This is the second of a series of articles to be written on a lengthy exposé published in the Boston Globe entitled “Grim Proving Ground for Obama’s Housing Policy.” The 27 JUN 2008 investigative report is required reading for all No Quarter users. The editorial board of No Quarter finds the evidence cited in Binyamin Appelbaum’s article very compelling, and we will attempt to unpack it in a series of short essays to be published this weekend. The first installment of this series was published on Friday.
She cites the testimony of two residents of Rezko’s slums, and she notes how many of Rezko’s properties in Obama’s former state Senate district were either foreclosed, condemned or both. Because so many of Rezko’s dilapidated public housing structures are located in Obama’s former state Senate district, the Chicago news corps asked the aspiring Presidential candidate if he was aware of the squalor plaguing Rezko’s slum empire. Here is Obama’s response:
Still, he said it was “possible” that during his tenure in the legislature that a constituent may have written or called his office “saying, ‘We’re in a building, and we’re unhappy with the service here.'”
Such problems, he said, would normally be brought to the attention of an alderman or the city’s Housing Department. “Had I known that there were buildings that were in deteriorating or poor condition, that certainly would have given me pause. But I didn’t” know, Obama said.
Obama, in other words, equivocated: “it is possible” he was aware of the financial and legal woes of Rezko’s slum landlord enterprise. But how do we square this statement with the following excerpts culled from the Boston Globe‘s investigative report on Obama’s political and financial ties to major donors who made concerted efforts to defraud the Chicago public housing system? I quote at length:
Barack Obama was among the many Chicago residents who shared Daley’s conviction that private companies would make better landlords than the Chicago Housing Authority….
He once told the Chicago Tribune that he had briefly considered becoming a developer of affordable housing. But after graduating from Harvard Law School in 1991, he turned down a job with Tony Rezko’s development company, Rezmar, choosing instead to work at the civil rights law firm Davis, Miner, Barnhill & Galland, then led by Allison Davis.
The firm represented a number of nonprofit companies that were partnering with private developers to build affordable housing with government subsidies….
Obama translated that belief into legislative action as a state senator. In 2001, Obama and a Republican colleague, William Peterson, sponsored a successful bill that increased state subsidies for private developers. The law let developers designated by the state raise up to $26 million a year by selling tax credits to Illinois residents. For each $1 in credits purchased, the buyer was allowed to decrease his taxable income by 50 cents.
Obama also cosponsored the original version of a bill creating an annual fund to subsidize rents for extremely low-income tenants, although it did not pass until 2005, after he had left the state Senate.
“He was very passionate about the issues,” said Julie Dworkin of the Chicago Coalition for the Homeless, who worked with Obama on affordable housing issues. “He was someone we could go to and count on him to be there.”
The developers gave Obama their financial support. Jarrett, Davis, and Rezko all served on Obama’s campaign finance committee when he won a seat in the US Senate in 2004.
Obama has continued to support increased subsidies as a presidential candidate, calling for the creation of an Affordable Housing Trust Fund, which could distribute an estimated $500 million a year to developers. The money would be siphoned from the profits of two mortgage companies created and supervised by the federal government,
Fannie Maeand Freddie Mac….
Similar problems also plagued the next generation of affordable housing de velopment in Obama’s district, created as part of the Daley administration’s efforts to subsidize smaller apartment buildings scattered throughout neighborhoods.
One of the largest recipients of the subsidies was Rezmar Corp., founded in 1989 by Tony Rezko, who ran a company that sold snacks at city beaches, and Daniel Mahru, who ran a company that sold ice to Rezko. Neither man had development experience.
Over the next nine years, Rezmar used more than $87 million in government grants, loans, and tax credits to renovate about 1,000 apartments in 30 Chicago buildings. Companies run by the partners also managed many of the buildings, collecting government rent subsidies.
Rezmar collected millions in development fees but fell behind on mortgage payments almost immediately. On its first project, the city government agreed to reduce the company’s monthly payments from almost $3,000 to less than $500.
