Clinton Firm's Deal Left Pennsylvania Churches in Shambles

By Sam Stein, Huffington Post. Posted April 12, 2008.

There is an old axiom of government: all politics is local.

And while the saying is clich, it can certainly prove true. How else does one explain the connection between former President Clinton, a hot shot Italian real estate speculator, and several Pennsylvania church-buying ventures that went terribly wrong?

It began in 2005, when an aide to Clinton helped a young Italian businessman named Raffaello Follieri connected with the business of the former president and his pal Ron Burkle. Follieri had an idea: to buy and redevelop old Catholic churches that were struggling in the wake of sex-abuse scandals. And Yucaipa Companies, which Burkle ran and on which Clinton served as a senior adviser to two funds, came on board.

But the scheme, while in some cases profitable, was also a house of cards. Using the Yucaipa money, Follieri purchased a Philadelphia church that he subsequently let rot. In a separate purchase in Pittsburgh, he instructed the church to be gutted of all its religious objects, then failed to come up with the money needed to finalize the deal.

Follieri's standing was soon on the rocks. In April 2007, Burkle sued the Italian in a Delaware state court for allegedly misappropriating more than $1.3 million. Follieri, he claimed, was spending the money on a lavish lifestyle, including gifts for his movie-star girlfriend Anne Hathaway (of Devil Wears Prada fame). The suit has since been settled. Last week, however, Follieri was arrested and charged with trying to pass a bad $250,000 check.

By that time, any connection between Clinton and Follieri, however tangential, had been severed. The former president began the process of leaving Yucaipa in December 2007 -- in part, The Huffington Post was told, out of anger over the Follieri mess.

But the episode illustrated some of the unique perils of Clinton's post-presidential career. Indeed, at various points in this primary season, Bill Clinton's activities have put him at contrast with his wife's presidential campaign. Take, for instance, revelations this past week that he had been paid $800,000 for speeches by an organization promoting the Colombia Free Trade Agreement -- a pact Sen. Clinton continues to oppose.

The Follieri story is similarly dicey. As Sen. Clinton campaigns across Pennsylvania, two communities in the state's largest cities have been affected by the spoiled real estate venture overseen by her husband's business. And while Bill Clinton, as his aides point out, was never directly associated with the project -- "President Clinton was not involved with the purchase of Vatican properties," said his spokesperson Jay Carson -- the former president did make out quite well during his time with Yucaipa.

According to recent tax filings, the former president earned $15.4 million from the private investment firm between 2003 and 2006. * * *

In the fall of 2005, Follieri was introduced to Yucaipa through Bill Clinton's aide and gatekeeper Doug Band. The Italian claimed he had close ties to the Vatican that he would use to buy run down churches in need of new ownership. The Wall Street Journal reported that in exchange for Clinton and Burkle's help, Follieri offered to assist Sen. Hillary Clinton with the Catholic vote. The senator was not officially running for president at the time.

Soon after their meeting, Yucaipa invested $100 million in the Follieri Group. With those funds, Follieiri quickly purchased two church properties in Philadelphia. Both structures had long been dormant. And he promised sweeping changes, including environmental restoration and structural repairs.

Virtually none of it panned out.

At the Transfiguration Church, which cost the group more than $1 million, Follieri sought to create a "cultural center" in a working class neighborhood. But within a mater of months, things went south. The group did not provide basic upkeep and security. The site became an eyesore. Burglars broke into the church and its adjoining school. A local paper found the once-stately Roman Catholic parish had become a hangout for boozing teenagers, and eventually a homeless man started camping out under the rectory porch. In April 2006, a three-alarm fire was set to the school, forcing more than 100 firefighters to work three hours to put it out. The damage was immense and neighbors grew worried and angered at Follieri's absenteeism.

Frank Quintero, a spokesman for Yucaipa, said the company "made a good profit on the properties, by putting them in hands of responsible developers." As for Transfiguration, security there was no worse than that under prior owners, he said.

"That same homeless guy was probably milling around that church before we owned it and after we owned it," said Quintero. "It's not like we are miracle workers even though Follieri claimed to be in connection with the Vatican. These things take time."

But it was only after a scathing column in the Philadelphia Daily News that Follieri's representatives agreed to meet with the Transfiguration community. They promised more attention and offered a new proposal, to make the site affordable housing. That idea, however, was met with community opposition and like the cultural center it never materialized. Follieiri eventually bowed out. According to city records, Transfiguration was sold in May 2007 for the price of $1.25 million. Currently, it houses the Boys Latin Charter School.

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Sam Stein is a Political Reporter at the Huffington Post, based in Washington, D.C. Previously he has worked for Newsweek magazine, the New York Daily News and the investigative journalism group Center for Public Integrity.

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