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Smoke and fire?

Wednesday, Oct 29, 2008

* Congressman Gutierrez’s self-professed love of quickie real estate deals has landed him back in the headlines

U.S. Rep. Luis Gutierrez personally lobbied Mayor Richard Daley to back a controversial multimillion-dollar development for a campaign contributor who had just lent the congressman $200,000 in a real estate deal, a Tribune investigation has found.

Now the congressman’s unusual gesture of support is under federal scrutiny as authorities investigate how developers overcame city planners’ objections to convert the West Side industrial site into a more profitable residential and commercial development.

Authorities have obtained Gutierrez’s July 7, 2004, letter to Daley—written on U.S. House stationery—as part of their grand jury investigation into how zoning works inside City Hall, sources told the Tribune.

Gutierrez said there is no connection between the loan and his letter of support for the Galewood Yards project, which is not in his district. In a written statement, the congressman said his involvement was “extremely minimal” and “entirely appropriate.”

He said he has not been contacted by federal authorities.

The federal investigation comes as the Tribune’s “Neighborhoods for Sale” series documents an insiders’ game in which politicians rake in millions in campaign cash from developers and other real estate interests while often overriding concerns of homeowners and city planners. It is a system that has fundamentally reshaped the character of city neighborhoods.

Go read the whole thing. Fascinating.

* Gutierrez does provide a thorough response. Here is his reasoning for writing to Mayor Daley on behalf of the developer who had loaned him the cash….

“Any fair analysis of the Galewood Yards development would show that my involvement was extremely minimal. Though my involvement in Galewood Yards was extremely minimal, this was a positive development that was deserving of support. This development is adjacent to the 4th Congressional District, and my constituents would be directly affected by any plans or developments in this area.”

“Specifically, the Galewood Yards development included a Laborers International Union job training center that is currently under construction. It is specifically targeted to helping the community’s significant Latino and African American population. This was an important and virtually unprecedented development, as many jobs in the trade unions have often excluded minorities. Moreover, it is my understanding that half of the total land use of Galewood was dedicated for the purpose of job training, and that as a precondition for approval of the project by the City of Chicago, the developer was required to transfer the land for the training center without receiving any profit.”

“The development also included moderate income housing and a multiplex movie theatre that would bring needed jobs and economic development to the community. I supported a project that included affordable housing, job training and job creation for Latinos and African Americans on a parcel of land that had been unproductive for years.”

He also claimed the loan was at an above-market rate of 7 percent and that he lost money on the flip.

More background here.

* Always remember when reading stories like these that smoke doesn’t necessarily translate into fire. For instance, the Tribune ran this letter to the editor about a big story it ran in a recent Sunday edition…

I would like to help clarify the facts regarding “Real estate success is scrutinized” (News, Oct. 19), a story about Illinois first lady Patricia Blagojevich and her relationship with North Star Investment Management. While Ms. Blagojevich was sponsored by our firm to take her licensing test that would allow her to become an investment adviser, she never did any work for our firm. North Star does not manage money for state pension funds and we have never pursued that kind of work.

We also want to apologize to her and to your readers for comments made by our chief compliance officer, Peter Contos. He misspoke when he suggested Ms. Blagojevich proposed bringing state pension fund business into our firm. She never proposed doing that or using any connection with the State of Illinois to benefit our company in any way.

—Peter Gottlieb, president, North Star

Investment Management, Chicago0

I’m not sure whom to believe, but the original story is here.

- Posted by Rich Miller        

  1. - wordslinger - Wednesday, Oct 29, 08 @ 10:51 am:

    That was quite a “misstatement” by Mr. Contos. What else could have possibly have been trying to say?

  2. - KenoMan - Wednesday, Oct 29, 08 @ 10:57 am:

    “He misspoke when he suggested Ms. Blagojevich proposed bringing state pension fund business into our firm.”

    Nixon “misspoke” too. Let’s see what Mr. Contos will say under oath at Blago’s upcoming trial.

