Privatization Nightmare: Sen. Dianne Feinstein's Husband Selling Post Offices to His Friends, Cheap
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CBRE kept the entire seller/buyer commission of up to 6 percent paid by the Postal Service in 34 of 52 transactions. In the majority of these deals, CBRE appears to have represented the interests of the buyer as well as those of the seller, even though CBRE was originally contracted to represent only the interests of the Postal Service.
Astonishingly, CBRE's contract was amended in 2012, at the request of CBRE, to allow it to negotiate on behalf of both the Postal Service and prospective buyers.
To be fair, CBRE need not shoulder all of the blame for the $79 million in lost revenue.
In his June 2013 audit, the inspector general reported that executives running the Postal Service Facilities Division were not properly monitoring the CBRE contract. He found that:
- The dollar amount of the contract is improperly open-ended and poses a risk of runaway costs. The original $2 million budget has unaccountably tripled.
- Facilities Division officials improperly paid CBRE invoices without checking for fraud. At least 227 invoices worth $1.7 million were paid without proper oversight—"present[ing] an increased risk of fraud [and] pos[ing] an increased risk to the Postal Service's finances, brand, and reputation."
In short, the normal checks and balances mechanisms for preventing conflicts of interest and contract fraud have been missing in the monitoring of CBRE's performance by Facilities Division officials. Given the ethical norms at play on the top floors of the Postal Service's headquarters at L'Enfant Plaza in Washington D.C., this is not surprising. The inspector general has also reported that high-ranking Postal Service executives have charged home mortgages and European vacations to their government credit cards.
And Facilities Division expense reports reveal that staffers have purchased hundreds of thousands of dollars worth of expensive dinners, online gift cards, inspirational literature, and even toys with their government-issued credit cards. The division's chief, Tom Samra, has billed the deficit-ridden Postal Service for flying first class to Europe, even though he personally is worth as much as $98 million.
The Postal Service was given a list of the key facts and analysis reported in this investigation. Through his spokesperson, David Partenheimer, Postmaster General Patrick Donahoe declined to comment.
The Boston Seaport Deals
In Boston, during 2012, while acting as the Postal Service's agent, CBRE sold discounted real estate to a group of developers with which it was partnered in a redevelopment project. CBRE sold a valuable parcel in the same development project to one of its largest stockholders, Goldman Sachs Group. These and a host of similar transactions around the country raise questions as to whether CBRE improperly benefited from selling postal properties to its clients and business partners.
CBRE is a major player in the development of a new neighborhood in downtown Boston called the Seaport District. The mixed-use district is slated to revitalize 1,000 acres of abandoned railways and crumbly docks that surround the Boston Convention Center. The linchpin of the giant redevelopment project's design is the upscale Channel Center, which will sport expensive residences, office buildings, and grassy parks. A portion of the project is sited on Postal Service land that has been sold by CBRE to the developers.
The parking garage
According to the Channel Center developer, Commonwealth Ventures LLC, CBRE is the member of its development "team" that provides real estate services to the project. Commonwealth Ventures is also partnered with AREA Property Partners, which has collaborated with CBRE on other real estate ventures. Another CBRE client, the real estate arm of General Electric Corporation, is also a member of Commonwealth Ventures' Channel Center team. In what appears to have been a conflict of interest, CBRE has acted as the broker for both the Postal Service and the Channel Center development partnership, of which it is considered to be a "team" member and which is composed of its clients.