Richard Blum: The Man Behind California’s “Developing Economy”
by Will Parrish, February 3, 2010
Darwin Bond-Graham contributed to this story.
On April 17, 2009, with the edifice of the global economy rotting under an architecture of monumental greed, war deficits, and official hubris, the University of California, Berkeley conducted a groundbreaking ceremony for its Richard C. Blum Center for Developing Economies. Before a throng of students, faculty, staff, and PR specialists affiliated with the Center’s new multi-UC campus “Global Poverty & Practice” program, the Blum Center's namesake was joined on stage by one of the many political heavyweights he counts among his business partners, Al Gore. The former Vice President praised Blum as a long-time friend and cited the new institute as a key to solving the interlocking problems of global poverty and global climate change, two of the many vexing boogeymen threatening to destabilize the profit-making order.
To paraphrase Upton Sinclair, who published a book on the general subject in 1921, some of the greatest sociopaths in this country's history have affixed their names to university buildings in an effort to burnish their reputations.
Richard Blum is a San Francisco-based finance capitalist presiding over a business empire that is, to say the least, expansive. Hedge funds? Blum owns one outright and wields a significant share of various others. Real estate? His primary investment vehicle, the $7 billion Blum Capital Partners, owns the largest real estate brokerage firm on the planet, CB Richard Ellis, of which Blum is chairman of the board. Construction? Until public scandal prompted him to sell off his holdings, Blum was a majority partner in a construction and engineering company that did billions in business with the US military among other government clients. Education? Try being the resident Alpha Regent of the largest public university system in the world, the University of California, while also being a primary owner of the world's second-largest for-profit education firm, Career Education Corporation.
Large land-holding firms? Digital media company of which Al Gore serves as frontman? Health industry corporation fighting to undermine the expansion of public health care? Border-town maquiladora that build weapons components for the Department of Defense? Check, check, check, and check.
The greatest investment of Blum’s career was undoubtedly his marriage, roughly 30 years ago, to the politically Joe Lieberman-esque US Senate Democrat, Dianne Feinstein. At the time of this meshing of Blum’s financial interests with Feinstein’s formidable political ambitions, Feinstein was Mayor of San Francisco and Blum — already one of her main financial backers — had much of his fortune staked to various development projects in the City.
Millions Stand Behind Him: Richard Blum and Dianne Feinstein, architects of the 1996 Headwaters forest buy-out scam, with Barack Obama at his inauguration.” Blum is far-left with scarf. Feinstein is far right.
Blum’s preferred means of personal enrichment rely on strong nation-state interventions in markets and societies to promote unfettered corporate dominance of national economies and distant lands. It should come as no surprise, then, that he and “DiFi” are among the leading proponents of the International Monetary Fund/World Bank/US Treasury nexus’ notion of how economies ought best be developed. This form of economic “improvement” (deriving from the Anglo-French “emprouwer,” meaning “to clear for profit”) involves burying Third World economies under mountains of debt backed by usurious interest rates, facilitating the greatest level of investment possible by rapacious multi-national corporate entities, privatizing government functions, and gutting social services. Ironically, this agenda of neoliberal “structural adjustment” has decimated and impoverished communities across the planet, causing suffering among the hundreds of millions of people Blum’s heart now bleeds for: poor folks.
The economic and political policies promoted by Richard C. Blum and associates, including Senator Feinstein and other leaders of both the Democratic and Republican Parties, have locked nations and peoples across the planet into a system of de facto colonialism whereby their lands and destinies are controlled by distant, debt-holding banks and hedge funds — among them, Blum Capital Partners, LLC, and Newbridge Capital, LLC, of which Blum was chairman of the Asia investment division for five years. The result has been what author and UC Irvine sociologist Mike Davis calls a “planet of slums,” where 0.23% of the world population privately owns more than 50% of the land, and 85% of urban dwellers in the Third World are consigned to living on illegal squats in hellish shanty towns under conditions of grinding poverty.
