The Freedom Minute

Should Obama’s associations with William Ayers and Tony Rezko worry you?

Vice Presidential candidate Sarah Palin has been on the attack again, this time regarding Barack Obama’s supposed associations with “shady characters” in his past. Specifically, the Democratic presidential candidate has been criticized by Palin, as well as conservative talk show hosts and bloggers, for his ties to William Ayers, a former 60’s radical and Tony Rezko, a Chicago real estate developer recently convicted on several counts of fraud and bribery (unrelated to Barack Obama). Are these attacks fair, or are they simply a desperate attempt by McCain’s campaign to prevent Obama’s lead from increasing to the point where it becomes insurmountable? Let’s take a look at the facts and compare Barack Obama’s ethical behavior to John McCain’s ethics as it relates to his involvement with Charles Keating (the Keating Five Scandal) in the late 1980’s.

The following accounts are summarized from the Chicago Sun Times, The Washington Post, Wikipedia, Politifact.com, Politico.com Factcheck.com, and Snopes.com. If you find any factual errors, please bring them to my attention so they can be corrected.

Barack Obama’s connection to William Ayers

In 1969 William Ayers co-founded the violent radical left anti-war organization The Weatherman. A years later, Ayers “went underground” after three Weatherman members were killed when a bomb they were assembling in a Greenwich Village townhouse exploded. However, nobody died as a result of the bombings in which Ayers said he participated as part of the Weather Underground; at the New York City Police Headquarters in 1970, in a men’s lavatory in the Capitol building in 1971 and in a women’s restroom in the Pentagon in 1972. After a decade on the run, Ayers and his wife, Bernardine Dohrn, turned themselves into authorities in 1980. They were never prosecuted for their involvement with the Weather Underground; charges were dropped because of improper FBI surveillance. Ayers is now a professor in the College of Education at the University of Illinois at Chicago, holding the honor of Distinguished Professor and is also a former aide to Chicago Mayor Richard M. Daley.

In 1995, State Senator Alice Palmer introduced her chosen successor, Barack Obama, to a few of the district’s influential liberals. The informal gathering was held at the home of William Ayers. In 2001, Ayers contributed $200 to Obama’s campaign.

From December 1999 to December 2002 Obama and Ayers both served on the eight-person board of the not-for-profit anti-poverty group, the Woods Fund of Chicago. That board met four times a year, and members would see each other at occasional dinners the group hosted.

Obama has said of Ayers: “This is a guy who lives in my neighborhood, who’s a professor of English in Chicago who I know and who I have not received some official endorsement from. He’s not somebody who I exchange ideas from on a regular basis. And the notion that somehow as a consequence of me knowing somebody who engaged in detestable acts 40 years ago, when I was 8 years old, somehow reflects on me and my values doesn’t make much sense.”

Aparently, Obama doesn’t know Ayers well enough to accurately state his profession; Ayers is a professor of Education, not English.

As an intersting footnote, shortly before leaving office in January 2001, Bill Clinton commuted the sentences of a couple of convicted Weather Underground members, Susan Rosenberg and Linda Sue Evans.

Barack Obama’s connection to Tony Rezko

In 1990, while a student at Harvard Law School, Obama received an unsolicited job offer from Rezko’s company, Rezmar Corp. Obama turned down the offer and eventually took a job with a law firm which primarily worked civil rights cases, but also, coincidentally, represented Rezmar. Obama has stated that, while at the firm, he was assigned to tasks appropriate for a junior lawyer and his Rezmar-related work amounted to a total of about five hours.

During Obama’s first run for Illinois state Senate in 1995, Rezko, who had been involved in fundraising for numerous Illinois Democratic and Republican politicians since the 1980s, donated, through two of his companies, a total of $2,000 for Obama’s campaign. Subsequently, the two became friendly and Obama and his wife, Michelle had dinners with Rezko and his wife a couple times. They also once took a day trip to visit the Rezkos’ home in Lake Geneva, Wisconsin.

When Obama ran for U.S. Senate in 2004, Rezko served on his finance committee and was a fundraiser. Rezko also hosted a significant fundraising event for Obama in his home. In addition to Obama, Rezko and his company, Rezmar, have contributed money to, or fund-raised for, prominent Illinois politicians including Democratic Governor Rod Blagojevich and Republican Governors Jim Edgar and George Ryan, as well as former Chicago Mayors Daley and Washington among many others. Rezko also co-chaired a multimillion-dollar fund-raiser for President George W. Bush in 2003.

A few months after Obama became a U.S. senator, he purchased a home in the Kenwood District of Chicago for $1.65 million. Although this was $300,000 below the asking price, it represented the highest offer on the property. On the same day, Rezko’s wife, Rita, purchased the adjoining empty lot from the same sellers for the full asking price of $625,000. Obama has acknowledged bringing his interest in the property to Rezko’s attention, but denied any coordination of offers. According to Obama, while the properties had originally been a single property, the previous owners decided to sell the land as two separate lots, but made it a condition of the sales that they be closed on the same date. Obama also notes that the properties had been on the market for months, that his offer was the better of two bids, and that Ms. Rezko’s bid was matched by another offer. Therefore, Ms. Rezko’s purchase of the lot at the asking price was due to the existence of a matching offer and, contrary to some allegations, she could not have purchased the property for less. Obama’s description of the transaction has been confirmed by the sellers of the property.

