McCain Camp Ramps Up Attacks on Obama-Rezko Ties

The McCain campaign, frustrated over their inability to dent Barack Obama over his ties to radical Bill Ayers, is ramping up attacks on the Democratic presidential candidate's connections to convicted developer and political fixer Antoin "Tony" Rezko. A new video, just released by the Republican National Committee this week, revives charges about a relationship that first came up last spring during the Democratic primaries. The McCain campaign has also begun "robo" calls and direct mailings and is preparing TV ads on Rezko that will "likely" run next week, said a campaign official who asked not to be identified. The calls and mailings will focus in part on a controversial 2005 house purchase by Obama that was made the same day Rezko, a longtime fundraiser for the Illinois senator, bought the vacant lot next door. Critics have alleged that Rezko's purchase helped Obama to buy his south Chicago house—a charge that Obama has strongly denied even while acknowledging that one of his later dealings with Rezko over the house showed "a lapse in judgement."

"Who is Barack Obama?" blares the headline in one of the McCain mailings, which includes a photo of Obama's house under the caption, "What has Rezko done for Obama?" The new GOP video also displays headlines about a recent lawsuit filed by a former real estate analyst against a Chicago area bank that makes new allegations about improper handling of a loan to Rezko and his wife that enabled them to buy the vacant lot next to the Obamas. The lawsuit makes no allegations of wrongdoing against Obama—and the Democratic presidential candidate is not a party to the suit against the Mutual Bank of Harvey, Illinois.

GOP operatives have been pressing the news media to write about it in hopes of reviving questions about why Obama maintained relations with Rezko even after he had been publicly identified as a key figure in an Illinois corruption probe. "Unfortunately, the Rezko issue has not received the attention many believe it should," said Danny Diaz, a spokesman for the RNC.

On Saturday, Ben LaBolt, a spokesman for the Obama campaign said: "At a time when we're facing the greatest economic crisis since the Great Depression, the fact that the McCain campaign wants to spend the final 10 days of this campaign on questions about a vacant lot that have already been answered by almost every major news organization in the country proves once and for all how fundamentally out of touch and out of ideas they are. We're confident the American people will reject the latest smear tactics from the McCain campaign just as they've rejected all their others."

But privately Obama strategists have been anticipating a last-minute attack on Rezko for months. The campaign last spring even prepared its own mock attack ads about Rezko (and other figures from Obama's past, such as the Rev. Jeremiah Wright) and then showed them to focus groups to figure out ways to deflect the attacks, according to a recent NEWSWEEK account.

So far, the McCain campaign has focused its harshest attacks on Obama's loose ties to Bill Ayers, an education professor and former Weather Underground radical with whom the Illinois senator served on two non-profit boards. But there is little sign that the attack ads on Ayers, whom McCain has called a "washed-up terrorist," have succeeded in raising questions about Obama's judgment—in part because there is no indication the two men were ever actually close.

Obama's relationship with Rezko was far more extensive, however. Rezko was for years a principal fundraiser for Obama, having brought in over $250,000 for the Democrat's state Senate races and his 2004 U.S. senate campaign. During Obama's Senate race, Rezko served on his finance committee. For a period during that campaign, "I would probably be talking to him once a day," Obama said in an interview with the Chicago Sun-Times last March.

Two years ago, the Chicago Tribune disclosed that Obama and Rezko purchased adjoining properties from a single seller on the same day in June 2005. The seller, Dr. Fredric Wondisford, now a professor at Johns Hopkins Medical School in Baltimore, had insisted that both properties close at the same time. Obama paid $1.3 million—$300,000 less than the original asking price—for the Georgian mansion on his property. Rezko paid nearly the full price, $625,000, for the vacant lot next door. Obama has acknowledged in several press interviews that he alerted Rezko to the availability of the adjoining property, but said that Rezko made the decision to buy the lot on his own without coordinating his offer with Obama. The Obama campaign says that Obama's offer of $1.3 million was the highest bid on the home. Rezko, who has faced legal troubles ever since the issue arose, has never addressed the matter.

Seven months later, on Jan. 4, 2006, Obama paid Rezko $104,000 for a strip of the developer's land so he could expand his side yard. Obama has conceded this later deal was a "boneheaded" mistake on his part, given that the Chicago news media had run multiple stories by that time reporting that Rezko was under scrutiny as part of a wide-ranging political corruption probe being conducted by U.S. Attorney Patrick Fitzgerald. One such story, in the Chicago Sun-Times, appeared on Dec. 31, 2005—the week before Obama bought the side strip from Rezko. The article reported that federal prosecutors had subpoenaed Rezko-related businesses as part of an investigation into the awarding of Illinois State Toll Highway Authority leases.

