At 94, most men are lucky to be alive, much less enjoying the scenery at a Caribbean seaside resort. But Ted Kheel is an unusual case of both longevity and networking. A longtime negotiator on behalf of New York City labor unions, he’s cultivated close ties to a number of Democratic Party leaders over the years, most significantly, Rep. Charles B. Rangel, D-N.Y., chairman of the House Ways and Means Committee. The business side of that relationship is now the subject of a possible federal investigation, a probe triggered by a series of articles appearing in the New York Post. Reporter Isabel Vincent had revealed that a real estate company co-founded by Kheel decades ago had arranged for the powerful Congressman to obtain an interest-free mortgage on a villa in the Dominican Republic. That deal opened the door for Rangel to collect what may be hundreds of thousands of dollars in unreported gross rental income.
Theodore Woodrow Kheel over the course of nearly 70 years has earned a reputation as one of the nation’s most respected labor union lawyers, leading or otherwise participating in roughly 30,000 disputes. In recent years he’s become a philanthropist as well. Unfortunately, not all of the ventures on which he has bestowed generosity have been well-founded. Kheel and his late wife, Ann, first met Rangel at a New York Urban League dinner in 1987, and became fast friends. This year’s tax filings show that the Ann S. Kheel Charitable Trust donated $440,000 toward the construction of the Charles B. Rangel Center at the City College of New York, the largest donation in its four-year history. Moreover, since 1990 the Kheels had given a combined more than $17,000 to Rangel’s re-election campaigns and another $52,000 to a Rangel-controlled political action committee, National Leadership PAC. That doesn’t even cover a certain real estate deal that has come back to haunt the Congressman.
Kheel is vice president of Grupo Punta Cana, which he co-founded nearly 40 years ago with Dominican businessman Frank Rainieri. The company’s crown jewel asset is the Punta Cana Yacht Club, a resort community located at the eastern end of the Dominican Republic. After opening for occupancy, the project did not lack for buyers. One of them would be Charlie Rangel. In 1988, only a year after first meeting Kheel, the Congressman took out a $52,000 loan from the developer to buy an $82,750 beachfront condominium, “Casita 412.” After two years, the builder waived the 10.5 percent interest, though Rangel says he was unaware of the financial arrangement. Holding onto the property proved to be a smart move. According to various sources, that property today is worth between $500,000 and $650,000. Rangel paid off the loan by 2003, and then borrowed an additional $23,000 to expand his unit from two to three bedrooms. But the busy Congressman, able to live there for only a few weeks a year, has met expenses by leasing the unit to vacationers. During peak season, the dwelling typically rents for up to $1,100 a night. Resort staffers told the Post that leasing was common among property owners, and that Rangel’s unit in particular was consistently occupied.
The problem with this is that the House Committee on Standards of Official Conduct last year placed tough new restrictions on lobbyist-financed travel. The panel barred House members from accepting free trips partly or fully financed by a lobbyist or a corporation. Ironically, it was the new Democratic majority who pushed for these rules; the Democrats became a majority in the fall 2006 elections by touting well-documented ties between key House Republicans and now-convicted lobbyist Jack Abramoff. In addition to potentially violating House ethics rules, Rangel also may have evaded federal, state and local taxes on a large portion of his rental income. There’s irony here, too, since as Ways and Means chairman, Rangel oversees all pending tax legislation. And that has National Legal and Policy Center calling for a federal probe.
In a letter to the Justice Department, NLPC Chairman Kenneth Boehm sought “an immediate investigation” of Rangel, who has served continuously in Congress since 1971. The Congressman’s annual rental income from his Punta Cana villa in recent years could well exceed $100,000, he said. Other critics also notice a credibility problem. “Charlie Rangel is the designated leader on tax policy in the Democrat-led Congress, but while he is authoring massive tax hikes to exact on middle-class Americans, he is apparently dodging the IRS at all costs,” remarked Ken Spain, a spokesman for the National Republican Congressional Committee.
Rangel, now 78, has denied all wrongdoing. His lawyer, Lanny Davis, who served as Special Counsel to the President during the Clinton administration, insists the grand total of his client’s condo-related income has come to just over $75,000. Admitting that the Congressman didn’t declare a large portion of that sum on his tax returns, he noted that most of his revenue was eaten up by debt, property tax and maintenance costs. “In 20 years, he [Rangel] never received a check from Punta Cana,” Davis told the Post. Citing real estate records, Davis, a partner in the Washington, D.C. office of Orrick Herrington & Sutcliffe, stated that the project condo owners arranged to split 47 percent of the pool of net rental income. He added that Rangel had been unaware of the requirement to declare this as income. “It walks, talks and feels like a time share…It’s certainly not generating any cash,” Davis remarked.
Yet if Rangel’s vacation getaway spot were a financial deadweight, one would think by now he’d be looking to sell it. As it is, Rangel has given the appearance of defying the new House rules on accepting gratuities – and not just in this instance. Last November he attended a conference at the Sandals Grande Resort and Spa in Antigua and Barbuda, sponsored by Sandals, AT&T, HSBC and Pfizer. In his 2007 tax filing, Rangel listed the organizer, NY Carib Foundation, but failed to disclose that the trip, which cost thousands of dollars, was corporate-financed. That at least puts him ahead of certain other Democratic lawmakers who had attended, but did not indicate as much on their tax returns. Rangel, to his credit, has indicated he welcomes a probe by the House Ethics Committee. Lanny Davis has stated that his client is willing to pay all back taxes and penalties.
Congressman Rangel’s benefactor, Ted Kheel, owns his own luxury dwelling at Punta Cana. Now suffering from spinal stenosis, he insists neither he nor Rangel have committed any acts of malfeasance. He defends his campaign donations to Rangel and National Leadership PAC, and called the lawmaker’s real estate income a “trivial story.” But it might not be trivial to federal investigators. And Kheel is no stranger to federal inquiries. A dozen years ago he made a $20,000 cash contribution to the re-election campaign of then-Teamster General President Ron Carey, a donation that former U.S. District Judge (Southern District of New York) Kenneth Conboy, now a litigator at Latham & Watkins, called “an improper scheme.” Kheel was not prosecuted in that case. Whether or not Rangel has broken any laws, this much is certain: His good fortune, if indirectly, was made possible in part by union dues. (New York Post, 8/31/08, 9/6/08, 9/7/08, 9/14/08; Washington Post, 9/6/08; Wall Street Journal, 9/16/08).