To quote famed short seller David Einhorn: “No matter how bad you think it is, it’s worse.” On the “corruption among what passes for our elites” front, this story about self-dealing in the privatization of the Postal Service gives an indication of how bad things really are.
By way of backstory: the Postal Service is being plundered through the device of a completely fabricated financial crisis. The mail provider has been widely declared to be broke, but that’s utter hogwash. Congress has created the appearance of financial ill health via a 2006 measure which astonishingly makes it prepay retiree benefits 75 years in advance. Yes, you read that right. It has to fund benefits now for workers who haven’t even been hired. The Postal Service is the only agency subject to this absurd requirement. If that were eliminated, and the Post Office charged stopped pricing business mail (meaning all that junk you get) at a loss, the Postal Service would be profitable. The Save the Post Office site sets forth the forces behind the campaign to turn the Post Office into a
looting opportunity public-private partnership, including Pitney Bowes, DHL, Federal Express, UPS, and USPS supplier Ursa Major.
EastBayExpress, via publishing a section from a new e-book by Peter Byrne called Going Postal (um, sadly the same as used by Mark Ames for his important book on workplace shootings), tells us how the husband of powerful Senator Diane Feinstein, Richard Blum, is feeding at the Postal Service privatization trough. Blum is the chairman of C.B. Richard Ellis (CBRE) which has the exclusive contract to handle sales for the Post Office’s $85 billion of property. Bryne summarizes the finding of his investigation:
• CBRE appears to have repeatedly violated its contractual duty to sell postal properties at or above fair market values.
• CBRE has sold valuable postal properties to developers at prices that appear to have been steeply discounted from fair market values, resulting in the loss of tens of millions of dollars in public revenue.
• In a series of apparently non-arm’s-length transactions, CBRE negotiated the sale of postal properties all around the country to its own clients and business partners, including to one of its corporate owners, Goldman Sachs Group.
• CBRE has been paid commissions as high as 6 percent by the Postal Service for representing both the seller and the buyer in many of the negotiations, thereby raising serious questions as to whether CBRE was doing its best to obtain the highest price possible for the Postal Service.
• Senator Feinstein has lobbied the Postmaster General on behalf of a redevelopment project in which her husband’s company was involved.
Mind you, Byrne isn’t the first to find serious improprieties. The contract looked sus from the get go:
In June 2013, Postal Service Inspector General David C. Williams published a scathing audit of CBRE’s exclusive contract to manage all the sales and leasing of postal real estate. Williams noted that outsourcing these activities to a single firm is “a fundamental change from how the Postal Service previously managed its real estate portfolio [and] Facilities officials should improve oversight to mitigate inherent risks associated with the CBRE contract …. Specifically, there are conflict of interest concerns.”
Williams warned of the potential for contract fraud, but he stopped short of referring the matter to a prosecutor, and advised the postal executives in charge of the CBRE contract to clean up their act.
It’s clear CBRE sold properties at bargain prices to favored parties, violating its contract with the Post Office:
In June 2011, the Postal Service hired CBRE as its exclusive agent to sell post offices, warehouses, parking lots, and vacant land worth hundreds of millions of dollars. The contract instructs CBRE to propose properties to sell with final approval reserved to the head of the Postal Service’s Facilities Division, Tom Samra. And it requires CBRE to sell them at or above appraised (fair market) values, or not at all.
CBRE is also charged with appraising the fair market value of these properties and listing a reasonable sales price. It is important to point out that real estate appraisals are not customarily performed by the agent marketing the property. To avoid conflicts of interest, property appraisals are normally performed by professionals not involved in negotiating the sale.
So you can see how this charade works: CBRE is tasked with selling properties at market value or higher. But who determines what market value is? CBRE. So the fox is officially running the henhouse.
Bryne filed a FOIA to try to obtain the appraisals. The Post Office refused, with the intelligence-insulting excuse that the appraisals were commercially sensitive and were comparable to national security secrets! Um, they are property specific and at a certain point in time, so their value after a sale is consummated is nil…except for audit purposes. But it appears that anything that might embarrass DiFi, who chairs the Senate Intelligence Committee, by definition is a national security issue.
