The Man Behind the Woman Who Would Be Governor : Politics: Dianne Feinstein’s husband, Richard Blum, is a shrewd businessman, a friend of the famous, with a ‘Lt. Columbo style’ and a passion for distance running and Tibetan treks.
It was 6 a.m., and lanky Richard Blum was sipping coffee in the kitchen of his Presidio Terrace home and waiting a bit impatiently for his overnight guest, former President Jimmy Carter, to get off the phone so that they could begin their jog.
After all, Blum was on a tight schedule. Once the run was over, he had to fly to Los Angeles to watch his wife work--first preparing for a televised political debate, then attending a $1,000-a-person fund-raising soiree at Jimmy’s, the posh Beverly Hills restaurant. No time for deal making today.
Business is taking a back seat these days for Blum, a self-made millionaire, investor, money manager, mountain climber, distance runner, philanthropist, human-rights activist and friend of the famous who lately has found himself in the role of supportive spouse for Dianne Feinstein, the woman who would be governor.
And such generous support it is.
So far, Blum (it rhymes with plum) has single-handedly solicited more than $200,000 from friends and business associates. The couple jointly have lent the campaign nearly $3 million, which Blum acknowledges will almost certainly be lost if she loses. About $700,000 of that paid for television commercials in February that injected a needed dose of vitality. Blum is also his wife’s prime political adviser, often campaigning by her side and relishing the media attention.
The lavish help has prompted Feinstein’s Democratic Party rival, California Atty. Gen. John K. Van de Kamp, to grouse that her campaign for the June 5 primary is being funded by a “blank check” and to rail against Blum’s refusal to disclose details of his investments and partners.
The refusal “raises serious questions of what there is to hide,” said Duane Peterson, a Van de Kamp spokesman. “Maybe (there’s) nothing, but expecting the voters and the press to take a politician’s word for it is ridiculous.”
Blum maintains--at times angrily--that his business dealings are aboveboard and that he is simply a devoted husband and Democrat who happens to have the wherewithal to back his wife in her chosen endeavor.
“I’m very concerned about the problems that are obvious to everybody in this state, and I wholeheartedly believe that Dianne can make a difference,” Blum said in a recent interview at his Montgomery Street office, which is filled with Tibetan art and photos from Blum’s many trips to Asia.
That is why, he added, “I’ve devoted most of my waking hours for the last six months and a great deal of capital to boot” to trying to get her elected.
If his wife, who was San Francisco’s mayor from 1978 to 1988, happens to be the one in the limelight at the moment, Blum, 54, is scarcely in danger of being known as the Dennis Thatcher of California.
In more than 30 years as an investor and deal maker, he has made ample news of his own and numbers among his close friends some of the most powerful figures in business. They and their families have contributed to his wife’s campaign. Donations have come from billionaire Texas investors Sid and Robert M. Bass, Al Checchi of Los Angeles and Frederic V. Malek, a former Marriott Corp. executive who once counted Jews in the Bureau of Labor Statistics for a paranoid President Richard Nixon.
Last year, Blum vaulted into the big leagues by arranging a $102-million chunk of financing for the $3.65-billion buyout of NWA, owner of Northwest Airlines. The deal was led by Checchi and Gary Wilson, longtime friends who helped engineer growth at Marriott Corp. and Walt Disney Co. Blum now serves on the Minneapolis-based airline’s board.
Blum also was a partner of Robert Bass in the purchase of Taft Broadcasting.
Blum’s 15-year-old San Francisco merchant banking and money management firm, Richard C. Blum & Associates, invests $400 million on behalf of 14 corporate clients, including BankAmerica, Fireman’s Fund Insurance and Executive Life, and about 70 wealthy individuals.
The usual practice is to blend clients into partnerships to buy stock in undervalued companies. Blum and his partner, Thomas L. Kempner (grandson of Carl Loeb, the New York financier and co-founder of Loeb Rhoades), always invest in them as well.
