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Op-Ed: Post office property sales and political connections in the U.S.

By Ken Hanly     Sep 24, 2013 in Politics
Richard C. Blum is married to well-known US Democratic Senator, Dianne Feinstein. He is also chair of CBRE a huge real estate company. CBRE also has an exclusive contract to sell off the US Postal Service's $85 billion real estate portfolio.
An edited version of the first chapter of an upcoming book by Peter Byrne, Going Postal can be found here. Historically, the United States Postal Service worked with more than one real estate agent. When the exclusive contract was awarded to CBRE in 2011, the company noted: "Historically, USPS has worked with multiple real estate service providers. The new contract enables USPS to consolidate these activities with one service provider." Of course this also provides CBRE with exclusive rights without any competing agents that would allow one to compare services.
In June of this year, Postal Service Inspector General David C. Williams published an audit quite critical of CBRE's exclusive contract. He noted that outsourcing these activities to a single company is "a fundamental change from how the Postal Service previously managed its real estate portfolio [and] Facilities officials should improve oversight to mitigate inherent risks associated with the CBRE contract .... Specifically, there are conflict of interest concerns."
Byrne claims that CBRE has violated its contractual duty to sell postal properties either at or above fair market values. This is hardly surprising. Governments often sell at fire sale prices in order to reduce deficits and help out their corporate friends. Even governments claiming to be socialist such as the former government in Greece sell off state assets and business enterprises to satisfy terms for bailout loans. Deficits provide great opportunities for private investors to acquire assets on the cheap.
Byrne compared assessed values of properties according to county records against the prices at which CBRE sold the properties. He found that the bulk of the properties were sold under their assessed values and often as well fair market values Chuck Zlatkin, Legislative and Political Director of the New York Metro Area Postal Union said of these findings: "Shocking as this information is, it is not surprising because we have seen a pattern of corruption at the Post Office ever since the manufacture of the health care benefit prepayment crisis. It is certainly not permissible for CBRE to sell property paid for by the public to its own business partners, or to anyone else, at a discount. In my opinion, CBRE's conflicts of interest contain an element of fraud." The Post Office has refused to disclose what CBRE's own appraisals are, arguing that the appraisals are sensitive commercial information akin to national security secrets. The company has refused to comment on the Byrne investigation.
Byrne notes that in Seattle, CBRE sold a post office building in 2011 for $8 million that was assessed at $16 million. In St. Paul, Minnesota, it sold an office building for $20 million under the 2009 value assessed for it a short time before it was put on the market by CBRE.
However, Byrne claims not only that CBRE sold properties at below market values but also to its own clients and business partners, including one of its own owners Goldman Sachs Group.
In some transactions CBRE has represented both buyer and seller and collected a commission as high as 6 per cent of the value of the transaction.
Byrne maintains that the Postal Service deficit is artificially created. This may be an exaggeration as there is an obvious decline in snail mail use that will hurt revenues. However, Byrne maintains that 80 per cent of the USPS multibillion-dollar deficit is the result of a law passed in 2006 that requires the service to pay retiree health benefits 75 years into the future. This requirement is unprecedented. He claims that if this burden were removed and business mail charged the actual cost of delivery that there would be no deficit. He claims Congressional reports show this.
Byrne points out that there are many forces pressing for privatization of the post office in the interest of competitors and also contractors such as Pitney Bowes. Steve Hutkins, a New York University professor discusses the issue here.
Usually real estate transactions are at "arms length" with different agents representing buyers and sellers. Each agent is trying to get the best deal for their client. However, CBRE sold 20 per cent of the properties to its own clients or even business partners. It even sold a parcel in Boston to Goldman Sachs one of its own business partners. CBRE should have been representing only the interests of the USPS not other parties especially those linked to CBRE. The CBRE contract was specifically amended in 2012 at CBRE's request to allow it to represent the interests of both buyers and sellers. However, not all the problems are the fault of CBRE. The June audit found that the Postal Services Division were not properly monitoring the contract. Blum's conflict of interest issues are not exhausted by the Post Office affair. According to Wikipedia: Blum's wife, Senator Dianne Feinstein, has received scrutiny due to her husband's government contracts and extensive business dealings with China and her past votes on trade issues with the country. Blum has denied any wrongdoing, however.[3] Critics have argued that business contracts with the US government awarded to a company (Perini) controlled by Blum may raise a potential conflict-of-interest issue with the voting and policy activities of his wife.[4] URS Corp, which Blum had a substantial stake in, bought EG&G, a leading provider of technical services and management to the U.S. military, from The Carlyle Group in 2002; EG&G subsequently won a $600m defense contract.[1]
In 2009 it was reported that Blum's wife Sen. Dianne Feinstein introduced legislation to provide $25 billion in taxpayer money to the Federal Deposit Insurance Corp, a government agency that had recently awarded her husband's real estate firm, CB Richard Ellis, what the Washington Times called "a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms."
Government is obviously doing what it was meant to do. Serve the interests of corporations and the elites connected to those corporations. This article is just a small sample of the extensive analysis in the Byrne article.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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