But what is in the public record is plenty damning. CBRE was routinely selling property at below assessed value. For anyone familiar with real estate in the US, “assessed value” is the value used for real estate tax purposes and by convention, almost without exception is meaningfully below market value. Bryne recaps the record:
During the first two years of its contract, CBRE sold the 52 properties it had picked to market for millions of dollars less than their assessed values. For example, in Seattle, CBRE sold a post office building in 2011 for $8 million that was assessed at $16 million. And earlier this year, it sold a seventeen-story office building in St. Paul, Minnesota for $20 million under the 2009 value assessed for it shortly before it was put on the market by CBRE.
Details presented in the chapter “Following the Money” of this e-book show that from June 2011 through May 2013, CBRE sold 52 postal properties for $166 million. The total assessed value of this portfolio at the time of sale was $232 million. Subtracting out the nine properties that sold at a value higher than their assessed value, CBRE has arguably undersold its postal real estate portfolio by at least $79 million. And it undersold these properties even as the price of commercial real estate, especially for central downtown parcels, was approaching the pre-crash highs of 2007.
Interviews about standard real estate practices with two experts provided by the National Association of Realtors indicate that the sale of a property at or below assessed values most often occurs when it is located in a distressed or impoverished area. When there is shortage of commercial real estate in developable areas — which has been the general situation, nationwide, for several years — demand tends to push prices far higher than assessed values.
But the vast majority of the CBRE-negotiated sales did not involve distressed properties: They were mostly located in economically healthy neighborhoods. The sales were mostly of central downtown buildings, with parking, in wealthy or revitalizing neighborhoods that attracted restaurant, boutique, and residential developers, or modern, suburban office buildings and warehouses, also with ample parking that attracted high-tech industrial firms.
There’s more damning detail in the book extract. I strongly urge you to read it in full. This case shows how open our ruling classes have become in stealing from the public at large. And the worst is that even if this story were to get traction, it’s highly unlikely anyone has the guts to cut a super powerful couple like Blum and Feinstein down to size.
Cypriots, Greeks, Irish, etc. welcome their American brothers and sisters to the Selloff Club. Special double welcome to Detroiters.
Rivers, lakes, skies, subterrain, air, water, schools, libraries, all forms of infrastructure, etc. will all be sold to the 1%.
There can be no Debt Crisis while there are still assets to sell off and loot. When those are gone, well maybe then there will be. But the Cookie Jar is still quite full.
The simple economic theorem: borrow until you are bankrupt and then we take all your assets.
(I live in a jurisdiction heavily in debt but they still borrow and run it up some more as there are lots of State assets to be sold a la Cyprus, Greece, Ireland, etc, when the Crunch comes.)
The looting is a human phenomenon. I do not make light of its consequences, but the real cookie jar contains the earth’s resources and biosphere -and they are turning against humankind as it plays the game of class exploitation. INO: what good will it do -what does it even mean?- to “own” a built environment you do not have the natural resources to run, maintain and repair? Or to “own” large swaths of a despoiled, debauched and overexploited natural environment? Watch the price of oil, the pace of climate change events, the increasing scarcity of fresh water, ocean acidification, and many other natural resources. And of course we have wildcards galore like Fukishima. Neoliberals now running the show are clueless and actually losing power, but they are also like the proverbial cornered rat.
The prototype is Russia, c. 1992. How well did that work out?
That’s true in this particular, but also on a grander, macro scale. The global oligarchs saw what the Russians got away with, and they thought “I’ll have a bit of that, thanks”.
It truly openned their eyes as to the possibilities, and It became the model to emulate.
What “Russians got away with” ??? How did the Hahvad Boyz make out? The 1%?
Larry Summers was the consultant arranging the approach to Russian major resource assets for Yeltsen
this was in early 90’s before he sold out usa middle class to the banks
How about America c. 1840-1850? Vanderbildt fleeced the US Government for carrying the mails on his steamships long before he even dreamed of railroads.
The only fact that keeps me from a serious bout of depression when hearing news of this kind of blatant corruption is that it has gone on so long and we have somehow managed to survive it all.
Supply may be an issue.
We need to have the taxpayers fund more infrastructure projects so they can be sold off cheaply.