Just ask the people of Haiti, whose capital city now greatly resembles a war zone reduced to rubble ala Fallujah, Iraq, or Kabul, Afghanistan, not by virtue of a natural disaster per se, but because the IMF-WTO-US Treasury specialists in immiseration have forced them off their land into desperately sub-standard slum housing, often perched tenuously on the side of deforested hills and ravines. This “urban geography of mass vulnerability,” as the academic field of disaster sociology refers to it, was created by the destruction of the country’s rural agrarian economy that provided for subsistence, in an economic transformation imposed by international creditors with the constant backing of the US military.
Yet, at UC Berkeley, we have Dick Blum hoisting up “sustainable solutions to the toughest poverty challenges” as his new line of work.
Blum’s name is a familiar one to those acquainted with the details of the corporate plundering of California northcoast forests and communities throughout the 80s and 90s. The year was 1995, and Texas corporate raider Charles Hurwitz — whose company, Maxxam, had laid waste to as much ancient forestland as possible, as quickly as possible, for nearly a decade — was looking to cash out of his ownership of the Headwaters forest in central Humboldt County. Headwaters was the flashpoint of the largest direct action protests in the history of the earth defense movement, as well as lawsuits and legislative initiatives aimed at preserving what little was left of old-growth redwood ecosystems in the Pacific Northwest. It so happened Hurwitz was an investment partner of Blum from way back. Blum also happened to be a major donor, fundraiser, and political booster of US President Bill Clinton.
Clinton and California Governor Gray Davis dutifully discharged their duty as proxies of the super-wealthy in general — and, in this case, Blum in particular — by appointing the inviolable “DiFi” to chair a legislative team to negotiate the purchase of Headwaters from Hurwitz. Feinstein and Hurwitz agreed on a final deal in 1996, hailed by Feinstein’s website as one of her 10% career accomplishments. Hurwitz gave up very little of real economic value — Maxaam had clear-cut most of the forest in question — in exchange for a $380 million taxpayer-funded payout, or more than four times the market value of the trees at the time. Much of the money went directly into Hurwitz's personal bank accounts. That despite the fact that all the government really needed to do to protect the acreage in question was enforce the Endangered Species Act. Regardless of the fact that Headwaters became officially “protected,” the vast majority of California's remaining old growth and other mature stands of redwood were pillaged by the end of the decade. Hurwitz's empire cashed out, like other timber conglomerates, by liquidating the forests and the livelihoods of the North Coast.
Alexander Cockburn and Jeffrey St. Clair later revealed that Blum and another Hurwitz pal, the Houston-based Continental Airlines chairman David Bonderman, had personally met with Clinton at the White House in a “coffee klatch” fundraiser on December 15, 1995, likely to discuss the details of the Headwaters buy-out, which occurred six months later. Bonderman and Blum are both directors of the Wilderness Society, the only national environmental organization that praised the buy-out.
For all the fanfare that emerged in the Clinton era about how corporate globalization had rendered the nation-state a bit player in the larger drama of the new, “free trade”-dominated corporate economic order, the nation-state’s role in propping up the global capitalist system has never been more central. That role is being laid bare as never before with each multi-billion dollar subsidy the federal government passes onto the financial industry — an estimated $5 trillion in total taxpayer money since the bail-out program commenced in fall 2008 (an exact figure is hard to determine). What is known in academic-speak as “neo-liberalism” represents little more than the sophisticated apex of a governing system refined and perfected over the course of several decades (nay, centuries), which is principally designed to socialize the risks of rapacious capitalism while privatizing public goods to create unprecedented levels of profit for the super-wealthy.
