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The Times (London)
February 26, 2008 Tuesday
Correction Appended
Mansion 'mistake' piles the pressure on Obama
BYLINE: James Bone in New York and Dominic Kennedy
British billionaire lent millions to fundraiser
Questions over who paid for family home
A British-Iraqi billionaire lent millions of dollars to Barack Obama
's fundraiser only weeks before an imprudent land deal that has returned to haunt the presidential contender, an investigation by The Times has revealed.
The money transfer raises the question of whether funds from Nadhmi Auchi, one of Britain's wealthiest men, helped Mr Obama to buy the mock Georgian mansion in Chicago where he lives.
A company related to Mr Auchi, who has a conviction for corruption in France, registered the loan to Mr Obama's bagman, Antoin "Tony" Rezko, on May 23, 2005.
Mr Auchi says that the loan, through the Panamanian company Fintrade Services SA, was for $3.5 million (£ 1.75 million).
Three weeks later Mr Obama bought a house on the South Side of the city, while Mr Rezko's wife bought the garden plot next door from the same seller on the same day, June 15. Mr Obama says that he never used Mrs Rezko's still-empty lot, which could only be accessed through his property. But he admits that he paid his gardener to mow the lawn.
Mrs Rezko, whose husband was widely known to be under investigation at the time, went on to sell a 10ft strip of her property to Mr Obama seven months later so that he could enjoy a bigger garden. Mr Obama says that his involvement in the land deal was a "boneheaded mistake".
Mrs Rezko's purchase and sale of the land to Mr Obama raises many unanswered questions. It is unclear how Mrs Rezko could have afforded the down payment of $125,000 and $500,000 mortgage for the original $625,000 purchase of the garden plot at 5050 South Greenwood Avenue. In a sworn statement a year later Mrs Rezko said that she had a salary of $37,000 and $35,000 in assets. Mr Rezko told a court that he had "no income, negative cash flow, no liquid assets, no unencumbered assets (and) is significantly in arrears on many of his obligations".
Mrs Rezko, whose husband goes on trial on unrelated corruption charges in Chicago on March 3, refused to answer questions about the case when she spoke by telephone to The Times. Asked if she used money from her husband to buy the land next to Mr Obama's house, she said: "I can't answer these questions, I'm sorry."
Asked how long she and her husband had known Mr Auchi, she replied: "I will not be able to answer this question." Mr Auchi's lawyer, asked whether the Fintrade Services loan was used to buy the land which became Mr Obama's garden, stated: "No, not as far as my client is aware." Mr Auchi's links with Mr Rezko are a new political headache for Mr Obama, the Illinois senator vying to become America's first African-American president. Hillary Clinton has sought to make Mr Rezko, who has bankrolled Mr Obama's political career since his first run for the Illinois state senate in the mid-1990s, into an election issue by calling him a "slum landlord" in a televised debate. She has suggested repeatedly that Mr Obama has not been "vetted" by media scrutiny and will not withstand "the Republican attack machine".
Bill Burton, a spokesman for Mr Obama, told The Times: "The bottom line is, Obama does not recall ever meeting him (Mr Auchi)."
The house and garden deal raised questions about whether Mr Rezko, a property developer and fast-food restaurateur, made it possible for the Obamas to purchase a mansion they could otherwise not afford.
Mrs Rezko paid the asking price for the garden but the Obamas bought the house for $1.65 million, - $300,000 less than the asking price. The sellers deny that they offered the Obamas a discount on the house because the garden had fetched full price from Mrs Rezko.
Mr Rezko has since been indicted for allegedly scheming to pressure companies seeking business with the state of Illinois for kickbacks and contributions to the campaign of the Governor, Rod Blagojevich.
A prosecution document filed last month alleged that a "political candidate" - identified by the Chicago Sun-Times as Mr Obama - received a $10,000 campaign contribution from what is said to be a $250,000 kickback in the corruption case. That means Mr Obama's name could figure in Mr Rezko's trial, although he is not accused of any wrongdoing.
Mr Obama insists that he never used his office to do favours for Mr Rezko but admits that, as an Illinois state senator, he once wrote letters to housing officials urging them to provide money in support of a proposed apartment building for elderly people that Mr Rezko wanted to build.
Mr Obama has sought publicly to atone for his closeness to Mr Rezko, paying $150,000 to charity to distance himself from a man accused of political corruption.
The spotlight fell on Mr Rezko's ties to Mr Auchi last month when the Chicago businessman was thrown in jail for violating his bail terms by failing to declare a different $3.5 million loan from the British billionaire, made in April 2007. Prosecutors feared that Mr Rezko, who travels widely in the Middle East, might flee to a country without an extradition treaty, such as Syria, his birthplace.