The firm has stakes in real estate development, equipment makers and hospital companies, among others. In California, it has holdings in Newhall Land & Farming Co., National Education Corp. of Irvine, Sumitomo Bank of California and URS Corp.
(Formerly called Thortec International, URS is a San Francisco engineering firm that was found a couple of years ago to be manipulating its books. An investigation showed that Blum’s firm, the largest shareholder, had been fooled along with other investors. URS’s auditors and insurance company recently paid several million dollars to settle a suit filed by shareholders.)
Blum is particularly proud of his firm’s investment in BankAmerica Corp. It holds about 2.5 million shares, bought at an average price of $11 each, now selling at about $30 a share.
The Blum firm’s annual return has averaged 37% in the past five years. Its fees are 1.5% of the money managed plus a hefty 15% of any profit on the investments.
The firm seeks to distance itself from the corporate raider mentality of the 1980s.
“For us, investment growth is a long-term process, a steady ascent grounded in cooperation and commitment,” reads a brochure about the firm. “As a matter of policy, we will not participate in hostile activities. Instead, we look for companies where we can work . . . with existing management.”
‘Lt. Columbo Style’
Friends and business associates describe Blum as an aggressive straight shooter with boundless drive and a disarming “Lt. Columbo style” that might seem to border on the bumbling but is actually quite effective.
Robert Bass said he finds Blum “extraordinarily capable, with good instincts and good judgment.” Added Checchi: “He applies to himself a high level of scrupulosity.”
One longtime friend noted, however, that Blum is “used to getting his own way.” Some view him as “kind of a user” who is pushy in business dealings, with his reach sometimes exceeding his grasp. The friend added that Blum’s high ambition for Feinstein “tends to rub some people the wrong way.”
As a progressive Democrat, Blum is a rare commodity in the investment community. He refuses to do deals with companies that he views as politically or sociologically incorrect, such as those with interests in South Africa, tobacco or gambling. After the Chinese crackdown on student protesters in Tian An Men Square, Blum told a partner, Shanghai Investment & Trust Co., that he would no longer participate in joint ventures.
Asia has had special meaning to Blum since his first trip to Nepal more than 20 years ago, when he traveled for three weeks in the Himalayas with Sherpas and fell in love with the country and the people. Now he takes advantage of any excuse to visit Asia.
Blum acknowledges that endurance and good genes have more to do with his mountain climbing success than does technical skill. “I’m a yak. I plod on. I’m good with altitude.”
Although Jewish, the deeply philosophical Blum has taken a keen interest in Buddhism and Eastern philosophy. He founded the American Himalayan Foundation to develop educational, environmental and health-care programs for Asian nations.
In 1981, he won permission from the Chinese to lead the first attempt in modern times to climb the east face of Mt. Everest. The first effort failed, so the team returned in 1983. Although Blum did not make it to the top, a colleague who did brought back a cherished piece of the mountain that Blum displays prominently in his office.
Blum is a longtime friend of the Dalai Lama, the exiled Tibetan religious leader, and has worked for years with former President Carter and others to further human rights in that region. In 1986, Carter and his wife, Rosalynn, accompanied Blum on a Himalayan trek.
A lifelong San Franciscan, Blum was brought up in well-to-do circumstances. His father, a former New Yorker who came West to sell men’s bathrobes and raincoats, died when Blum was a boy. Blum attended San Rafael Military Academy for a year, then went to prestigious Lowell High School.
Even as a gangly, brown-haired, blue-eyed teen-ager, Blum struck people as different.
“I wouldn’t say he was a sparkling personality, but he was a good guy and fun; he had electricity,” said Eugene L. Friend, 73, a San Francisco developer and longtime friend.
One holiday season, Friend hired Blum as a stock boy in a clothing store. Blum would occasionally disappear, and Friend would have to track him down in the local bowling alley.
