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Family Law

Feinstein Conflict Allegations 'Aren't Going Away,' Watchdogs Say

Why is this on my blog, you may ask. Well, the conflict allegations are apparently that if Feinstein's husband owns a company, and that company is community property, Feinstein herself has an interest in it. Plus, I was interviewed on the issue and, well, had to put it up for that reason too.

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Feinstein Conflict Allegations 'Aren't Going Away,' Watchdogs Say
Fred Lucas
Staff Writer
(CNSNews.com) - Sen. Dianne Feinstein may have had as much of a financial interest in two defense contractors as her husband who controlled them, according to California law.

The state's "community property law" could be relevant at a time when the senior Democratic senator from California is facing allegations of a conflict of interest and growing calls for an inquiry.

Feinstein stepped down late last year from the Senate Appropriations Committee's subcommittee on military construction (MILCON) after five years on the panel. The subcommittee was charged with reviewing construction projects, some of which were awarded to the Perini and URS firms owned by Feinstein's husband, Richard Blum.

Feinstein spokesman Scott Gerber said earlier that she left the subcommittee not out of conflict but to be chair of the interior appropriations subcommittee.

The "community property" law in force in California says that any income earned, assets obtained or debts incurred by either partner during a marriage belongs to both partners. The law is typically applied during a divorce, explained family attorney Tilden Moschetti of San Francisco.

"A business started during the marriage would definitely be community property," Moschetti told Cybercast News Service. "If not [started] during the marriage, there would still be some community interest, but not 50-50."

Moschetti said he would need more details before he could assess the Feinstein case regarding Blum's companies, but he said she "quite possibly" would be regarded as an owner.

It would be a tough sell to argue otherwise, said Jerry Maly, a certified financial planner and certified public accountant in Houston, Texas, one of nine states that have the law.

"Every penny that belongs to one party belongs to the other party," Maly told Cybercast News Service. "She gets 50 percent of all the contracts. It flows into her own pocket. She might say it's her husband's company. But it's community property assets."

Feinstein spokesman Gerber said none of this was relevant, because Feinstein took no action while serving on the committee for financial gain.

"Neither Sen. Feinstein, nor her office sought to award contracts," Gerber told Cybercast News Service. He added that Congress does not award military construction contracts - the Pentagon does. MILCON is just one review that a project gets before it is approved, he said.

Feinstein also was not privy to extra information on military project via her membership on the subcommittee, Gerber stated. "There was no insider information, it was public information," he said.

'We're keeping track'

But government ethics groups like Judicial Watch counter that Congress often knows what companies are in the best position to bid on a project. Thus, deciding what projects to fund - a powerful role of budget appropriators - can be an indirect way to boost a project.

"I don't think this issue is going away for Sen. Feinstein," Judicial Watch President Tom Fitton told Cybercast News Service. "She was involved in the decision-making process that involved her family's finances."

In the age of earmarks, it's not enough to claim Congress doesn't award contracts, said Tom Schatz, president of Citizens Against Government Waste (CAGW), a taxpayer watchdog group critical of both parties' spending.

"That's what Duke Cunningham said, not to make the comparison," Schatz told Cybercast News Service, referring to the California House member now in federal prison for accepting bribes. "Members know where an earmark is going ... We are keeping track of this."

Last week, David Keene, chairman of the American Conservative Union, wrote an op-ed for The Hill, a Capitol Hill newspaper, calling Feinstein's case "the classic conflict of interest that exploited her position and power to channel money to her husband's companies."

"On the face of it, it seems like there are enough hard facts here," Keene told Cybercast News Service. "Nobody is guilty of anything until it's proven. But if appearances are true, she could be the poster child for improprieties."

The op-ed prompted Feinstein defenders to respond.

A blog for the Sunlight Foundation, another government watchdog group, posted items last week and on Monday defending Feinstein. The Sunlight Foundation is run by a close associate of Blum.

The blog, written by longtime investigative reporter Bill Allison, refers to California freelance journalist Peter Byrne, who broke the story for Metro Active, an alternative weekly in Silicon Valley. "Evidence Byrne cites, when closely examined, either doesn't support or in fact contradicts the allegations he makes."

Sunlight Foundation board chairman Michael Klein said that while he was on the Perini board, he provided information on company projects to Feinstein's office.

This was anything but nefarious, said Klein.

In a letter to the Metro Active newspaper, Klein wrote that "Perini, acting through me, would periodically alert a senior staffer in the senator's office to any proposed Perini bid that might depend on new funding so that the senator could avoid any action to aid Perini."

Klein could not be reached for comment Monday.

In a statement, CAGW said, "The fact that [Feinstein] knew which contracts her husband was involved in is troubling."

The Sunlight blog information is similar to a nine-page written statement released by Feinstein's office last month calling much of the report from the California newspaper "fiction." The statement from Feinstein's office pointed to several aspects of the article it considered hyped or taken out of context.

The statement from Feinstein's office further repeatedly states the Pentagon - not Congress or the subcommittee she served on - awards military construction contracts.

This was never the contention of the story, Byrne said.

"It's a simple story really. I said Blum controlled the company and that hundreds of millions of dollars in projects were approved by the committee," Byrne told Cybercast News Service.

"I never said she approved contracts. He [Gerber] has recast the story into accusations she was steering contracts, then denying allegations I never made. I've showed her not recusing herself when it would be ethically sensible to do so," Byrne added.

Ethics Committee ruling

Feinstein was "proactive" in seeking guidance from the Senate Ethics Committee on the matter, Gerber said. The committee paved the way for her to serve on the committee from 2001 through 2006 as both chairwoman and ranking member.

The committee's ruling was not for public viewing, but Gerber said it related to rule 37 of the Senate ethics code regarding conflicts of interest.

"The specific guidance from the [ethics] committee is confidential, but the guidance was based on relevant portions of the ethics rules," Gerber said.

"That guidance confirmed that, given the facts, Senator Feinstein could fully consider, debate, and vote on broad appropriations bills and serve in her role on the military construction appropriations subcommittee," Gerber added.

That should not be the last word on the matter, said Fitton.

"A, the Senate Ethics Committee can't absolve her of any potential federal law violation," said Fitton. "B, the ethics committee could be wrong. C, they haven't seen all the potential conflicts; or D, they could be completely right, but we'll only know if we look at this further to find out."

From San Francisco Family Law Blog posted 2007-05-08.

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