House Speaker Nancy Pelosi, the most powerful woman in Congress, proudly sang the praises of her longtime friend and major Democratic donor Eleni Tsakopoulos-Kounalakis during the California real estate developer's confirmation hearing in November as U.S. ambassador to Hungary.
"My husband and I are here as friends of the family and admirers of the Tsakopoulos-Kounalakis family," she told the Senate Foreign Relations Committee at the Nov. 18 hearing. "I salute her for her patriotism and for all that she will bring to this position."
What the 12-term California Democrat didn't say was that her husband, Paul Pelosi Sr., a California-based investment banker, has made more than $1 million as part of a business relationship with the new ambassador's father, Angelo Tsakopoulos, that dates back nearly 20 years.
While ambassadorships often are part of a "spoils system" that rewards big donors and the politically well-connected, the Pelosis' relationship with Mr. Tsakopoulos goes well beyond the business-as-usual label.
Since 1991, Mr. Pelosi's real estate partnership investments with Mr. Tsakopoulos have netted him between $1.4 million and $9 million, according to Mrs. Pelosi's personal financial disclosure statements. In 1993, Mrs. Tsakopoulos-Kounalakis joined the business, AKT Development Corp., which was founded by her father, becoming its president in 1997.
Craig Holman, legislative representative for Public Citizen, a Washington, D.C.-based consumer advocacy group, described the appointment of ambassadors as a "favoritism system based on money." He said that in this case, Mrs. Pelosi should have mentioned her family's business ties to the Tsakopoulos-Kounalakis family during the confirmation hearing.
"It would have been better if there was a conflict of interest to clear the air," he said.
Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington (CREW), said that while she did not see a conflict of interest for Mrs. Pelosi to be pushing the nomination of someone with whom her family had business ties, she saw the appointment as part of a larger problem of how ambassadorships "are not given to the people best qualified but best connected."
Ronald E. Neumann, president of an organization of retired senior diplomats, said qualifications should be key for ambassadors and the number of political appointments should be reduced to 10 percent. Traditionally, around 30 percent of the ambassadorships go to political appointees and 70 percent to career diplomats.
"Too many get the job purely because of political donations and without qualifications," said Mr. Neumann, head of the American Academy of Diplomacy and a career foreign service employee who was ambassador to Afghanistan, Algeria and Bahrain. 
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