More mess, more mess, more mess. Charlie just keeps operating as usual. It does not matter to him if anyone (15th Congressional District) is watching or not. As long as he gets what he wants, the 15th CD can just go to H......l! Harlem needs better representation.Interlopers, need not apply (aka Craig Schley).
The Congressman, the Donor and the Tax Break
At a press conference in July, Representative Charles B. Rangel denied acting unethically in his fund-raising for a local graduate school and his leasing of several rent-stabilized apartments.
By DAVID KOCIENIEWSKI
Published: November 24, 2008
Representative Charles B. Rangel has helped raise $11 million for a City College of New York school of public service to be named in his honor. In recent months, as questions have emerged about his fund-raising, he has insisted that he has kept his efforts to attract donors scrupulously separate from his official duties in Congress.
But Congressional records and interviews show that Mr. Rangel was instrumental in preserving a lucrative tax loophole that benefited an oil-drilling company last year, while at the same time its chief executive was pledging $1 million to the project, the Charles B. Rangel School of Public Service at C.C.N.Y.
The company, Nabors Industries, was one of four corporations based in the United States that were widely criticized in 2002 and 2003 for opening offices in the Caribbean to reduce their federal tax payments. Mr. Rangel was among dozens of representatives from both parties who bitterly opposed those offshore moves and, in 2004, pushed unsuccessfully for legislation to make the companies pay more tax.
But in 2007, when the United States Senate tried to crack down on the companies, Mr. Rangel, who had recently been sworn in as House Ways and Means chairman, fought to protect them. The tax shelter for the four companies was preserved, saving Nabors an estimated tens of millions of dollars annually and depriving the federal treasury of $1.1 billion in revenues over a decade, according to a Congressional analysis by the nonpartisan Joint Committee on Taxation.
Mr. Rangel said he stood with Nabors because, as much as he was offended by the company’s attempts to get around some of its United States taxes, he thought it wrong to impose a retroactive tax increase. The congressman said he has long believed that retroactive punishments are bad public policy.
Mr. Rangel also said that the pledge from the Nabors chief executive, Eugene M. Isenberg, one of the largest the school received, played no role in his decision to protect the loophole, and maintained that he did not even know about it until this summer, more than a year later. His aides said he also later pushed tax legislation that would have adversely affected Nabors and hundreds of other offshore companies, though those efforts came to naught.
Mr. Isenberg said that he pledged the money — $200,000 of which he has already paid — because the school is a worthy cause, and that he never sought or received special treatment from Mr. Rangel.
“There was no quid pro quo,” Mr. Isenberg said in an interview on Friday.
What is clear is that Mr. Rangel played a pivotal role in preserving the tax shelter for Nabors and the other companies in 2007. And while the issue was before his committee, Mr. Rangel met with Mr. Isenberg and a lobbyist for Nabors and discussed it, on the same morning that the congressman and Mr. Isenberg met to talk about the chief executive’s potential support for the Rangel center.
Mr. Rangel’s opposition to closing the loophole surprised his Congressional colleagues, who had viewed him as an outspoken ally in the effort to eliminate the tax shelter.
The House ethics committee is now investigating Mr. Rangel’s solicitations for donations for the school, along with several other issues involving his personal finances and fund-raising. Mr. Rangel used Congressional stationery when he wrote to many potential donors to the project and, after criticism, asked the ethics committee to determine whether or not he violated any rules.
When asked to comment on this subject, Mr. Rangel referred questions to the lawyer who is representing him before the ethics panel. The lawyer, Leslie Kiernan, said that Mr. Rangel’s efforts on behalf of Nabors and the other companies were unrelated to the Nabors chief executive’s financial support for the Rangel center.
“The donation and his action on the tax matters had nothing to do with each other,” she said.
‘Sharing the Sacrifice’
Mounds of charred rubble were still being cleared from the World Trade Center site in January 2002, and American soldiers were searching for Osama bin Laden in Afghanistan, so when news reports surfaced about a handful of major American companies opening small offshore offices to avoid paying millions in United States taxes, the issue quickly was cast as a battle between patriotism and greed.
Members of Congress from both parties moved quickly to file bills that would prevent the companies from sidestepping their United States tax obligations, branding the fleeing corporations as “taxpatriates,” and “corporate Benedict Arnolds” whose accounting maneuvers were “akin to treason.”
