CB Richard Ellis’ internal denial on Feinstein allegations to employees
posted at 5:20 pm on April 22, 2009 by Ed Morrissey
Earlier today, an employee of CB Richard Ellis forwarded me an internal memo distributed to all employees after the Washington Times exclusive on alleged abuse of power and conflict of interest by Senator Dianne Feinstein. The senior Senator from California allegedly pushed $25 billion to the FDIC in unusual federal funding at the same time the agency was granting a bid by CBRE to manage its residential-foreclosure properties and sell them at higher-than market commissions. CBRE’s board chairman is Richard Blum, Feinstein’s husband.
Needless to say, CBRE isn’t exactly impressed with the Washington Times, but their logic seems a little short of the mark here. I’m posting the memo in its entirety to ensure readers see the entire context. I’m removing the names on the memo, as they’re not really material to the story. An e-mail to CBRE’s media office has so far not been answered:
Date: April 22, 2009
To: All U.S. Employees
From: [name redacted by HA]
Subject: FDIC Contract
CC: [names redacted by HA]
A very irresponsible and sensational article about our FDIC contract was published yesterday in a second-tier Washington newspaper with a well-known political agenda. Given today’s viral news environment, the article has subsequently been picked up on certain political Internet sites and has also appeared in more legitimate news outlets. I wanted to discuss the article with you.
The article is an attack piece and attempts to contrive a connection between our FDIC contract and the fact that our Chairman, Dick Blum, is married to Dianne Feinstein, the senior Senator from California. The article makes the inference that Senator Feinstein influenced our involvement in the FDIC program. However, the article never actually draws any connection whatsoever between the Senator and the FDIC contract or Dick Blum, for that matter.
As Chairman of the Board, Dick helps to set the company’s strategic direction, but he does not get involved in day-to-day operational decisions, including client service or contract bidding. Dick had no advance knowledge whatsoever that we were pursuing the FDIC opportunity, and only discovered we were awarded this contract when Brett issued his internal employee announcement on November 26. Equally, Sen. Feinstein had no knowledge of our work for the FDIC, as an article in the San Francisco Chronicle explains. Frankly, given all the challenges Sen. Feinstein is dealing with, she has other more important priorities to focus on than CBRE’s day-to-day operations.
Ironically, the article highlights legislation she introduced (which was subsequently superseded by the President’s stimulus plan) that was designed to help stem property foreclosures. Since CBRE is paid under the FDIC agreement only by handling foreclosed properties, it is unclear just how CBRE would supposedly have benefited from the Senator’s proposed legislation.
The reporter, relying on quotes from some local real estate agents, questions our qualification to handle foreclosure sales and the commission rates and fees under the agreement. The fact is that CBRE was selected for this assignment – along with one other firm – as the result of a highly competitive, multi-faceted bidding process that involved more than 30 firms. We had a team of people working continuously on this opportunity for more than nine months, responding to a written request for proposals, preparing oral presentations and developing pricing schedules based on the FDIC models. Our broad service offering, national office network and specialty services focused on both serving the public sector and restructuring and repositioning failed assets made us ideally suited to assist the FDIC with managing and disposing of its Owned Real Estate portfolio.
Contrary to what’s alleged in the article, we have extensive in-house expertise in working with property foreclosures. Ken Pearson, who heads our FDIC team, is a highly experienced bankruptcy attorney who has represented the Resolution Trust Corporation and other clients in loan restructurings, foreclosures and receiverships. Our subcontractor, Realogy, the nation’s largest residential real estate brokerage company, adds complementary residential expertise.
The article also questions our pricing under the FDIC contract. You should know that the rates we are charging were developed in accordance with the pricing matrix the FDIC provided to all service providers bidding for the work. We accepted the matrix as part of our bid submission. We believe our pricing is at market for a highly complex assignment with significant and frequent reporting requirements, and is consistent with rates the other FDIC service provider is charging.
The revenue opportunity under the FDIC contract is unknown, but under any scenario, the amount of money we will earn will be immaterial (well less than one percent of revenue) for a $5 billion company, and the FDIC will receive significant value for our work.
During the months leading up to the publishing of the article, we provided the reporter all the pertinent facts about the FDIC contract. It is unfortunate that he and his editors would elect to discount these facts and move forward with an article that, objectively, had very little basis for being published.
We are proud to serve our government during this extremely stressful time in our nation’s history, and to play a small role in helping to correct the imbalances that had developed in the marketplace.
Consistent with corporate policy, should anyone from the news media contact you about the FDIC contract, please refer them to Steve Iaco or Bob McGrath in Corporate Communications.
This rebuttal is rather weak tea:
The article makes the inference that Senator Feinstein influenced our involvement in the FDIC program. However, the article never actually draws any connection whatsoever between the Senator and the FDIC contract or Dick Blum, for that matter.
Yes, it makes a strong inference that at the time the FDIC considered a contract that would greatly benefit a firm that her husband ran as board chairman and in which the two have a significant community-property financial stake, Feinstein pushed for $25 billion in funding — when the government had never funded FDIC at all in the past. It ran from insurance proceeds from member banks. Did the Times establish an explicit quid pro quo? Not yet, but the circumstances of this transaction were highly unusual, and certainly bear some investigation to see whether a quid pro quo exists. Bear in mind, too, that Feinstein has no connection to the Senate Banking Committee, which has jurisdiction over the FDIC, which makes her funding bill even more unusual.
As Chairman of the Board, Dick helps to set the company’s strategic direction, but he does not get involved in day-to-day operational decisions, including client service or contract bidding. Dick had no advance knowledge whatsoever that we were pursuing the FDIC opportunity, and only discovered we were awarded this contract when Brett issued his internal employee announcement on November 26.
