A Project of The Annenberg Public Policy Center

‘Unethical?’

A McCain-Palin/RNC ad claims Obama 'rewards his friends with your tax dollars.' It's off the mark.


Summary

An ad released jointly by the McCain-Palin campaign and the RNC claims Obama "rewards his friends with your tax dollars" and calls his actions "unethical." Some of what the ad says is false or misleading. Here are the facts:

  • The ad claims that Obama supporter and Chicago real estate developer Allison Davis received $20 million in taxpayer money. That’s false. Davis didn’t get this money. Instead, the federal grant went to the Chicago Housing Authority, replacing money it had already put forward for a mixed-income housing project on which Davis was a developer. The grant didn’t go to Davis, nor did it help him pocket any additional funds.
  • The ad says Obama gave Tony Rezko $14 million of taxpayer money. That’s misleading. It’s true the housing project Rezko was working on cost $14 million in taxpayer cash. Rezko and his partner netted $855,000 in fees.
  • Obama worked to get Kenny Smith a $100,000 grant to build a park, which Smith later failed to complete. Smith has since caught the attention of the state attorney general. But, according to reports, Obama isn’t under investigation for helping Smith get the grant.

The RNC and McCain may consider Obama’s actions to be "unethical"; that’s a matter of opinion. But the fact is, as far as these three incidents are concerned, Obama has not been officially accused of any wrongdoing, and there’s been no report that his actions are the subject of any official investigation.

Analysis

The joint ad from the McCain-Palin campaign and the Republican National Committee accuses Sen. Barack Obama of being "unethical," citing instances in which individuals connected to Obama received federal or state funds. Sen. John McCain’s campaign and the RNC have spent $5.9 million so far airing the ad in 17 states, including Pennsylvania, where $1.2 million has been spent on the ad, and North Carolina, where it has aired a total of 1,629 times, according to the Campaign Media Analysis Group of TNS Media Intelligence. The ad started airing on Oct. 14.

 

 

[TET ]RNC/McCain-Palin Ad: "Unethical"

Announcer: Obama rewards his friends with your tax dollars. Tony Rezko, fourteen million. Allison Davis, twenty million. Kenny Smith, one hundred thousand. That’s unethical. Congressional liberals promise to raise your taxes to reward their friends with wasteful pork. Taxes for you. Pork for them. Who’s gonna’ stop ’em? Congressional liberals? Or him.

McCain: I’m John McCain and I approve this message.[/TET]

$20 Million? Try Zero

The ad claims that real estate developer Allison Davis received $20 million of taxpayer money thanks to Obama. But that’s false. Davis didn’t get any of this money. The ad cites a story from The Washington Times, but the article says that "city housing authorities confirmed" that the "grant money won’t go to Mr. Davis or his company."

According to documentation provided by the Chicago Housing Authority (CHA), a letter was ghostwritten for Obama, Sen. Dick Durbin (D-Ill.) and others by the CHA in support of a project called Stateway Gardens – an urban revitalization effort to transition crime-ridden high-rises into mixed-income housing. The letter was sent to the U.S. Department of Housing and Urban Development in an effort to acquire a fiscal year 2008 grant of $20 million to support the project, of which Davis, a supporter of Obama, was one of the developers.

We spoke with Housing and Urban Development (HUD) spokeswoman Donna White, who told us that the money was not awarded to Davis, but to the Chicago Housing Authority:

Donna White, spokeswoman for HUD: The Chicago Housing Authority competed for [the Hope VI] grant. The housing authority applies for the funding, they select a developer. … It’s common for congressional members to submit letters of support when they know that a housing authority in their jurisdiction is competing for a grant.