Mr. Rangel, whose service in the Korean War and seat on the Ways and Means Committee made him a respected voice on both taxes and defense policy, blasted the Bush administration for failing to move more forcefully against companies.
“Supporting America is more than about waving the flag and saluting — it’s about sharing the sacrifice,” Mr. Rangel told a reporter at the time. “That’s true of soldiers, citizens, and it should be true of big companies, too.”
As public outrage grew, some companies, including Nabors, which was based in Houston, raced to reincorporate outside the United States, a process known as corporate inversion, before the law could be changed to prevent them from doing so or imposing federal taxes on them.
But leaders in the Senate issued a bipartisan statement warning companies that it was pointless to try to beat the deadline, because whatever legislation was ultimately enacted would apply to all corporations that completed their offshore moves from that date (March 21, 2002) forward.
“Let me be clear to everyone developing or contemplating one of these deals,” announced Senator Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee. “You proceed at your own peril.”
But as the furor died down, four companies, including Nabors, went ahead and established themselves offshore in 2002 and 2003.
Soon afterward, Nabors and the other companies persuaded a group of House Republicans that any crackdown on companies moving offshore should apply only to those that did so after 2003 — which would exempt Nabors and the three others. The Republicans tried to push through such a provision twice in 2003, but House Democrats led by Mr. Rangel blocked them.
Then, in October 2004, despite howls of protest by Mr. Rangel and other Democrats, the Republican-led House attached language to a budget bill carving out the loophole for the companies, and preserving their tax bonanza.
And when lobbyists for the companies argued that depriving Nabors and the other companies of the loophole would amount to a retroactive tax increase, Mr. Rangel’s Democrats brushed aside that argument, pointing out that the companies had been warned.
Opposition to retroactive tax increases is often based on a concern that individuals or companies may have acted differently had they known a change in tax policy was coming. Nabors, and the other companies, the public record shows, had been warned.
“Making them pay taxes wasn’t a retroactive tax increase, it was common sense,” said Dan Maffei, who was a spokesman at the time for Democrats on Ways and Means, reporting to Mr. Rangel.
A Library as a Legacy
Mr. Rangel was born in Harlem in 1930 and has lived in the neighborhood nearly his entire life, so when he began thinking about how to memorialize his long Congressional career, he did not look far from home.
In 2004, Mr. Rangel and officials at City College of New York began discussing the possibility of leaving his papers at the college’s campus in Harlem. By the next year, Mr. Rangel and the C.C.N.Y. president, Gregory H. Williams, had agreed on a plan to build a library as part of a new school for public service, and for it to be named in the congressman’s honor.
At a cost of $30 million, the school, in a refurbished five-story brownstone, would allow the college to offer students a master’s degree in public administration and allow Mr. Rangel to maintain an office and preserve his legacy in a dignified academic setting.
But raising money for the project was not easy.
In June 2005, using his Congressional stationery, Mr. Rangel wrote letters to 100 foundations, many of them charitable arms of corporations like Verizon and Bristol-Myers Squibb, asking them to meet with school officials to learn about the project. While the letters did not directly ask for donations, Mr. Rangel later acknowledged in a statement to the ethics committee that “of course” he hoped they would lead to contributions.
But donations only trickled in, with the 100 letters leading to just $1.6 million in pledges, according to Mr. Rangel’s statement to the ethics committee. So in July 2006, he tried again, writing to 47 more foundations.
Later that summer, Mr. Rangel spoke with the Manhattan district attorney, Robert M. Morgenthau, a longtime friend and political ally, who wanted to put him in contact with another potential donor: Mr. Isenberg. For years, Mr. Morgenthau had been a supporter of C.C.N.Y. and knew of Mr. Isenberg’s generous donations to educational projects like the Parkside School in Manhattan and the University of Massachusetts at Amherst.
So on Sept. 18, 2006, Mr. Morgenthau hosted a meeting at his office in Downtown Manhattan that included Mr. Rangel, Mr. Isenberg, Dr. Williams from C.C.N.Y., and one of the school’s top fund-raising officials. Their discussion, which lasted about 75 minutes, touched on a variety of aspects of the proposal — plans to renovate the building, the school’s possible course requirements and curriculum, and efforts to attract top-flight scholars and professors.
