The potential pitfalls created by Blum's active role in raising political funds are "a nightmare," said Ellen Miller, executive director of the nonpartisan Center for Responsive Politics. "The next best thing to handing a check directly to (Feinstein) is handing it to her spouse."
Blum, 59, earned the bulk of his estimated $50-million fortune by investing in undervalued companies on behalf of some of America's wealthiest people and largest corporations. His company manages $750 million in investments for about 70 clients, including oil heir Gordon Getty and Bank of America.
Tax returns released by Blum and Feinstein show that the couple's income rose from $292,000 in 1980, the year they married, to $3.9 million last year. The couple was hit by the tax increase contained in President Clinton's deficit-reduction plan that Feinstein supported. They paid 29.6% of their adjusted gross income in federal taxes last year--up from 24.2% in 1992--and owed an additional $180,518. They also took advantage of a provision in the Clinton plan--added at the urging of Feinstein and other senators--to defer $120,345 of their federal tax bill.
Feinstein has criticized Huffington for refusing to release information about the sources of his wealth and divulge his tax returns.
Feinstein's tax returns offer little insight into her husband's merchant banking business.
"What you see is that he is generating seven-digit figures coming out of his financial interests," said Robert K. Mah, a San Francisco certified public accountant whose firm was hired by The Times to review the couple's tax returns. "But what you don't see is the makeup of those financial interests to determine if there is any potential conflicts of interest between Feinstein's track record and his investments."
Such detailed financial information, Mah said, would have to come from Blum's corporate tax returns, a list of his clients and other financial records. Blum said he would release his corporate returns when Huffington makes his tax records available.
Senate financial disclosure documents, together with a client list Blum released in 1990, reveal a wide range of business ventures and investments in industries that come in contact with Congress, government agencies and federal regulators. These include the Bank of America, cable television holdings in Georgia and California, a pair of San Francisco Bay Area high technology firms, an interstate trucking company and broadcast properties.
When Feinstein first ran for Senate in 1992, she and Blum sought legal advice from the Democratic law firm of Manatt, Phelps, Phillips & Kantor on the question of participating in decisions that affect her husband's business interests.
Manatt, Phelps stated that it was "very unlikely" that any actual conflicts of interest would arise because Senate rules are so broad. "Somewhat more problematic," the Manatt, Phelps memo said, "is the possibility of an appearance of a conflict of interest."
As a candidate in 1992, Feinstein vowed to stay clear of any mergers between the private and public sectors of her household. She appointed her top Senate staffer in Washington, Michael McGill, to steer her away from potential conflicts.
So far, Feinstein said, no problems have surfaced.
"There's never been a question so much of right or wrong. That is easy to deal with," Blum said. "We try to go beyond that--even if it is right, how does it look?"
Last May, Feinstein declared her strong support on the Senate floor for continued trading with China while her husband was planning a major investment in that country.
For the past year, Blum said, he has been preparing to place up to $150 million on behalf of several investors in Chinese enterprises that make products such as cement, bicycles, washing machines and telecommunications equipment. Blum said he would put between $2 and $3 million of his own money into the investment.
Blum's economic interest in China is "news to me," Feinstein said. "All I know is presently he doesn't have any investment in China."
Blum also serves as vice chairman and director of Shanghai Pacific Partners, an import-export broker that participated in building a $30-million residential and retail high-rise on the outskirts of Shanghai. Blum's firm joined with the state-run Shanghai Investment Trust Corp. to form one of the first joint ventures between San Francisco and Chinese investors.
The project was cited by Chinese officials as a testament to the friendly business ties between Shanghai and San Francisco that Feinstein had initiated. Since she began America's first sister-city relationship with a Chinese city in 1979 as mayor of San Francisco, Feinstein has developed a close relationship with Jiang Zemin, the former Shanghai mayor and current president of China.