Mr Auchi was convicted of corruption, given a suspended sentence and fined £ 1.4 million in France in 2003 for his part in the Elf affair, described as the biggest political and corporate scandal in postwar Europe. He, in a statement from his lawyers, says that he is appealing against the sentence.
Mr Auchi founded his Luxembourg-based General Mediterranean Holding (GMH) in 1979, a year before he left Iraq. He says that he did business with his native country when it was considered a friend of the West but ceased to trade with the late Saddam Hussein's regime once sanctions were imposed after the invasion of Kuwait.
Mr Rezko has told a court that Mr Auchi is a "close friend". Mr Auchi's lawyer told The Times: "It is untrue that my client and Mr Rezko are "close friends". Mr Auchi first met Mr Rezko after the 2003 Iraq war and they have a business relationship.
Mr Rezko and Mr Auchi have been partners in a pizzeria business in the Midwest and a 62-acre (25ha) land development in Riverside Park in Chicago. According to court documents, Mr Rezko's lawyer said that his client had "longstanding indebtedness" to Mr Auchi's GMH. By June 2007 he owed it $27.9 million.
Under a loan forgiveness agreement described in court, Mr Auchi lent Mr Rezko $3.5 million in April 2005 and $11 million in September 2005, as well as the $3.5 million transferred in April 2007. That agreement provided for the outstanding loans to be forgiven in return for a stake in the Riverside Park development.
A posting last week on a GMH-owned website, middle-eastonline.com, portrayed Mr Auchi as a Middle Eastern "Donald Trump" with a global business construction empire.
Mr Auchi visited the United States in 2004. Pictures show him meeting Emil Jones, the president of the Illinois state senate, an ally of Mr Obama, a former state senator.
Mr Auchi and Mr Obama say that they have no memory of meeting. But, according to a source, the two may have had a brief encounter at the Four Seasons Hotel in Chicago where Mr Auchi's visit was being honoured with a dinner attended by the governor when Mr Obama, coincidentally in the hotel, dropped in. An aide to Mr Obama said that he did attend an event at the Four Seasons at which Mr Rezko was present, but does not remember meeting Mr Auchi.
Prosecutors say that, after Mr Auchi was unable to enter the US in 2005, Mr Rezko approached the State Department to get him a visa and asked "certain Illinois government officials to do the same". Mr Obama denies that he was approached. Mr Auchi's lawyer has emphasised to The Times that it would be false to imply that money had been lent by GMH to Mr Rezko in return for Mr Rezko seeking to assist Mr Auchi to obtain a visa.
Mr Auchi's lawyer said that the purpose of the Fintrade Services loan was to "assist the financial position" of a pizzeria company called AR Pizza, in which GMH held a shareholding. He said that the loan had since been repaid in the form of a greater stake in the Chicago 62-acre land project.
Mr Auchi's lawyer said: "My client played no part in the management and/or day to day running of AR Pizza, the GMH Group being an entirely passive investor in the company. Further, there was no need as a minimum return on the investment was guaranteed. As to the court proceedings, my client is not a party to these."
Mr Rezko was a fundraiser for Governor Blagojevich. The governor's chief fundraiser, Christopher Kelly, who also served as his gambling adviser, is fighting tax charges.
*Read our blog dedicated to the White House race timesonline.co.uk/acrossthepond
DEALS AND LOANS
Spring 2004 Nadhmi Auchi visits Illinois and Michigan, attending an event at Four Seasons Hotel. Senator Obama shakes his hand
2004 Mr Auchi makes first investment in 62-acre land development project Riverside Park in Chicago
June 16, 2004 AR Pizza established in Delaware. Mr Auchi is "passive investor"
April 28, 2005 Mr Auchi's General Mediterranean Holding (GMH) lends $3.5 million to Tony Rezko
May 23, 2005 Fintrade Services SA, a Panamanian company related to Mr Auchi, registers loan to Mr Rezko, secured by Mr Rezko's stake in AR Pizza
June 15, 2005 Mr Rezko's wife, Rita, buys garden plot on same day as Obamas buy neighbouring mock-Georgian mansion from same seller
September 30, 2005 GMH makes $11 million loan to Mr Rezko
November 2005 Mr Rezko lobbies to get a US visa for Mr Auchi
January 2006 Mrs Rezko sells 10ft strip of garden to the Obamas for $104,500
November 2006 Mr Rezko tells court he is broke
April 4, 2007 Mr Auchi's GMH makes $3.5 million loan to Mr Rezko
January 28, 2008 Mr Rezko jailed for violating his bail by failing to declare $3.7 million in payments from Mr Auchi's companies
March 3, 2008 Mr Rezko's corruption trial due to begin in Chicago
Source: Times database
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