Too Close for Comfort?

(Flickr: Esther17)

SIERRA VISTA, Ariz.–Did Sen. John McCain, the GOP presidential nominee dodge a bullet when Rep. Rick Renzi, (R-Ariz.) was indicted in February on charges of wire fraud, money laundering, extortion and conspiracy in connection with the misuse of campaign funds and the sale of a business associate’s land?

The 35-count indictment against the three-term congressman did not include charges during a crucial time period in 2003, when Renzi was working with McCain to move a controversial amendment through Congress. They were trying to keep Fort Huachuca, a large Army base in southeast Arizona, from closing.

If prosecutors had focused on Renzi’s submission of what might be false congressional financial disclosure statements, then McCain might have been drawn deeper into the Renzi case. The FBI has already interviewed at least one member of McCain’s Senate staff and requested that his Senate office turn over documents possibly related to the case.

Illustration by: Matt Mahurin

Public records show that Renzi might have filed false congressional financial disclosure statements from 2001 through 2003, because he did not disclose his 50-percent ownership in Fountain Realty & Development, Inc. While submitting false congressional financial disclosure statements in this time period is not one of the counts against Renzi, the indictment states that Fountain Realty had more than $1 million in transactions with Renzi’s former business partner, and co-defendant, James W. Sandlin.

In contrast, the Justice Dept.’s seven-count felony indictment against Sen. Ted Stevens accuses the Alaska Republican senator of submitting false financial disclosure statements to Congress by concealing $250,000 in gifts from an oil industry supply company.

Did prosecutors avoid filing similar charges against Renzi to shield McCain from questions about his ties to the congressman? Or did they decide to focus on the more serious charges of wire and insurance fraud, money laundering, conspiracy and extortion?

Rep. Rick Renzi (R-Ariz.) (U.S. Congress)

What’s clear is that the absence of the charges has spared McCain having to answer questions about his relationship with the then first-term congressman in 2003, when they were working together to pass the controversial Fort Huachuca Preservation amendment. As a result, we may never know if McCain was aware that Renzi and Sandlin were business partners, and that Sandlin stood to gain financially from keeping Fort Huachuca open because he owned property in an area near the base that was rapidly growing. That property, a 480-acre alfalfa field, later played a central role in the criminal charges filed against Sandlin and Renzi.

When asked why prosecutors didn’t include charges against Renzi for possibly filing false congressional disclosure forms, several former federal prosecutors told me that the government typically files its strongest charges in a case. Weaker charges can always be added later, or offered in a plea bargain. Renzi’s possibly false congressional financial statements, while potential felonies, are relatively minor compared to the indictment’s more serious charges.

“Most federal prosecutors will spend considerable time thinking about–and then charging–their ‘best’ counts,” said David Schindler, a former federal prosecutor who won a fraud conviction against former Arizona Gov. J. Fife Symington III in 1997. “Even if a prosecutor has evidence of other crimes, [he or she] may choose to proceed on a narrower universe because the evidence is strongest as to those counts.”

Map of Arizona

The Renzi indictment is the first high-profile case for former McCain aide and newly appointed U.S. attorney in Arizona, Diane Humetewa. A member of the Hopi Tribe, Humetewa, who was sworn in in December, is the nation’s first Native American woman to serve in the job. She was McCain’s legal counsel on the Senate Indian Affairs Committee from 1993 to 1996.

McCain called her in early 2007 and asked if she wanted to be a U.S. attorney. “Frankly, I was pretty taken aback and surprised and flattered,” Humetewa was quoted as saying in a June 2008 story in Indian Country Today. “I felt I certainly couldn’t say no.”

Renzi’s trial in Tucson is set to begin March 24. He announced in August 2007 that he would not seek a fourth term.

Fort Huachuca Amendment

The Renzi-sponsored amendment was attached to a 2003 defense appropriations bill and aimed to protect the fort from being downsized or shuttered in the scheduled 2005 round of military base closures. Congressional watchdog groups sharply criticized Renzi for pushing the amendment because the fort wasn’t in his congressional district and because his father, the late Maj. Gen. Eugene Renzi, was an executive at ManTech International, a defense intelligence contractor, which had more than $1.5 billion in contracts at the military base.

As the ranking Republican, McCain shepherded the measure through a House-Senate Armed Services conference committee in November 2003. He backed it despite the criticism that Renzi’s sponsorship of it created a potential conflict of interest and despite his own 2001 admonition to fellow senators that they should refrain from injecting local politics into decisions regarding military bases.

McCain’s embrace of Renzi’s amendment, which was supported by the Army, was noticeable because he had done nothing publicly a year earlier when a similar measure, introduced by 12-term Rep. Jim Kolbe (R-Ariz.), whose district included Fort Huachuca, passed the House but was never introduced in the Senate.

