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A Testing Friendship

A Developer, His Deals and His Ties to McCain

By David Kirkpatrick and Jim Rutenberg

For John McCain, who has pledged to avoid even the appearance of dispensing official favors for donors, Donald R. Diamond is the kind of friend who can pose a test.

Donald R. Diamond, a wealthy Arizona real estate developer, was racing to snap up a stretch of virgin California coast freed by the closing of an Army base a decade ago when he turned to an old friend, Senator John McCain.

When Mr. Diamond wanted to buy land at the base, Fort Ord, Mr. McCain assigned an aide who set up a meeting at the Pentagon and later stepped in again to help speed up the sale, according to people involved and a deposition Mr. Diamond gave for a related lawsuit. When he appealed to a nearby city for the right to develop other property at the former base, Mr. Diamond submitted Mr. McCain’s endorsement as “a close personal friend.”

Writing to officials in the city, Seaside, Calif., the senator said, “You will find him as honorable and committed as I have.”

Courting local officials and potential partners, Mr. Diamond’s team promised that he could “help get through some of the red tape in dealing with the Department of the Army” because Mr. Diamond “has been very active with Senator McCain,” a partner said in a deposition.

For Mr. McCain, the Arizona Republican who has staked two presidential campaigns on pledges to avoid even the appearance of dispensing an official favor for a donor, Mr. Diamond is the kind of friend who can pose a test.

A longtime political patron, Mr. Diamond is one of the elite fund-raisers Mr. McCain’s current presidential campaign calls Innovators, having raised more than $250,000 so far. At home, Mr. Diamond is sometimes referred to as “The Donald,” Arizona’s answer to Donald Trump -- an outsized personality who invites public officials aboard his flotilla of yachts (the Ace, King, Jack and Queen of Diamonds), specializes in deals with the government, and unabashedly solicits support for his business interests from the recipients of his campaign contributions.

Mr. McCain has occasionally rebuffed Mr. Diamond’s entreaties as inappropriate, but he has also taken steps that benefited his friend’s real estate empire. Their 26-year relationship illuminates how Mr. McCain weighs requests from a benefactor against his vows, adopted after a brush with scandal two decades ago, not to intercede with government authorities on behalf of a donor or take other official action that serves no clear public interest.

In California, the McCain aide’s assistance with the Army helped Mr. Diamond complete a purchase in 1999 that he soon turned over for a $20 million profit. And Mr. McCain’s letter of recommendation reinforced Mr. Diamond’s selling point about his McCain connections as he pursued -- and won in 2005 -- a potentially much more lucrative deal to develop a resort hotel and luxury housing.

In Arizona, Mr. McCain has helped Mr. Diamond with matters as small as forwarding a complaint in a regulatory skirmish over the endangered pygmy owl, and as large as introducing legislation remapping public lands. In 1991 and 1994, Mr. McCain sponsored two laws sought by Mr. Diamond that resulted in providing him millions of dollars and thousands of acres in exchange for adding some of his properties to national parks. The Arizona senator co-sponsored a third similar bill now before the Senate.

A spokeswoman for Mr. McCain, Jill Hazelbaker, said the senator, now the presumptive Republican presidential nominee, “had done nothing for Mr. Diamond that he would not do for any other Arizona citizen.”

The campaign said in a statement that the Arizona land exchanges had broad support from local governments and environmentalists seeking to expand a federal park, the statement said.

For the California projects, the campaign said the McCain aide arranged the introduction to an Army official for Mr. Diamond’s team as “a constituent matter.” The campaign said it had no knowledge of the aide helping to expedite the sale.

In Mr. Diamond’s other project at Ford Ord, the campaign initially said that the senator “would not have issued” the letter vouching for Mr. Diamond “if he knew at the time it would be used to favor any particular party in the course of a pending competition.” Later, the campaign described the letter as “a character reference” and said it was included only at a “pre-competition” stage in the selection process. The campaign also noted that two other members of the Arizona Congressional delegation provided similar letters.

