|Rep. Luis Gutierrez says his investments were routine business dealings. Yeah, right.|
U.S. Rep. Luis Gutierrez has made more than $420,000 on real estate deals
Many are done with campaign contributors
When U.S. Rep. Luis Gutierrez was looking to buy in the sizzling Bucktown real estate market, he teamed up with a developer and longtime political donor who sold him a plot of land and built him a new home.
And when the congressman decided not to move into the home, the developer, Krzysztof Karbowski, was there to buy it back.
Gutierrez walked away with nearly $200,000.
In Chicago, where a decadelong building boom has reshaped neighborhoods, politicians have come to rely on real estate interests to donate to their campaigns. But the Democratic congressman's financial relationship with some contributors goes beyond campaign cash, according to records and interviews.
In half a dozen deals with campaign supporters since 2002, Gutierrez has made about $421,000 by investing his money in real estate deals and exiting a short time later. The congressman says he made a profit in five of those deals but lost a small amount of money on the sixth.
Gutierrez said his real estate investments were appropriate and that he shared the same risk as any other investor.
"I don't believe in the stock market," Gutierrez said. "It always causes conflicts of interest."
Among the reasons his real estate dealings do not cause conflicts, Gutierrez has said, is that he never interferes in local zoning matters. But the Tribune reported in October that Gutierrez sent a letter to Mayor Richard Daley seeking support for a controversial project built by one of the congressman's political donors who also had lent him money. The newspaper reported that federal authorities investigating zoning matters have shown interest in the Gutierrez letter.
Further, Karbowski and several of the developers who did real estate deals with Gutierrez obtained key zoning changes for other projects from Ald. Manuel Flores (1st), his former aide and political ally.
Gutierrez is among a handful of candidates under consideration to fill the vacant U.S. Senate seat of President-elect Barack Obama, and if he is chosen, Flores is among those considering a step up to the congressman's seat.
Both Flores and Gutierrez rent space for their government offices from Karbowski. Taxpayers pay $4,000 a month for Gutierrez to rent space for his district office in Karbowski's building.
Like Gutierrez, Flores bought a residence from Karbowski. Flores said he bought a condominium from Karbowski because it was for sale and in Wicker Park, where he and his wife wanted to live.
Gutierrez said he has never discussed zoning changes with Flores.
"Though I initially supported his opponent when Manny first ran for public office, I believe he works hard and does a very good job for the people he represents," he said.
Flores said he has never discussed zoning change proposals in his ward with the congressman and treats Karbowski like any other businessman in his ward. Flores said that while he has supported four Karbowski projects, he has rejected five others.
As part of its ongoing "Neighborhoods for Sale" series, the Tribune has documented an insiders' game at City Hall where elected officials haul in millions in campaign cash from developers and others whose interests often trump the wishes of homeowners and city planning staff. It is a system that fundamentally has changed the look of neighborhoods.
Federal authorities now are investigating how zoning works at City Hall and have subpoenaed city files.
The FBI has obtained the letter Gutierrez wrote in July 2004 to Daley. Gutierrez, a former alderman and 1st Ward Democratic committeeman, wrote the letter on behalf of developer Calvin Boender. Months earlier, Boender had lent the congressman $200,000 in a land deal.
Gutierrez has bought and sold properties with five campaign donors, including convicted political fundraiser Antoin "Tony" Rezko.
One of Gutierrez's earliest such real estate deals was with Karbowski, who came to the United States from Poland in the mid-1980s when he was 20 and began investing in real estate in 1995. Karbowski has made political donations to Gutierrez since at least 1997.
Gutierrez entered into the first of two real estate deals with Karbowski several years later.
Gutierrez said he had sold his home and was looking to reinvest the proceeds when Karbowski sold him a vacant lot in the 1600 block of North Hermitage Avenue and then built a two-story brick home for the congressman.
Gutierrez said he paid a total of $813,422. When the house was finished, Gutierrez said he decided not to move in. But the congressman said Karbowski and his wife "liked it so much" they bought it back from him in January 2003 for $1 million.
"Kris said, 'I'll buy it from you.' I said, 'Great,' " Gutierrez recalled. "I just want to make an investment. It's not like I wanted to stay with it."
Gutierrez said he made $186,578 on his investment.
Later in 2003, Gutierrez entered into his second profitable deal with Karbowski, this time as a short-term investor in a project in the 400 block of West Superior Street. After four months in the deal, the congressman sold his share to one of Karbowski's business associates.
Gutierrez said he netted $52,000.
Karbowski has been in the news recently with his controversial plans to convert the 1929 Art Deco-style Northwest Tower on Milwaukee Avenue into a hotel. He declined to comment for this story.
Gutierrez said that Krzysztof and Ivona Karbowski have made modest contributions to his campaigns.
"They come sporadically to fundraisers that I've had. I know them because he's a respected businessman in the community," Gutierrez said.
Gutierrez said his successful investments with Karbowski and others were just routine business dealings. He said he never used his position to do favors for people he did business with.
In a statement sent Thursday to the Tribune, Gutierrez said, "I found out about properties the same way everyone else does—because they were available for sale on the open market."