OBAMANSION A HOUSE OF CARDS

Research started here, and here and here

Tony Rezko was obviously in trouble. He was a defendant in at least a dozen lawsuits, federal investigators in Chicago were poking around, and his name was in newspaper articles about corruption and fraud. None of that stopped Mr. Rezko, a politically connected developer, and Senator Barack Obama from completing real estate deals a few years ago that resulted in the Obamas obtaining their dream house and the Rezkos buying an empty lot next door.
Nearly three years later, fallout from Mr. Obama’s relationship with Mr. Rezko, who raised more than $150,000 for Mr. Obama’s campaigns, continue to dog Mr. Obama on the presidential campaign trail. That distraction promises to linger as Mr. Rezko goes on trial on corruption charges starting Monday. Rezko is accused of shaking down companies seeking business with the State of Illinois.

But a review of court records, including new details of Mr. Rezko’s finances that emerged recently, show that the lot purchase occurred as he was being pursued by creditors seeking more than $10 million, deepening the mystery of why he would plunge into a real estate investment whose biggest beneficiary appears to have been Mr. Obama.
As Mr. Obama and Mr. Rezko were completing the property purchases in June 2005, Mr. Rezko was fighting to keep lenders and investors at bay over defaulted loans and failing business ventures. But he side-stepped that financial dragnet by arranging for the land to be bought in his wife’s name, making it the only property she owned by herself, according to land records.
When the property deals first surfaced in late 2006, Mr. Obama said he had done nothing wrong. In a statement at the time, he also said: “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.”

Mr. Obama has said he did not know why Mr. Rezko decided to buy the lot. Business associates of Mr. Rezko said he gave various explanations, among them that he wanted to help the Obamas expand their backyard and that he thought it would be a good investment to own a lot next to a prominent politician. But Mr. Rezko’s involvement was important because the owners of the house and the lot had stipulated that neither could be sold unless a deal for the other closed on the same day.

What is Rezko's connection to Obama? The two men met after Obama graduated from Harvard Law School. The developer offered the young lawyer a job at his real estate company. Obama turned him down. But as it happened, the law firm Obama went to work for represented a nonprofit group that participated in some of Rezko's low-income housing developments. Obama himself did a small amount of legal work on Rezko-related matters—about six billable hours over a two-year period, according to Obama's campaign. When Obama embarked on a political career, Rezko and his associates contributed generously to his campaigns.

Did Rezko help Obama buy a house? In June 2005, Obama and his wife, Michelle, purchased a large home on Chicago's South Side. The owners of the property wanted to sell both the house and the adjacent lot as a package deal, but the Obamas didn't want to buy the extra land. Obama consulted his friend Rezko, who had once lived in the same neighborhood. In transactions that closed at the same meeting on the same day, Obama bought the house for $1.65 million—$300,000 less than the sellers had originally asked— and Rezko's wife, Rita, bought the lot next door for $625,000. Several months later Rita Rezko sold the Obamas a strip of the vacant lot for $104,500. Several months after that, Tony Rezko was indicted by the Feds on the unrelated charges.

Is there an Obama connection to Rezko's trial? Federal prosecutors have accused Rezko and an associate (who turned state's evidence) of operating a "pay to play" scheme: investment firms allegedly had to pay kickbacks or make political contributions to get money from the Illinois teachers' pension fund. In a court filing, prosecutors described how $10,000 of alleged finder's fee money was subsequently contributed to the campaign of an unnamed "political candidate" for whom Rezko was a fund-raiser. Chicago media have reported that the money went to Obama's 2004 Senate campaign.

How troublesome is Rezko for Obama's campaign? The candidate's supporters say that nobody has demonstrated anything illegal about his dealings with Rezko. No one has shown that Obama did favors for Rezko in exchange for contributions. Obama has acknowledged that, as an Illinois state senator, he once wrote a letter to a state agency urging financial support for a senior-citizens project in which Rezko was an investor. But Obama says he wrote the letter based on the project's merits. Even so, by Obama's own account his real-estate entanglement with Rezko was a "boneheaded" mistake.

SO MUCH FOR THE OBAMA CLAIM THAT HE USES "GOOD JUDGEMENT"

Mr. Rezko had troubles, deep troubles paying his debts, leaving many to wonder where he got the money to purchase the adjacent lot. Now we know, Rezko had come into money two months earlier, when he obtained a $3.5 million loan from a Panamanian company controlled by his friend and business partner, Nadhmi Auchi, an Iraqi billionaire who was convicted several years ago in France on fraud charges.

For at least two years before the property purchases, news articles had raised questions about Mr. Rezko’s influence over state appointments and contracts. There had also been reports that the F.B.I. was investigating accusations of a shakedown scheme involving a state hospital board to which Mr. Rezko had suggested appointments. Also, Chicago officials had announced that they were investigating whether a company partly owned by Mr. Rezko had won public contracts by posing as a minority business. As a result, said Jay Stewart, executive director of the Better Government Association in Chicago, Mr. Obama “should have been on high alert.”