Mr. Diamond, for his part, said Mr. McCain had only done his job. “I think that is what Congress people are supposed to do for constituents,” he said. “When you have a big, significant businessman like myself, why wouldn’t you want to help move things along? What else would they do? They waste so much time with legislation.”

He said he often complained to Mr. McCain that he was “too straight” about refusing to provide federal help for Arizona businessmen. “I tell him, ‘You are an Arizona senator besides being the world senator. Loosen up, kid!’ ”

'A Love Fest'

Mr. Diamond, 80, met Mr. McCain when he was a former prisoner of war running for Congress in 1982. “I liked him right away because I respected what he went through in Vietnam,” Mr. Diamond recalled. When he got to know Mr. McCain and his wife, Cindy, Mr. Diamond said, “it became a love fest.”

Mr. Diamond was already a major player in Arizona real estate and Republican politics. A tenacious dealmaker who once visited a Mexican jail to close a sale with an inmate, Mr. Diamond had made a first fortune on Wall Street before turning his trader’s eye to the Arizona desert in 1965. He eventually became one of the state’s biggest landowners, picking up trophies that included the 12,000-acre Howard Hughes estate, stakes in two of Arizona’s professional sports teams, the Diamondbacks and the Suns, and, for a time, a Tucson television station.

Over the years, Mr. Diamond and his wife, Joan, visited the McCains at their ranch in Sedona, Ariz., and entertained them in their Tucson home and in the Bahamas, where Mr. Diamond sometimes keeps his 134-foot yacht, the Queen of Diamonds. In 2001, the two men attended a Yankees-Diamondback World Series game together. “He is just very, very good company,” Mr. Diamond said of Mr. McCain. “I knew all his people and the staff.”

Mr. Diamond and his family have given more than $55,000 to Mr. McCain’s campaigns (and more than $600,000 to other federal candidates). More significantly, the developer has collected (or “bundled”) hundreds of thousands of dollars in contributions from others, and is now serving as a national co-chairman of the finance committee for Mr. McCain’s current presidential run. In the spring of 2000, when Mr. Diamond was in the thick of the negotiations for his California deals, he traveled with Mr. McCain through the early Republican primaries. Mr. Diamond was on the campaign trail again this year.

In building his empire, Mr. Diamond said he had struggled with local elected officials over land use and zoning issues just like any other developer. “They are a pain in the ‘you-know-what,’ ” he said.

But associates say he revels in his ability to “work the system,” as his friend and sometimes partner, Stanley Abrams, put it: “Nobody is as connected as Donald.”

Mr. Diamond is close to most of Arizona’s Congressional delegation and is candid about his expectations as a fund-raiser. “I want my money back, for Christ’s sake. Do you know how many cocktail parties I have to go to?”

To raise money for Mr. McCain, Mr. Diamond invites local Republicans to make fund-raising calls from his Tucson office. Ray Carroll, a member of the council that controls zoning in Pima County, Ariz., said Mr. Diamond followed up on one fund-raising session with a thank-you note “on behalf of Mr. McCain,” sending a copy to the senator.

“To reciprocate, if you need any zoning in the county, let me know,” Mr. Diamond wrote. (Mr. Diamond said it was the kind of joke he often made.)

Mr. McCain has campaigned as a critic of the corrupting influence of money and politics, saying he had learned a lesson from a late 1980s scandal over his part in an intervention with banking regulators examining a savings and loan controlled by a patron, Charles Keating. Since then, Mr. McCain vowed to embrace ethics standards that set him apart from many colleagues.

“I have carefully avoided situations that might even tangentially be construed as a less than proper use of my office,” he wrote in his memoir, “Worth the Fighting For” (Random House, 2002).

Mr. McCain once publicly criticized Mr. Diamond as lobbying too hard for his own financial interests. In 1995, Mr. McCain called it “unheard of” that Mr. Diamond had hired a Washington lobbyist to try to block construction of a federal building in Tucson that threatened to take away some of his rental income. “I didn’t talk to him for one year,” Mr. Diamond said of Mr. McCain. “I was annoyed.”