Rep. Charles Rangel (D-NY) would seem an unlikely point man for the legislation passed by the House yesterday imposing a 90% tax on any bonuses given to employees with family incomes of more than $250,000 at firms that received more than $5 billion in bailout funds.
As exposed by NLPC, Rangel failed to pay federal income tax on rent received from his beachfront home in the Dominican Republic, and cheated on his D.C. property tax by improperly claiming a homestead exemption. Also, Rangel led a Citigroup-funded Caribbean junket last November that violated House rules.
After the 328-93 vote, the indignant Rangel warned, “Don’t dare try to take a bonus and get away with it.”
In a CNBC interview, Rangel was challenged on his moral authority to lead the floor fight for the bill. Strangely, Rangel seemed to deny the “false” reports about his own tax evasion, even though he admitted to not paying taxes on $75,000 in rental income and enjoyed an interest-free mortgage on the Dominican property.
Some recent history is in order.
On July 11 of last year, the New York Times reported that Rangel occupied four rent-controlled apartments in Harlem, and used one as his campaign headquarters.
On July 15, NLPC filed a formal Complaint with the Federal Election Commission alleging that Rangel’s below-market rent for the campaign office was an illegal corporate contribution from the landlord. Media coverage included the New York Post and the New York Times. NLPC Chairman Boehm was interviewed on WCBS-TV in New York City. Rangel soon after announced that he would give up the apartment used by his campaign.
While preparing the Complaint, NLPC reviewed Rangel’s financial disclosure forms. Congressmen are required to disclose their income and assets within certain ranges. It was noticed that Rangel disclosed receiving rent from a property in the Dominican Republic at the exclusive Punta Cana Yacht Club several years ago, but nothing recently.
Boehm dispatched a bilingual lawyer to the scene who is familiar with Dominican Republic real estate. He quickly found out that not only was Rangel’s “villa” right on the beach, it is continuously rented out.
Boehm provided the information to New York Post reporter Isabel Vincent, who made her own trip to the Dominican Republic, with a photographer in tow. The result was a front-page story on Sunday, August 31 with the now-famous photo of the overweight Rangel lounging in the sun.
In response, Rangel hired former Clinton spinmeister Lanny Davis. At a press conference, Rangel announced that he would be amending his federal and state tax returns, as well as his disclosure forms. He also said he would file a Complaint against himself with the House Ethics Committee, apparently expecting a whitewash.
To a skeptical press corps, Rangel admitted not paying taxes on $75,000 in rental income, blaming his wife. He also claimed that a language barrier prevented him from understanding he was receiving income.
Rangel claimed further that he was unaware that he had a no-interest mortgage on the property. He announced that he would hire a forensic accountant to determine the extent of his obligations.
Rangel also expressed embarrassment at the lounge-chair photo and pledged to lose 15 pounds.
In a formal Complaint to the IRS and the U.S. Attorney for the District of Columbia, NLPC alleged the total unreported rent was much higher than $75,000. At the height of the season, Rangel’s villa brings in $1,100 per night. As Boehm was quoted in the Washington Post, “Ordinary citizens are prosecuted all the time for tax evasion. Rangel should not get special treatment just because his committee writes the tax laws.”
Rangel may have had plenty of motivation not to report or disclose the income. In order to retain a rent-controlled apartment, a New York City resident may not make more than $175,000 in two consecutive years. Rangel’s Congressional salary is $169,300. The Punta Cana income would clearly put him over the threshold.
The examination of Rangel’s disclosure forms yielded other leads. Rangel owned a home in the District of Columbia from 1971 to 2000. After weeks of digging out old records, NLPC alleged that Rangel improperly claimed a “homestead” exemption, saving him on his D.C. property taxes.
A homestead exemption can only be claimed on a primary residence in the District of Columbia. In New York City, Rangel claimed his four apartments as his primary residence in order to qualify for rent control. Moreover, to be eligible for the homestead exemption, one must pay D.C. income tax, from which members of Congress are exempt.
Again, the New York Post put the story on the front page, on Sunday, November 23. On November 26, NLPC filed a Complaint asking the House Ethics Committee to investigate this tax cheating as well.
NLPC also meticulously reviewed Rangel’s travel forms. Members of Congress are required to file forms when they travel, including the identity of who paid for the trip. The rules were tightened considerably by House Speaker Nancy Pelosi (D-CA) in the wake of the Abramoff scandal — and the infamous golf trip to Scotland.
Rangel had filed the form for a Caribbean trip in 2007, months after the deadline, and only after he knew that NLPC and journalists were scouring his disclosures. The trip was supposedly for an annual business conference, heavily attended by other members of the Congressional Black Caucus.
