The Dan Mahru Reader — Connecting Some Dots

Daniel Mahru, the former development partner of convicted political fixer — and PSBHO’s personal real estate fairy — Antoin “Tony” Rezko, is bankrupt, the Chicago Sun-Times’ Tim Novak reports today.

Dan Mahru — a lawyer who became an ice peddler and real estate developer — has filed for bankruptcy, declaring that he and his business partners, including Rezko, owe as much as $95 million to creditors.

Mahru estimates his personal debts could be as high as $50 million.

Mahru and Rezko split a few years ago [2005]. But they’re still fighting dozens of lawsuits filed over housing developments they built. “I couldn’t handle all the multitude of lawsuits involving Mr. Rezko,” Mahru says.

Mahru lists $48,970.61 in assets in the bankruptcy case he filed shortly before Christmas.

His creditors are a “who’s who” of Rezko’s world, including:

• A company owned by Nadhmi Auchi (right), the Iraq-born billionaire who took control of 62 acres in the South Loop that Rezko and Mahru hoped to develop [in 2002].

• Joseph Cacciatore, a lawyer and developer who says he’s owed $5 million from the South Loop project.

• John Thomas, a developer and FBI mole [more here] who helped authorities document the repeated visits former Gov. Rod Blagojevich and President Obama made to the offices where Rezko and Mahru ran their Rezmar Corp.

• Fortunee Massuda, a podiatrist who invested millions in Rezmar projects. [See Rezko's "dirty money" list.]

Mahru has stopped paying the $1.5 million mortgage on his Glencoe home, which is now in foreclosure. He owes $5.4 million on mortgages for his company, Automatic Ice, which provides icemakers to restaurants and hotels. And he owes more than $480,000 in legal fees to eight law firms — including $5,075.28 to the law firm of Ald. Edward M. Burke (14th).

Crain’s reported December 17, 2008, on Mahru’s bankruptcy filing:

Mahru, who now has his own company, blamed [Tony] Rezko (left, with PSBHO) for his financial troubles, saying Mr. Rezko has not lived up to the terms of a September 2005 buyout of Mr. Mahru’s stake in Rezmar.

“I’m forced into this position because of Mr. Rezko,” said Mr. Mahru, CEO of Chicago-based Radian Development LLC. The bankruptcy filing “is not my first choice, it’s my last choice,” he added.

As part of the buyout agreement, Mr. Rezko agreed to reimburse Mr. Mahru in connection with any Rezmar-related litigation, Mr. Mahru said. Mr. Rezko also agreed to pay a $2-million promissory note, Mr. Mahru said, and make an additional payment, which Mr. Mahru declined to disclose. [...]

Mr. Mahru’s bankruptcy petition comes as he says he faces collection efforts by creditors on several Rezmar ventures, including a 4.4-acre site in Sauganash on the Northwest Side, where nearly four years ago Rezmar planned to build 35 homes.

The plan collapsed, and Wisconsin-based lender M&I Marshall & Isley Bank last year obtained a judgment for about $13 million, property and court records show.

Mr. Mahru said creditors have obtained several other judgments against him in connection with Rezmar projects, which he declined to identify.

In March, National City Bank filed a $1.5-million foreclosure lawsuit on Mr. Mahru’s Glencoe home. Mr. Mahru says the case is in “limbo.”

Crain’s clarifies the little matter of whether or not Mahru has been cooperating with federal prosecutors in Rezko’s criminal cases. Both Mary Wisniewski at the Chicago Sun-Times (Rezko accuses ex-partner. Mahru denies claim he turned informant to avoid arrest) and RBO (Rezko’s power plant—bribe allegation) wrote about this nearly a year ago. Crain’s writes:

There is little love between Messrs. Rezko and Mahru.

In December 2005, after Rezmar’s breakup, Mr. Mahru began cooperating with federal investigators against Mr. Rezko, according to a document filed by Mr. Rezko in one of his two criminal cases. Mr. Mahru ultimately was not called as a witness in Mr. Rezko’s case.

