The Harry Reid story looks very, very bad for the Democrats’ number one senator. CNN has run an amazing story, and this jumps out:
Reid and his wife, Landra, personally signed the deeds selling their full interest in the property to Brown’s company, Patrick Lane LLC, for the same $400,000 they paid in 1998, records show.
Despite the sale, Reid continued to say on his public ethics reports that he personally owned the land until it was sold again in 2004. His disclosure forms to Congress do not mention an interest in Patrick Lane or the company’s role in the 2004 sale.
So, did Harry own it or not after 2001? Sure, he violated the Senate’s rules, but why? Why go to all this trouble?
And here, for reference, is Harry Reid’s January 17, 2006 press release calling for an end to the D.C. culture of corruption: “REID: REPUBLICANS CANNOT BE TRUSTED TO END THE CULTURE OF CORRUPTION” Opening graph:
The idea of Republicans reforming themselves is like asking John Gotti to clean up organized crime. I thought I’d seen the last of corruption when I helped clean up Las Vegas thirty years ago. But, while its not quite the mafia of Las Vegas in the 1970s, what is happening today in Washington is every bit as corrupt and the consequences for our country have been just as severe.
Has Harry Reid become Harry Greed? And aren’t there some parallels with Duke Cunningham’s sweetheart real estate deal that led to the investigation of Cunningham? From Wikipedia’s account of Cunningham’s scandals:
In June 2005 it was revealed that a defense contractor, Mitchell Wade, founder of the defense contracting firm MZM Inc. (since renamed Athena Innovative Solutions Inc.), had bought Cunningham’s house in Del Mar for $1,675,000. A month later, Wade placed it back on the market where it remained unsold for 8 months until the price was reduced to $975,000.
Obviously Cunningham’s real estate deal was a $700,000 gift. What was Harry Reid’s deal? And what did he declare on his IRS forms? Will the media be requesting his returns from 1998, 2001, and 2004?
UPDATE: Here’s the Financial Disclosure Form for the Senate. See Part IV, “Transactions.”
And here is Reid’s 2005 financial disclosure form. There’s a whole lot of buying and selling going on.
With the “windfall” having arrived in 2004, that’s the year’s disclosure form that will show where Harry Reid stuffed the $1.1 million.
UPDATE: Much more detail here. Interesting graphs:
Nevada land deeds show Reid and his wife bought the property in January 1998 in a proposed subdivision created partly with federal lands transferred by the Interior Department to developers.
Reid’s two lots were never owned by the government, but the piece of land joining Reid’s property to the street corner, a key to the shopping center deal, came from the government in 1994.
One of the sellers was Fred Lessman, a vice president of land acquisition at Perma-Bilt Homes.
Around the time of the 1998 sale, Lessman and his company were completing a complicated federal land transfer that involved Arizona-based developer Del Webb Corp.
In the deal, Del Webb and Perma-Bilt bought environmentally sensitive lands in the Lake Tahoe area, transferred them to the government and then got in exchange several pieces of Las Vegas land.
For years, Reid had been encouraging Interior to make land swaps on behalf of Del Webb, where one of his former aides worked.
In 1994, Reid wrote a letter with other Nevada lawmakers on behalf of Del Webb and then met with a top federal land official in Nevada. That official said in media reports he felt pressured by the senator. Reid denied applying pressure.
The next year, Reid collected $18,000 in donations from Del Webb’s political action committee and workers.
In December 1996, Reid wrote a second letter on behalf of Del Webb, urging Interior to answer the company’s concerns. The deal came together in the summer and fall 1997, with Perma-Bilt joining in.
“This land investment was completely unrelated to federal land swaps that took place in the mid-1990s,” Manley said.
From an e-mailing CPA:
Harry Reid’s transaction was done, obviously, to hide his ownership in the underlying land. His indirect ownership of the land after his contribution to the LLC should have been disclosed. His initial contribution of the land to the LLC in exchange for an LLC interest is non taxable under IRC section 721. He should have received a capital account in the partnership equal to the fair market value of the land. This is required under the capital account maintenance rules of IRC section 704(b). If this fair market value is in excess of the cost of the land, this too is not taxable. The tax rules would require any pre contribution gain, ie, the fair market value increment in excess of his basis, to be allocated to him under IRC section 704(c).
I only caught a piece of the segment on this, but it sounded like he received his cash back almost immediately. This is a bad fact if so. The IRS has some really awful rules to recharacterize this as a sale transaction if he received a cash distribution that, when looked together with the contribution of the land, is more properly characterized as a sale of the property. These are referred to as the disguised sale rules and reside in IRC Section 707(b) and the regulation thereunder. There is a presumption that any distribution of cash to a partner within two years of a property contribution is part of a disguised sale and requires disclosure and rebuttal on a tax return if it is not treated as such by the partnership and the partner. This could be a significant tax issue to Mr. Reid if he did not recognize a gain on this. The only way it would not be taxable is if he completely liquidated his LLC interest for cash equal to his basis in the land. If he retains any interest in the LLC, then he has a taxable gain.