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Feds Probe Menendez Rental Deal

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Feds probe Menendez rental deal
Senator took in at least $300,000 from nonprofit in Union City
by Jeff Whelan and Josh Margolin, Star Ledger Staff

September 7, 2006 - Federal investigators have subpoenaed records of a rental deal between U.S. Sen. Robert Menendez and a nonprofit agency in Union City, launching a criminal investigation that is sure to rock New Jersey's hotly contested Senate race.

Authorities delivered the subpoena to the North Hudson Community Action Corp. earlier this week, according to four sources familiar with the move who requested anonymity because of the ongoing investigation.

The action comes two weeks after The Star-Ledger reported that Menendez collected more than $300,000 from the organization over a nine-year period while he represented Hudson County in the U.S. House of Representatives. During that period, he also helped the agency win millions of dollars in federal funding.

State Sen. Tom Kean Jr., Menendez's Republican challenger, has called the arrangement a case of profiting from official action. Two of his Republican allies filed an ethics complaint against Menendez in Congress, accusing him of a conflict of interest. Independent watchdog groups also have said it was a conflict for Menendez to seek federal funds on behalf of his tenant.

Menendez campaign spokesman Matt Miller said last night the senator has nothing to fear from the investigation, and questioned the timing of the action by the U.S. Attorney's Office, considering the election is two months away.

"This transaction was already approved by the House Ethics Committee, and the U.S. attorney will find that Bob Menendez did nothing but support a well-respected agency in the exact same manner that he has supported other nonprofits in the state," Miller said.

"We're troubled by the timing of this subpoena in the middle of a political campaign, but the facts are that the NHCAC has received federal funds for over 35 years because they provide education and health care services to New Jerseyans who need it the most," he said.

A spokesman for U.S. Attorney Christopher Christie declined to comment. Christie is a Republican who was appointed by President Bush, but has won wide, bipartisan support for pursuing public corruption cases involving both political parties.

The New Jersey Senate race is considered one of the most hotly contested in the nation and holding on to the seat is critical to the national Democrats' uphill battle to take control of the U.S. Senate, where Republicans now have a 55-45 edge. Menendez moved up from the House in January when he was appointed by Gov. Jon Corzine to replace him in the Senate.

Kean, who has made questions about Menendez's ethics a cornerstone of his campaign, issued a statement last night saying: "After years of embarrassment, it should be perfectly clear to New Jerseyans that we must have leaders with the highest ethical integrity. Today's developments illustrate the need to clean up the corruption and scandal that has plagued Washington, D.C., and our state, so we can finally restore the public's faith in government."

Menendez purchased a three-story brick house on a residential street in Union City for $92,000 in 1983. He and his family lived there for a time, but they later moved out and he began renting it as commercial property.

In 1994, shortly after Menendez went to Congress, he entered into a lease with the North Hudson Community Action Corp., which used it to house administrative offices. Menendez initially charged $3,100 per month, and eventually raised the rent to $4,000.

Meanwhile, he advocated for the agency in Congress.

In 1998, Menendez helped the agency win designation as a federally qualified health care center, a move that made it eligible for certain federal health care grants. The agency has since collected $9.6 million in federal grants through the designation. In all, 64 percent of the agency's $38 million annual budget comes from the federal government, according to the organization.

Menendez has had strong ties to the organization for years.

The nonprofit group honored Menendez as its "man of the year" in 2001 and also named a pavilion in its headquarters after him. The agency's employees also have contributed more than $30,000 to Menendez's campaigns over the years.

Michael Leggiero, the longtime head of the agency, contributed more that $9,000 to Menendez's political accounts. Leggiero died last year and Menendez spoke at his funeral.

Menendez has said he gave the tenant no special treatment, and had helped other nonprofits in his district obtain status as federally qualified health centers.

The senator said that before renting out the house in 1994, he obtained clearance from the House Ethics Committee, but did not get a written opinion. He said there was nothing improper about his actions because he never negotiated directly with agency officials and the organization paid slightly below-market rent.

Menendez sold the house in 2003 for $450,000 to a woman who had contributed to one of his campaigns. The new owner continues to rent the house to the North Hudson Community Action Corp. at a current rate of $3,700 per month.

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