April 23, 2007
BY TIM NOVAK Staff Reporter/tnovak@suntimes.com
For more than five weeks during the brutal winter of 1997, tenants shivered without heat in a government-subsidized apartment building on Chicago's South Side.
It was just four years after the landlords -- Antoin "Tony'' Rezko and his partner Daniel Mahru -- had rehabbed the 31-unit building in Englewood with a loan from Chicago taxpayers.
It was just four years after the landlords -- Antoin "Tony'' Rezko and his partner Daniel Mahru -- had rehabbed the 31-unit building in Englewood with a loan from Chicago taxpayers.
Rezko and Mahru couldn't find money to get the heat back on.
But their company, Rezmar Corp., did come up with $1,000 to give to the political campaign fund of Barack Obama, the newly elected state senator whose district included the unheated building.
Obama has been friends with Rezko for 17 years. Rezko has been a political patron to Obama and many others, helping to raise millions of dollars for them through his own contributions and by hosting fund-raisers in his home.
Obama, who has worked as a lawyer and a legislator to improve living conditions for the poor, took campaign donations from Rezko even as Rezko's low-income housing empire was collapsing, leaving many African-American families in buildings riddled with problems -- including squalid living conditions, vacant apartments, lack of heat, squatters and drug dealers.
The building in Englewood was one of 30 Rezmar rehabbed in a series of troubled deals largely financed by taxpayers. Every project ran into financial difficulty. More than half went into foreclosure, a Chicago Sun-Times investigation has found.
"Their buildings were falling apart,'' said a former city official. "They just didn't pay attention to the condition of these buildings.''
Eleven of Rezko's buildings were in Obama's state Senate district.
Obama, now a U.S. senator running for president, has come under fire over his friendship with Rezko, who was charged last fall with demanding kickbacks on state business deals under Gov. Blagojevich.
Much of the criticism has centered on two real estate deals involving Obama's South Side mansion. In the first, Obama paid $300,000 less than the asking price for a doctor's home, while Rezko's wife paid the doctor full price for the vacant lot next door. Then -- a few months before Rezko was indicted -- Obama bought part of that lot from Rezko's wife.
But Obama's ties with Rezko go beyond those two real estate sales and the political support, the Sun-Times found. Obama was an attorney with a small Chicago law firm -- Davis Miner Barnhill & Galland -- that helped Rezmar get more than $43 million in government funding to rehab 15 of their 30 apartment buildings for the poor.
Just what legal work -- and how much -- Obama did on those deals is unknown. His campaign staff acknowledges he worked on some of them. But the Rezmar-related work amounted to just five hours over the six years it said Obama was affiliated with the law firm, the staff said in an e-mail in February.
Obama, however, was associated with the firm for more than nine years, his staff acknowledged Sunday in an e-mail response to questions submitted March 14 by the Sun-Times. They didn't say what deals he worked on -- or how much work he did.
"The senator, relatively inexperienced in this kind of work, was assigned to tasks appropriate for a junior lawyer,'' according to an e-mail from Obama spokesman Robert Gibbs. "These tasks would have included reviewing documents, collecting corporate organizational documents, and drafting corporate resolutions.''
In fact, Gibbs wrote, "Senator Obama does not remember having conversations with Tony Rezko about properties that he owned or any specific issues related to those properties.''
Rezko and Mahru had no construction experience when they created Rezmar in 1989 to rehabilitate apartments for the poor under the Daley administration. Between 1989 and 1998, Rezmar made deals to rehab 30 buildings, a total of 1,025 apartments. The last 15 buildings involved Davis Miner Barnhill & Galland during Obama's time with the firm.
Rezko and Mahru also managed the buildings, which were supposed to provide homes for poor people for 30 years. Every one of the projects ran into trouble:
• Seventeen buildings -- many beset with code violations, including a lack of heat -- ended up in foreclosure.
• Six buildings are currently boarded up.
• Hundreds of the apartments are vacant, in need of major repairs.
• Taxpayers have been stuck with millions in unpaid loans.