I’m not sure that CBRE is doing anything different for the USPS than it does for its other clients. They constantly have interests that conflict with their clients and always take every opportunity to capitalize on them. It is no different from the financial sector.
everybody knows the dice are loaded…
… everybody rolls with their fingers crossed.
WTF! DiFi’s constituents should be demanding to see the appraisals. The excuse for denying them is laughable. If CRBE was selling these properties for assessed value, you can be sure that that the proceeds were less than market value.
Many of the owners of these commercial properties are already gaming the property tax system to keep their out-of-pocket expenses to a minimum. Meanwhile, your local appraisal board is more than willing to offer you a rubber-stamp hearing on your residential dwelling to explain why they shouldn’t jack up the value of your home by the 10 percent maximum to make up for the shortfall on those commercial properties.
How much evidence of double-dealing and conflict of interest does it take to remove one of these Congress critters from office?
yeah, i tried the hearing route, the city rep (well they were all city reps really, including the “impartial” adjudicators) said i was lucky they didn’t raise the appraisal more.
See accompanying post “When Too Much Housing is Bad for our Health.”
I ended up taking my board to binding arbitration (successfully). Here in Texas it’s $250 fee/deposit for expedited arbitration, but refundable if you win.
As a broker, I was able to pull ample evidence that their assessment was a joke. They brought 3 appraisers to my hearing to refute my evidence. One even had the audacity to pull sales from a custom gated section nearby and average those in with relevant sales in my neighborhood and tell me what I great deal I was getting. I looked him strait in the face and told him he was asinine. It was at that point I knew my $250 deposit was money well spent.
Here in Texas, the review board hearing doesn’t even allow you an opportunity to directly question/address the panel members, no matter how bad their comps data are. It’s a complete joke.
Aaron that’s the game. Other’s just pay up. You live in a special district boondoggl state. They have got to tax you. Wil probably need to tax you even more. Do visit Strong Towns, which explains why building pattern norm is extremely costly. Wait till second life cycle blues hit!
The Secret Tax Explosion
Special districts are growing like weeds—and raising tax burdens as they proliferate.http://www.texaswatchdog.org/2012/10/insider-network-surrounds-special-texas-government-districts-texas/1350577204.story
Special districts, special favors: An insider network of favors surrounds these proliferating governments in Texas
Taxing districts proliferate out of public eye
Special purpose districts are weaving a tangled tax web
Second Life Cycle Blues
As a Calif resident I can tell you that DiFi’s “constituents” are the ones getting the sweetheart deals.
Of, by, and for the .001%.
We should start calling her DiFungus.
Stop calling them Congress critters like they are some harmless little creature.
They are criminals and should be named as such.
‘CBRE negotiated the sale of postal properties to its own clients and business partners, including one of its corporate owners, Goldman Sachs Group.’
‘We control the horizontal and vertical,’ as the old Outer Limits intro went.
Is it any coincidence that after decades in Washington, Dianne Feinstein’s face is morphing into a jowly, beady-eyed visage with a distinct pig snout? The picture of Doreen Gray, as it were.
Californicators rot from the inside out.
With all do respect Jim… swinging market players like to pump themselves up… yet some squeal… when its them… that gets the pumping.
skippy… thousands of years vs. a few decades… tilted playing field… ya bet ch’a.
JH, isn’t it a “racket” by any definition? Bring RICO. Frogmarch the perps out of the House & Senate.
For a while now, I have been hypothesizing that the U.S. intelligence services have evidence of Dick Blum’s corrupt activities and use that evidence to blackmail his wife, which would explain why Feinstein–the chair of the senate intelligence committee–is such an apologist for the bad acts of the NSA and the rest of the bunch. It’s just pathetic to see her braying for Snowden’s head and stomping her feet that all the NSA phone/email intercepts are legal.
It really is uncharacteristic of her to be so openly in the pocket of the spy agencies, and certainly contrary to the preferences of her California constituents. In my political experience, when people openly are carrying water for the interests of others, there is always a reason.
I’ve also had personal business dealings with Blum. At the time, his investment firm had a huge stock bet where the outcome was almost totally dependent on the outcome of a pending federal regulatory decision. Both Blum personally and his staff had an unnatural complacency that the decision would turn out favorable to their position, which was totally contrary to the prevailing market consensus at the time regarding what the feds would do. Wouldn’t you know, the market turned out to be wrong and Blum correct when the regulatory decision ultimately broke in Blum’s favor.