At Lowell, Blum was known for being strong-willed and independent. Said John B. Vlahos, a San Mateo attorney who was a classmate: “Even then, he had a lot of self-confidence and poise. He could see past day-to-day drudgery.”
Blum received a B.A. and a master’s in business administration at UC Berkeley, taking a year out as an undergraduate to study philosophy at the University of Vienna.
At Berkeley, a friend, John Berl, persuaded him to join a $25-a-month investing club. Results, Blum recalled, were “so-so, nothing spectacular.”
Berl later encouraged Blum to join Sutro & Co., an old-line regional brokerage based in San Francisco and headed by Berl’s brother Warren. After beginning as a $300-a-month junior research analyst at age 23, Blum six years later became the firm’s youngest partner. In the meantime, he had managed as a fledgling stockbroker to leverage a $10,000 inheritance into a $100,000 stake, then to lose it to bad investments a year later.
“I think I made most of the mistakes one makes in the investment world by the time I was 30,” Blum said.
While at Sutro, he spearheaded a highly successful deal that still delights him and his fellow investors: their $8-million purchase of Ringling Bros. and Barnum & Bailey Circus.
As Blum tells it, the story of how they closed the deal was “almost a circus in itself.”
In 1968, Blum had started work on a Ph.D. in economics and was in Vietnam on a U.S. military project, helping to devise economic recovery plans for some supposedly pacified villages. As it turned out, “the areas weren’t pacified at all,” Blum said. He was under fire much of the time.
In Da Nang, he learned that final papers for the circus deal were to be signed, with a theatrical flourish, at the Coliseum in Rome. He headed to Bangkok and caught a flight.
“It was a totally bizarre period of 48 hours, going from a terrible scene of refugees in a war zone to the other extreme,” he said. At the Coliseum, a baby tiger borrowed from the Rome zoo capped off the event by chewing up one of the documents.
Four years later, Blum and his partners sold the circus to Mattel Inc. for $40 million in stock.
That deal helped give Blum the reputation to strike out on his own, which he did in 1975 with Richard C. Blum & Associates. He also kept his hand in politics, as chair of Mayor George Moscone’s Fiscal Advisory Committee.
In 1977, Feinstein, then president of the Board of Supervisors, asked Blum for a briefing on an economic report. They went to lunch at Jack’s, an old restaurant in the city.
Feinstein at the time was preoccupied with the serious illness of her husband, neurosurgeon Bertram Feinstein, and with a bombing attempt at her home.
“To be honest, it was not a memorable meeting,” she said in a recent interview. “I don’t remember it.”
A year later, they went to dinner so that Blum could update her on the city’s economic situation. By then, Bert Feinstein had died and Blum was divorced from Andrea Blum, a doctor with whom he had three daughters. A romance soon blossomed.
Late in 1978, Feinstein accompanied Blum on a trip to India and Nepal. She caught a stomach ailment, and the two flew home.
The day Feinstein returned to work, Mayor Moscone was assassinated, and she was suddenly thrust into the city’s top job. When Feinstein and Blum married in 1980, local wags called it a “marriage of the public and private sectors.”
Blum’s business clearly has benefited from the union and the networking opportunities. Accompanying Feinstein on a city-sponsored trip to China a decade ago, Blum met T. C. Chang, a San Francisco businessman. They soon formed a consulting firm and became partners in a Shanghai development. Blum’s office is in a building owned by the Chang family. By the same token, many observers attributed Feinstein’s pro-business stance as mayor to Blum’s influence.
When Feinstein became mayor, the 6-foot-4 Blum took up what has become one of his favorite pastimes: distance running. Although the campaign has cut into his running time, he usually does 50 miles a week, setting out from his Tudor-style home at about 5:30 a.m.
He twice attempted but failed to complete the Western States 100, a grueling 100-mile run over mountainous terrain.
Blum, who wears size 15 Nike jogging shoes, has many running partners, and most have a tale or two.
F. Warren Hellman, a boyhood acquaintance who is with the highly successful investment banking firm of Hellman & Friedman, said Blum’s nickname in school was “the duck” because he walked and ran like one.
