Obama had help from wealthy donor

Tech firm owner paid him a retainer, got his endorsement

Election 2008

April 27, 2008|By Chuck Neubauer and Tom Hamburger | Chuck Neubauer and Tom Hamburger,Los Angeles Times

WASHINGTON -- After an unsuccessful campaign for Congress in 2000, Illinois state Sen. Barack Obama faced serious financial pressure. Help arrived in early 2001 from a significant new legal client - a longtime political supporter.

Chicago entrepreneur Robert Blackwell Jr. paid Obama an $8,000-a-month retainer to give legal advice to his technology firm, Electronic Knowledge Interchange. It allowed Obama to supplement his $58,000 part-time state Senate salary for more than a year with payments from Blackwell's firm that totaled $112,000.

A few months after receiving his final payment from EKI, Obama sent a request on state Senate letterhead urging Illinois officials to provide a $50,000 tourism promotion grant to another Blackwell company, Killerspin.

Killerspin specializes in table tennis, running tournaments nationwide and selling its own line of equipment and apparel and DVD recordings of the competitions. With support from Obama, other state officials and an Obama aide who went to work part time for Blackwell's firms, the company eventually obtained $320,000 in state grants between 2002 and 2004 to subsidize its tournaments.

Obama's staff said the senator advocated only for the first year's grant, which was $20,000, not $50,000. The day after Obama wrote his letter urging awarding of the state funds, Obama's U.S. Senate campaign received a $1,000 donation from Blackwell.

Obama's presidential campaign rejects any suggestion that there was a connection between the legal work, the campaign contribution and the help with the grant. "Any implication that Senator Obama would risk an ethical breach in order to secure a small grant for a pingpong tournament is nuts," said David Axelrod, Obama's chief political adviser.

Business relationships between lawmakers and people with government interests are not illegal or uncommon in Illinois and other states with a part-time legislature, where lawmakers supplement their state salaries with income from the private sector.

But Obama portrays himself as dedicated to transparency and sensitive even to the appearance of a conflict of interest.

Obama spokesman Robert Gibbs, who provided the Los Angeles Times with details of Obama's compensation from EKI, says Obama did nothing wrong acting on behalf of Killerspin. He said the state senator simply wrote a letter backing a project developed by a constituent.

When Blackwell sought backing for his table tennis tournament in 2002, other politicians including U.S. Sen. Richard J. Durbin, an Illinois Democrat, and Chicago Mayor Richard M. Daley offered support for the event. But Obama was the only one who provided a letter that became part of the initial application for state funds, state records show. In addition, he wrote a state Senate proclamation heralding the first tournament and an official letter welcoming "table tennis friends" to the 2004 contest.

Initially the idea of table tennis receiving funds from a state tourism program - designed to encourage overnight visits to Illinois - was met with skepticism by one Republican state official. But the funding was granted at the $20,000 level that first year and then grew to $200,000 in 2003 and totaled $100,000 in 2004.

Today, Illinois Tourism Director Jan Kosner lauds the state's decision to support the table tennis tourneys and dismisses the role that letters from politicians play in the grant-making process.

Unofficial estimates place 3,000 to 6,000 spectators in the 8,000-seat University of Illinois-Chicago arena during some events.

When Blackwell hired Obama in 2001 to serve as general counsel for his tech company, EKI, the monthly retainer paid by EKI was sent to the law firm that Obama was affiliated with at the time, currently known as Miner, Barnhill & Galland, where he worked part-time when not tending to legislative duties. The entire EKI retainer went to Obama, who was considered "of counsel" to the firm, according to details provided to the Times by the Obama campaign and confirmed by Miner. Obama's tax returns show that he made no money from his law practice in 2000. But that changed in 2001, when Obama reported $98,158 income for providing legal services. Of that, $80,000 was from Blackwell's company.

On disclosure forms for 2001 and 2002, Obama did not specify that EKI provided him with the bulk of the private-sector compensation that he received. As was his custom, he attached a multiple-page list of all of the law firm's clients, which included EKI among the names of hundreds of other firm clients. Illinois law does not require more specific disclosure.

Stanley Brand, a Washington lawyer who counsels members of Congress and others on ethics rules, said he would have advised a lawmaker in Obama's circumstances to separately disclose such a singularly important client and not simply include it on a list of hundreds of firm clients.

An Illinois ethics advocate who worked with Obama, Cynthia Canary, said his disclosure, by listing all the firm's clients, "was a more complete disclosure than you see 80 percent of the time in Illinois." Further, she said that Obama's letter on behalf of the table tennis tournament did not "rise to the level of a conflict of interest" because Obama did not have decision-making authority over the grant.

Obama's wife, Michelle, then a member of the Commission on Chicago Landmarks, reported her husband's work for EKI on a city of Chicago financial disclosure form obtained by the Times. Gibbs said she identified EKI on her form after consulting with her husband.

Chuck Neubauer and Tom Hamburger write for the Los Angeles Times.

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