Blum is not only a representative of this system, but one of its most skillful promoters and practitioners. Throughout his career, and particularly in recent years, he has siphoned off taxpayer money into the coffers of his various personal holdings with a calculated brazenness that would make the most swaggering Costra Nostra blush. The Headwaters Forest scam was indicative of exactly how these people have done business for nigh on three decades. To pull only a handful of examples from the very recent past:
In early-2007, investigative reporter Peter Byrne published a groundbreaking series in the North Bay Bohemian, the “Feinstein Files.” Byrne revealed that as chairperson of the Senate’s Military Construction Appropriations subcommittee from 2001 through 2005, Feinstein supervised the appropriation of more than $1.5 billion for two defense contractors, URS Corporation and Perini Corporation, in which Blum owned a controlling interest. In the series’ smoking gun, long-time Blum business partner Michael R. Klein told Byrne he regularly took the highly unusual step of supplying Feinstein’s office with lists of Perini’s current and upcoming contractual interests in federal legislation, ostensibly so the senator would abstain from voting on these matters for ethical reasons (which she never did). “Earmarks, you know, set asides, you name it, there was a system in place which on a regular basis I got notified, I notified her office, and her office notified her,” said Klein, Perini’s vice chairman at the time. Blum later sold his holdings in URS to the tune of $57 million in personal profit.
In January 2009, Feinstein introduced legislation to route $25 billion in federal funding to a Federal Deposit Insurance Corporation (FDIC) program designed to forestall home foreclosures by expediting loan workouts and expanding federal loan guarantees. On the surface, Feinstein’s legislation was a straightforward intervention on behalf of troubled homeowners nationwide. But less than two months prior, the FDIC had also awarded Blum’s real estate company, CB Richard Ellis, a multimillion dollar contract to sell homes the agency had inherited from failed banks. This move was also highly unusual, since Feinstein is not a member of the Senate committee that oversees the FDIC.
This past November, the University of California Board of Regents imposed an “emergency” 32% fee increase on undergraduate students, effective in the 2009-10 academic year. The increase stems not only from severe state-mandated budget cuts, but also a series of decisions by the university’s board of regents — of which Richard Blum is the resident alpha member (although no longer chair of the board), having been appointed to that post by Gray Davis — that have effectively pledged student fee increases to the capital bond market, thereby creating a financial incentive for the Regents to continually raise fees, in a pyramid scheme that raises money for campus construction projects. It should come as no surprise that URS Corporation, the same company that made $1.5 billion on contracts awarded by Feinstein's Senate military construction committee, has been the main contractor for the largest university capital projects in recent years: UCLA’s $150 million reconstruction of Santa Monica Hospital, UC Berkeley’s $48 million nanotechnology laboratory, and Berkeley’s $200 million Southeast Campus Integrated Project, which includes a seismic retrofit of Memorial Stadium and an expansion of the Haas School of Business — home of the Blum Center for Developing Economies. More on this in next week’s AVA.
Blum-Feinstein, Inc. has accomplished these immense transfers of public wealth absent of almost any serious media scrutiny. But in recent years, the media deep freeze has slowly begun to thaw, beginning with a pair of front-page stories in the San Francisco Chronicle in May 2005. Chronicle science writer Keay Davidson’s fine reporting was spurred on by a public outing at a UC Regents meeting when students revealed Blum’s conflict of interest as a member of the committee overseeing the two nuclear weapons labs the UC runs on behalf of the US government. Blum’s URS Corporation had a $125 million, five-year construction and engineering services contract with the UC’s Los Alamos, NM nuclear weapons development compound at the time. Less than two years later, Peter Byrne’s series regarding Blum's war profiteering appeared in the North Bay Bohemian.
This past semester, UC Berkeley Professor of Geography Gray Brechin co-taught a course on investigative journalism. Brechin is best known as the author of the definitive historical work on Northern California’s ruling elite, Imperial San Francisco. He has been an observer of Blum-DiFi, Inc. for years.
“I'm very impressed by the reluctance of most journalists to follow a story that has been screaming to be done for years while they have been covering their ears and eyes,” Brechin told us. “You guys and Peter [Byrne] are about the only ones who understand that behind the billowing smoke appears to be a roaring bonfire.”
