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january 31-February 6, 2007

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Richard Blum

In Blum: Richard Blum is the husband of Sen. Dianne Feinstein. Says longtime partner Michael R. Klein, 'One of my roles in life has been to make sure that, when he wakes up in the morning, he doesn't do something that embarrasses his wife.'

Daddy Kleinbucks

Why the media missed the story on Dianne Feinstein's past conflicts of interest

By Peter Byrne

LAST YEAR, Wikipedia blocked congressional staffers from editing Wiki entries on their bosses after an employee of Sen. Dianne Feinstein changed certain references to her war-contractor husband, Richard C. Blum. For example, Feinstein's office excised Wiki's account of the $190,000 fine she paid for not disclosing that Blum underwrote her political campaigns.

Following the Wiki crackdown, a website devoted to creating bios of congressional members was born: Democrat Feinstein's Congresspedia page paints her as being politically courageous and full of ethical grace. But conversely, Republican senator James Inhofe's Congresspedia blurb details his sins, including his support for torturing prisoners at Guantanamo Bay, Cuba. Con gresspedia is edited by the Center for Media and Democracy as a "joint project" with the Sunlight Foundation.

The nonprofit Sunlight Foundation was founded and bankrolled last year by Blum's longtime business partner, attorney Michael R. Klein. They co-own Astar Air Cargo, which holds defense contracts to service military bases, including Gitmo. Other war-contracting firms in which Blum was a majority shareholder have regularly wrung billions of dollars out of military appropriations that were overseen by Feinstein.

In a telephone interview in September, Klein told me, "I've known Dick [Blum] for a long, long time. One of my roles in life has been to make sure that, when he wakes up in the morning, he doesn't do something that embarrasses his wife. And, to the extent that I can, to make sure that, when she wakes up in the morning, she doesn't do something to embarrass herself, or him." (Our Jan. 24 cover feature, "Iraq & Diane," details how Klein, as a board member of Perini Corp., a defense contractor then controlled by Blum, repeatedly updated Feinstein on Perini's projects coming before her as legislation.)

Klein says the goal of the Sunlight Foundation is to "disinfect" Congress by funding watchdog groups and investigative journalism. He shares the board of directors with Nicholas J. Klein and Ellen S. Miller. The latter is a journalist who founded the Center for Responsive Politics (CRP), a nonprofit that tracks campaign donations, lobbyist activities and functions as a reliable source of data for investigative journalists.

Sunlight's advisory board includes Kim Malone, the director of online sales for AdSense at Google; Esther Dyson, who blogs for the Huffington Post; and Craig Newmark, founder of A section of Sunlight's website is devoted to creating blog tags for "your Google homepage," so it is obvious why Malone is involved. Ditto for Dyson, who is an Internet venture capitalist. Newmark, however, is an icon of electronic self-empowerment. I e-mailed him to inquire if he is aware of how Klein makes his living. He did not reply.

In its first year of existence, Sunlight gave out more than $1.6 million in "transparency grants" to ethics watchdog groups, such as Ellen Miller's CRP ($796,000); OMB Watch, which oversees the government's Office of Management and Budget ($334,000); the Center for Media and Democracy ($95,000); ($200,000); Dan Gilmore's Center for Citizen Media ($25,000); and Arizona Congresswatch ($1,650). Journalists may submit individual grant proposals online to Klein.

The money has funded worthwhile activities. OMB Watch used its Kleinbucks to partner with Eagle Eye Publishers, a for-profit company based in Fairfax, Va., that sells search capabilities on federal databases. The resulting contract data obtainable online from is useful. and (recipient of $77,000 Kleinbucks) have created free online access to state and federal legislation. And Miller's CRP used the grant to streamline a searchable database of lobbying and campaign records.

Miller is cofounder and executive director of the Sunlight Foundation. She is still a board member of the CRP, however, which raises a conflict-of-interest question. The IRS generally frowns on leaders of nonprofit foundations steering tax-free dollars to outside organizations in which they have a governing interest. In a telephone interview, Miller explained, "The question of self-dealing is irrelevant, because I am not paid by the CRP." She says she is aware of Klein's defense-contracting activities.

For many years, Klein represented Blum's interest as the vice-chairman of the board of directors of Perini Corp., which holds more than $2.5 billion in military-construction contracts in the global war on terror. Klein is also a member of the board of directors of SRA International, which earned $776 million from the federal government last year for such tasks as performing technology- and strategic-consulting services for national security programs.

But it is Klein's co-ownership with Blum of Astar Air Cargo that has furrowed more than a few brows inside the Beltway. Astar is the U.S.-based arm of DHL Worldwide Express (DHLWE), a German-owned air freight service. According to a May 2003 Astar press release, "The airline operates 40 aircraft in the United States or abroad for the United States Air Force, and was actively engaged in providing service to the U.S. Department of Defense during the Iraqi conflict. The airline currently serves the U.S. military with missions to Guantanamo Bay, Cuba; Roosevelt Roads, Puerto Rico; Ramstein Air Force Base, Germany; and other military bases around the world."

The byzantine circumstances in which Klein and Blum acquired Astar prompted competitors FedEx and UPS to formally complain to the federal government, claiming that Astar is a front for the German government. The Congressional Research Service investigated the matter and made a report to Congress in December 2003 that related the following facts:

  • Foreign corporations are not allowed to directly deliver air freight inside the United States.
  • In 2001, DHLWE was acquired by the German Post Office (Deutsche Post AG), which made it problematic for DHLWE to deliver packages inside American territory.
  • The Department of Transportation (DOT) ruled in May 2002 that DHLWE could operate in the U.S. as a "citizen." But in March 2003, the Congressional Research Service's report stated that the Inspector General found that "the informal review process employed by the DOT was not well-suited to the evaluation of DHL Airways' citizenship."
  • In April 2003, Congress earmarked the Emergency Wartime Supplemental Appropriations Act with a special provision that required DHLWE's American delivery arm to be majority owned by U.S. citizens. The bill also ordered DOT to conduct another review of the matter.
  • Shortly thereafter, Klein and Blum purchased control of DHLWE's domestic delivery arm with $50 million from Boeing Capital. They renamed it Astar Air Cargo. The gargantuan loan was guaranteed by Deutsch Post AG.
  • Nevertheless, in December 2003, DOT ruled that Astar meets citizenship requirements because it is controlled by Klein and Blum. The favorable ruling allowed Astar's parent company the right to operate in the U.S. and to obtain military contracts.
  • The Congressional Research Service pointed out that Klein was a partner in Wilmer, Cutler & Pickering, the Washington, D.C.-based law firm that simultaneously represented DHLWE, Deutsche Post AG and Astar Air Cargo. The report suggested that Astar was potentially controlled by the Deutsche Post AG given its legal bedfellows. Therefore, Klein's potential conflict of interest could have reasonably disallowed Astar Air Cargo from operating inside the U.S. and contracting with the Department of Defense.

    In summary, Klein, a member of the powerful law firm representing a foreign-owned corporation, bought a part of that corporation with a loan from a major defense contractor in partnership with the husband of a U.S. senator who directly oversaw military appropriations.

    This, then, is the war-contractor-cum-media-philanthropist who is systematically purchasing control over the agendas of congressional watchdog groups and investigative journalists who are supposed to keep on eye on this type of shenanigan.

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