  3. - Vote Quimby! - Wednesday, Oct 29, 08 @ 11:01 am:

    You would think a compliance officer would be well versed in how to say “no comment.” This smacks of a PR response to something hitting a fan. I wonder what documents are now being shredded…

  4. - Captain America - Wednesday, Oct 29, 08 @ 1:03 pm:

    Luis G has always struck me as a somewhat sleazy political opportunist. But it’s not clear to me that the Honorable Mr. G has committed any wrongdoing with respect to the real estate deal cited above, since he was in no position to control the outcome of the zoning decision. Now if he passed some of the financial windfall/loan along to others in a position to influence the ultimate zoning decision, it would be an altogether different matter.

  5. - Mrs. O'Leary's Cow - Wednesday, Oct 29, 08 @ 1:22 pm:

    A Compliance Officer does not make a “mis-statement” of this nature on a sensitive subject such as this; without recognizing in advance the potential consequences when talking to the press. Any mis-statement of this nature would normally be grounds for termination. As we have seen with the Mutual Bank and “uncle Amrish” recently however, sometimes the un-timely employment termination can open up a whole other can of worms, so perhaps that was placed on the “deferred” agenda for now.

    This situation appears to have either been spin on the part of Mr. Contos initially followed by damage control on the part of Mr. Gottlieb, or alternatively it was damage control initially by Mr. Contos, now followed by spin by Mr. Gottlieb at this time. Either way; such a dramatic and immediate change in directions is capable of causing severe whiplash or other external or internal soft tissue injuries. As a consequence
    participants should not be preganant, and should otherwise be in good health, as well as free from high blood pressure, heart, back or neck problems, motion sickness or other conditions that can be aggravated by a ride of this nature.

    Why would North Star sponsor Mrs. B for her licensing exam; if they did not expect her to produce business or do any work for their firm? Simply holding the license; even if dormant from activity for them proposes some potential liability for Northstar. At the same time however this would allow other firms to direct compensation to a licensed “investment advisor” in the form of “referral fees”, for work actually performed by others at other investment management firms. Much like a lawyer I believe; an “investment advisor” is unable to receive referral fees without first being licensed.

    Even though Gottlieb contends that Northstar does not manage pension investment funds for the State of Illinois; and perhaps did not pursue those opportunities either, there is likely a plethora of other non-pension related funds retained and maintained by the state which likely require both short term or long term investment. Many of these are likely controlled by the Treasurer or the Comptroller, but there may be some others under the discretionary control of Director’s of various state agencies as well.

    Aside from those funds maintained by the State of Illinois there are also certainly many other funds controlled by outside organizations that need to be invested and which might benefit from the services of Mrs B as well. There are a whole host of union pension funds that are managed independently of the State of Illinois, as well as a wide range of local government and private equity funds requiring investment management services as well.

    While Mrs B. may never have suggested using any connection with the State of Illinois to benefit Northstar in any way, oten times the perceived ancillary benefits of retaining someone’s services can be inferred without being explicitly stated. A nudge is as good as a wink to a blind bat; you might recall. (See Vanecko-CTA, for further examples).

    Besides; if NorthStar were simply to hold her license they may have benefitted indirectly anyways, if they were to receive the typical over-ride compensation for business developed outside their organization, but for which one of their licensed personnel had received compensation for separately anyway instead. Not much different than real estate commissions in this regard.

    I have the sense that a few more rocks need to be over-turned here. This prospective path towards additional income may have taken a detour out of the sunlight and into the shadows of path with more shade however, when Mrs. B have opted for a a lower profile and less volatile “fixed salary” position in the “non-profit” world instead.

    I think they are pursuing Vrydolyak at this point for something based on intent; which never actually occurred, so sometimes timing is everything.

  6. - Leave a light on George - Wednesday, Oct 29, 08 @ 2:11 pm:

    “He misspoke when he suggested Ms. Blagojevich proposed bringing state pension fund business into our firm. She never proposed doing that or using any connection with the State of Illinois to benefit our company in any way.”

    That’s my story and I’m stickin’ to it.

    Until Fitz comes along.

  7. - Wumpus - Wednesday, Oct 29, 08 @ 2:38 pm:

    Please, someone start bombing the rocks on Vieques, PR and get that goofy LuGu to focus on soemthing else.

  8. - Amy - Wednesday, Oct 29, 08 @ 9:47 pm:

    Luis was into the land deal dance long before Congress. Remember, he was the Council member in charge of the Housing and Land Acquisition Committee. He knew Rezko before Blago was let loose by Daddy Mell.

Sorry, comments for this post are now closed.

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