This makes good sense. I’ve been wondering what happened to DiFi for a while now – ever since she got so bellicose about Asange and Wikileaks. Real estate should be a controlled susbstance – it is so easy to abuse.
Well, I wasn’t expecting good news about post office privatization, but I am shocked, shocked to find out that insiders are cashing in on relationships with our elected representatives. All this time I thought Feinstein was just a witless yammering t**t. Quel surprise!
Good Lord. Aren’t these bloodsuckers rich enough? Why can’t they all just retire to some island and leave the rest of us alone?
Enough is never enough….
Going for broke: The multiple lost decades of US household income. Is it possible to have a recovery while the standard of living collapses?
While most are scratching to get by, the top 5 percent have done spectacular since 1970. There will no doubt be income inequality in any market based system but these kinds of gains are unprecedented. Especially when you consider that banks are being bailed out for essentially causing the first financial crisis! Where else can you implode the economy, get away with legalized bank robbery, and make away with generous bonuses?
This can only occur in a system where most of Congress is in the millionaire ranks and does the bidding for these interests.
People seem to be going broke and as long as the next shiny device is working, all is well. Well not all is well on the income front as many families continue to slowly go broke.
The brazenness and relentless lawlessness is truly mind-blowing.
It’s impossible not to conclude that some deep psychological defect is driving this behavior.
DiFi’s Berkeley constituents have been protesting the sale of the town’s beautiful 99-year old post office for months now. Alas, this has been to no avail.
Where are all the folks saying you never say bad things about Dems?…grin
One use to say that there is not a nickel’s worth of difference between the R’s and D’s but since we stupidly still have the penny, I propose the saying be upgraded to read that there is not a penny’s worth of difference…..the majority are good puppets for their masters….and they get to look down on the rest of us little people as they are bent over for the global plutocrats.
A small correction: the Post Office is paying retiree health benefits for workers who haven’t been born.
Feinstein is a vain, egotistical, entitled female version of Senator Foghorn. The best thing that ever happened to her was the murder of Harvey Milk. It made her career, and she has been ‘milking’ it ever since. Of course, she is a crook, and her husband has been trading off her connections for years. This is only their latest scam.
The joke is that the lame reformist CREW’s most recent list of most corrupt members of Congress doesn’t list her.
But look at this from a wider perspective. The whole California Congressional delegation is pretty ghastly. Barbara Boxer is the quintessential ditz. She was so incompetent that John Kerry (yes, John Kerry!!!) was sent in to shepherd the Senate greenhouse gas (Kerry-Boxer) bill to its eventual defeat. And Darrell Issa, anyone?
And if you think that I am picking on California, look at your own state’s delegation. I am sure it is full of frights. I know mine is.
Hey, I’m actually a resident of Nancy Pelosi’s district. So my entire congressional representation consists of rich women between the ages of 72 and 80. Both Feinstein and Pelosi are married to rich men. None of them has had any serious challenge for office in years. They could care less what their constituents think (Do you think San Franciscans were in favor of bombing Syria? or consider Snowden a traitor? or were in favor of bank bailouts?). Between the democratic “lock” on California in presidential elections and the permanent incumbency of these three women, I often wonder when I vote whether my vote is any more important than “voting” was in the Soviet Union…
Let’s remember who Dianne Feinstein really is:
1) total lack of spine on anything that does not directly concern her immediate interests
2) her worshiping of the Surveillance State
3) her constant efforts to undermine civil rights.
Thus, the content of Yves’s post cannot start to surprise me.
To be fair, if the Post Office didn’t have what should be an illegal monopoly on mailboxes that homeowners pay for, then they wouldn’t even have a chance in hell of competing against UPS and such. Just think of UPS was allowed to drop packages and letters into the mailbox I paid for and installed in my front yard. They’d clean the USPS’s clock, even without the inane funding requirements from Congress.
Oh, smells like someone who works for the folks pushing the privatization meme.
Have you bothered acquainting yourself with what UPS charges for its services?
And don’t test me. Pretty much every case of privatization has resulted in higher costs and worse services to the public.
