Obama's Rezko connection

(Originally published June 19, 2008)

SUMMARY: After Obama's longtime fundraiser was convicted on federal fraud and money laundering charges, the Republican National Committee went on the attack.

It didn’t take long for the Republican Party to pounce after Antoin "Tony" Rezko, a prominent longtime fundraiser for Sen. Barack Obama, was convicted on June 4, 2008, of federal charges of fraud and money laundering.

The day of the conviction, the Republican National Committee shot off a news release titled "Rezko: Obama’s longtime friend and money man." The next morning, it sent one titled: "Obama Must Answer Questions so the American People Can Decide."

There is plenty to scrutinize in Obama’s dealings with Rezko, a developer and political operative who has come to symbolize Illinois’ shadowy and infamous pay-to-play politics. But the news releases from the GOP distort facts to make Obama’s dealings with Rezko appear more nefarious than they really were.

For example, one asks, "Did Obama know that Tony Rezko was saving him $300,000 on the purchase of his home?"

By asking if Obama knew about it, the question presumes that Rezko did, in fact, save Obama $300,000 on the purchase of his home. He didn’t.

Now Obama did pay $300,000 less than the asking price for a century-old mansion he and his wife, Michelle, purchased from a Chicago doctor in 2005 for $1.65-million.

And on the same day the Obamas closed on their house, Rezko’s wife, Rita Rezko, bought a vacant lot next door from the same seller, at the full asking price of $625,000. Obama said it was his understanding that there was another offer for the vacant lot at or near the asking price, thereby setting the market.

Donna Schwan, with MetroPro Realty, which listed both the house and the vacant lot, recalled that there were several offers on both the house and the lot, though she could not remember the amount of those other offers and said she has since discarded the offer sheets.

"The most important thing to the sellers was to close on the same day," Schwan said, as they did not want one of the properties to sit unsold, alone.

The sellers also required the buyers to put off the closing until June 15, after their children had gotten out of school.

The fact that the Rezkos agreed to purchase the vacant lot on that date in mid June "could have been to their (the Obamas’) advantage, absolutely," Schwan said.

"Each was contingent on the other selling," she said.

One could certainly argue that the Rezkos’ purchase solidified the Obamas’ purchase. And that may have some value. But whether that saved the Obamas $300,000 is another matter. The GOP offers no proof that the price paid by the Obamas was anything other than a matter of negotiation, or that the Obamas would have had to pay $300,000 more if not for the Rezkos’ purchase.

The Obama campaign has posted an e-mail from the seller, Frederic Wondisford, in which he specifically confirmed that the Obamas’ offer of $1.65-million was the best offer received on the house. In fact, the seller rejected two lower offers from the Obamas before the two sides settled at $1.65-million.

Further, the seller confirmed that he did not offer the Obamas a discount on the price of the house "on the basis of or in relation to the price offered and accepted on the lot" purchased by Rezko. Lastly, Wondisford confirmed that it was he who insisted the closing for the two properties be completed on the same day.

Having the Rezkos as flexible buyers on the vacant lot might have helped the Obamas get the house they had been trying to buy, but there's just nothing to suport the GOP claim that the Rezkos saved the Obamas $300,000. We rule this GOP claim False.

The following year, the Obamas purchased a one-sixth strip of the Rezkos’ vacant lot to enlarge their yard.

In an interview with the Chicago Sun-Times in March 2008, Obama said he got an appraisal for the strip of land because he didn’t want to be perceived as paying below an appraised price. The appraisal came back at $40,000, but Obama ended up paying Rezko $104,500, one-sixth of what Rezko paid. It was a deal Obama came to regret, for appearance sake alone.

"But it’s fair to say at that time a red light might have gone off in my mind in terms of him purchasing his property next to mine, and the potential conflicts of interest," Obama told the Sun-Times. "And I think that’s the first stage of where I wasn’t sufficiently focused on how this would look.

"I think that a larger problem is me having bought the strip of land. At that point, it was clear that he was going to have some significant legal problems. But more to the point, even if he hadn’t‚ he was a contributor and somebody who was doing business with the state. For me to enter into a business transaction with him was a bad idea. I’ve said repeatedly it was a boneheaded move, and a mistake that I regret."

