Capitol Watchdogs Fret Over Rise in 'Honest Graft' Land Deals

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May 17, 2007 9:38 AM

A series of questionable land deals involving U.S. lawmakers have raised alarms among government watchdogs, who fear such dubious arrangements are on the rise.

"Everyone's been trying to catch up to this phenomenon," said Keith Ashdown of Washington, D.C.-based Taxpayers for Common Sense.

Each deal is different, but experts say they follow the same pattern. By himself or with others, a lawmaker buys up cheap property. Then the lawmaker pushes for changes in law or a shot of federal spending which boosts the value of the property. When the price surges, the property is sold, sometimes netting the lawmaker hundreds of thousands of dollars.

On their face, such deals aren't illegal, say experts. The bar is high: to prove that a lawmaker specifically intended to use his public act for private gain.

"Unless you have these guys wired up and record them talking about the deals," it's almost impossible to prove a lawmaker had such an intent, Ashdown said.

Still, watchdogs are growling over the trend.

"Some of these deals look so cozy and were so profitable you have to wonder," said Massie Ritsch of the Center for Responsive Politics, which tracks money in politics.

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Recent investigations by reporters and watchdog groups have led to four instances in which sitting lawmakers have been accused of improperly enriching themselves through such deals, leading Ashdown to dub the trend "the public service land rush."

Indeed, according to the most recent figures available, lawmakers invest more of their wealth in real estate than any other type of investment, according to the Center for Responsive Politics. 

"In Congress, land deals are more popular than a shoe sale at Nordstroms," quipped Naomi Seligman-Steiner of the left-leaning anti-corruption group, Citizens for Responsibility and Ethics in Washington (CREW). Her group has called for IRS and FBI investigations into several recent land sales by lawmakers that have been linked to their public actions.

While the rise in such deals appears new, the deal itself is hardly innovative. A powerful New York City political boss described the gentle art of "honest graft" more than 100 years ago. In a now-infamous 1905 speech, George Washington Plunkitt, a prominent figure of New York's notoriously corrupt Tammany Hall, defended his practice of making money in real estate using exclusive foreknowledge of where the government was developing parks and other public amenities.

"Ain't it perfectly honest to charge a good price and make a profit on my investment and foresight?" asked Plunkitt. "Of course, it is. Well, that's honest graft."

In Plunkitt's time, it was harder for reporters and the public to catch such worrisome deals. 

Today, watchdogs are beginning to use technology and publicly available information to match up lawmakers' real estate holdings to the perks they squeeze into legislation for new bridges, highway interchanges and other goodies that can boost property values.

The Washington, D.C.-based Sunlight Foundation has mapped thousands of proposed bridges, highway improvements and other projects funded by U.S. lawmaker requests, or "earmarks."

Ashdown's group, Taxpayers for Common Sense, is taking the effort a step further, by using the online satellite imagery and geolocating tools of Google Earth to map real estate holdings belonging to U.S. lawmakers, in the hopes of seeing where certain tracts match up with certain improvements.

A review of the questionable deals recently unearthed gives an idea why those groups and others feel a sense of urgency about their efforts.

Last year, the Sunlight Foundation raised questions over a deal involving former House Speaker Dennis Hastert, R-Ill. In 2003, Hastert and two other men had used an investment trust to buy up land in Illinois. Then Hastert pushed for hundreds of millions of federal dollars to build a highway improvement which would make the land more accessible. Three months after the federal funding was approved, Hastert and his business partners sold the land. Hastert reportedly pocketed an estimated $1.8 million from the deal.

When questioned, Hastert told the Associated Press the land deal "has nothing to do with" the nearby $207 million highway interchange for which he won funding. 

The Los Angeles Times discovered that in 2005, Rep. Ken Calvert, R-Calif., went in with a partner to buy a four-acre tract in southern California. Then Calvert championed a $10 million earmark for a highway interchange and commercial improvement near the parcel. A few months after the bill passed, the two men sold the property, bagging nearly $450,000 in profit.

A week after the paper reported the deal, the FBI scrutinized Calvert's financial records. Later, a grand jury requested documents relating to a separate land deal between Calvert and a California town.

Calvert has said he "encourages a thorough review" of any of his earmarks. "I am sure they all meet the highest standards of public benefit," he told Roll Call newspaper.

This week, House Republicans gave Calvert a coveted seat on a powerful spending panel which oversees such earmarks.

In terms of complexity, Rep. Gary Miller, R-Calif. may have the most impressive deal in the bunch. First, he reportedly borrowed millions from a political backer to buy from the backer's company land near an ailing city airport. Then Miller helped push a bill through Congress to close the airport, allowing his political backer to develop the airport property, which improved the value of the land Miller had bought. Shortly afterward, Miller sold the land at an undisclosed profit.

Miller has called the deal "a normal real estate transaction." Watchdogs and ethicists decried the deal as ethically compromised, particularly because he did not mention the massive loan on his financial disclosure reports during the period. The FBI is reportedly investigating a number of Miller's recent land deals. Despite the FBI's interest in his dealings, House Republicans recently made Miller their top man for investigations and oversight at the Financial Services Committee.

Miller's office has said the lawmaker has done nothing wrong. "His business dealings have all been above-board...these allegations are baseless and have no merit," his spokesman said in February responding to news of the investigation.

Now, some Republicans from the Alaskan congressional delegation appear be working on a real doozy: scoring hundreds of millions of federal dollars to extend highways to a backwater Alaskan region known as the "Knik Arm," where a number of the members' aides and relatives own land. According to Roll Call newspaper, which broke the story, the deal involved Sens. Lisa Murkowski, Ted Stevens and Rep. Don Young.

Murkowski declined to comment to Roll Call, but Sen. Ted Stevens' office said the state needs access to Knik Arm because the population of Anchorage, the closest major city, continues to grow.

The Republicans aren't the only ones with land deals that raise eyebrows. Senate Majority Leader Harry Reid, D-Nev., used his position to help snag $18 million in taxpayer money to build a bridge near 160 acres of undeveloped Arizona land he owned. The deal, discovered by reporters at the Los Angeles Times, likely increases the value of his land, according to experts and local officials contacted by the paper.

Reid has defended the deal, saying the bridge was necessary for interstate truck travel and denying the bridge would significantly improve the value of his land. Congress-watchers voiced disappointment to the Times that taxpayers "may have helped inflate the value" of Reid's property.

And House Speaker Nancy Pelosi, D.-Calif., has been accused of funneling federal dollars into projects that could boost the value of property held by her and her husband.  Pelosi got $25 million for a San Francisco waterfront improvement project about a mile away from four properties owned by her husband. 

Pelosi's office has said it's highly unlikely the project will boost her husband's property values, and even Republicans who led the charge against Pelosi's earmark did not offer evidence or expert opinion to support the idea.

Watchdog groups say they aren't deterred by the difficulty in identifying these questionable deals.

"Through our work and other muckraking, the public can see what's going on," said Ritsch of the Center for Responsive Politics.

Ashdown echoed the sentiment, "Let the public decide for themselves if they feel there's a bit of hanky-panky here."