NLPC decided to monitor the 2008 event that took place November 6-9 on the sunny Caribbean island of St. Maarten at the Sonesta Maho Bay Resort & Casino. NLPC President Peter Flaherty flew to St. Maarten and registered for the event under his own name.
Inside, Flaherty snapped photos and openly made audio recordings. It was quickly obvious that the event was funded by big corporations and was crawling with lobbyists — all in violation of Pelosi’s new House rules. The “lead sponsor” was Citigroup, a major recipient of bailout funds, which contributed $100,000. Other sponsors included IBM, AT&T, Verizon, Pfizer, Macy’s and American Airlines.
In addition to Rangel, five other members of Congress attended. They were Donald Payne (D-NJ), Sheila Jackson-Lee (D-TX), Carolyn Cheeks Kilpatrick (D-MI), Bennie Thompson (D-MS) and Donna Christensen (D-VI).
Just before a dinner featuring Rangel, Flaherty was detained by the Police Korps of St. Maarten. He was questioned and his driver’s license was taken from him. He was released after being told that conference organizers did not want him to attend additional events.
Flaherty raced back to his hotel room to remove his camera, recordings, notes and laptop computer. According to Flaherty, “If Rangel and company had nothing to hide, they would not have kicked me out.”
On Sunday, November 30, the New York Post ran a major article on the junket based on Flaherty’s eyewitness account, photos and recordings.
House rules prohibit members of Congress from accepting travel or lodging on a multiday trip from corporations that “employ or retain a registered lobbyist.” At the opening session, Rep. Payne identified each corporate sponsor by name and asked for a round of applause. Yet Payne’s spokesman would tell the Post, “We are unaware of any corporate sponsors.” Additionally, Payne checked the “no” box on his travel form in response to a question about any corporate sponsorship.
When she took over as House Speaker, Nancy Pelosi pledged to “lead the most honest, the most open and the most ethical Congress in history.” In November, Pelosi said that she expected the House Ethics Committee to finish its Rangel investigation by January 3, 2009. Not only would that have made the probe incredibly swift, but Pelosi’s comments sparked questions about her influence on the committee, whose deliberations are supposed to be secret.
Since that time, the Ethics Committee has taken no action against Rangel. As long as he chairs the Ways and Means Committee, which writes the tax laws, Rangel is sure to be a liability to House Democrats.
Yesterday, Rangel’s hypocrisy was too much for the co-hosts of CNBC’s Squawk on the Street, Mark Haines and Erin Burnett. After Rangel said something about the “public trust,” Haines asked, “With all due respect Congressman, when you talk about violating the public trust, you’ve had some tax issues of your own.”
Rangel replied, “Well, I wouldn’t think that you know what they are since what I did or did not is being investigated by a committee, by me. So what you’re doing is reporting on what a reporter says because you have no clue as to what problems, if any, I have.”
Haines followed up by asking, “So all of the reports in the press were erroneous?”
Rangel replied, “All of the reports in the press have been sent to a congressional committee that I asked to be sent to.”
Burnett’s asked Rangel if he should step aside while under investigation for his tax problems.
Rangel said, “I don’t pay too much attention to irresponsible reporters who report inaccuracies that I know are going to be, in the final exam, be exonerated. If every time a reporter decides that they want to attack someone, whether they call it taxes, whether they call it ethics, and that person has to step aside, we can find reporters really governing the House of Representatives.”
Burnett asked Rangel about media reports about his failure to pay taxes on the rent, the no-interest mortgage, and the rent-stabilized apartments.
Rangel replied, “You know, if I tell you that if at the end of the day I will be exonerated of these charges, you’re just going to ask the questions over and over. I am telling you that you have to have some confidence in the House Ethics Committee, where we have Republicans and Democrats. I’m not telling you anything, except accusations, false accusations have been made by a reporter and picked up by other reporters and find people like you asking me questions, where the only thing that you have is not that anyone except the reporter has said it.”
Tax cheating is not Rangel’s only ethics problem. The Washington Post and the New York Times have done some excellent reporting about the so-called Charles B. Rangel Center for Public Service at City College of New York. The Post reported that Rangel solicited donations for the Center on Congressional letterhead, in violation of House Rules. One of the companies solicited for gifts was AIG. The Times reported that Rangel protected a lucrative tax break for Nabors Industries at the same time the company made a million-dollar gift to the Center.
Rangel may be right about one thing. He may well be exonerated by the Pelosi-dominated Ethics Committee. After all, Rangel selected his own forum by filing the Complaint against himself. He picked his own investigator in the person of the forensic accountant. And he has confidently predicted the outcome.
The controversy over his problems will not go away, however, until there is an independent investigation. In the meantime, Rangel is the public face of Congress.