By the time Obama entered the state Senate in 1997, the buildings were beginning to deteriorate. In January 1997, the city sued Rezmar for failing to provide adequate heat in a South Side building in the middle of an unusually cold winter. It was one of more than two dozen housing-complaint suits filed by the city against Rezmar for violations at its properties.
People who lived in some of the Rezmar buildings say trash was not picked up and maintenance problems were ignored. Roofs leaked, windows whistled, insects moved in….
By the time Rezmar asked Chicago’s city government for a loan on its final subsidized development, in 1998, the city’s housing commissioner was describing the company in a memo as being in “bad shape.” The Daley administration still made the $3.1 million loan.
Shortly thereafter, Rezmar switched from subsidized housing to high-end development, fueled by the money it had made in subsidized work. Rezko’s companies also stopped managing the subsidized complexes.
“Affordable housing run by private companies just doesn’t work,” Mahru, who no longer works with Rezko, said in an interview with the Globe. “It’s difficult, if not impossible, for a private company to maintain affordable housing for low-income tenants.”
Responsibility for several buildings fell to the Chicago Equity Fund, which had purchased government tax credits from Rezmar to help finance the projects. After Rezko walked away, the fund was obliged to maintain the buildings as affordable housing. If it did not, it would have to repay the government for the tax credits.
The fund found the buildings in terrible condition. In a 2001 plea to the state to temporarily suspend payments on its mortgages, a fund executive wrote that heating problems, lapsed maintenance, and uncollected rent made the buildings almost impossible to manage.
Most of the buildings have since been foreclosed upon, forcing the tenants to find new housing.
All the while, Tony Rezko was forging a close friendship with Barack Obama. When Obama opened his campaign for state Senate in 1995, Rezko’s companies gave Obama $2,000 on the first day of fund-raising. Save for a $500 contribution from another lawyer, Obama didn’t raise another penny for six weeks. Rezko had essentially seeded the start of Obama’s political career.
As Obama ascended, Rezko became one of his largest fund-raisers. And in 2005, Rezko and his wife helped the Obamas purchase the house where they now live.
Eleven of Rezmar’s buildings were located in the district represented by Obama, containing 258 apartments. The building without heat in January 1997, the month Obama entered the state Senate, was in his district. So was Jones’s building with rats in the walls and Frizzell’s building that lacked insulation. And a redistricting after the 2000 Census added another 350 Rezmar apartments to the area represented by Obama.
But Obama has contended that he knew nothing about any problems in Rezmar’s buildings.
After Rezko’s assistance in Obama’s home purchase became a campaign issue, at a time when the developer was awaiting trial in an unrelated bribery case, Obama told the Chicago Sun-Times that the deterioration of Rezmar’s buildings never came to his attention. He said he would have distanced himself from Rezko if he had known.
Other local politicians say they knew of the problems.
“I started getting complaints from police officers about particular properties that turned out to be Rezko properties,” said Toni Preckwinkle, a Chicago alderman.
She had previously received campaign contributions from Rezmar and said she had regarded the company as a model, one of the city’s best affordable housing developers.
But in the early 2000s, she called Rezko to ask for an explanation for the declining conditions. He told her Rezmar was “getting out of the business,” she said – walking away from its responsibility for managing the developments.
“I didn’t see him nor have anything to do with him after that,” she said….
Allison Davis, Obama’s former law firm boss, dabbled in development for years while he worked primarily as a lawyer. He participated in the development of Grove Parc Plaza. And in 1996, Davis left his law firm to pursue a full-time career as an affordable housing developer, fueled by the subsidies from the Daley administration and aided, on occasion, by Obama himself.
Over roughly the past decade, Davis’s companies have received more than $100 million in subsidies to renovate and build more than 1,500 apartments in Chicago, according to a Chicago Sun-Times tally. In several cases, Davis partnered with Tony Rezko. In 1998 the two men created a limited partnership to build an apartment building for seniors on Chicago’s South Side. Obama wrote letters on state Senate stationery supporting city and state loans for the project.
