Sep 6, 2008 8:33 am US/Eastern
Tax Expert: Rangel Likely Won't Be Prosecuted
Former Justice Department Official Says While Congressman's Problems Are Public, They Are Not Dire
Tax Status Of Dominican Beach-Front Villa Will Be Looked At
NEW YORK (CBS) ―
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Rep. Charles Rangel (file)
CBS
Congressman Charles Rangel is being asked some tough questions about a villa he has owned since 1988 on the prized Punta Cana resort in the Dominican Republic. The well-connected lawyer he has brought in to run interference in Washington, Lanny Davis (former Counsel to President Clinton and a Democratic Party power), is sorting through both the somewhat disorganized paperwork of Rangel and his wife Alma, and the sporadic financial reports of the corporation in Punta Cana to Rangel, all going back over this 20-year period.
And all this comes after the revelation in July that Rangel was able to get three apartments at the condo he has lived in for years to be converted into one, with a fourth apartment used as an office, at what appeared to be a sweetheart rate. The negative publicity prompted Rangel to drop the office/apartment. Now, the Dominican paperwork mess is allowing some of Rangel's critics to have a field day at the expense of the man who is supposed to be a watchdog of the nation's budget. Rangel is, after all, Chairman of the House Ways and Means Committee.
But until truly scandalous or criminal behavior is unearthed, if at all (or, if more of these "pesky problems" begin to add up to the humiliation of "a thousand cuts"), one tax expert I talked to seems to think this will all blow over, and Rangel at most might wind up paying a small fine.
As first reported in the New York Post Sunday, and followed up Friday by the New York Times, Rangel in the mid-1980s was invited by powerful labor mediator Ted Kheel to be part of the original group of investors backing the development of what became the Punta Cana Yacht Club (now the Punta Cana Resort and Club). Other investors included Oscar de la Renta and Julio Iglesias. At the time, it was mostly an idea, and a lot of jungle, though Kheel was smart enough to have an airport built first nearby, in 1984. Three years later, the "development" began. Gradually, the jungle was cleared, and what remained was one heck of a beach. Rangel got one of the original villas.
His deal as an original investor (which the Punta Cana group called "the Pioneers") allowed him to buy in for $82,750 two decades ago with a down payment of about $28,000. But the mortgage was paid off with no interest in exchange for what the corporation got by renting the villa when Rangel wasn't using it. Kheel has compared it to a time share. Any money that came in was split among the corporation, with a small sum -- say, $7600 in 1994, or $2700 in 2004 -- being Rangel's share. His lawyer, Lanny Davis, though, told me Rangel was never given even that money. "It went back towards paying off the mortgage, and other costs. Except once, he did get $700. So over 20 years," Davis said over the phone, "He invested over $100,000 and got back seven hundred. That's what the New York Post calls 'a cash cow.'"
Except, of course, the Congressman being in the right place and having the right friends means he's got a piece of property worth 10 times what he originally put in back in 1988. Once the messy paperwork is all sorted out, it looks like it will all pass muster. But, as every politician knows, perception is everything.
Like those apartments in Lenox Terrace, home to other members of Harlem's old guard as well: Basil Paterson and Percy Sutton.
Following published reports, on Aug. 31, House Republicans tried to censure Rangel for allegedly using his influence years ago to obtain and convert the rent-stabilized apartments.
After a lot of speeches on the floor, Rangel won out. The Republicans got outvoted. And when it was his turn, the Congressman stood up and played to the gallery:
"There is no one in this House that is more thick-skinned than I am in terms of playing politics," Rangel said. "But playing with someone's reputation, especially someone that has felt so honored to serve in this House, I really think goes a step beyond."
Even the Republicans who went on at length against him knew the Ethics Committee was not about to hold Rangel's feet to the fire: do you know how much else, and far bigger, they have looked the other way on, on both sides of the aisle?
But that was then. This is now. The climate has changed. It's a Presidential election year. And the Democrats have decided that they do not want even a hint of one of their own using his influence or position to get a favor. Republicans Friday began jumping on the Dominican situation, and more "pesky problems" related to Rangel are also starting to come out. The Times is reporting this Saturday that Nancy Pelosi, the Speaker of the House, will now allow the Ethics Committee to look into all this. Brendan Daley, Pelosi's spokesman, told the Times, "Instead of making this political, what we should do is have the ethics committee investigate. We want to look into this."
Now it turns out that Rangel and his wife own a building with six apartments at 74 West 132nd Street that, between 1978 and 1987, and again between 1993 and 2000, they reported no income.
It's beginning to add up. The question is, will Rangel survive with a slap on the wrist? Or will the Democrats now be so embarrassed that he, too, will have to step down as chair of the Ways and Means Committee (and take with him all that seniority)? Although he is a force in the party, most of his political capital lies with Clintonites and the ties he has built over the decades (on both sides of the aisle). But there's a new breeze blowing. The Obama camp is on the rise. And only a last-minute plea got Rangel a speaking role from the stage of the convention. He was almost blocked.
Looking for someone who could at least guide me through what Rangel was facing with regards to the Dominican investment, I sought out Kathleen Packenham.
Pablo Guzman: "As I understand it the potential liability that Rep. Rangel may be looking at is more like a fine. Is that right?"
Packenham: "Typically in a case like this, what you would see on both the federal and state side would be a civil penalty of no more than 20 percent of the understated tax."
Pablo Guzman: "If he was found to have committed any indiscretion, what might [the penalty] be?"
Packenham: "Well, on the federal side it could be federal tax evasion. On the civil side, the state side, it could be the same thing. Those are both felonies. On the federal side punishable by up to five years in prison; on the state side up to four years in prison."
Pablo Guzman: "But it's not likely he would actually get a sentence like that?"
Packenham: "No. I don't think so."
Pablo Guzman: "Still, if you're the head of the Ways and Means Committee it probably doesn't look good, right?"
Packenham: "Well, for the people who are writing the tax laws to not be reporting their taxes properly, it certainly doesn't look good."
Pablo Guzman: "Yet on the other hand, how often does it happen both to someone who is a public person like he is and for the common person that somehow they made a mistake in the paperwork or forgot to file something?"
Packenham: "It's actually pretty common. People rely quite heavily on their preparers or other professionals. Tax laws are very complex. This certainly is not something the average person would understand."
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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