It is INHERENT in the economic model that privitazation of public services results in higher costs. Private sector firms have to provide the same service (same underlying requirements) and price it to provide for 1. a profit so they can look good to stockholders or equity investors, 2. Debt service if there are meaningful assets to be acquired and 3. Higher comp to C level execs and sometimes middle management (private sector pay scales at the top way way higher than public sector).
So that efficiency meme is bunk. “Efficiency” generally consists of degrading service levels in a big way (and to add insult to injury, the privitazation players raise prices aggressively too). For instance, when I called NYC to sort out what was going on with my corporate taxes (as in I knew I had a large credit but wanted to have someone verify that I had the right $ amount), I left a VM and a guy called back within 2 hours. When I called him back 10 minutes later, he had clearly looked at my records and went over where things stood check by check and made sure I understood. I have similar consistently good experiences (speed and thoroughness of response) when I deal with the NYS insurance regulator. I don’t get remotely that level of service from anyone in large private sector vendors I deal with.
Or, as has been said: “It’s a FEATURE, not a bug.”
This is how it ends up.
We have created areas where crony capitalism can meet crony government to create crony corruption that cheats all taxpayers.
Edward Snowden and Booz: How Privatizing Leads to Crony Corruption
Contractors recruit government employees, then lease them back to the government — where they do the same jobs at much higher cost.
But in recent decades, the dramatic push for more and more privatization of federal functions has gone beyond a discussion or analysis about how to best sort out public and private functions, turning into a headlong rush to privatize more. A good part of this is ideological in nature — driven by vociferously antigovernment ideologues who want to squeeze the size and role of government, decapitate government-employee unions, and discredit government generally along the way. Another part is greed: Sell off parts of government, or hand out contracts, in ways that reward one’s cronies and campaign benefactors. And a third part is to hide the costs of difficult or unpopular activities such as war or spying. Mixed in with these motives is a broader, less malign one: As government has been squeezed and public employees vilified and cut back, the only feasible way to hire competent people who are needed to fill important functions is to do it through the back door.
The intelligence brouhaha and Snowden fiasco — how could this guy have been hired, given his high-level classification, paid $122,000 a year, and gain access to areas expressly off-limits for someone at his level? — should make us focus on the bigger issue, and bigger problem, here. We have vastly over-privatized, and in the process lost control over swaths of important policy areas while allowing unaccountable and even outlaw behavior to expand. And we have created areas where crony capitalism can meet crony government to create crony corruption that cheats all taxpayers.
There were at times more than 100,000 contractors in Iraq, including nearly 50,000 “soldiers,” many making $1,000 a day, far more than active-duty military, with the money coming from American taxpayers. Conveniently for politicians, if these “soldiers” died, they were not counted in the official death toll of Americans killed in the war.
Then there is the corruption, which is at least as worrisome as the corruption we have from the lobbying industry interacting with lawmakers and congressional staff, illustrated chillingly by Jack Abramoff and described compellingly by Bob Kaiser in his book So Damn Much Money. If multiple public functions are privatized, or partially privatized, government employees have huge incentives to curry favor with potential private employers by granting them rich contracts or consulting fees, and then subsequently getting jobs paying multiples of their government salaries — or just giving nice perks to one’s former colleagues and friends who left for the private sector.
Your oh so wonderful UPS contracts the USPS to deliver it’s packages because they are so cheap and efficient.
Criminal elite tool.
It looks like Dianne Feinstein and the Chinese Generals have a lot in common. Elitism and crony capitalism work the same in whatever country.
“exclusive contract” – makes Ellis the “sole source provider”. Sweet Suite.
Sen. Feinstein has a history of successfully, but without shame, flushing the system for her private interests. After authorizing war on Iraq, as a member of the Military Construction Appropriations subcommittee, Sen. Feinstein voted for military contracts worth billions in Iraq to her husband’s (Richard Blum) firms
Senator Feinstein’s Iraq Conflict
By Peter Byrne 01.24.07
Should Dianne recuse herself from the Senate Judiciary Committee
by Timmy on Thu, 03/29/2007
Berkeley gathers forces to save landmark (post office)
As Lily Tomlin says, “No matter how cynical I get, it’s never enough.”
And guess who was a co-sponsor of the original bill? Why, Henry Waxman!