- Obama always had an interest in public housing. In fact, Rezko recruited Obama when Obama was a student at Harvard Law in order to serve in some capacity in Rezko’s slum landlord enterprise.
- Obama as a state legislator passed and authored bills to provide tax credits and other incentives for private companies to transform public housing into private-public partnerships that would yield profit to investors such as Rezko, Allison Davis and Valerie Jarrett.
- Mayor Richard Daley and Obama both participated in this effort.
- Obama passed and authored these laws as Rezko’s tenements in his district were deteriorating.
- Obama even wrote letters to City Commissioners in order to obtain more revenue for Rezko when residents of Rezko’s tenements were filing complaints, complaints Obama may or may not have received. As Obama states, “it is possible” his office received complaints from Rezko’s slum tenants. Obama wrote these letters for Rezko at a time when City Commissioners knew of the squalor plaguing Rezko’s slum landlord business.
- As Obama passed laws and wrote letters to City Commissioners in order to obtain revenue for slum managers such as Rezko, Obama accepted their contributions.
- One local politician, Alderwoman Tony Preckwinkle, whose Chicago ward overlaps sections of Obama’s former state Senate district, severed relations with Rezko after she realized Rezko was exploiting her constituents. This occurred in during the early 2000s.
Because Rezko refused to uphold his responsibilities to African-American constituents in Preckwinkle’s ward and Obama’s former state Senate district, Preckwinkle severed relations with the slum landlord and political fixer. Obama, on the other hand, continued to pursue a political, personal and financial relationship with Antoin “Tony” Rezko.
According to the Chicago Tribune, Obama’s relationship with Rezko become more involved at the time when Preckwinkle rebuffed Rezko. I quote:
- 2003: “JUNE — Rezko helps bankroll all of Obama’s subsequent campaigns except his presidential bid. Rezko is on Obama’s campaign committee in his failed run against U.S. Rep. Bobby Rush and gathers between $50,000 and $75,000 of the estimated $600,000 raised, Obama said. Rezko also is on the finance committee for Obama’s 2004 U.S. Senate run. Rezko uses his Wilmette home for an Obama fundraiser.”
- 2004 – “EARLY 2004 — At Rezko’s request, Obama drops in at a business meeting for Middle Eastern bankers. The New York Times has cited Rezko business partners who thought Rezko was seeking to impress the foreign guests, potential investors in his business ventures. Obama says he could recall only one instance when he and Rezko discussed recommendations for appointments to state jobs, boards or commissions.”
- 2005 – “Obama disclosed in the March interview that someone else already had an option to buy the garden lot. But he said Rezko took over that option after Rezko learned Obama was bidding for the house. Obama said he knew next to nothing about those transactions and does not recall when he learned that Rezko was interested in buying the side lot—or even how Rezko learned it was for sale. But they talked about the upcoming sales.”
- 2005 – “He told the Tribune that he does not recall when he learned that Rezko was interested in buying the side lot, or how Rezko learned of the sale. But Obama raised the possibility that he was the first to bring the lot to Rezko’s attention. The senator’s campaign provided a copy of a previously released e-mail from the sellers. In response to questions from the Obama campaign, the sellers agreed that they “did not offer or give the Obamas a ‘discount’ on the house price” because Rezko paid their asking price for the yard.”
- 2005 – “At some point before the sale closes, Obama tours the property with Rezko for 15 to 30 minutes, a fact the Obama campaign disclosed this February. The campaign said Obama wanted Rezko’s opinion of the property because Rezko was a real estate developer in the area. In previous accounts of the purchase, Obama did not divulge the tour. In 2006, he told the Tribune that he recalled talking to Rezko about the potential home purchase “either at an event or some conversation we had where they mentioned to me that they either knew the property or knew the developer or something like that. …I actually asked him what he thought of the house and he thought it was a good house. And I said, ‘I’m looking at putting in a bid on it.’ And from that point on I just worked through my real estate broker, purchased the property.”
