him to attend a meeting with four other senators and Ed Gray, chairman of the Federal Home Loan Bank, which was preparing to crack down on Keating for "the largest violation in the history of the agency," William Black, former deputy director of the Federal Savings and Loan Insurance Corp., said Friday. Black, one of the regulators in the room for the second "Keating Five" meeting, is now a law professor at the University of Missouri-Kansas City.
McCain balked at attending the meeting. Keating met with him and called him "a wimp." The two argued, and the friendship pretty much ended, McCain would later say, but the Arizona senator went to that meeting, as well as a later one.
At the first one, McCain raised no objection as Sen. Dennis DeConcini (D-Ariz.) read Gray the scripted request of Keating to drop the crackdown on Lincoln.
Gray would not agree.
At a meeting the next week, McCain told Gray and three other regulators: "One of our jobs as elected officials is to help constituents in a proper fashion . . . ACC [Lincoln's parent company] is a big employer and important to the local economy. I wouldn't want any special favors for them. . . . I don't want any part of our conversation to be improper."
Black recalled, "McCain was clearly extremely nervous and distressed at the meeting. We thought, 'If he's this nervous, then we ought to be petrified.' I think he really was conflicted. He really did know that Keating wanted him to do something very wrong."
When told investigators were preparing to recommend criminal charges against Lincoln, McCain backed off.
Gray was replaced as head of FHMB, and Black and the other regulators were ordered to lay off Lincoln, which got another two years to go deeper into the red.
Attorney Bob Bennett was appointed special counsel to investigate and recommended no action against McCain and Sen. John Glenn (D-Ohio.), whom he deemed less culpable than the other senators.
"The other three were not deterred by [the criminal investigation]," Bennett said. "They kept pushing on behalf of Keating." But the Senate's Democratic majority did not want to excuse McCain, the only Republican among the Keating Five, Bennett said.
The Senate Ethics Committee found that McCain "exercised poor judgment in intervening with the regulators."
"Even though the Senate Ethics Committee found John McCain free of any wrongdoing, he immediately recognized he'd made a mistake in appearance, and used the experience to launch sweeping reforms aimed at the intersection of money and politics. The same cannot be said for Barack Obama. He should use the Rezko episodes to make reforms," McCain spokesman Tucker Bounds said Sunday.
Obama spokesman Ben LaBolt responded, "Barack Obama is a leader on lobbying and ethics reform -- he stood up to members of both parties in Illinois and Washington to pass the most extensive reforms since Watergate that bolstered transparency and limited the influence of money on the political process."
McCain and Obama both returned their contributions from their convicted friends or donated them to charity.