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
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.
Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Feb 25, 2008 at 4:38 am
We need to be careful discussing “indefinite delivery-indefinite quantity" contracts. Sometimes falsely and maliciously called "No bid" contracts, they are far more protective of the public purse than a fixed price contract where the scope of work cannot be specified in advance. Ask any contractor about change orders.
I do agree that Dianne "Ban all guns but the one in my purse" Feinstein's ethics seem clouded.
Posted by Milton, a resident of Stanford, on Feb 25, 2008 at 11:54 am
I largely agree with your assessment, but I think many of us forget how we also rely on many UNELECTED leaders who represent powerful institutions, including bureaucrats in the State Dept, CIA, FBI, NSA, Pentagon, law enforcement, judiciary, elite schools, defense contractors, privatized intelligence gathering services, think tanks, foundations, NGOs, United Nations, Federal Reserve and Wall Street.
Posted by An Observer, a resident of Another Palo Alto neighborhood, on Feb 25, 2008 at 4:55 pm
This is one reason we are at war. To transfer $$ from oridnary taxpayers to billionairs. Wake up. This is obviously a primary reason we go to these type of wars.
The billionairs get tax reductions/breaks. Our grandchildren will be burdened with this for a very long time.
We need a death tax of at least 90% for amounts beyond say 1 million $$ to each child. And no charity deductions over 1 million $$.
The goal should be to repay all of the national debt with death taxes.
Also another source of$$ would be to put in a income tax of at least 75% for amounts over ,say, $250thousand on those who have not served in the military or if their children are not serving in the military.
Another thing to tax much more is the profits military contractors make.
Posted by perspective, a resident of the Midtown neighborhood, on Feb 27, 2008 at 7:13 am
Uh..Pig...either you got frozen in time or you have just read Marx..either way, it is old stuff, already long proven to be a harmful ideology.
As for "took advantage of it financially"..and you believe most people don't take advantage financially of situations? And if you were offered a job that paid double what you make now, you would turn it down?
Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Feb 27, 2008 at 9:18 am
ONE EURO = $1.50, add Walter E. Wallis to that list. I have been opnly critical of Feinstein, Lieberman, Lantos, Specter, Greenspan, Kissinger, Pipes, Krauthammer, Goldberg, Graham, Eisner, Bork and Dershowitz. I favor civilized behavior. I favor a free Palestine, free on the lands taken from them by their Muslim "brothers".
Posted by perspective, a resident of the Midtown neighborhood, on Feb 29, 2008 at 9:37 am
I didn't vote for her. I despise her and all she stands for. She is a HUGE hypocrite, and works against almost everything I believe in. She is more than ethically challenged, she is ethically disabled and needs to be forcibly retired. I despise elected people who don't get out of conflict of interest situations, even if it is just at the local school board level and a vote on an issue which will make a spouse look good in his job.
My comment was related to the sentiment that somehow greed and capitalism are wrong. Human nature is greedy, and within ethical confines that is a GREAT thing, because if everyone watches out for their own self interest, the whole society improves. Hence my question about "if you were offered a job that paid double".
I completely agree that unethical gain is not worth it. I chose to work in less paying situations because the ethics of the environment suited my ethics better. Though I could have worked in places that did LEGAL, but to my mind horribly unethical, practices, and made about 20% more than I did. But, if I could have made double in an ethical way, I would have jumped ship!!!
Posted by litebug, a resident of the Duveneck/St. Francis neighborhood, on Mar 3, 2008 at 1:43 am
I was once a fan of Feinstein's, a long long time ago, but I can't stand her any more. I am so sick of her Blue Dog-ness, her unethical behavior, and her unrepresentative votes. Thanks to her we now have Mukasey added to the list of Bush Administration officials who have thumbed their noses at the Constitution and Congressional oversight. She has become a disgrace to the party and the state. She should run off with Liebermann...they are cut from the same cloth. I thought I heard that she will not be running again. I hope this is true. This would save me the trouble of voting against her. I'd like to put both DiFi and Pelosi out to pasture for the same reasons. They have been self-serving wimps and have been more interested in kissing up to Bush than in doing what they were elected to do. I've seen pictures of each of these women looking up at Bush all moony-eyed...it was totally disgusting and sickening. Both are rich and vote accordingly. They are not friends of the common people nor of the Constitution, judging by their records.