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February 21-27, 2007

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The Byrne Report

Blum's Plums

By Peter Byrne


I have reported recently in these pages the history of United States senator Dianne Feinstein's 2001-2005 conflict of interest due to her husband Richard C. Blum's former stake in two war contractors, URS and Perini corporations. Unfortunately, the senator is not the only one in her family with an ethics problem. In March 2002, Gov. Gray Davis appointed Blum to a 12-year term as a regent of the University of California. For the next three years, both URS and Perini benefited from construction contracts awarded by the Regents.

A "conflict of interest" is defined as using a governmental position for personal gain. But since the laws governing official ethics are written by people who often have actual or potential conflicts, they are packed with loopholes and are basically unenforceable. So if you're waiting for Feinstein or Blum to be indicted, dream on. Nevertheless, we serve history by documenting such trespasses.

In 1992, former regent Willis Harman enthused to the San Jose Mercury News about the pleasures of appointment because "this is definitely a great club to belong to, because the majority of members travel in fairly high circles. Through them, you tend to meet others in high financial, business and society circles." The current crop of regents is full of such politically savvy business folks as Gov. Arnold Schwarzenegger's personal financial adviser and longtime business partner Paul Wachter. Blum was a genuine catch for the club, which, it turns out, was already doing business with him.

In May 2001, URS announced the award of "a contract from the University of California at Los Angeles to perform construction-management services for the $150 million replacement project for Santa Monica Hospital." URS, which designs and sells advanced weaponry, also held a $125 million design and construction contract at UC's Los Alamos nuclear weapons lab. So URS had substantial interests in UC capital projects when Blum, its principal owner, became a "decider" on construction planning and awarding contracts.

Perini was similarly situated. When Blum became a regent, the construction firm of Rudolph & Sletten was midway through building dorms and a dining hall for UC San Diego under a contract with the Regents. After Blum's appointment, the Lawrence Berkeley National Laboratory, which is managed by the Regents, hired Rudolph & Sletten as the construction manager and general contractor for a $48 million nanotech laboratory, the Molecular Foundry.

(Construction management and general contracting are not normally awarded to the same firm, as the construction manager is supposed to oversee general contracting costs. By the nanolab's dedication in March 2006, the project had gone over budget by $4 million.)

On Oct. 4, 2005, Perini Corp. announced the acquisition of Rudolph & Sletten while it was still building the Regent's nanolab. It paid $53 million cash for the $700 million-a-year construction firm. Shortly thereafter, Blum divested his Perini stock at a substantial profit.

Back to URS: On May 26, 2005, 50 UC Berkeley students interrupted a meeting of the Regents to protest the Blum-URS-Los Alamos conflict of interest. Nevertheless, UC's general counsel ruled that Blum's ownership of a university contractor while a sitting regent was not a conflict--which is illogical but not surprising given that the regents have a long history of tolerating ethical conundrums. But the Los Alamos and Santa Monica Hospital deals were only part of Blum's ethical problems. Public records available at the UC Berkeley Facilities Services website show that, after Blum joined the board, URS wrote portions of the Long Range Development Plan for UC Berkeley: the sections on hydrology, air quality and hazardous materials. These construction projects will change the face of the campus and cost hundreds of millions of dollars through 2020.

In an expensive act of privatizing a governmental function, Blum's URS was hired by the Regents on July 29, 2005, to provide "program management services" for the development of a $200 million Southeast Campus Integrated Project, which includes a seismic retrofit of Memorial Stadium and a substantial expansion of the Haas School of Business. The university delegated URS to manage the planning, design, contracting and construction of the mammoth project for an initial fee of $4.5 million. So far, according to a UC Berkeley spokesperson, URS has been paid $1.7 million.

In November 2005, Blum resigned from the URS board of directors and also divested his investment firm of about $220 million in URS stock. In April 2006, the Feinstein-Blum family made a $15 million "gift" to UC Berkeley. The expanded business school is slated to house the Richard C. Blum Center for Developing Economies, which will encourage students to study the effects of global poverty upon political radicalism.

Words fail me.


Contact Peter Byrne or send a letter to the editor about this story.