-Caveat Lector-
Husband's Business Ties to China Dog Feinstein
As he vows to have no personal stake in the nation, the senator
expresses frustration that the issue remains under constant scrutiny.
By RICHARD SIMON, GREG KRIKORIAN
LATimes Staff Writers
For years, international financier Richard C. Blum's vast
business portfolio has persisted as a nettlesome issue for his
wife, Sen. Dianne Feinstein (D-Calif.), a vocal proponent of
increased China trade.
Three years ago, he vowed to turn over any profits from his China
investments to charity.
Last year, as Feinstein prepared to run for reelection, Blum
says, he disposed of his remaining personal investment in
mainland China to avoid any hint of impropriety.
Even so, Blum continues to manage a partnership that has invested
in China, records and interviews show. And he, his partnerships
or accounts he manages have major interests in an airline seeking
U.S. government approval to expand its China business and in a
South Korean bank that operates a joint venture in China.
After inquiries about his China-related business, Blum pledged
this week that he "will not invest in mainland China or Hong Kong
as long as Dianne Feinstein is a U.S. senator to avoid even the
appearance of conflict."
He said profits from Hong Kong investments, like those from the
mainland, would go to charities he established to benefit
impoverished Himalayan people. He specifically committed about
$400,000 from a Hong Kong real estate investment sold this year.
Through a spokesman, Blum said any money he receives from
managing the investments of others in China also will go to
charity. "We have done everything we possibly can," Feinstein
said in exasperation. "I can't tell my husband to die. I can't
tell him to give up what he does. . . . I don't know what more
I can do. I mean, get divorced and live in sin, I suppose."
Blum's finances have drawn scrutiny in part because his holdings
and the funds he manages are so extensive and complex that
government-required disclosure forms do not show precisely where
the money is invested.
His China investments have become a target because Feinstein long
has been active in promoting U.S.-China relations and recently
supported the congressional vote to grant China permanent normal
trade relations.
Questions about Blum's financial affairs illustrate the
difficulties facing any candidate whose spouse has large
financial interests. The issue was raised this year by Rep.
Tom Campbell (R-San Jose), Feinstein's opponent in the Nov. 7
election. When there was speculation that Feinstein could be
Vice President Al Gore's presidential running mate, political
analysts cited her husband's investments as a potential
liability.
"All candidates with rich and powerful spouses are walking in the
shadow of Geraldine Ferraro," said John J. Pitney Jr., associate
political science professor at Claremont McKenna College,
referring to the 1984 Democratic vice presidential candidate
whose husband's business became a political albatross.
Blum says he has never benefited from his wife's positions on
China. "I can't think of one single reason why the Chinese
leadership would be wanting to help us with investment
opportunities," Blum wrote to The Times, calling himself an
outspoken critic of China's human rights record and a supporter
of Tibet's exiled religious leader, the Dalai Lama.
Blum declined to be interviewed, but he responded in writing to
questions through a spokesman, who emphasized that "Sen.
Feinstein does not participate in Mr. Blum's business in any
way."
Feinstein grew angry when asked about her husband's investments.
"There's no conflict of interest," the senator said in an
interview. "I take what I do very seriously. It's my lifeblood.
I'm not going to jeopardize my public trust."
Feinstein provided The Times a letter showing that she consulted
the Senate Ethics Committee before the vote on China trade. The
letter said the committee did not consider her vote a conflict
because it could benefit all people doing business in China, not
just Blum.
Gary Ruskin, director of the Congressional Accountability
Project, a government watchdog group in Washington, said he
sympathizes with the desire of public officials to keep parts of
their lives private.
But with the hundreds of millions of dollars handled by Blum and
his firm, Feinstein and Blum must "bend over backward in order to
convince voters that they're not profiting from her governmental
actions," Ruskin said. That means, he said, fully disclosing
Blum's holdings.
Feinstein's disclosure statement--which runs 84 pages and
indicates that she and Blum had at least $27 million in assets at
the end of 1999--lists Blum's partnerships but not all the
investments of those partnerships.
The couple made available their 1999 tax return, showing they
paid $1.7 million in taxes on almost $9.3 million in income while
donating $1.9 million to charity.
Extensive Ties to Asia
Blum, 65, is a money manager whose business is based in San
Francisco, not far from the Transamerica pyramid. He is chairman
of BLUM Capital Partners L.P., which, along with its affiliates,
manages $3.5 billion in assets invested in companies involved in
everything from high technology to aviation. Blum and his firm
have interests in dozens of partnerships.