• At least a dozen times, the city of Chicago sued Rezmar for failure to heat buildings.
For five weeks, the Sun-Times sought to interview Obama about Rezko and the housing deals. His staff wanted written questions. It responded Sunday but left many questions unanswered. Other answers didn't directly address the question.
Among these: When did Obama learn of Rezmar's financial problems? "The senator had no special knowledge of any financial problems,'' Gibbs wrote.
Did the senator ever complain to anyone -- government officials, Rezmar or Rezko -- about the conditions of Rezmar's buildings? "Senator Obama did follow up on constituency complaints about housing as [a] matter of routine,'' Gibbs wrote.
Did the senator ever discuss Rezmar's financial problems with anyone at his law firm? "The firm advises us that it [is] unaware of any such conversations,'' Gibbs wrote.
Turns down Rezmar job
Obama's friendship with Rezko began with a telephone call.
It was 17 years ago. Obama had just become the first black president of the Harvard Law Review. Newspapers wrote about him. One story caught the eye of David Brint, a vice president of Rezmar, a new company that had become the Daley administration's favored developer of low-income housing.
"I just cold-called him," Brint said in an interview.
Brint said he wanted to know if Obama would come work for Rezmar, developing housing for the poor -- something Obama had expressed interest in, according to the story Brint had read. Brint arranged for Obama to meet Rezko, but Obama didn't take the job.
Obama, who has a law degree from Harvard, subsequently returned to Chicago to lead a voter-registration drive in 1992.
The next year, Obama joined Davis Miner Barnhill & Galland, a 12-lawyer firm that specialized in helping develop low-income housing. The firm's top partner, Allison S. Davis, was, and is, a member of the Chicago Plan Commission, appointed by Mayor Daley. Davis was also a friend of Rezko. Davis and Rezko would eventually go into business together, developing homes.
Another firm partner, Judson Miner, ran the city Law Department under Mayor Harold Washington, one of Obama's political idols.
Asked what Rezko cases Obama worked on, Miner told the Sun-Times, "We'll put together a list of the cases he worked on involving Rezko/Rezmar in the next day or two.''
That was March 13. He never provided the information.
While at the law firm, Obama spent much of his time working on issues that would help improve conditions in poor neighborhoods, according to his first book, Dreams from My Father, published in 1996.
"In my legal practice, I work mostly with churches and community groups, men and women who quietly build grocery stores and health clinics in the inner city, and housing for the poor,'' Obama wrote in the book.
Three community groups represented by Davis Miner Barnhill & Galland were partners with Rezmar in the troubled housing deals.
Rezko offers Obama support
Obama had been at the firm for two years when he began his political career, running to replace state Sen. Alice Palmer.
Rezko became Obama's political patron. Obama got his first campaign contributions on July 31, 1995: $300 from a Loop lawyer, a $5,000 loan from a car dealer, and $2,000 from two food companies owned by Rezko.
Around that time, Rezmar began developing low-income apartments in partnerships with the Chicago Urban League and two other not-for-profit community groups, both founded and run by Bishop Arthur Brazier, pastor of the Apostolic Church of God and a powerful ally of the mayor -- the Woodlawn Preservation and Investment Corp., known as WPIC, and the Fund for Community Redevelopment and Revitalization.
All three community groups were clients of the Davis law firm. Davis himself was treasurer of WPIC when it went into business with Rezmar.
Why go into business with Rezmar? "We thought they were successful,'' Davis said, noting that little development was taking place in Woodlawn.
At the time, Rezmar had been in business for six years and had become one of City Hall's favored developers of low-income housing, managing 600 apartments in 15 buildings it rehabbed with government funding. Teaming now with community development groups, Rezmar rehabbed another 15 buildings, with 400 apartments, between 1995 and 1998. Each deal involved a mix of public and private financing -- loans from the city or state, federal low-income-housing tax credits and bank loans.
By the time Rezmar started working with those community groups, at least two of its earlier buildings were falling into disrepair -- including the Englewood apartment building at 7000 S. Sangamon where the tenants were without heat for five weeks.