We also spoke with William Little, executive vice president of development for CHA, who reiterated that the HUD grant was not awarded to Davis, but to the CHA, and that the grant allowed the CHA to reallocate funds it had already directed to the Stateway project. Davis did not see a profit as a result of the HUD grant, according to Little, nor did the budget for the Stateway project increase. When we asked Little about the charge in the ad that Obama "reward[ed]" Davis with $20 million, he told us:

William Little, CHA: That’s totally false. HUD awarded CHA $20 million in a Hope VI grant, which allows CHA to reallocate funds it had previously earmarked for that particular project to other projects. The overall budget for the project did not increase. Allison Davis gets none of it.

A portion of the Stateway development is devoted to market-priced housing, and Davis stood to profit from the sales of those homes. But he did not pocket any of the HUD grant, which went to construction of low-income units.

Tony Rezko (Again)

The ad also claims that Tony Rezko got "fourteen million," because of Obama. But he didn’t.

A 2007 report from The Chicago Sun-Times is the source, but the article goes over territory we’ve addressed before: that Obama wrote letters to state officials supporting a low-income senior housing complex Rezko was trying to have built. Both men say Rezko did not solicit the letters. The Sun-Times quoted Obama spokesman Bill Burton as saying Obama didn’t write the letters as a favor but "in the interests of the people in the community who have benefited from the project."

Regardless, the ad is wrong to imply Rezko pocketed millions. The project cost $14 million of taxpayer money. But, as we’ve reported, Rezko and his partner, who was Allison Davis, received $855,000 in fees. It’s not peanuts, but it’s not $14 million either.

Kenny Smith’s $100,000 Garden

The ad then claims Kenny Smith received $100,000 in taxpayer money as a "reward" from Obama. This claim holds more water than the rest, but it’s still a leaky vessel. 

The ad cites a New York Post report that details how Obama, then a state senator in the midst of a race for a congressional seat, worked on Smith’s behalf in 2000 in an effort to raise $1.1 million in state funding for the "Englewood Botanic Garden Project." Smith, head of the nonprofit Chicago Better Housing Association and a volunteer for Obama’s congressional campaign, planned to rehabilitate a plot of land in a Chicago neighborhood. He was awarded a $100,000 state grant to do so, a far cry from the $1.1 million he had hoped to receive.

But Smith never built the park. And, according to a report from The Chicago Sun-Times, state Attorney General Lisa Madigan, a Democrat who backs Obama, has started to look into whether or not taxpayer money was mishandled. While questions have been raised about how Smith spent the money, according to the Sun-Times, the paper notes that "neither Smith nor his wife are accused of any wrongdoing." The Post report cited by the ad said that "officials in Madigan’s office said Obama’s actions in giving out the member item aren’t under investigation."

Democrats "Promise to Raise Your Taxes"

The ad swings away from the taxpayer hand-outs and claims: "Democrats promise to raise your taxes to reward their friends with wasteful pork." That linkage doesn’t sound like a promise any sane politician would make. 

The ad cites a Nov. 2007 article from The Washington Times, which chronicles a bill introduced by Rep. Charles Rangel (D-N.Y.). The bill would have amended the tax code to repeal the Alternative Minimum Tax and limit deductions that could be claimed by taxpayers making more than $250,000 a year, among other measures. But Rangel’s bill, introduced a year ago, never cleared the Ways and Means Committee.

As for the "wasteful pork" claim, the fact is that securing earmarks is a popular practice among both Democrats and Republicans. Two oft-cited earmark recipients are longtime Sens. Robert Byrd (D-W.V.) and Ted Stevens (R-Alaska). Both were listed in Porkbusters.org’s "Hall of Shame" in 2006 and have been singled out as "Porker of The Month" more than once over the last eight years by the organization Citizens Against Government Waste – proof that, promise or not, Democrats and Republicans send money home for projects whether taxes go up or down.

– by Emi Kolawole

Sources

Novak, Tim. "Obama’s Letters for Rezko." 13 June 2007. The Chicago Sun-Times. 22 August 2008.

McElhatton, Jim.  "Obama sought HUD grant for donor’s project."  6 Oct. 2008. The Washington Times.

Miller, S.A. "Democrats’ Plan Taxes All."  8 Nov. 2007. The Washington Times.