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Obama sought HUD grant for donor’s project

- The Washington Times - Monday, October 6, 2008

EXCLUSIVE:

Sen. Barack Obama, who vows to change Washington by trimming wasteful spending and disclosing special-interest requests, wrote the Bush administration last year to seek a multimillion-dollar federal grant for a Chicago housing project that is behind schedule and whose development team includes a longtime political supporter.

Mr. Obama's letter, however, was never disclosed publicly. In fact, the letter was ghostwritten for him by a consultant for the Chicago Housing Authority, which wanted the money - a practice ethics watchdogs have frequently criticized.

The housing project through July had completed fewer than one-sixth of the 439 public housing units it had planned, court records show.

The Bush administration obliged Mr. Obama's request, awarding a $20 million competitive grant last month from the Department of Housing and Urban Development (HUD). It called the project a “shining example” of urban revitalization. The Washington Times learned of the letter from Republican operatives.

As Mr. Obama campaigns for president as an agent of change who promises to clean up Washington's money game, his role in the Stateway project raises questions about the appearance of a conflict of interest and whether he has been participating in the very system he criticizes, watchdogs say.

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“It's not just Senator Obama; it's endemic to Capitol Hill. It's a broad issue, where lawmakers are just simply rubber-stamping something through,” said Steve Ellis, vice president of the nonpartisan Taxpayers for Common Sense, referring to the practice of consultants writing funding requests for lawmakers.

“It's sort of like of your standard earmark practice in a lot of ways, where lobbyists end up writing the request letters,” he said. “It's a problem especially if neither the staff nor the lawmaker knows what's going into the request.”

Mr. Obama's aides say he knew the project was worthwhile because it is helping make safe and affordable housing available to hundreds of people displaced by the demolition of public housing complexes.

But complicating the picture, one of developers for the Stateway Project is a firm headed by Allison S. Davis, one of Mr. Obama's early mentors and a longtime political supporter. A founding partner at the firm where Mr. Obama practiced law, Mr. Davis and his family have given the senator from Illinois tens of thousands of dollars in political contributions over the years.

Aides to Mr. Obama said he did not know of Mr. Davis' involvement in the Stateway project when he sent the letter. They noted that none of the HUD money will flow to Mr. Davis or his business. They also said other lawmakers - including fellow Illinois Democrats Sen. Richard J. Durbin and Chicago Mayor Richard M. Daley - sent similar letters to HUD.

“John McCain, Barack Obama and other members of the U.S. Senate have routinely written to executive agencies in support of federal grant requests for programs critical to their constituents. Making safe and affordable housing available to those displaced by the demolition of public housing certainly meets that threshold,” said Obama spokesman Ben LaBolt.

None of the elected officials drafted the letters of support. Rather, the letters were written by an Atlanta-based housing consultant working for Chicago's housing authority.

Though Mr. Obama's office said he didn't know of Mr. Davis' role, ethics watchdogs said he left himself open to creating the appearance of a conflict of interest, a situation senators are encouraged to avoid in their code of ethics.

Whenever a politician seeks help for a project in which supporters are involved, it can “spawn all kinds of traps and minefields,” said Leslie Paige, a spokeswoman for the nonpartisan Citizens Against Government Waste, an advocacy group.

“The appearance of a conflict of interest is almost as bad as a conflict of interest,” she said.

Chicago Housing Authority officials say the practice is nothing unusual and in fact has been going on for years.

James Brooks, the consultant who drafted Mr. Obama's letter, said such letters of support are seen as a “positive sign” by HUD when it doles out grants, though he added that the letters are not in themselves deciding factors.

“This isn't a political process,” he said. “I might add that I wrote those letters myself. They didn't originate from the mayor's office or either of the senators' offices,” Mr. Brooks said in an e-mail. “The final signed letters that are included in the application were changed very little from the drafts that I wrote.”

The Chicago Housing Authority's managing director of development, William Little, called the practice “commonplace.”

“When we or other city agencies request the support of any member of our congressional or state delegation, the mayor or an alderman, we speak with them or their staff about the nature of and reasons for the request,” he said.

“If they agree that the request serves a compelling public purpose and are supportive we then prepare and submit the support letter for their and their staff's review and approval. ... The official and their staff are of course free to edit the letter as they wish.”

However, it's unclear whether Mr. Obama's office sought any additional information about the Stateway project.

“I'm not sure he or his staff would need to review any particular funding application in any detail to understand what we were trying to accomplish with the [grant] application,” Mr. Little said.

“In this instance, Senator Obama and Senator Durbin demonstrated their support of the Chicago Housing Authority´s mission and effort to provide badly needed, safe, sanitary, affordable housing by supporting our request for funding,” he said.

If Mr. Obama or his staff had learned more about the project, it's likely they would also have known of Mr. Davis' involvement, since Mr. Davis' company, the Davis Group, is one of four in the Stateway Associates LLC development partnership, according to the city housing authority's Web site.

Built in 1958, the Stateway site included eight crime-ridden, high-rise buildings with more than 1,600 public housing units. Officials are replacing the towers to make way for a “lower density, mixed-income community,” which they say eventually will include a mix of more than 1,300 market rate, affordable housing and public housing units, according to the housing authority.

The Chicago Tribune reported earlier this year that the development team, which was picked in 2001, had sought to complete 439 public housing units by September 2008. As of July, 58 units had been completed, according to court records.

Asked about the delays, Mr. Little said the project has encountered the same market downturns as elsewhere across the country. He said the development “is no more immune to the effects of the flagging housing market than anywhere else.”

“As sales have slowed, the team´s ability to start buildings - and public housing units - has slowed as well. Likewise, as the market heats up, construction of public housing will heat up as well. In the interim, the team is exploring strategies to improve production, even in this challenging market.”

When he announced the grant last week, HUD Secretary Steve Preston praised the project.

“This site has become a shining example of neighborhood revitalization and illustrates what can be done when there's a commitment to make life better for the families who lived in these communities,” he said.

In his letter, Mr. Obama said the first phase of construction at the Stateway site “has proven successful thus far in contributing to the revitalization of the surrounding community.” He also cited nearby businesses, such as a Starbucks and a FedEx Kinkos.

According to a Tribune report on the Stateway project last year, those businesses sit on property tied to Mr. Davis and his family.

Obama aides said Mr. Obama created no conflict of interest in sending the letter. They said, and city housing authorities confirmed, that HUD grant money won't go to Mr. Davis or his company.

“The request was made with the consultation of city officials, not the developers, and since the overall budget remains the same, the developers will not gain any financial benefit from the grant,” Mr. LaBolt said.

Obama campaign aide Valerie Jarrett also has ties to the project. She is chief executive of the Habitat Co., the federally court-appointed receiver in charge of overseeing several housing authority redevelopment efforts in Chicago, including Stateway. She is not a developer in the project.

Neither Mr. David nor Miss Jarrett returned e-mail or phone messages. An assistant for Miss Jarrett said she was unavailable for comment, but added, “She never spoke with Barack about this matter.”

Mr. LaBolt also said Mr. Obama and his staff never discussed the letter with Mr. Davis or Miss Jarrett, calling the letter “a routine request from Chicago´s housing agency to encourage the Department of Housing and Urban Development to provide funding for the second phase of a development that would create 1,300 units of affordable housing in the city, replacing a crime-ridden public housing project.”