Probe of FDIC contract urged by watchdog group
Citizens for Responsibility and Ethics in Washington (CREW), a public watchdog group, urged the Inspector General’s Office at the Federal Deposit Insurance Corp. on Monday to investigate a contract that the agency awarded to a real estate firm headed by the husband of Sen. Dianne Feinstein.
CREW sent the letter in response to a report last Tuesday in The Washington Times, which disclosed that the CB Richard Ellis Group (CBRE), the firm headed by Ms. Feinstein’s husband, Richard Blum, received a lucrative FDIC contract in November to sell foreclosed real estate from failed banks at compensation rates higher than industry norms.
In January, Ms. Feinstein, California Democrat, introduced legislation sought by the agency that would have routed $25 billion in taxpayer funds to the FDIC for a program to help prevent home mortgage foreclosures.
CREW is asking that Inspector General Jon T. Rymer launch an investigation into how the contract was awarded and the genesis of its terms, which the watchdog group said “reward CBRE at a much higher rate than is typical for these contracts.”
• Click here to view the letter. (PDF)
“Senator Feinstein would welcome a review from the Inspector General, because there is no conflict of interest or wrongdoing,” Feinstein spokesman Gil Duran said in response to the CREW letter.
Mr. Duran, spokesmen for the FDIC and Mr. Blum’s firm have told The Times that there was no connection between the contract and the legislation. Mr. Duran and a spokesman for the Blum firm also said that the couple were not aware of the CBRE’s interest in the contract until after it was awarded.
The FDIC and CBRE have defended the terms of the contract as being fair and reasonable and said it was awarded by professional staffers after a competitive process.
“In these times of great economic turmoil, we must be able to trust that the government is getting the best value for our taxpayer dollars,” said Melanie Sloan, executive director of CREW. “The Inspector General should investigate the terms and genesis of this contract and let the American people know if this is a fair deal or not.”
CBRE spokesman Robert McGrath said the statements by CREW “betray a lack of understanding of our company and the FDIC assignment.
“We have been retained to serve as asset manager in overseeing and managing a process to manage, value and dispose of hundreds of properties across the U.S.,” he said. “We are highly qualified to assist the FDIC … and our pricing is competitive for a highly complex assignment with significant reporting requirements.”
Mr. McGrath described Mr. Blum as the “nonexecutive chairman of our company,” saying he plays no operational role and was unaware the firm was pursuing the FDIC contract. He said the contract at most will account for “significantly less ” than 1 percent of the firm’s revenues, which last year were $5 billion.
Mr. Rymer said, “We have received the letter and we have no comment at this time.”
The Times reported that real estate experts with experience in selling foreclosed properties found the terms of the contract “sweet.” For example, they found it unusual that CBRE was allowed to collect incentive fees of up to 2 percent on top of their normal commissions if they sell the properties within six months.
Cynthia Kenner, a Colorado real estate agent who specializes in selling foreclosed properties, said, “From everything I know about it, it is a very sweet deal and went to somebody who is less than qualified in dealing with foreclosed residential properties. Their expertise is in commercial real estate.”
In her letter, Ms. Sloan of CREW said that according to real estate experts, “the contract contains a number of highly favorable terms, at least some of which are unusual for these kind of contracts and not typically available to real estate companies involved in comparable contracts.”
She said the terms of the FDIC contract “suggest a ‘sweetheart deal’ that may have been awarded for an improper purpose.”
“The circumstances surrounding the FDIC’s contract with CBRE, including the possible intervention of Senator Feinstein, the contract’s unusually favorable terms, and that fact that CBRE is a commercial real estate firm less experienced in selling foreclosed properties, suggest there may have been some impropriety in the award process,” she said.
Mr. Duran said Ms. Feinstein played no role in the awarding of the FDIC contract.
CBRE is the nation’s largest commercial real estate services firm.
Last week, a grass-roots organization, Americans for Limited Government (ALG) called on the Senate Ethics Committee to investigate Ms. Feinstein for what it described as “this apparent conflict of interest.”
“They must ensure that this government contract was not awarded in return for the senator introducing legislation favored by FDIC Chairman Sheila Bair,” ALG President Bill Wilson said. “While the Senate considers legislation offered by Senator Feinstein to funnel money to the FDIC, what it should really be considering is whether she did so because her husband is doing profitable business with the FDIC.”
Mr. Duran has said there was no conflict and that Ms. Feinstein has complied with all the Senate ethics rules.