Six months later, Obama paid Rezko’s wife $104,500 for a strip of her land, so he could have a bigger yard. At the time of the sale, it had been widely reported that Tony Rezko was under federal investigation, and in an attempt to avoid any appearance of impropriety, Obama paid $60,000 above the land’s assessed value. On December 28, 2006, Ms. Rezko sold the vacant lot for $575,000. That sale, combined with the earlier $104,500 sale to the Obamas, less $14,000 for a fence along the property line and other expenses, amounted to a net profit for the Rezkos of $40,500 over their original purchase. The Rezkos’ purchase of the lot and subsequent sale of the small parcel to Obama therefore benefited the Rezkos and not Obama. However, questioned later about the timing of the Rezko deal, Obama called it “boneheaded” because people might think the Rezkos had done him a favor adding, “I consider this a mistake on my part and I regret it.”

In October 2006, after Rezko’s indictment, Obama took all campaign contributions tied to Rezko and donated them to charity.

John McCain and the Keating Five

The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. The S&L crisis resulted in the failure of 747 savings and loan associations (S&Ls), the ultimate cost of the crisis is estimated to have totaled around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. taxpayer. The five senators, Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), John McCain (R-AZ), and Donald W. Riegle (D-MI), were accused of improperly intervening in the investigation of Charles H. Keating, Jr., chairman of the failed Lincoln Savings and Loan Association, which was the target of a probe by the Federal Home Loan Bank Board (FHLBB). Keating ultimately served five years in prison for his corrupt mismanagement of Lincoln.

McCain and Keating had become personal friends following their initial contacts in 1981, and McCain was the closest socially to Keating of the five senators. Between 1982 and 1987, McCain had received $112,000 in political contributions from Keating and his associates. In addition, McCain’s wife Cindy McCain and her father Jim Hensley had invested $359,100 in a Keating shopping center in April 1986, a year before McCain met with the regulators. McCain, his family, and their baby-sitter had made nine trips at Keating’s expense, sometimes aboard Keating’s jet. Three of the trips were made during vacations to Keating’s opulent Bahamas retreat at Cat Cay. McCain did not pay Keating (in the amount of $13,433) for some of the trips until years after they were taken, when he learned that Keating was in trouble over Lincoln.

Beginning in 1985, Edwin J. Gray, chair of the FHLBB, feared that the savings industry’s risky investment practices were exposing the government’s insurance funds to huge losses. Lincoln, in particular, had become burdened with bad debt resulting from its past aggressiveness, which took the form of buying land, taking equity positions in real estate development projects, and buying high-yield junk bonds. By early 1986 its investment practices were being investigated and audited by the FHLBB. By early 1987, it appeared as though the government might seize Lincoln for being insolvent. Keating was asking that Lincoln be given a lenient judgment by the FHLBB, so that it could limit its high risk investments and get into the safe (at the time) home mortgage business, thus allowing the business to survive. Keating wanted the five senators to intervene with the FHLBB on his behalf.

In March 1987, Riegle told chairman Gray of the FHLBB that “Some senators out west are very concerned about the way the bank board is regulating Lincoln Savings,” adding somewhat ominously, “I think you need to meet with the senators. You’ll be getting a call.” Keating and DeConcini asked McCain to travel to San Francisco to meet with regulators regarding Lincoln Savings; McCain refused. DeConcini told Keating that McCain was nervous about interfering. Keating called McCain a “wimp” and on March 24, Keating and McCain had a heated, contentious meeting.

However, on April 2, 1987, McCain did attend a meeting with Gray held in DeConcini’s Capitol office along with Senators Cranston, and Glenn. The senators requested that no staff be present. DeConcini started the meeting with a mention of “our friend at Lincoln.” Gray told the assembled senators that he did not know the status of Lincoln Savings and Loan, and that the senators would have to talk to the bank regulators in San Francisco that had oversight jurisdiction for the bank. Gray then set up a meeting between those regulators and the senators.

On April 9, 1987, a two-hour meeting with three members of the FHLBB San Francisco branch was held, again in DeConcini’s office, to discuss the government’s investigation of Lincoln. Present were Cranston, DeConcini, Glenn, McCain, and additionally Riegle. The regulators felt that the meeting was very unusual and that they were being pressured by a united front, as the senators presented their reasons for having the meeting. DeConcini began the meeting by saying, “We wanted to meet with you because we have determined that potential actions of yours could injure a constituent.” McCain said, “One of our jobs as elected officials is to help constituents in a proper fashion. (Keating’s) ACC [American Continental Corporation] is a big employer and important to the local economy. I wouldn’t want any special favors for them… I don’t want any part of our conversation to be improper.” Glenn said, “To be blunt, you should charge them or get off their backs,” while DeConcini said, “What’s wrong with this if they’re willing to clean up their act? … It’s very unusual for us to have a company that could be put out of business by its regulators.” The regulators then revealed that Lincoln was under criminal investigation on a variety of serious charges, at which point McCain severed all relations with Keating.

