Tie to indicted developer tests Obama's image

CHICAGO — Suddenly, an old friendship forged on the streets of Chicago is threatening to make new waves in the Democratic presidential campaign.

Sen. Hillary Rodham Clinton's charge this week that Sen. Barack Obama represented a Chicago "slum landlord" in the 1990s put front and center one of Obama's potential political vulnerabilities: his long ties to Antoin "Tony" Rezko, the developer soon to go on trial in federal court.

Obama angrily rejected Clinton's accusation at Monday's debate in South Carolina, and there is no suggestion Obama is involved in any of the alleged criminal activity.

A Chicago Tribune review of land and court documents, law-firm files, correspondence and other records related to Obama's eight years as an Illinois state lawmaker supports his contention that he did not directly represent Rezko's development firm. Instead, the records show, he represented nonprofit community groups that partnered with Rezko's firm.

But Rezko's upcoming trial on federal extortion, influence-peddling and conspiracy charges — and details of Obama's relationship with him — threatens to be a liability.

In recent weeks, Obama has sought to minimize the nature of their relationship. Among other things, he has returned $85,000 in Rezko-related campaign donations in what a staffer calls "an abundance of caution."

A review by the Los Angeles Times shows that Rezko, a Syrian-born entrepreneur who made a fortune in pizza parlors, Chinese restaurants and real estate, played a deeper role in Obama's political and financial biography than the candidate has acknowledged:

• Rezko, his employees and business associates provided Obama in excess of $200,000 in campaign donations since 1995, helping fuel his rapid ascent in Illinois and U.S. politics. Although Rezko is not Obama's largest bundler, he was there at the start and at critical moments along the way, helping to support the candidate when few others would do so.

• Rezko surfaced when Obama and his wife purchased their house on Chicago's South Side in 2005. On the day the Obamas bought their house, Rezko's wife, Rita, bought an adjacent lot from the same sellers, part of which Obama later bought back.

Rita Rezko's purchase, at the $625,000 asking price, came just as the Obamas successfully bid in a slow market to purchase the house for $300,000 below the asking price, according to the Chicago Tribune. The Obamas secured their home for $1,650,000. Later, the Chicago Tribune reported, Rezko paid $14,000 to build a fence, required by city ordinance, along the new property line.

Obama denies there was anything improper in these transactions. The housing deal came after Rezko was under federal scrutiny. Obama has said that, in retrospect, the property deal was a "mistake" because of the appearance it created.

The Clinton campaign, fearing an Obama electoral triumph in the South Carolina primary this weekend, is ratcheting up its rhetoric against the Illinois senator, in the process hoping to bring new attention to his relationship with Rezko.

Obama's spokesman Bill Burton waves away such concerns and compares Rezko against jailed Clinton fundraiser Norman Hsu.

"This has nothing on the nearly $1 million that Hillary Clinton has had to give back as a result of the Norman Hsu scandal," he said. "I would put Senator Obama's record of fighting for lobbying and ethics reform up against anyone in this race," Burton said.

But a government watchdog group that once lauded Obama for leadership on ethics says the Illinois senator should have known better.

"Everybody in this town knew that Tony Rezko was headed for trouble," said Jay Stewart of the Better Government Association. " ... Why would you be having anything to do with Tony Rezko, particularly if you're planning to run for president?"

South Side

Obama was a community organizer on Chicago's South Side before leaving for Harvard Law School and saw firsthand a critical need for affordable housing.

In 1991, after Obama became the first black president of the Harvard Law Review, Rezko offered him a job. While Obama declined, the two began a friendship that deepened as Obama launched his political career, and Rezko became a fundraiser.

After earning his degree, Obama returned to Chicago, ran a voter-registration drive and in 1993 went to work in a small but influential law firm now known as Miner, Barnhill & Galland.

The firm had long served nonprofits engaged in affordable housing, and several initiatives involved Rezko's firm, Rezmar, according to a document from the firm Obama attached to his state ethics reports.

Rezko was dramatically expanding his company by partnering with nonprofits and community organizations to tap government subsidies and tax credits. By 1994, the company owned or managed more than a dozen Chicago multiunit low-income housing projects, records show.

Some of Rezko's ventures eventually went bad and left residents living in poor conditions. After a published report last year raised questions about the law firm's involvement in representing the Rezko-linked ventures, Obama's campaign said he was unaware of the plight of the properties and was only a bit player in the legal work required to get them off the ground, a contention Obama repeated Monday as he responded to Clinton's charge.

Law-firm partner Judson Miner said Obama billed no more than 5.7 hours of time working on a Rezko-related matter.

Back in the mid-1990s, Miner said, Rezko enjoyed a reputation in Illinois as an up-and-coming, even enlightened, entrepreneur with a strong interest in the risky low-income- and affordable-housing markets. He also was a reliable source of campaign cash for an array of politicians from both parties.

"He became more interested in greener pastures," Miner said. "He got indicted. He became a bum. But in the 1990s, it was a very different picture."

The criminal case against Rezko appears to center, in part, on his efforts to provide contributions to Illinois Democratic Gov. Rod Blagojevich in exchange for appointments to state boards and commissions. The investigation produced Rezko, his employees and business associates provided Obama in excess of $200,000 in campaign donations since 1995, allegations that Rezko and others sought to squeeze kickbacks from firms doing business before state boards.

Infusion of cash

When Obama first sought public office in 1995, Rezko provided $2,000 in donations. Five years later, when Obama unsuccessfully challenged Rep. Bobby Rush for a seat in the U.S. House, Rezko and his associates contributed a much-needed infusion of cash in the final weeks of the campaign.

In 2003, when Obama launched his bid for the U.S. Senate, Rezko hosted a fundraiser at his home, attended by more than 130 donors.

Both men declined to comment on their once-close friendship. Obama has been accused of no wrongdoing and has insisted he never used his office to benefit Rezko.

Thus far, there is little in the public record to suggest otherwise, and the few exceptions that have come to light appear minor. On Capitol Hill, Obama once gave a summer internship to the son of a Rezko business associate on Rezko's recommendation. Earlier, as a state senator, Obama was one of several political and community leaders who wrote state and Chicago officials urging approval of public funding for a senior housing project involving Rezko.

But when Rezko pushed for passage of a major gambling measure, Obama vocally opposed it.