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Going Postal

The husband of US Senator Dianne Feinstein has been selling post offices to his friends, cheap.

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Editor's Note: The following is an edited version of the introductory chapter of a new e-book, Going Postal, by investigative journalist Peter Byrne.

On July 27, two hundred people sang and chanted on the steps of the historic main post office in downtown Berkeley to protest its upcoming closure and sale. City Councilman Jesse Arreguin took the microphone to angrily decry the closure. In fact, the Berkeley City Council had voted unanimously to oppose the sale. Why the day of rage?

When a post office closes, it is obviously that much harder to buy a stamp, pick up a package, send a registered letter, or purchase a money order. But inconvenience alone did not account for the existential angst being expressed by the mostly over-fifty members of the throng as they questioned the motives of the United States Postal Service for selling post offices all over the country to developers. "Which of our public assets will be privatized next?" speakers asked. "Streets? Schools? The Lincoln Bedroom?"

The Berkeley crowd is not acting alone: From the beaches of Santa Monica to the avenues of the Bronx to the orange farms of Nalcrest, Florida, people who like the US Mail are getting mad. "Hey, wait a minute, Mr. Postman! That is our community post office — "

To which the federal flak-catchers reply: "The Internet is killing us. The Postal Service is broke. We have to sell. Get used to it."

But email is not the problem and the budget deficit is easy enough to fix, so there must be other reasons for the forced sales, say save-the-post-office activists. The post office is being killed for political reasons, they assert, pointing out that the corporation with the exclusive contract to negotiate sales for the Postal Service's $85 billion real estate portfolio is C.B. Richard Ellis (CBRE). And that the company is chaired by Richard C. Blum, who is the husband of US Senator Dianne Feinstein and a member of the University of California Board of Regents. CBRE's connection to a politically powerful family with a history of accessing public pension funds to make private investments has caused more than a few activists to suspect wrongdoing — even though no evidence of any conflicts of interest tied to the CBRE contract have been revealed.

Until now.

My yearlong investigation has uncovered evidence of multiple conflicts of interest and problems with post office sales supervised by Blum's company, including:

• CBRE appears to have repeatedly violated its contractual duty to sell postal properties at or above fair market values.

• CBRE has sold valuable postal properties to developers at prices that appear to have been steeply discounted from fair market values, resulting in the loss of tens of millions of dollars in public revenue.

• In a series of apparently non-arm's-length transactions, CBRE negotiated the sale of postal properties all around the country to its own clients and business partners, including to one of its corporate owners, Goldman Sachs Group.

• CBRE has been paid commissions as high as 6 percent by the Postal Service for representing both the seller and the buyer in many of the negotiations, thereby raising serious questions as to whether CBRE was doing its best to obtain the highest price possible for the Postal Service.

• Senator Feinstein has lobbied the Postmaster General on behalf of a redevelopment project in which her husband's company was involved.

The Backstory

Because the Postal Service is running an artificially created budget deficit, tens of thousands of jobs are being liquidated as post offices and mail processing facilities in towns and cities across the country are short-listed to be sold for ready cash. CBRE has already sold 52 of these properties, and hundreds more are on the chopping block.

And 80 percent of the Postal Service's multibillion-dollar deficit is caused by a law passed by Congress in 2006 that requires it to prepay retiree health benefits 75 years into the future. This unprecedented, budget-killing command does not apply to any other government agency. If this burden were to be rescinded — and business mail were to be charged the cost of its delivery — the Postal Service would be in the black, according to Congressional reports.

The ugly truth of the matter, say informed critics such as New York University professor Steve Hutkins, is that the Postal Service is being privatized in the interests of scores of corporations that not only compete with it, but are also its largest contractors, including FedEx and United Parcel Service (package routing); Parsons Corporation (management services); Accenture (financial consulting); and Pitney Bowes (direct mail).

And then there is CBRE, the world's largest commercial real estate firm. In June 2013, Postal Service Inspector General David C. Williams published a scathing audit of CBRE's exclusive contract to manage all the sales and leasing of postal real estate. Williams noted that outsourcing these activities to a single firm is "a fundamental change from how the Postal Service previously managed its real estate portfolio [and] Facilities officials should improve oversight to mitigate inherent risks associated with the CBRE contract .... Specifically, there are conflict of interest concerns."

Williams warned of the potential for contract fraud, but he stopped short of referring the matter to a prosecutor, and advised the postal executives in charge of the CBRE contract to clean up their act.

Over the past year, my investigation has explored the kinds of conflicts of interest that concerned Williams by diving deep into the public record. CBRE's contract, its postal facility sales data, as well as expense reports for Postal Service executives were obtained under the Freedom of Information Act (FOIA). The deeds of sale and assessment data for most of the postal properties sold by CBRE were found at the county level.

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