Lincoln stayed in business; from mid-1987 to April 1989. During this time, Lincoln’s branch managers and tellers convinced customers to replace their federally-insured certificates of deposit with higher-yielding bond certificates of ACC. The customers later said they were never properly informed that the bonds were uninsured and very risky given the state of American Continental’s finances. Indeed the regulators had already adjudged the bonds to have no solvent backing. FDIC chair L. William Seidman would later write that Lincoln’s push to get depositors to switch was “one of the most heartless and cruel frauds in modern memory.” American Continental went bankrupt, and Lincoln was seized by the FHLBB on April 14, 1989. More than 21,000 mostly elderly investors lost their life savings, totaling about $285 million. The federal government became liable for $2 billion to cover Lincoln’s losses when it seized the institution. Keating was hit with a $1.1 billion fraud and racketeering action, filed against him by the regulators. In talking to reporters in April, Keating said, “One question, among many raised in recent weeks, had to do with whether my financial support in any way influenced several political figures to take up my cause. I want to say in the most forceful way I can: I certainly hope so.”

The Senate Ethics Committee which investigated the five Senators’ role in the scandal subsequently ruled that McCain’s involvement in the scheme was minimal, and he was cleared of all charges. However, McCain was criticized by the Committee for exercising “poor judgment” when he met with the federal regulators on Keating’s behalf. On his Keating Five experience, McCain said: “The appearance of it was wrong. It’s a wrong appearance when a group of senators appear in a meeting with a group of regulators, because it conveys the impression of undue and improper influence. And it was the wrong thing to do.”

Analysis and Opinion

First of all, if you haven’t read the above text, I encourage you to do so. It’s a bit long, but the facts are at least as important as my opinion and it never hurts to have them at your disposal.

Let’s compare the candidates’ associations:

Clearly John McCain and Charles Keating were close friends. McCain socialized with Keating over a period of many years and accepted substantial campaign contributions from him as well as personal gifts totaling over $13,000. Furthermore, McCain’s wife and father-in-law were involved in business dealings with Keating.

Barack Obama on the other hand appears not to have known William Ayers well at all and likely never socialized with him. William Ayers did contribute a fairly insignificant $200 to one of Obama’s campaigns and Obama once attended a meet-and-greet at Ayers’ home. Obama and Ayers both served on the board of a non-profit along with six others. This appears to be the full extent of their “relationship” and there is no indication that Barack Obama either agreed or sympathized with William Ayers’ radical actions or political views.

In the case of Tony Rezko, Obama and Rezko were personal friends (but seemingly not as close as McCain and Keating) and they did socialize a bit. Rezko was a contributor and fundraiser for Obama at various times as he was for many other politicians, including George W. Bush. Obama seems not to have accepted any significant personal gifts from Rezko and according to the former owners of Obama’s house, the real estate deal involving the sale of the house and adjacent land involved no “favors” for Obama from Rezko and was perfectly ethical. In addition, when Obama purchased a piece of the vacant lot, he overpaid for it in order to avoid even the appearance of impropriety. Neither Obama nor any of his family members has had any other personal business dealings with Tony Rezko and there are no accusations that Barack Obama was in any way involved in any of Tony Rezko’s criminal acts.

John McCain was investigated by a Senate ethics committee because it appeared that he might have used his political position to intervene with the government on behalf of his friend and political supporter Charles Keating. Barack Obama has never been investigated, nor even accused of using his influence to personally assist Tony Rezko or William Ayers.

So is it fair to criticize Barack Obama for his associations with William Ayers and Tony Rezko? Is it fair to criticize John McCain for his association with Charles Keating? My personal opinion, in both cases, is no. I strongly believe that we are all responsible for our own personal actions and it is unfair to hold someone responsible for the personal failings of their family members, friends, business associates or acquaintances, especially when they have no knowledge of or involvement in their actions. Although it does seem as if John McCain’s involvement with Charles Keating was more extensive than Barack Obama’s association with either William Ayers or Tony Rezko, and John McCain was actually investigated for his possible breach of ethics in his dealings with Keating, he was cleared of committing any criminal acts. I’m therefore willing to give him the benefit of the doubt here. McCain’s poor judgment in the whole affair is another matter, and I leave it up to the reader to form their own opinion in that regard.

The bottom line is that there are serious issues to be weighed in deciding who to vote for in the next presidential election and whether or not either of the two candidates is guilty by association shouldn’t be one of them.

October 9th, 2008 Posted by freedomminute | Election | 2 comments