From The San Francisco Chronicle
War brings business to Feinstein spouse
Blum's firms win multimillion-dollar defense contracts in Iraq, Afghanistan
Phillip Matier, Andrew Ross
Sunday, April 27, 2003
When it comes to scoring mega-military-related contracts, Sen. Dianne Feinstein's multimillionaire husband, Richard Blum, is right in the thick of things.
First up: a contract announced last week between the Army and URS Corp., the San Francisco planning and engineering company that specializes in defense work -- and that happens to be partly owned by Blum's investment firm.
The contract -- which could grow to $600 million -- is to help with troop mobilization, weapons systems training and anti-terrorism methods.
That's on top of a $3.1 billion Army contract that URS snared back in February for weapons systems and homeland defense.
Next up: Perini Corp., which qualified earlier this month for as much as $100 million of defense work in Iraq and elsewhere. The Massachusetts-based company is already busy building barracks and other facilities for the new Afghan army -- a separate contract worth $28 million.
Blum's investment firm controls about 20 percent of Perini's shares, with the majority held by a group of investors led by company chairman Ron Tutor.
Some of Perini's stock is also held by Tutor's West Coast construction company, Tutor-Saliba -- the firm that built the Los Angeles subway system, rebuilt the Oakland Coliseum and put BART into San Francisco International Airport.
Tutor-Saliba also oversaw construction of SFO's new international terminal - - work that is under investigation by the city attorney's office for alleged overbilling.
But it's Blum's ties to URS -- in which he controls about a quarter of the stock -- that are certain to raise the most questions.
In July, URS acquired defense contractor EG&G (the technical services branch that won the $600 million contract) from the Carlyle Group investment firm. That's the outfit that boasts ex-President George H.W. Bush, former Secretary of State James Baker and ex-British Prime Minister John Major as advisers.
In exchange, Carlyle received cash and a chunk of URS stock worth a total of $500 million. What's more, a top Carlyle manager now sits alongside Blum on URS' board of directors.
Celia Wexler, research director for Common Cause in Washington, D.C., says all the defense and homeland security deals involving Blum-connected companies raise concern of political hanky-panky -- especially with talk of the United States spending $100 billion to rebuild Iraq.
"You don't want this process to be tainted by the possibility that there is any favoritism involved -- whether it's to the husband of a powerful Democratic senator or someone close to the Bush administration," Wexler said.
"In the end, you want a process that is competitive, accountable and open. It's the only way there will be confidence the process is not larded by cronyism or inside deals."
Both Blum and Feinstein -- along with representatives of both URS and Perini -- said all the deals have been on the up and up.
"Sen. Feinstein has no say or involvement whatsoever in how (Defense Department) contracts are awarded," said Blum spokesman Owen Blicksilver.
He added that URS -- with 27,000 employees worldwide -- is "a big public company that bids on dozens of public contracts . . . and as a matter of policy, the board of directors -- of which Mr. Blum is a member -- is never told what the company is bidding on."
As for Blum's Perini involvement, Blicksilver said that Blum doesn't serve on the board and that the company represents less than 1 percent of his overall investments. "So his benefit from any contract to Perini is (minuscule)," Blicksilver said.
Feinstein spokesman Howard Gantman similarly dismissed any ethics concerns, saying none of the contracts is voted on by the Senate. "We have checked with the Ethics Committee to make sure there is no conflict of interest, and have been told there are no conflicts," Gantman said.
By the way, we questioned the office of Rep. Henry Waxman, the Los Angeles Democrat and House Government Reform Committee member whose protest recently halted the awarding of a defense contract to Vice President Dick Cheney's old company, Halliburton.
"That's a fundamentally different situation," said Waxman's chief of staff, Phil Schiliro. His boss objected to a Halliburton subsidiary being awarded a no-bid contract to repair Iraqi oil fields because the firm had just paid $2 million to settle a claim that it had overcharged the government on an earlier contract, Schiliro said.
"The government didn't allow any other bidders to compete for the contract, and gave Kellogg Brown & Root (the Halliburton subsidiary) the kind of contract it had just abused," Schiliro said.
Charles Lewis, executive of the nonpartisan Center for Public Integrity watchdog group in Washington, says that "regardless of whether there is a direct conflict of interest, it's useful to know that the spouse of a sitting senator is getting richer because of what's going on in the world."
"Why hasn't she expressed outrage about some of the potential conflicts with people in or close to the Bush administration?" Lewis said. "Could it be that she herself has some entanglements?"
Chronicle columnists Phillip Matier and Andrew Ross appear Sundays, Mondays and Wednesdays. They can also be heard on KGO Radio on Mondays, Wednesdays and Thursdays. Phil Matier can be seen regularly on KRON-TV. Got a tip? Call them at (415) 777-8815 or drop them an e-mail at
matierandross@sfchronicle.com.