The New Republic
October 6, 2006
By Norman Ornstein, Scott Lilly
Until last week, the broad image of House Speaker Dennis Hastert was of
an affable, even grandfatherly figure. But Hastert's response--or lack
thereof--to the Mark Foley scandal has suddenly put him in the hot
seat, requiring even President Bush to defend him. The Speaker's
reputation has taken a serious hit. Still, the image remains of an
amiable guy, whose sins are more of sloth than malevolence.
Speaker Hastert, however, is no passive figure. When it comes to
running the House, Hastert has, in fact, been an aggressive partisan.
Recall, for instance, that he personally fired the chairman and two
Republican members from the House Ethics Committee after they had the
effrontery to rebuke Tom DeLay for misconduct. And when it comes to
real estate, he has been a downright wheeler-dealer. Virtually
overnight, the speaker's net worth went from approximately $300,000 to
at least $6.2 million--thanks, in no small part, to an earmark he
authored.
Hastert's real estate transactions have been reported extensively in
the Chicago press and picked apart in a June report issued by the
Sunlight Foundation. But they have been largely ignored in the national
media. A careful examination of the facts in the case, however, leads
to the conclusion that there are compelling reasons beyond the Foley
case to call for the speaker's resignation from the post.
Here are the essential facts: In August, 2002, Hastert bought 196 acres
of land in rural Kendall County, Illinois for $2,125,000. According to
the Chicago Tribune, Hastert bought the plot in two separate
transactions. The first deal gave him a house, barn, swimming pool, and
17 acres of land for $1.2 million. In the second deal, he obtained an
additional 179 acres on an adjacent property for a little less than
$5,200 per acre. The least valuable portions of the second deal were
two fields, separated from the rest of the farm by a stream and
inaccessible by road.
That was a big deal for a life-long politician and wrestling coach like
Hastert, but harmless enough. Eighteen months later, however, Hastert's
purchase took a new direction. The speaker entered into a real estate
agreement with Dallas Ingemunson, the chair of the Kendall County
Republican Party, and a campaign contributor named Tom Klatt. The three
men formed a real estate trust and purchased an additional 69 acres of
land adjacent to Hastert's two inaccessible fields. The trust paid
$1,033,000 for the land, or about $15,000 per acre--more expensive turf
than Hastert's plot in part because of its access to a road.
And here's where the deal first begins to acquire a pungent odor: The
trust then added Hastert's two fields to the jointly acquired parcel
and credited Hastert with 62 percent ownership apparently on the
presumption that Hastert's $5,200 land was equal in value to his
partners $15,000 land.
These deals coincided with a protracted battle in Congress sparked by
the expiration of the 1998 highway bill. Hastert's purchase of his new
home and the additional 179 acres of land took place the same month
that the House Transportation Committee prepared for its first hearings
on a new highway bill--a bill that would be rife with opportunities for
members of congress to bring new roads to their districts in the form
of earmarks, changes in infrastructure that could have a major effect
on real estate values.
A new highway bill, however, didn't neatly wend its way to the
president's desk. Members tacked literally thousands and thousands of
earmarks to the legislation, wildly inflating its costs and provoking
prolonged opposition from the administration. As the President's Fiscal
Year 2003 budget warned: "The proliferation of congressional earmarking
comes at a cost, in wasted dollars and in unfairness, as when a grant
applicant who played by the rules and earned a place at the front of
the funding line gets shoved backwards."
There was no better object lesson in the case against earmarks than the
Prairie Parkway Corridor, pushed by none other than Denny Hastert. This
new highway, designed to connect the counties west of Chicago to the
metropolis itself, had neither the support of the public nor the
Illinois Department of Transportation. Their objection: Rigid
requirements in the highway bill would force the diversion of state
funds that might have been used for the widening and improvement of
existing roads--an approach, according to opinion polls, favored by a
majority of the area's residents--or for more efficient transportation
corridors to Chicago. But the Prairie Parkway did offer one important
convenience: It was located just over a mile from the property owned by
Hastert's trust.
Squabbling over the ballooning cost of the bill might have prevented
this highway from ever coming to fruition. But Hastert played an
unusually active role in shepherding the legislation, a more aggressive
role than he played at any other point in his speakership. His
dominance of the process was noted by an Illinois highway official, who
remarked, "I think it's truly a recognition of the leadership of
Speaker Hastert. Speaker Hastert was able to deliver a bill that made
it through Congress that the president could sign, rather than a bill
that would make it through Congress that the president would veto."
Hastert himself explained at one point in the process that the
negotiations had become so intense that he was no longer dealing with
White House staff and had begun working directly with the president.
When the bill finally passed in the summer of 2005, President Bush also
recognized Hastert's efforts by traveling to his district for the bill
signing ceremony. Bush also mentioned the Prairie Parkway which he
said," is crucial for economic development in Kendall and Kane
counties."
It was, we now know, crucial to the speaker's own economic development.
In December of 2005, four months after the signing of the new Federal
Highway Bill containing the $207 million inserted by Hastert for
construction of the nearby Prairie Parkway, the 138 acres held by the
trust were sold to a developer as part of planned 1600 home housing
development. The trust received $4,989,000 or $36,152 an acre for the
parcel of which 62.5 percent or $3,118,000 went to Hastert. Klatt and
Ingemunson also did well. Their profit equaled 144 percent of their
original investment. Hastert, however, received six times what he had
paid for his investment, a profit equal to 500 percent of his original
investment.
The Hastert earmark not only provided money for Parkway construction
but mandated that the construction take place on the portion of the
Parkway nearest his recently purchased property. While the money
contained in the highway bill was sufficient to build only about
one-third of the entire 36-mile road, the speaker insured that the
right third would be selected by also earmarking funds for construction
of a interchange in that portion of the proposed thooughfare.
The decision by the developer to build a subdivision in an area
proximate to Hastert's farm had financial implications for the speaker
that ran well beyond the $2.5 million profit he reaped on the sale. The
Tribune has calculated that the remaining 125 acres he still owns is
now worth about $4.5 million. Even counting the mortgage on the
property, Hastert's net worth, according to the Tribune, appears to be
more than $6.2 million. An estimate that Hastert's office does not
dispute, probably because it is extremely conservative.
Hastert has responded forcefully to the allegations of venality. "I
owned land, and I sold it, like millions of people do every day." The
speaker's office has painted a portrait of a guy who just happened to
be driving past a house he liked; he bought it and subsequently, in a
straightforward transaction, sold some of the land that came with it
for a profit.
The speaker hasn't exactly helped his case with his accounts of the
transaction. His office has, for instance, described the Prairie
Parkway as located over five miles from his property. But U.S.
Geological Survey aerial photographs clearly show it to be about four
miles closer than that.
We cannot say at this juncture whether the actions taken by the speaker
are illegal. We can say that they do not meet the standards we
expect--or should expect--from a member of Congress. And they certainly
do not meet the standards we expect from the speaker of the House.
Norman Ornstein is a resident scholar at the American Enterprise
Institute and co-author of The Broken Branch: How Congress is Failing
America and How to Get It Back On Track. Scott Lilly is a senior fellow
at the Center for American Progress.