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Deal linked Edwards, Saudi PR man

WASHINGTON -- While a participant in a congressional investigation into US and Saudi intelligence failures, presidential candidate John Edwards agreed to sell his home for $3.52 million to the public relations specialist hired by Saudi Arabia to counter charges it was soft on terrorism.

Edwards, a Democrat on the Senate Intelligence Committee, said yesterday he learned sometime during the course of the 2002 transaction -- months after the initial offer was signed but before the deal fell apart -- that Michael Petruzzello worked for Saudi Arabia.

Though the sale broke off nearly a year ago, Edwards hasn't returned or publicly disclosed Petruzzello's $100,000 deposit, which remains in a real estate escrow account as the senator decides what to do with it. Edwards recently sold the house to another buyer for a half-million dollars less than Petruzzello's offer.

"If I took control of the $100,000, I would disclose it because that would be an asset of mine and it would be necessary that it should be disclosed. And that disclosure would include making sure that it was appropriate because of the legal issues associated it with it," Edwards said.

The Senate ethics manual says lawmakers are obligated to avoid financial transactions that create even the "possibility or appearance" of a conflict of interest or if "they have personal financial stakes in the outcome of their official duties." Discretion is left to the senator.

Edwards said he handled the transaction through real estate agents and doesn't believe he had any obligation to try to learn about Petruzzello's clients. He said he never had any suspicions, even after learning of the Saudi connection while he and other Intelligence Committee members were still investigating Saudi Arabia's possible complicity in the Sept. 11 attacks.

"This guy never said anything to me about Saudi Arabia," Edwards said, noting he was critical of the Saudis both before and after the house deal. "So it is an arm's length transaction with a stranger, and he ends up backing out of the deal, which created a financial loss for us."

Petruzzello, a registered foreign agent for Saudi Arabia since shortly after Sept. 11, said his offer had nothing to do with the Saudis. "My wife loved [the house], and I just wanted to make her happy," he said.

Several ethics specialists who reviewed the transaction at the request of the Associated Press said they believed Edwards had an obligation to recognize the appearance of a conflict of interest once he learned of the Saudi connection, either disclosing the transaction or seeking Senate Ethics Committee clearance.

"The potential conflict of interest is readily apparent when a member of the Senate Select Committee on Intelligence receives $100,000 in a real or sham business deal with a foreign agent or a person with extensive foreign contracts at the same time the Senate is investigating possible lapses in national security," said Kent Cooper, the former head of government's public disclosure office for federal candidates.

Stephen Gillers, a New York University law professor, said he didn't have an opinion on whether laws or rules were broken but that the house sale "could to a reasonable person appear to be improper, even if it is not."

"If Edwards knew the Saudi connection before the purchase fell apart, it was his job to avoid unfortunate inferences through disclosure," Gillers said. "But he had no duty to ask for his buyer's client list."

Washington attorney Lawrence Barcella, a former federal prosecutor, said he believed the real estate transaction was legal, but showed poor judgment. "I think it would have been better practice to submit the question to the Senate Ethics Committee. And given the facts and circumstance, I think the likely outcome is that the Ethics Committee would not have an objection," he said.

Though Washington real estate was hot, Edwards's home had been on the market for 13 months at an asking price of more than $4 million when Petruzzello offered to buy it May 17, 2002.

The offer was $1.3 million more than what Edwards paid for the home in 1999, deed records show.

Edwards finally sold the house in June 2003 to the government of Hungary for $3 million, about $500,000 less than Petruzzello offered but $800,000 more than Edwards paid in 1999, deed records showed.

Petruzzello is a managing partner of the Washington public relations firm Qorvis Communications, which was hired Nov. 14, 2001, by Saudi Arabia at a rate of $200,000 a month plus expenses to oversee a lobbying and public relations campaign to counter criticisms Saudi Arabia was soft on terrorism.

Fifteen of the 19 Sept. 11 hijackers were Saudis.

In the weeks before the offer, Petruzzello had visited Edwards's home state of North Carolina with the Saudis as part of their campaign, and had been widely quoted in Washington and national publications describing his work for the Middle East kingdom.

Petruzzello's firm also placed pro-Saudi television ads in 20 large markets, including North Carolina and the home states of other intelligence members.

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