Compare that passage to this:
The fact is that CBRE was selected for this assignment – along with one other firm – as the result of a highly competitive, multi-faceted bidding process that involved more than 30 firms. We had a team of people working continuously on this opportunity for more than nine months, responding to a written request for proposals, preparing oral presentations and developing pricing schedules based on the FDIC models.
So the man who had bought ten million shares to deepen his own investment in CBRE had no idea about a proposal for a lucrative government contract that took a team of executives nine months to develop, including oral presentations? He just decided to have his investment company buy ten million shares on a whim? The sun came out, and a little birdie told him that the shares would rise in value from $3.77 to $5.14 after the contract award, creating a $13 million profit? It could be true, but it almost requires a belief in the Tooth Fairy to buy that explanation.
Frankly, given all the challenges Sen. Feinstein is dealing with, she has other more important priorities to focus on than CBRE’s day-to-day operations.
This is really the best question of all. Given all of the challenges Feinstein is “dealing with”, why did she take it upon herself to get involved in business that falls under the purview of the Senate Banking Committee, on which she does not serve? She’s not on the subcommittee that deals with insurance or the one that oversees financial institutions, which has jurisdiction over the FDIC. Yet Feinstein, out of nowhere, sends a letter announcing her intention to give the FDIC $25 billion in an unprecedented funding mechanism the same week they chose CBRE for the contract?
CBRE says that the potential revenue on the contract will be negligible, but obviously they didn’t think it negligible when they put a team of executives on it for nine months. They also got very favorable terms, with monthly maintenance fees and an above-market commission rate on all sales. It’s a darned good deal for CBRE and those who invested in the company before they received the award. I guess it’s just a coincidence that Feinstein’s husband happens to have put himself and his investment firm in that position.
Update: Haven’t heard back from CBRE, but Senator Feinstein’s office has responded with a couple of denials. When they have it on their website, I’ll add the links. Here’s the substantative part of the first denial:
Today’s piece in the Washington Times makes inaccurate and unfair suggestions of impropriety that are simply not supported by facts.
Senator Feinstein had no knowledge of CB Richard Ellis’ receipt of an FDIC contract before the Washington Times made an inquiry on January 21st. There is no evidence of any conflict of interest – or any connection – between the Senator’s foreclosure relief bill and CB Richard Ellis winning a competitively-bid contract, which was awarded – unbeknownst to her – by non-political career staff.
California is besieged by foreclosures – the state has the nation’s highest number of foreclosures, with 837,665 foreclosures filed in 2008 alone. In the first quarter of 2009, California has seen another 230,915 foreclosure filings – a 35 percent increase over the fourth quarter of 2008. The foreclosure relief bill was only one of many actions Senator Feinstein has taken to address this crisis.
Senator Feinstein learned of FDIC Chairman Sheila Bair’s proposal for foreclosure relief for homeowners from news reports, expressed her support in a letter, and introduced legislation to allocate $25 billion from the Troubled Assets Recovery Program (TARP) to implement it.
Subsequently, the President, by executive order, allocated $75 billion in federal funds for a foreclosure relief program similar to the Bair plan. Consequently, Senator Feinstein’s legislation was not necessary and no action on it has been forthcoming.
The Washington Times reporter frames his piece with distortions. He asserts that Senator Feinstein’s foreclosure relief bill was “an intervention on behalf of FDIC.” This is nonsense. Her sole motivation was to help struggling homeowners. Additionally, a federal agency does not benefit itself from administering federal funds which are designated to help citizens stave off foreclosure.
The reporter also wrongly asserts that it is “unusual” for Senator Feinstein to pursue legislation related to FDIC because she is not on the Senate Committee on Banking, Housing and Urban Affairs. But a simple examination of the Senator’s legislative record reveals that she has often pursued legislation that falls outside the scope of her committee assignments.
Below is a sample of bills that Senator Feinstein introduced in the last Congress:
A bill that established licensing standards for the mortgage industry, although she is not on the Banking, Housing and Urban Affairs Committee (enacted as part of P.L. 110-289);
A bill that closed the Enron Loophole, although she is not on the Agriculture Committee (enacted as part of P.L. 110-234);
A bill that banned harmful phthalates from children’s toys, although she is not a member of the Commerce Committee (enacted as part of P.L. 110-314);
A bill to raise fuel efficiency of America’s fleet of vehicles by ten miles per gallon over ten years, although she is not a member of the Commerce or Energy Committees (enacted as part of P.L. 110-140);
A bill to renew trade sanctions against the Burmese junta, although she is not a member of the Finance Committee (enacted as P.L. 110-52);
A bill to reduce the tariff on imported ethanol, although she is not a member of the Senate Finance Committee.
Senator Feinstein has the highest ethical standards and complies with all requirements of the Ethics Committee. Her legislative agenda is dictated by what she believes is best for the people of the United States and the people of California. Period. Any suggestion to the contrary is untrue and unfair.
The office includes a timeline of everything Feinstein did in Congress to deal with issues on the financial crisis, which is simply too lengthy and more or less irrelevant to the allegations of conflict of interest for me to include them here. Oddly, even though the two documents are dated yesterday, neither appear on Feinstein’s Senate website yet. When they do, as I said, I’ll add the links.
I’ll add this: if the Senate Banking Committee didn’t think it necessary to promise the FDIC a $25 billion chunk of the taxpayer’s money, the first direct federal funding in its history, why did Feinstein? At the same particular moment that the FDIC was considering the bid from CB Richard Ellis?
Update II: They have their full response posted here. Be sure to check it out.
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