In May 2002, Sandlin entered into negotiations to sell the 480-acre, water-intensive alfalfa field he purchased in early 2000 for $960,000 to Fort Huachuca, as part of a water conservation program to save the nearby San Pedro River, threatened by extensive groundwater pumping. The talks ended in 2004, when Sandlin rejected the Army’s offer as too low.

Protecting the San Pedro River was important to McCain and to the Army. The river’s deteriorating ecology had made Fort Huachuca vulnerable to downsizing or closing because the Army base was fueling rapid growth in the ground-water-dependent area. Both were trying to find ways to reduce depletion of the river, and the sale of Sandlin’s alfalfa field, less than a half-mile west of the river, would have helped. Sandlin’s parcel was the largest agricultural groundwater pumping use in the San Pedro River watershed, and acquiring it was a top priority for the Army, according to base officials.

While the Army was negotiating to buy Sandlin’s land, in the summer and fall of 2003, it was also lobbying McCain to back Renzi’s amendment. It is not known if McCain knew about the Army’s interest in the property. But linking Sandlin to Renzi could have been as easy as doing a Google search on Sandlin. He was among the first contributors to Renzi’s 2002 campaign.

Investigation of Renzi

The Renzi case, according to watchdog groups, has been impeded by political interference. Former Arizona U.S. Atty. Paul Charlton was pressing for the Renzi investigation in the fall of 2006. He was fired Dec. 7, 2006, a month after Renzi won reelection to his third term. Charlton was one of eight U.S. attorneys fired by former U.S. Atty. Gen. Alberto Gonzales. The dismissals led to congressional investigations that eventually forced Gonzales’ resignation. Charlton declined to comment about the Renzi case and his firing.

Justice Dept. officials in Washington, a source familiar with the case said, delayed the criminal investigation into Renzi’s activities for more than a year after investigators sought permission to go forward in 2005. “They did not want to indict this guy,” the source, who requested anonymity, said. “They didn’t want to put a wire on him, and they didn’t want to do a search warrant.”

The criminal investigation got back on track in April 2007, when the FBI raided Renzi’s wife’s insurance business in Sonoita, Ariz. Ten months later, a federal grand jury in Tucson returned the indictment against the congressman.

Prosecutors allege that Renzi used his congressional seat in 2005 to demand that a private investment group purchase Sandlin’s land in exchange for Renzi assisting the group with passage of federal land exchange bill. The investment group, which included former Interior Sec. Bruce Babbitt, ultimately bought Sandlin’s land for $4.5 million, yielding Sandlin a $3.5 million profit. Sandlin, according to the indictment, then funneled $770,000 to Renzi, which Renzi never reported on his 2005 congressional financial disclosure report.

Less Than Full Disclosure

In between allegedly embezzling funds from a family insurance company and pressuring investors to buy Sandlin’s land, Renzi filed three congressional financial disclosure reports where he never disclosed his partnership with Sandlin in Fountain Realty & Development.

Sandlin and Renzi’s business relationship began in August 2001, when Sandlin became a partner in Renzi Investments Inc., according to Arizona Corporation Commission records. The two men changed the company name to Fountain Realty & Development Inc. Renzi did not disclose any of this on his 2001 congressional financial disclosure statement. Instead, he reported receiving a dividend from Renzi Investments worth between $1 million and $5 million.

Nor did Renzi reveal his partnership with Sandlin in Fountain Realty & Development in his 2002 congressional disclosure forms. Renzi filed the statement on July 11, 2003– while he was seeking McCain’s support for his amendment.

Renzi also did not mention the company in his 2003 financial disclosure report. Nor did not he report the June 2003 sale of the balance of Fountain Realty to Sandlin for $200,000 cash and a $800,000 promissory note. Instead, Renzi reported a $1 million to $5 million gain from a company with a similar name, Fountain Hills Realty and Development Inc. That company, however, had ceased to exist in January 2002, when Renzi changed its name to Renzi Vino, Inc., according to Arizona Corporation Commission records.

McCain appeared unfazed by news of Renzi’s indictment and the 16-month criminal investigation that led up to it. When the indictment was unsealed Feb.22, Renzi was listed as one of 24 co-campaign chairmen for McCain’s Arizona presidential campaign, though the FBI’s criminal probe had been known since October 2006.

When asked by reporters four days after the indictment was made public whether Renzi was still on his campaign team, McCain said, “I don’t think so. It doesn’t matter.” Two months after Renzi’s indictment, McCain told a reporter that Renzi was a “good friend” and that the two “have a good relationship.”