Blum-Feinstein’s concentration of power is greatest in their home state, of course, and it stands to reason in any case that Blum’s CB Richard Ellis would be making a killing off the ongoing fire sale of State of California assets. In October, CBRE secured a contract from the California Department of General Services to broker over $2 billion in office buildings the state intends to privatize.
Blum’s fortunes aren't entirely a function of Feinstein’s legislative exploits. Nor are Feintsein's political powers entirely a result of her Daddy Warbucks. And the State of California’s economic plight stems not only from the avarice of a small handful of individuals, but from an economic system that is inherently self-destructive and crisis-prone.
Blum and Feinstein, however, have worked hand-in-glove with other members of the state's banking, real estate, agribusiness, and military-industrial interests to buffer regressive tax and spending policies, helping to devise the very austerity measures currently being hoisted upon the people of California across all public sectors, not just within the University of California.
Therein lies much of the reason Blum is now so quick to tout his anti-poverty bona fides. Blum, you see, has a public relations problem. It’s built into the way he does business. It's built into the political economy he straddles as one of the US empire's most connected and wealthy power elites.
Gray Brechin notes that Blum seems to have hired a public relations firm to bolster his personal brand. “Blum has gotten an extraordinary amount of fawning publicity in a very short time, including a front page feature in the Haas Business School magazine about what a whiz he is. I believe that this coincided with the black tie event at the Palace Hotel where Haas celebrated him as Global Citizen of the Year and I joined others from Cal to protest his actions as Alpha Regent.”
“Then there were the two treacly profiles of him in the San Francisco Chronicle recently. I can't believe this is all coincidental.”
It isn't. Nor is it coincidental that, as Peter Byrne revealed, longtime Blum business partner Michael Klein has founded a nonprofit foundation that makes grants to media organizations that watchdog the federal government. The organization started after Wikipedia instituted a policy blocking congressional staffers from editing Wiki entries pertaining to their bosses. Employees from Dianne Feinstein’s office had just been caught editing entries in the online encyclopedia that cast Blum and Feinstein in an unfavorable light. Thus does one of Blum's closest business associates now control a significant portion of the budgets of several ostensibly independent organizations that monitor political corruption.
Blum is also now strongly affiliated with a multi-campus academic program at the UC, centered on an institute at UC Berkeley that Blum founded with $15 million in seed money, designed to put band-aids on the symptoms of global poverty he and his wife have had an instrumental role in creating. Beyond this exercise in mystifying the causes of poverty in distant lands, the state's economic elite — with Blum and Feinstein helping to lead the charge — have long endeavored to turn their philosophy of neoliberal privatization, fiscal austerity, and personal enrichment on the State of California itself. Richard C. Blum Center for Developing Economies, indeed.
Blum is a self-professed Buddhist and friend of the XIVth Dalai Lama. Many of his anti-poverty efforts are geared toward slum dwellers in Tibet and Nepal. “Would an actual Buddhist provide the bulk of the funding for a multi-million dollar institute, only to attach his own name to it?” Brechin mused.
The populist anger seething below the surface of the American body politic has not yet boiled over into any sort of coherent rebellion against the elites who have wrought the greatest economic catastrophe since the 1930s. There is little indication that it will any time soon. Blum’s own financial empire, however, is now quietly under assault by the hundreds of University of California students who have learned to loathe the man who has done more than any other to structurally adjust their university and price many of the state's youth out of higher education. These cognizant students, supported by campus workers paid poverty wages by university leaders like Blum, are now organizing building take-overs and some of the largest student protests on those campuses of the past four decades.
In the next part of this exclusive series for the AVA, we will focus on Blum’s role in gutting the University of California, where the tuition increases paid in the last four years by Mendocino County residents alone would be large enough to close roughly half the $7 million county budget gap.
Footnotes for this article are available at darwinbondgraham.blogspot.com.
* * *
Read Part Two of this series.