The tenants there had no heat from Dec. 27, 1996, until at least Feb. 3, 1997, when the city of Chicago sued to turn the heat on. The case was settled later that month with a $100 fine.
It was during that time that the area's new state senator, Barack Obama, got a $1,000 campaign donation from Rezmar. The date: Jan. 14, 1997.
Obama works on Rezmar deals
Obama spent the next eight years serving in the Illinois Senate and continued to work for the Davis law firm.
Through its partnerships, Rezmar remained a client of the firm, according to ethics statements Obama filed while a state senator.
Davis said he didn't remember Obama working on the Rezmar projects.
"I don't recall Barack having any involvement in real estate transactions,'' Davis said. "Barack was a litigator. His area of focus was litigation, class-action suits.''
But Obama did legal work on real estate deals while at Davis' firm, according to biographical information he submitted to the Sun-Times in 1998. Obama specialized "in civil rights litigation, real estate financing, acquisition, construction and/or redevelopment of low-and moderate income housing,'' according to his "biographical sketch."
And he did legal work on Rezko's deals, according to an e-mail his presidential campaign staff sent the Sun-Times on Feb. 16, in response to earlier inquiries. The staff didn't specify which Rezmar projects Obama worked on, or his role. But it drew a distinction between working for Rezko and working on projects involving his company.
"Senator Obama did not directly represent Mr. Rezko or his firms. He did represent on a very limited basis ventures in which Mr. Rezko's entities participated along with others,'' according to the e-mail from Obama's staff.
Obama buys Rezko land
Over the years, Rezko, Mahru, their wives and businesses have given more than $50,000 to Obama's campaign funds, records show. And Rezko has helped raise millions more.
Rezko was among the people Obama appointed to serve on his U.S. Senate campaign finance committee, the Sun-Times reported in 2003. The committee raised more than $14 million, according to Federal Election Commission records, helping send Obama to Washington in 2004.
As a U.S. senator, Obama grew closer to Rezko.
Two years ago, Obama bought a mansion on the South Side, in the Kenwood neighborhood, from a doctor. On the same day, Rezko's wife, Rita Rezko, bought the vacant lot next door from the same seller. The doctor had listed the properties for sale together. He sold the house to Obama for $300,000 below the asking price. The doctor got his asking price on the lot from Rezko's wife.
Last year, Rita Rezko sold a strip of that vacant lot to Obama for $104,500 -- a deal Obama later apologized for, acknowledging that people might think he got a favor from Rezko. Obama called the episode "boneheaded'' and a "mistake.''
At the time Obama bought that strip of land, it had been reported that Rezko was under federal investigation for influence-peddling involving the administration of Blagojevich, whose campaign also received Rezko's financial support.
Rezko has since been indicted for allegedly demanding kickbacks from companies seeking state business under Blagojevich. Rezko's trial has been postponed while investigators sort through his finances.
'Disenchanted with Rezmar'
Rezmar's final low-income housing deals involving the Davis law firm went bad quickly.
Those deals were supposed to provide affordable housing for at least 25 years. But the first deal Rezmar struck with the Woodlawn Preservation and Investment Corp. collapsed in just six and a half years, when the state sued for foreclosure. WPIC and its sister agency, the Fund for Community Redevelopment and Revitalization, ultimately forced Rezmar to give up control of all 12 buildings they rehabbed together, citing financial troubles and deteriorating conditions of the buildings.
The state foreclosure suit came because Rezmar had stopped making monthly mortgage payments in March 2001 on a state loan to help turn an old nursing home into low-income apartments at 6140 S. Drexel, in Obama's state Senate district.
"WPIC became disenchanted with Rezmar and wanted to get rid of them,'' Brazier said. "They thought the buildings weren't being kept up properly. There were some financial problems.''
Rezmar and WPIC cut all ties last October, when the Chicago City Council agreed to let Rezmar out of a city loan. Rezmar transferred its interest to The Wolcott Group, a management company run by business partners of David Brint -- the man who had introduced Rezko to Obama.