On December 28, 2006, the neighbors parted ways when Rezko's wife sold the property to a company owned by her husband's former business attorney, Michael J. Sreenan, for $575,000.

That sum, plus the $104,500 paid by the Obamas for the 1,500-square-foot strip, comes to a net profit of $54,500 for the Rezkos (though the Rezkos also paid $14,000 to erect a fence between the two properties). In October 2007, the new owners listed the vacant property for $1.5 million.

The GOP news release suggests Obama changed his story about not needing help to buy the home or the vacant lot next door.

"Could Obama have afforded his home without Rezko’s help?" the release asks.

"Obama originally said that he could not afford to purchase the parcel of land Rezko’s wife purchased and that the house itself was already a stretch."

"But Obama later said that he did not need help purchasing ‘both or either of the tracts’ of land involved in the purchase of his Chicago home."

The first statement is accurate. It comes from an interview Obama had with the Chicago Tribune, published on Nov. 1, 2006:

"It was ‘already a stretch’ to buy the house, Obama said, so the vacant lot was not affordable for his family."

The second quote is based on a Time magazine reporter asking Obama for a March 6, 2008, story: "Did you generally or expressively state a need for help in buying both or either of the tracts?" Obama: "No, I didn’t need help."

This isn’t the "gotcha" it’s made out to be. If Obama had no interest in the vacant lot next to the home (other than the sliver he purchased from Rezko a year later), he would have no reason to tell Rezko he needed help buying it. The answer is not a contradiction of his first statement. We rule this GOP claim False, too.

We also did some research to check out a GOP claim that "Obama has maintained a friendship with a now convicted felon."

There is no question Rezko was a longtime friend of Obama’s. In his interview with the Chicago Sun-Times, Obama detailed a relationship that dated back to when Obama was finishing law school at Harvard and Rezko approached him about coming to work for his development company. Obama declined.

Obama got to know Rezko, he said, when his law work overlapped occasionally with Rezko’s development business. But the two became friends when Obama made his first run for Illinois state Senate. Rezko was a key supporter and fundraiser for Obama.

"So we became friendly at that point, and through most of my years in the Senate, he was somebody I considered a friend, and I’d probably see maybe when I wasn’t in the midst of a campaign, I would probably see maybe six times a year," Obama said. "We’d have lunch or we’d have breakfast."

Obama and his wife, Michelle, had dinners with Rezko and his wife a couple times, Obama said, and they once visited the Rezkos’ home at Lake Geneva, in Wisconsin, for the day.

When Obama ran for U.S. Senate in 2004, Rezko served on his finance committee and was a significant fundraiser. Rezko even hosted a fundraising event in his home.

In the wake of Rezko’s October 2006 indictment, the Obama campaign took all campaign contributions tied to Rezko — $160,000 as of January 2008 — and donated them to charity. In the March interview with the Chicago Sun-Times, Obama said he still considered Rezko a friend, though he had not spoken to him since his indictment. That was October 2006.

In a statement issued after the verdict, Obama said he was "saddened" by Rezko’s conviction. "This isn’t the Tony Rezko I knew," Obama stated.

Obama said that if elected president, he would not pardon Rezko for his corruption convictions or reduce his prison time. Any implication that Obama actively continues to maintain a friendship with Rezko — getting together, even speaking on the phone — is misleading. But since "maintained a friendship" is a bit ambiguous and the GOP says it only meant that Obama had, in the past, maintained a relationship with Rezko, which he certainly did, we rate the GOP statement Mostly True.

This isn’t the first time PolitiFact has looked into a claim about Obama’s relationship with Rezko. In a Democratic debate in South Carolina on Jan. 21, 2008, Sen. Hillary Clinton claimed Obama was doing legal work for Rezko "in his slum landlord business in inner city Chicago." We rated that claim Barely True.

With Rezko now officially a convicted felon, expect his name to be invoked by Obama’s opponents again and again in coming months, and expect every nook of Obama’s dealings with Rezko to be heavily scrutinized. Stay tuned.