Hellman recalled a single day when Blum went jogging in three separate locations, sustaining bloody injuries to both knees and an elbow.
“It was like a demolition derby,” said Hellman, who attended grammar school, high school and college with Blum and has been a limited partner in his investment funds. “He’s not a great runner, but he has a lot of courage and endurance.”
Through the years, some of Blum’s associations have prompted accusations of conflicts.
In 1980, not long after his wedding to Feinstein, a reporter for the San Francisco Examiner wrote about Blum’s business tie with Gary Wilson, a senior vice president of Marriott Corp., which was joining with Olympia & York of Toronto to bid on a city redevelopment contract.
Wilson (of the Northwest Airlines deal) was a limited partner in a company of which Blum’s firm owned about 14%.
Two years later, after the references resurfaced in subsequent stories, Blum contacted Reg Murphy, a friend and at that time publisher of the Examiner (Murphy is now publisher of the Baltimore Sun). Blum said he told Murphy that he was upset by the implications and challenged the newspaper to run an expose if it felt it could establish that Olympia & York and Marriott got the contract because of his influence. Otherwise, he said, the paper should quit with the innuendo. No such expose was written.
Also in 1982, Blum bought from Marriott its struggling chain of Farrell’s Ice Cream Parlours for $15 million, $12 million of which was debt.
In 1985, after failing to fix the chain, he gave it back to Marriott, giving up his original $3-million equity stake plus $1 million more that he had pumped in.
Blum’s and Feinstein’s 1985 tax documents show that losses from Farrell’s and from the Hotel Carlton, a residential hotel the two own in the city, wiped out the couple’s earnings and caused them a loss of $112,985. Van de Kamp has routinely made a point that the couple paid no taxes that year.
Van de Kamp has also made a campaign issue of business ties between Blum and Executive Life Insurance Co., owned by First Executive Corp. of Los Angeles, which recently has had steep losses from investments in high-risk, high-yield junk bonds. Fred Carr, First Executive’s chairman, has donated to the Feinstein campaign, and Executive Life put up one-fifth of the $102 million in financing that Blum arranged for the Northwest Airlines deal.
Blum noted that his firm has made only equity investments for First Executive and has nothing to do with its junk bond woes.
In April, Blum and Feinstein supplied further grist for Van de Kamp by disclosing their 1989 tax return, which showed that they earned nearly $7.4 million last year and paid $2.5 million in combined state and federal taxes. More than half the income--$4.6 million--came from capital gains. For example, Blum’s firm made a paper gain of more than $40 million on shares of United Airlines, which skyrocketed after a takeover bid was disclosed.
On the campaign trail, Van de Kamp has often challenged Feinstein to reveal the sources of Blum’s income and details of his investments and partners. Blum has declined, citing his clients’ right to privacy.
Blum was perturbed, in fact, when the San Francisco Chronicle recently obtained a confidential client list and printed details about some investments. And when a Times reporter sitting in a restaurant with Blum and Feinstein made a joking remark about a past controversy, Blum flew into a rage.
He maintains, however, that if Feinstein is elected he will do everything necessary to avoid even the appearance of conflict.
“I will have to sit down with the legal powers that be and fully disclose all our business activities” to decide whether there is a need to sell any assets or put them into a blind trust, he said.
“Not only does someone in Dianne’s position have to live up to the letter of the law, but (we) have to take it a step beyond and be concerned with how things look as well,” he said, adding: “I’ll worry about the problem when the time comes.”
Of his need to achieve in so many diverse pursuits, “ultra-marathon man” Dick Blum is characteristically philosophical.
“I guess I’ve just always been for pushing whatever happens to be my agenda to the max,” he said. “Despite the fact that I’ve spent a lot of time with Tibetans (discussing reincarnation), . . . no one has convinced me we come this way more than once.”
Times researcher Norma Kaufman contributed to this story.