- 2005 – “MARCH — In the months preceding Obama’s June 2005 purchase of his home, Rezko had already become a controversial figure in Chicago and Illinois politics. In March 2005, for example, city officials alleged that a minority contractor at O’Hare International Airport acted as a front for a Rezko firm. Then in May, Rezko reportedly was among several to receive Cook County grand jury subpoenas in a joint county-state investigation of jobs and campaign contributions in Blagojevich’s administration. Subsequent reports showed a federal grand jury asked the state teachers’ pension system for records involving Rezko and other political insiders. Obama said he was aware of the growing controversies.”
- 2005 – “JUNE 15 — A land trust controlled by the Obamas buys the house for $1.65 million, and the Obamas secure a $1.32 million mortgage from Northern Trust to complete the purchase. That day, Rezko’s wife, Rita, buys the side lot for $625,000. Rita Rezko, who made $37,000 a year as a member of the Cook County Employee Appeals Board, secures a $500,000 mortgage from Mutual Bank of Harvey to complete her purchase. Michael Sreenan, the corporate attorney for Rezko’s food and real estate companies, told the Tribune that he provided some of the $125,000 down payment. As to why the Obamas did not buy both the house and the lot, Obama said he could not afford both. The house, he said, was “already a stretch.”
- 2005: JULY — The Obamas decide to build a fence between their property and Rezko’s. Because the surrounding neighborhood is covered by a city landmark designation, special permits are required. Michelle Obama, who had served on the city Landmarks Commission from 1998 to March 2005, contacts commission staff about the fence just days after the home purchase. The Obamas’ attorneys and architect work for several months to secure the permits. The Obamas pay for the paperwork, but Rezko pays the roughly $14,300 cost of erecting the fence. The bill is sent to one of his construction firms. Obama told the Tribune in 2006 that he wanted the fence for security and to clearly demarcate the two parcels. He paid for the permit work, he said, because “I felt it was important to make sure that all the T’s were crossed and I’s were dotted in terms of compliance with landmarks. I thought it would be embarrassing if somehow whatever fence was erected didn’t comply.
- 2006 – “Obama seeks to put some space between his house and the proposed fence, so he asks Rezko to sell the Obamas a portion of his lot. Using a standard formula, Obama’s appraiser estimated the 1,500-square-foot portion to have a market value of $40,500. But Obama pays the Rezkos $104,500, or one-sixth of their original $625,000 purchase price, because he is acquiring one-sixth of their land. Obama later said the extra land was purchased to preserve aesthetic balance. He said the sale would not restrict Rezko’s ability to build on the lot.”
- 2005-2006: “Obama pays his landscaper to mow and maintain Rezko’s 7,500-square-foot lot as well as his own property. After the 2006 Tribune story, Obama says he sent a bill to the subsequent owner for the work, but doesn’t recall how much it was.”
- 2003-2004: “In Rezko’s trial, prosecutors allege that Rezko in two instances used straw donors to funnel $20,000 to the Obama campaign. Obama says he conducted an internal investigation to determine if there were other instances when Rezko used straw donors.”
Responding to her constituents’ complaints and to Rezko’s dereliction of duty to his buidlings’ residents, Alderwoman Preckwinkle terminated all contact with Rezko. Obama, on the other hand, remained aloof and oblivious: he appointed Rezko to his 2004 Senate campaign finance committee; he allowed Rezko to hold fund raisers on his behalf; he accepted straw contributions from Rezko’s bundling network; he had multiple conversations with Rezko about the purchase of a home; he toured the home with Rezko; he payed Rezko’s landscaper; he arranged for payments to be made by Rezko for a fence Michelle had to approve; and he attended business meetings Rezko coordinated. “It is possible” he was aware of Rezko’s legal and financial woes, but he did not care, for Rezko promised to raise cash and to help him purchase a home.