Mr. Mahru declined to comment about the investigation except to say, “I’ve had no discussions with the federal authorities in a very long time.”

Tim Novak, who has followed and reported extensively on Rezko, wrote a pair of articles April 23 and 24, 2007, from which RBO is borrowing heavily below.

Novak reported on April 23, 2007, that “[f]or more than five weeks during the brutal winter of 1997, tenants shivered without heat in a government-subsidized apartment building on Chicago’s South Side.”

It was just four years after the landlords — Antoin ‘Tony” Rezko and his partner Daniel Mahru — had rehabbed the 31-unit building in Englewood with a loan from Chicago taxpayers.

Rezko and Mahru couldn’t find money to get the heat back on.

But their company, Rezmar Corp., did come up with $1,000 to give to the political campaign fund of Barack Obama, the newly elected state senator whose district included the unheated building. [...]

Obama, who has worked as a lawyer and a legislator to improve living conditions for the poor, took campaign donations from Rezko even as Rezko’s low-income housing empire was collapsing, leaving many African-American families in buildings riddled with problems — including squalid living conditions, vacant apartments, lack of heat, squatters and drug dealers. [...] Eleven of Rezko’s buildings were in Obama’s state Senate district.

Davis Miner Barnhill & Galland

Novak wrote in his April 23, 2007, article that at the time PSBHO was “an attorney with a small Chicago law firm — Davis Miner Barnhill & Galland — that helped Rezmar get more than $43 million in government funding to rehab 15 of their 30 apartment buildings for the poor.” It remains unclear how much work the Unprez may have contributed to these efforts although, as Novak wrote, he was “associated with the firm for more than nine years.”

Between 1989 and 1998, Rezmar made deals to rehab 30 buildings, a total of 1,025 apartments. The last 15 buildings involved Davis Miner Barnhill & Galland during Obama’s time with the firm. [...]

Rezko and Mahru also managed the buildings, which were supposed to provide homes for poor people for 30 years. Every one of the projects ran into trouble.

We do know that in 1994 Obama “appeared in Cook County court on behalf of Woodlawn Preservation & Investment Corp., defending it against a suit by the city, which alleged that the company failed to provide heat for low-income tenants on the South Side during the winter.”

The connection? PSBHO’s boss, Allison Davis (left), told the Chicago Sun-Times in April 2007 that, while he was “running the law firm, he was also a board member of the Woodlawn Preservation and Investment Corp., a not-for-profit company that hooked up with Rezko’s Rezmar Corp. on tax-supported projects to rehabilitate apartments for low-income tenants. Davis’ firm handled the legal work on those housing deals.”

As Tim Novak wrote April 23, 2007, it was the DMB&G law firm that connected Rezko and Rezmar to PSBHO in 1991:

Obama’s friendship with Rezko began with a telephone call.

It was 17 years ago. Obama had just become the first black president of the Harvard Law Review. Newspapers wrote about him. One story caught the eye of David Brint, a vice president of Rezmar, a new company that had become the Daley administration’s favored developer of low-income housing.

“I just cold-called him,” Brint said in an interview.

Brint said he wanted to know if Obama would come work for Rezmar, developing housing for the poor — something Obama had expressed interest in, according to the story Brint had read. Brint arranged for Obama to meet Rezko, but Obama didn’t take the job.

Obama did join the law firm — “which specialized in helping developers build housing for the poor. Five of those deals included Rezko’s company, Rezmar Corp.” — in 1993. According to an April 2007 Chicago Sun-Times interview, PSBHO “reported primarily to former partner Allison Davis and occasionally to William Miceli,” who continues to serve as fiscal agent for the Obamas’ Hyde Park real estate.

Obama, who has a law degree from Harvard, subsequently returned to Chicago to lead a voter-registration drive in 1992.