Blum also is a director of companies such as Northwest Airlines,
Korea First Bank in South Korea, Playtex and Shaklee. He is
honorary consul to Nepal and Mongolia and once served as an
unpaid "special foreign advisor" to Shanghai International Trust
and Investment Co., a government-owned investment firm.
As the husband of a senator and former mayor of San Francisco,
Blum has enjoyed access to Chinese officials. He has accompanied
his wife on trips to China, including one in August 1999 when she
delivered a letter from President Clinton to President Jiang
Zemin, seeking to jump-start talks on China's entry into the
World Trade Organization. The couple paid their own way.
In the mid-1980s, Blum invested in a trading company and a
building in China. A spokesman said the investments were
liquidated in 1994, two years after Feinstein was elected to the
Senate.
That year, Blum joined forces with Texas financier David
Bonderman to create Newbridge Associates Ltd. to seek
investments in emerging countries such as China.
With more than $100 million in capital, the first Newbridge
limited partnership bought major interests over the next few
years in a Chinese pig iron company and in leading Chinese
producers of soybean milk and candy.
His business activity generated enough controversy that in 1997
he pledged to donate profits from his China investments to the
American Himalayan Foundation, a charity he founded and runs out
of his office to support social programs in Tibet and other
countries in the region.
Last May, as Feinstein campaigned for reelection, Campbell
accused her of failing to fully disclose Blum's financial
interests. "Do you or your family have any holdings in China?"
Campbell asked. A Feinstein campaign aide said Blum no longer
had any investments in "mainland China."
Earlier that month, Blum had divested himself of an investment in
a Hong Kong-based Internet company, Asiacontent.com, his
spokesman said recently.
When asked whether Blum planned to donate the profits from Hong
Kong investments to charity, his spokesman initially said that no
commitment had been made to do so. But days later, the spokesman
said Blum's investment of $100,000 to $200,000, in fact, had been
placed into a charitable trust on May 1, because it was
mistakenly listed as a mainland China investment, not a Hong Kong
investment.
In fall 1998, Newbridge Asia II, another firm, bought a stake in
Kerry Properties, a large Hong Kong-based property investment and
development company with projects throughout China.
Blum's spokesman said that Newbridge sold its interest in Kerry
in April and August and that Blum would give his approximately
$400,000 profit to the charitable trust.
The Newbridge partnership, of which Blum is co-chairman, made two
investments in recent months in China: China Civilink Ltd., an
Internet provider, and Zhongxing-Suntek Data Communication Co.
But Blum's stake in the investments was simultaneously
transferred to an irrevocable charitable trust, according to his
spokesman.
Blum sold his last personal investment in mainland China--North
Dragon Iron & Steel Group--on Dec. 1, 1999, although Newbridge
still has an investment in the company, his spokesman said,
noting that Blum lost $105,383 last year on mainland China
investments. Blum's earlier $490,000 investment in Shanghai
Pacific Partners made a $203,000 profit, he said, and now is in
liquidation.
Stakes in Firms With China Presence
Newbridge Capital Ltd., formerly Newbridge Associates, last year
bought a controlling interest in Korea First Bank for a reported
$415 million. Blum is a board member of the bank, which
affiliated with Qingdao International Bank in China three years
earlier.
The China-Korea joint venture, Blum's spokesman said, constitutes
only about 1% of Korea First's assets. "The fact that Korea Bank
may be doing business in China is . . . no different than any
other company located in the United States--such as Boeing, GE,
GM or IBM--doing business in mainland China," he said.
Blum owns interests in Northwest Airlines and iAsiaworks, a San
Mateo company that has set its sights on China's Internet market.
His spokesman said Blum's partnerships and accounts he manages
own about $116 million in stock in Northwest, which in 1998
signed a three-year passenger sharing agreement with Air China,
China's flag carrier. Northwest is seeking U.S. Department of
Transportation approval to add flights to China.
Blum has $457,000 invested in iAsiaWorks, and the company had
$47,000 in China revenue last year, his spokesman said.
Blum expressed dismay over continued questions about his
business, noting that last year he received an award from the
Dalai Lama. He and his wife donated about $560,000 to the
Himalayan foundation.
"I am very proud to have received this award, but it's hardly one
I would have been interested in if I care at all about making
money in China," Blum wrote. * * * Times librarian Paul Singleton
contributed to this report.
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