Michelle Obama also engaged with Rezko after Alderwoman Preckwinkle severed ties with the slumlord who left her constituents in squalor. I quote Chicago Magazine:
Two days before last November’s elections, benefactors held a fashion show in the Rosemont convention center to raise money for St. Jude Children’s Research Hospital in Memphis. The invitation to the affair offered a veritable guidebook to political influence in Illinois, much of it centered on one St. Jude benefactor, Antoin “Tony” Rezko.
The chair of the event was Rezko’s wife, Rita, a member of the Cook County Employee Appeals Board, which hears cases brought by fired or disciplined workers. (She was appointed to the part-time post, which pays $37,000 a year, by John Stroger, the former president of the Cook County Board, whose 2002 campaign finance committee was headed by Tony Rezko.) The fashion show’s honorary cochair was Governor Rod Blagojevich’s wife, Patti, who owns a real-estate firm (and has been involved in real-estate deals with Tony Rezko dating back to 1997).
The event’s sponsoring committee included Governor Blagojevich’s former spokeswoman, Cheryle Jackson, who now heads the Chicago Urban League; Becky Ruff Chipparoni, whose husband, Guy Chipparoni, was the press secretary for then secretary of state Jim Edgar before setting up a public-relations firm in Chicago (Chipparoni has represented some of Rezko’s businesses); and Hollie Rumman, whose husband, Michael Rumman, served as one of Blagojevich’s cabinet members (and is an investor with Rezko in various deals, such as a proposed power plant in Iraq).
Michelle Obama, wife of the Democratic U.S. senator and presidential candidate Barack Obama, was a special guest that day (even though the news had just broken about Rezko’s participation in a funky real-estate transaction involving the Obamas’ Hyde Park home).
Tenants freeze, Obama’s raises campaign cash, the Obamas obtain a home, Rezko defrauds residents of low income housing and the upwardly mobile Michelle Obama enjoys a fashion show: Obama continued his relationship with Rezko even when it was widely known in Chicago that Rezko was neglecting the slum landlord business he built with government funds.
Alderwoman Preckwinkle acted, while Barack Obama, a man who desires to serve as President, remained aloof, oblivious and dangerous. I write dangerous, as the aloofness of Barack and Michelle Obama is partially responsible for the following:
“In the winter I can feel the cold air coming through the walls and the sockets,” said Anthony Frizzell, 57, who has lived for almost two decades in a Rezmar building on South Greenwood Avenue. “They didn’t insulate it or nothing.”
Sharee Jones, who lives in another former Rezko building one block away, said her apartment was rat-infested for years.
“You could hear them under the floor and in the walls, and they didn’t do nothing about it,” Jones said.
The dangerious obliviousness and aloofness of Barack and Michelle Obama is also partially responsible for this woman’s plight. I quote:
Mrs Larkins, 51, lives just seven city blocks away, in a district where posters advertise “dirt cheap properties” and “foreclosure advice”. She moved there almost a decade ago, taking a subsidised apartment with her 20-year-old daughter and one-year-old grandson in a building that had fallen into neglect when run by Mr Rezko.
The family boiled water on the stove and draped plastic sheeting across the windows in an effort to keep warm during the city’s bitter winters, as the heating was not working. Rubbish piled up uncollected and repeated requests for basic repairs were ignored.
“It was a terrible place to live: there were a lot of drug dealers and people fighting and getting shot,” Mrs Larkins, a widow who receives invalidity benefit, told The Sunday Telegraph.
“The owners never took any interest in the place; they just wanted the rent money. We had to call the city just to get the garbage collected.”
Michelle attends her fashion show; the Obamas obtain their mansion; Barack is elected to the US Senate; Barack is bankrolled; Barack and Michelle climb the political and social ladder: as wonderful as all this may be, it was accomplished on the backs of African-Americans who were forced to live in squalor as Barack and Michelle remained oblivious to their plight. Preckwinkle understood Rezko was a problem, but Barack and Michelle Obama chose to engage even more intimately with the convicted slum landlord and political fixer. Aloof, oblivious and dangerous, Barack and Michelle Obama do not belong in the White House. Some would say they do not belong in the Rezko house they could not afford.