The next year, Obama joined Davis Miner Barnhill & Galland, a 12-lawyer firm that specialized in helping develop low-income housing. The firm’s top partner, Allison S. Davis, was, and is, a member of the Chicago Plan Commission, appointed by Mayor Daley. Davis was also a friend of Rezko. Davis and Rezko would eventually go into business together, developing homes.

Another firm partner, Judson Miner (right, with Linda Miner and PSBHO), ran the city Law Department under Mayor Harold Washington, one of Obama’s political idols.

Rezko and Mahru’s “luck” turned for the better in 1998

Novak explains in his April 24, 2007, article that, even though Rezko and Mahru had “no construction experience,” Mayor Richard Daley’s city hall gave “their new company, Rezmar Corp. a $629,000 loan to help fix up … rundown buildings for poor black families,” specifically an “abandoned apartment building at 46th and Drexel.”

They had applied for the loan just six days after Richard M. Daley won his first term as mayor in 1989, having campaigned on a promise to build more housing for the poor.

Rezko and Mahru got the loan four months later, and quickly became one of the Daley administration’s favored developers. They got deal after deal — between 1989 and 1998, more than $100 million from the city, state and federal governments and bank loans to rehabilitate 30 buildings in Chicago.

Rezmar was paid at least $6.9 million to develop those apartments.

Taxpayers have lost $5.7 million in grants and loans written off by the Daley administration, a Chicago Sun-Times investigation has found. Millions more could be written off, based on court records and interviews.

Novak wrote Rezmar “was supposed to provide 1,025 apartments for the poor.” But, as of his April 2007, article …

• Six of its 30 buildings are boarded up.
• Seventeen went into in foreclosure, most after Rezmar abandoned them.
• An 18th building is being foreclosed on by the state. Rezmar walked away from it, leaving it to the corporate investors, who got a state loan to try to save it but failed. The building is now boarded up.
• Hundreds of apartments are vacant, most in need of major repairs.

When Mahru met Rezko

Novak continues in his April 2007 article:

In 1984, Rezko went to work for Crucial Concessions Inc., owned by Herbert Muhammad, whose father, Elijah Muhammad, founded the Nation of Islam. Herbert Muhammad also was the longtime manager of boxing great Muhammad Ali. Crucial had a contract with the Chicago Park District to sell food on the beaches and in many South Side parks. Rezko was running Crucial when he met Daniel Mahru.

“That’s an interesting story,” Mahru said. “He sold food along the beaches, and I sold him ice.”

Mahru, chief executive officer of Automatic Ice Inc., which leases ice makers to bars, hotels and restaurants, grew up on the North Shore. He had been an attorney with a big Chicago law firm.

He and Rezko incorporated Rezmar in January 1989 [incorporated 01/10/1989 in Cook County, Illinois (Doc. 89030572 recorded 01/19/1989)] , when Chicagoans were focused on Daley’s campaign to oust Mayor Eugene Sawyer. Daley won, and Rezmar came seeking funding from City Hall.

“Rezmar Corp. expects this project to be the first of many during the next few years,” Mahru wrote in Rezmar’s first application to the city Housing Department.

And it was.

As Rezmar’s loan application was pending, Daley reformed the Housing Department. [Richard Daley] (left with PSBHO) said he found that housing officials were giving loans to their cronies. So the mayor’s staff would now decide who got the money.

And his staff liked Rezmar, which got more than $24 million in loans and $8.5 million in federal tax credits from the city to rehab 14 buildings during Daley’s first six years as mayor. Daley’s top advisers signed off on those deals before the City Council approved them.

Novak explained how Rezko and Mahru managed to get all that money:

How did inexperienced developers like Rezko and Mahru get money from the city, state and banks? It was the people Mahru hired, and his business acumen, said Robin Coffey, a vice president at Harris Bank.

“It was his team,” Coffey said. “It was his management style. He was using contractors we knew. He was outsourcing management.”

Along with the city, Harris funded Rezmar’s first project in 1989. Over the years, Harris gave Rezmar more than $10.6 million to help rehab 18 buildings. Harris also put in additional money, purchasing some of the $50 million in federal tax credits Rezmar obtained from the city or state for the projects.

