Washington Post | October 25, 2006; Page A04
By Jonathan Weisman and Dan Eggen

U.S. prosecutors in Arizona have opened a preliminary investigation into whether Rep. Rick Renzi (R-Ariz.) twice pressured landowners to buy a 480-acre parcel owned by his former business partner, a major backer of Renzi's political campaign, according to federal law enforcement sources.

The deal ultimately netted the business partner a $3 million profit, according to Arizona land records.
 
Renzi is the latest lawmaker whose land deals have come under scrutiny. Senate Minority Leader Harry M. Reid (D-Nev.) and House Speaker J. Dennis Hastert (R-Ill.) have drawn criticism from political opponents for deals with home-state business partners that netted earned them hundreds of thousands of dollars or more.

The Arizona transaction has drawn the interest of the U.S. attorney's office and the FBI's Phoenix field office. Three law enforcement officials said both are investigating Renzi's involvement in two land deals -- one of which was not completed -- designed to put the 480 acres under federal protection from development in exchange for land more fit for commercial development.

One of the officials said the inquiry is at a preliminary stage. No subpoenas have been issued, and public developments are not likely before the Nov. 7 midterm elections, said the official, who along with the other two spoke on the condition of anonymity because the investigation has not been publicly announced.

A spokesman for U.S. Attorney Paul Charlton in Phoenix declined to confirm or deny the existence of an inquiry. Spokesmen for the Justice Department and the FBI in Washington also declined to comment.

The inquiry was revealed by two liberal Arizona blogs last weekend.

Grant Woods, a former Arizona attorney general who is Renzi's lawyer on the matter, said neither he nor Renzi has been contacted by law enforcement officials. He ascribed any inquiry to political gamesmanship by the two-term lawmaker's Democratic opponent, lawyer Ellen Simon.

"When I was attorney general, we dealt with this all the time in the last 30 days before an election, when candidates came to us with an accusation. We had to look at it, but it was designed to use politically," Woods said.

According to sources, the investigation is focusing on whether, in exchange for political contributions and business support, James Sandlin received special treatment from Renzi for a parcel of land that earned him a $3 million profit .

Sandlin bought into Renzi's real estate firm in 2001, then paid about $200,000 for half the business and, after he was elected to Congress, $1 million to $5 million for the rest.

Investigators want to know whether Renzi twice attempted to arrange deals for Sandlin, including once by proposing legislation, two sources with knowledge of the investigations said.

According to land developer Guy Inzalaco, Renzi was approached last year by an investment group that included Inzalaco and former Arizona governor Bruce Babbitt, a Democrat. The group sought legislation that would put environmentally sensitive watershed land under federal protection in exchange for opening other federal land to development.

Renzi said he would back the legislation if the Sandlin tract was included, Inzalaco said.

Woods said Renzi was trying to include a tract of land that environmentalists had been trying to preserve for years and did not know until later that his business partner owned it.

That fall, Renzi announced he would introduce the San Pedro River Land Exchange Act, a bill that would include the Sandlin property. Within days, Sandlin sold the tract to the Inzalaco-Babbitt group, turning a $3 million profit in three years. The land-swap legislation was never enacted.

Inzalaco said yesterday that he knew nothing of Sandlin's connections to Renzi.