I know Bernie Sanders has done some work on saving USPS and has some good ideas for how to improve its services and bring in more revenue (which the 2006 bill also does not allow). Can’t find a link right now but there’s this:
Thank you for writing about this, Yves, this has been a pet project of mine for a while. A freaking travesty.
Better link: http://www.savethepostoffice.com/
Feinswine + Blum = Plootercrats
Wow! I called Feinswine’s office just a minute ago, after reading this piece – unfortunately, she’s my senior USSA senator – and the fellow answering the phone just laughed when I told him what and where I had just learned these facts. While I’ve often experienced the disdain and hubris coming from DiFi’s beltway office staff, this incident, while funny to the man answering the senator’s phone, is anything but funny to me. This witch should resign because of conflict(s) of interest due to her deep involvement with her husband’s company; she’s also more interested in aiding the warmonger’s lobby, AIPAC – I am Jewish and a democrat,btw – than in protecting the constitution of the country to which she swore an oath.
Fiendswine knows she has nothing to fear from constituents that are passive and submissive.
Her staff know that too; hence, they can’t help themselves and laugh at their own constituents.
It is pretty pathetic that a state like CA can’t produce ONE serious primary challenger to DiFi.
Earlier this year a firm I was consulting with was officing in spare space at the San Francisco Chamber of Commerce. One day I rode the freight elevator up to the 12th floor with my bicycle, and just as I was getting out of the elevator, what do I see slithering out of the event room but the hideous visage of Dianne Feinstein leading an entourage.
It was all I could do to maintain propriety and not shout out “Free Bradley Manning” or “Resign you corrupt scum.” If only I had the power to vomit on demand…
The story of privatisation in the UK is mostly a case of hidden disaster. We may have had a short period of cheaper prices or fares, but this came with the sell-off of a lot of property and the build-up of lack of investment and maintenance work. We have to churn most of our services every 12 – 18 months for the cheapest deals. We were, of course, copying the brilliant and competitive USA. A number of British Rail property sales were as bad as the ones Yves tells us about here.
Kudos for bring attention to the accounting gimmick of prepaying benfits.
Almost every gov’t agency is pulling this BS.
Counting benefits to be paid years out as a cash payment TODAY!
This is the a significant part of the CAFR scam that permiates gov’ts allow over the nation.
I’m looking at you Detroit…..
Thank you, Yves, for bringing this up. I have been raving at cocktail parties about this since I first heard about it on the radio as a side comment a few months ago. All I get are looks and comments that I am raving mad.
But guess what my reply is: if these buildings were to be sold, why weren’t they offered to architecture schools across the country for renewed municipal planning? Why weren’t architecture and city planning grads allowed to engage in a WPA-style contest to recreate these buildings for new uses by the local citizens. Many of these buildings were built during the gold-standard days when people actually paid for them with tax dollars.
(1) With the stroke of a pen, the USPS could be in the black tomorrow. The prepaid benefits clause is a congressional artifact and can be changed with a vote, not a sound business idea.
(2) What Feinstein and her husband are doing is an elite crime against the common. Period.
Again, Yves, THANK YOU.
“it’s highly unlikely that anyone has the guts to cut a super powerful couple like Blum and Feinstein down to size.”–No exageration here, remembering that DiFi was able to summon Candidate Clinton and Candidate Obama to a meeting inher home in the midst of the 2008 primary campaigns and broker the deal that sealed the nomination of Candidate Obama. These people decide who the president will be, for cat’s sake. And it’s easy to see who is in debt to whom.
The lead-in is misleading. The budget crisis is mostly manufactured by the pre-funding requirement, but there is no doubt that the postal service must contract – meaning many of its facilities must be disposed of – because of electronic communications. Also, for whatever reasons package delivery had been largely taken away by private enterprise.
Nobody has proven that there is a necessary future role for the government delivering paper letters. More complete electronic communication, for example universal WiFi including video, would seem to be a more suitable thing to be doing. At the moment internet and TV are nasty semi-monopolies. Nobody is guaranteed high-speed internet as they are guaranteed letter delivery.
Those whatever reasons are fedex and ups paying republican politicians.
The postal service has been a target of connected scavengers since at least the early 80s, and should it fall, we’ll all be much worse off. If you ship or receive packages regularly, you already know.