"It was a mistake to have been engaged with him at all in this or any other personal business dealing that would allow him, or anyone else, to believe that he had done me a favor," Obama told the Chicago Sun-Times when he was first questioned about the purchase in November 2006. "For that reason, I consider this a mistake on my part, and I regret it."

Rezko, who was indicted in October 2006, was convicted last June on 16 felony charges of fraud, money laundering and aiding and abetting a bribery scheme involving businesses seeking Illinois state business. His sentencing, at first scheduled for Oct. 28, was recently postponed to give his lawyers time to work out a cooperation agreement with federal prosecutors in their ongoing corruption probe, which is primarily focused on Democratic Illinois Gov. Rod Blagojevich. Blagojevich has not been charged and has denied any wrongdoing.

A recent lawsuit filed by Kenneth J. Conner, a former real estate analyst, against Mutual Bank of Harvey, Ill., for wrongful termination, includes an exhibit indicating for the first time that loan records of the Rezkos' purchase of the vacant lot next door to Obama has come up in Fitzgerald's investigation. The exhibit is an Oct. 19, 2006, e-mail distributed among bank executives referring to a "grand jury subpoena" for "Rita Rezko's loan" for the property at 5050 S. Greenwood Avenue—the lot adjacent to the Obamas. There is nothing in the lawsuit that indicates why federal prosecutors subpoenaed the records. But the subpoena was issued at a time when they were intensely examining all of Rezko's business dealings. A spokesman for the U.S. attorney's office declined comment. LaBolt, the Obama spokesman, told NEWSWEEK that Obama has never been contacted by Fitzgerald's prosecutors.

In the lawsuit, filed in Cook County Circuit Court last week, Conner claims that he was asked to review the bank's appraisal of the property purchased by Rezko after the bank learned that he was selling a slice of it to Obama. Conner says he concluded that the bank's appraisal of the property was "overvalued" by $125,000 and that, based on comparable prices of nearby properties, the vacant lot that the Rezkos paid $625,000 for was worth no more than $500,000. To back up his own conclusion, he included as an exhibit an appraisal that Obama paid for in November 2005, which assessed Rezko's property to be worth $490,860—about the same as Conner's assessment and also far less than Rezko and his wife paid for it. The president of Mutual, Amrish Mahajan, personally approved the loan to Rezko's wife and had an "established relationship" with Rezko, according to the lawsuit.

GOP critics have charged that, given the insistence of the seller to close on both properties at the same time, Rezko's willingness to pay an inflated price for the lot next door to Obama was a financial favor to him. Obama, they charge, later returned the favor by paying the $104,000 price for the side strip (one sixth of Rezko's lot) when his own November 2005 appraisal only valued the strip at $40,000. Obama has said that he offered the $104,000 price because it was one sixth what Rezko paid for the entire lot and he did not want to be perceived as taking any favors from the developer. This week, in an effort to dispute the suggestion that Rezko overpaid for the vacant lot, the Obama campaign solicited an e-mail from the seller in which he confirmed that there was an earlier offer for the same amount of $625,000 for the property.

Connor alleges in his suit that his objections to the Rezko loan led to his dismissal from the bank in October 2007. He also claims that after Mutual Bank received the grand jury subpoena for the loan, bank officials tampered with the Rezko file and removed his report challenging the validity of the earlier appraisal. "If the FBI were to ask me about such matters, I would tell them the truth," Conner wrote in an Oct. 15, 2007, e-mail to a bank official eight days before he was fired, according to another exhibit.

A lawyer for Mutual did not respond to requests for comment on the lawsuit. Conner's lawyer, Glenn Gaffney, said the bank has not yet been served with a copy of the complaint and has not filed a response.

Conner's lawsuit suggests that there may have been other issues creating problems for him at the bank. While including a positive job-performance evaluation he received from the bank in December 2006, he also states in his lawsuit: "During the calendar year 2007, Conner had to overcome a non-disruptive health condition as well as repeated, ongoing and well-documented unprofessional and harassing conduct from a group of female co-workers, all of which was made known to Mutual Bank's management."

Other records in the lawsuit indicate that the medical condition Conner was referring to was a sleeping disorder. He said in an interview with NEWSWEEK that he had "no political motivation" in filing his lawsuit, adding that when he first challenged the validity of the appraisal on the Rezko property, "I didn't even know that Barack Obama had anything to do with the transaction."

"I was wrongfully terminated and I'm pursuing a case on that basis," he said in a telephone interview. "I talked to some Democratic lawyers who wouldn't touch my case. It's taken a great deal of perseverance and sacrifice on my part to see this case through to its filing."

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