As of Novak’s April 2007 article, Harris had “lost at least $1 million on Rezmar loans” and had “to repay the IRS for some federal tax credits it got by investing in Rezmar buildings.”

While “Mahru ran Rezmar’s day-to-day operations,” Novak wrote:

Rezko was the schmoozer. He showered politicians with money for their campaign funds and got others to do the same. He gave to Democrats — foremost among them former Cook County Board President John Stroger (right), Gov. Blagojevich, Daley and Sen. Barack Obama. Rezko gave to Republicans, too — among them former Gov. Jim Edgar, the late Rosemont Mayor Don Stephens and President George W. Bush.

He also gave to others who held sway over Rezmar’s housing deals — like Chicago aldermen.

Novak reported that at the same time Rezko was doing all that schmoozing, “Rezmar’s low-income apartments were deteriorating, and it stopped repaying some loans.”

“So why did the city keep lending Rezko’s company more tax dollars?” Novak asks:

“During the time he did work with us — and that was many years ago — there was nothing to indicate there was a problem,” Daley spokeswoman Jacquelyn Heard said.

In fact, there was. City attorneys repeatedly went to court to force Rezmar to make repairs to its buildings and, in some cases, to get the heat turned on.

So, you ask, if there were all these problems, how did Rezko and Mahru stay in business? keep getting loans? Novak wrote that the city knew — they had to know.

If one of these low-income housing deals failed, lenders and investors would lose money — but not Rezmar or its owners.

Rezko and Mahru weren’t responsible for any government or bank loans. And they would never have to repay the $50 million in federal tax credits they got to rehab the buildings.

But they were guaranteed to make money. Rezmar put just $100 into each project and got a 1 percent stake as the general partner in charge of everything. Rezmar got to hire the architect and contractor, as well as the company that would manage the buildings, screen tenants and make repairs. The management company Rezmar hired? Chicago Property Management, also owned by Rezko and Mahru.

Rezmar made its money on upfront development fees [which "ultimately came from taxpayers"]. And Rezmar got paid first — $6.9 million in all from its deals. [...]

Rezmar got part of its development fees when its deals closed. It got the last of those fees when tenants moved in.

Under its deals with the Chicago Equity Fund, Rezmar promised to cover all operating losses in any building for seven years. But after that, Rezmar began walking away from the buildings, often leaving them with many vacant apartments and other problems. [...]

Rezmar’s deals “were doomed to fail,” said David Brint, Rezmar’s former executive vice president. “You had unrealistic expectations on expenses and income.”

Rezmar missed 16 payments on its first city mortgage, and the city changed the terms: Rezmar would have to pay just $465 a month, instead of $2,982.79.

Meanwhile, the city and state each gave Rezmar more money for two more buildings — one in Logan Square, another in Uptown. Both later went into foreclosure.

Rezko and Mahru had willing accomplices in fleecing the public trough. Novak continues:

Rezmar’s financial problems became a concern to city officials in the summer of 1998 — six years after it first missed payments on city loans. Rezko and Mahru were seeking a $3.1 million loan in 1998 for what would be their final low-income housing project. [...] First National Bank of Chicago and Apollo Housing Capital — invested in that project.

That deal included three of the mayor’s top African-American allies: Bishop Arthur Brazier (right, on left with PSBHO and Dr. Byron T. Brazier), Leon Finney Jr. and Allison Davis. Brazier and Finney ran the Fund for Community Redevelopment and Revitalization, a not-for-profit group that was Rezmar’s partner in the project.

Davis’ company is listed in state records as an investor in the deal, though the state said he didn’t end up investing in the deal. Davis said he had no recollection of investing in the deal. But one of his companies formed a partnership with Apollo and got a $130,000 fee on that deal, state records show.

Davis and Finney (left) [were] also members of the Chicago Plan Commission, appointed by Daley.

