Edwards OK’d Home Sale to Saudi PR Man
The public relations specialist hired by Saudi Arabia to influence Congress and the public after the Sept. 11 attacks struck a deal to buy the home of Democratic presidential hopeful John Edwards last year as he and other Senate Intelligence Committee members were investigating Saudi and U.S. terrorism lapses.
Edwards, D-N.C., told The Associated Press he learned sometime during the course of the proposed $3.52 million purchase – months after the initial offer was signed but before the deal fell apart – that registered foreign agent Michael Petruzzello worked for Saudi Arabia.
Although the sale broke off nearly a year ago, Edwards hasn’t returned or publicly disclosed Petruzzello’s $100,000 deposit, which remains in a real estate escrow account as the senator decides what to do with it.
Edwards recently sold the house in Washington’s Georgetown neighborhood to another buyer for a half-million dollars less than Petruzzello’s offer.
“If I took control of the $100,000, I would disclose it because that would be an asset of mine and it would be necessary that it should be disclosed. And that disclosure would include making sure that it was appropriate because of the legal issues associated it with it,” Edwards told the AP.
The Senate ethics manual says lawmakers are obligated to avoid financial transactions that create even the “possibility or appearance” of a conflict of interest or if “they have personal financial stakes in the outcome of their official duties.” Discretion is left to the senator.
Edwards, a critic of Saudi Arabia, said he handled the transaction through real estate agents and doesn’t believe he had any obligation to try to learn about Petruzzello’s clients. He said he never had any suspicions, even after learning of the Saudi connection while he and other Intelligence Committee members were still investigating Saudi Arabia’s possible complicity in the Sept. 11 attacks.
“This guy never said anything to me about Saudi Arabia,” Edwards said, noting he was critical of the Saudis both before and after the house deal. “So it is an arms-length transaction with a stranger, and he ends up backing out of the deal, which created a financial loss for us.”
Petruzzello said his offer had nothing to do with the Saudis. “My wife loved it (the house), and I just wanted to make her happy,” he said.
Several ethics experts who reviewed the transaction at the AP’s request said they believed Edwards had an obligation to recognize the appearance of a conflict of interest once he learned of the Saudi connection, either disclosing the transaction or seeking Senate Ethics Committee clearance.
“The potential conflict of interest is readily apparent when a member of the Senate Select Committee on Intelligence receives $100,000 in a real or sham business deal with a foreign agent or a person with extensive foreign contracts at the same time the Senate is investigating possible lapses in national security,” said Kent Cooper, former head of the disclosure office for federal candidates.
Stephen Gillers, a New York University law professor, said he didn’t have an opinion on whether laws or rules were broken but said the house sale “could to a reasonable person appear to be improper, even if it is not.”
“If Edwards knew the Saudi connection before the purchase fell apart, it was his job to avoid unfortunate inferences through disclosure. But he had no duty to ask for his buyer’s client list,” Gillers said.
Jan Baran, a Republican lawyer who represented former House Speaker Newt Gingrich during a 1990s ethics investigation, said he believed the real estate transaction was legal but that Edwards may be held politically accountable.
“Any time there are transactions between public officials and lobbyists, there is heightened scrutiny and increased political risk. It really becomes a matter of judgment,” Baran said.
Though Washington real estate was hot, Edwards’ home had been on the market for 13 months at an asking price of more than $4 million when Petruzzello offered to buy it May 17, 2002 for $3.52 million, according to Edwards’ office.
The offer was $1.3 million more than what Edwards paid for the home in 1999, deed records show.
Edwards finally sold the house in June 2003 to the government of Hungary for $3 million, about $500,000 less than Petruzzello offered but $800,000 more than Edwards paid in 1999, deed records showed.
Petruzzello is a registered foreign agent and managing partner of the Washington public relations firm Qorvis Communications. It was hired Nov. 14, 2001, by Saudi Arabia at a rate of $200,000 a month plus expenses to oversee a lobbying and public relations campaign to counter criticisms that Saudi Arabia was soft on terrorism. Fifteen of the 19 Sept. 11 hijackers were Saudis.
Petruzzello’s Foreign Agent Registration Act filing with the Justice Department said his firm would try to influence Congress. “We will liaise and provide documentation and information to members of the U.S. Congress and legislative officials in the administrative branch of the government concerning the relationship between Saudi Arabia and the United States,” the filing said.
In the weeks before the offer, Petruzzello had visited Edwards’ home state of North Carolina with Saudi officials as part of their campaign, and had been widely quoted in Washington and national publications describing his work for the Middle East kingdom.
Petruzzello’s firm also placed pro-Saudi TV ads in 20 large markets, including North Carolina, Washington D.C., and cities near the homes of other House and Senate Intelligence committee members.
Edwards’ office said he learned in general of Petruzzello’s Saudi connection in the late summer or fall of 2002, while the deal was pending, when he became concerned Petruzzello might back out of the sale.
“As the Edwardses became concerned that the Petruzzellos were going to back out of the contract, someone mentioned to the senator that Mr. Petruzzello owned a public relations company and that one of his clients was the Embassy of Saudi Arabia,” his office said.
The deal fell through in November 2002 after Petruzzello personally called the senator and told him he couldn’t sell his existing home. “I simply couldn’t afford both places,” Petruzzello said. “I felt bad.”
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On the Net:
A chronology of key events in Edwards’ home sale is available at http://customwire.ap.org/dynamic/external/wid.ap.org/index.html