Now for the “Big Lie”

In that April 2007 Chicago Sun-Times interview, the Unprez was asked and answered accordingly, with bold added:

Q: By the time the Fund for Community Revitalization and Redevelopment closed on its final deal with Rezmar in 1998, Rezmar was having financial problems, according to a 1998 lawsuit over Rezmar’s failure to pay its mortgage on an earlier housing deal. That lawsuit was filed several months before Rezmar and the Fund closed on that final housing deal, which included an investment from Allison Davis’ company, American Housing Partners. [Editor's note: American Housing Partners was to invest $250,000 in Rezmar's last low-income housing deal, state records show. But state officials say that, in the end, American Housing didn't participate in the deal.]

A: The Senator is unaware of Mr. Davis’ company making any investments in housing deals involving the Fund for Community Redevelopment and Revitalization. We have checked this point with the Miner firm, which also reports no knowledge of such an investment.

Here it comes. 1995-1996 documents posted by Judicial Watch show a clear connection between the Fund for Community Redevelopment and Revitalization (the “Fund”) and the Chicago Annenberg Challenge. On page 61 we find that, in 1996, the CAC contributed $22,155 to the “Fund”.

At the time, PSBHO was not only an associate at Miner, Barnhill & Galland, P.C. but was also serving as the CAC’s founding president and chairman of the board of directors. This puts him in a direct connection between the “Fund” and the funds that were received from it by Rezmar Corp.

At the same time, PSBHO was serving on the boards of directors of the Joyce Foundation and the Woods Fund, had joined the New Party, and was running for the Illinois State Senate.

Additional connections at the time between the “Fund” and the Unprez are through various members of its board of directors. The Judicial Watch documents show, beginning on page 46, that board membership included Brazier and Finney, as mentioned above.

The following page (47) shows two more familiar names — current White House advisor Valerie Jarrett (right, with PSBHO) and Toya D. Horn (now Howard).

The Valerie Jarrett connection is via Chicago City Hall. Jonathan Kaufman wrote in his April 11, 2008, WSJ article “For Obama, Chicago Days Honed Tactics”:

Richard M. Daley, son of the former Mayor Richard Daley, was elected mayor in 1989. He “appointed numerous blacks to high positions, including Mr. Obama’s girlfriend and future wife, Michelle,” whose “father had been a precinct captain for the first Mayor Daley’s political machine, and she knew the families of many black politicians, including Jesse Jackson’s.”

Then, while working 1989-1991 as a summer associate at Sidley Austin law firm, PSBHO met Michelle Robinson, a Harvard Law School graduate who was his mentor at the firm.

The Obamas and Valerie Jarrett have been mutually acquainted since summer 1991, at which time Jarrett interviewed Michelle Robinson for a job at City Hall. It has been reported that Michelle told Jarrett “My fiancé wants to know who is going to be looking out for me?” Michelle, PSHBO and Jarrett met prior to her hiring.

By September 1991, Michelle Robinson was hired by Susan Sher, corporation counsel in the Daley Administration, for $60,000 to be mayoral assistant. Within weeks Daley promoted Jarrett to run the Department of Planning & Development and Michelle Obama followed as her assistant. And on it goes.

Regarding Toya D. Horn, as RBO reported in Friends of Obama — 1995, we find that Horn was not only an Obama campaign supporter 1995-2005, but that she and her husband, Bob Howard, both worked for Fannie Mae:

Toya D. Horn [Howard], $150, 12/11/1995. In 1999, Howard contributed $1000 to Obama for Congress 2000, in addition to $3700 2002-2004 to Obama for Illinois and $2300 towards Obama’s presidential campaign.

In August 1998, Horn married and became Toya Horn Howard. A graduate of Wellesley College and the University of Washington in Seattle, she was then an account executive for multifamily housing at Fannie Mae. When Obama was sworn into the U.S. Senate in 2005, Howard was described as a long-time supporter.

Friends of Obama — 2001 shows Bob and Toya D. Horn, 4/20/2001, $1000. FEC records identify Bob Horn as an account executive with Fannie Mae.

See next page for more.

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