During two interviews in recent weeks, Mr. Morgenthau recalled: “No one talked about money. The conversation was about the project, and the plans for the school, which will make a very important contribution.”
A few weeks after the meeting, Mr. Isenberg said, he received a call from school officials who asked for a contribution. By year’s end, Mr. Isenberg had promised the project its largest donation to that point: $1 million.
Rush to Close Loopholes
Democrats swept into control of Congress in January 2007 after promising to “drain the swamp” in Washington and end government giveaways to big business.
One of the top priorities, announced by the incoming House speaker, Nancy Pelosi, was to eliminate loopholes used by corporations to avoid taxes.
So in mid-January 2007, as the Democratic-led Senate Finance Committee put together a bill to increase the minimum wage and provide tax cuts for small businesses, it proposed paying for the plan by ending $8.3 billion in tax loopholes, including the one carved out for Nabors — one of the world’s largest oil-drilling companies — and the three others.
The finance committee chairman, Max Baucus, a Montana Democrat, said he was proud that Congress was finally closing loopholes for companies like Nabors “who reinvented themselves as foreign corporations to avoid paying tax here in America.”
On Feb. 1, the bill passed the Senate, 94-3.
When it arrived in the House of Representatives, however, the measure received a surprisingly chilly reception, especially from Mr. Rangel, whose new position as chairman of Ways and Means made him one of the more powerful members of Congress. A week later, Mr. Rangel released a counterproposal that left the tax shelter intact. Aides made clear that he considered the Senate measure a retroactive tax increase.
A review of Mr. Rangel’s record on retroactive taxes finds mixed results. He has supported them on a number of occasions, including in 1996, when he voted to reduce tax windfalls for life insurance companies.
His opposition in 2007 startled some legislators who had fought alongside Mr. Rangel during his earlier efforts to crack down on Nabors and the other companies, in part because he and the other Democrats had rejected the same argument about retroactivity three years earlier
Senator Grassley was so incensed that he issued a public statement warning that Mr. Rangel and House Democrats would be rewarding Nabors and the other companies for putting their narrow financial interests above their broader responsibilities as corporate citizens.
“It’ll be pretty disappointing if the new leadership of Congress fails to live up to its reform rhetoric by abandoning these reforms,” Mr. Grassley said. “For example, companies that rushed to beat our crackdown on corporate inversions and opened a post office box in Bermuda to avoid U.S. taxes will celebrate that they pulled off a fast one.”
At the same time, Mr. Rangel was also hearing from Nabors, which had an interest in saving the tax shelter and had expressed a willingness to support the Rangel center.
On Feb. 12, the day the bill was being marked up by the committee he leads, Mr. Rangel held two discussions at the Carlyle Hotel in Manhattan. First, the congressman sat down for breakfast with Mr. Isenberg and Mr. Morgenthau to further talk about Mr. Isenberg’s support for the Rangel center, Mr. Morgenthau said. Mr. Isenberg said that after breakfast, he escorted Mr. Rangel across the room, where the lobbyist for Nabors, Kenneth J. Kies, was waiting.
Over sweet rolls and coffee, Mr. Kies asked Mr. Rangel if he would maintain his opposition to the efforts to take away the company’s loophole. Mr. Rangel said he would, Mr. Kies and Mr. Isenberg said in interviews.
“His position against retroactive taxes was well-known,” Mr. Kies said, “so it wasn’t hard to sell at all.”
Mr. Rangel does not recall meeting with Mr. Kies that day, according to his lawyer, Ms. Kiernan.
Mr. Isenberg said that he was not asked explicitly about his financial donations to City College at either meeting, and that the congressman’s chat with the lobbyist lasted eight minutes, and only three were spent on the tax loophole.
Eleven days later, a check for $100,000 from Mr. Isenberg was cashed by City College. Mr. Isenberg said that the check was dated Feb. 7, but that he was not certain when he gave it to the school, and college officials declined to comment.
The next month, Mr. Rangel presided over Ways and Means hearings during which he presented four witnesses who testified that the effort to eliminate the loopholes was bad policy because it was a retroactive tax increase. No testimony was taken from those on the other side, and nothing was offered to explain why Mr. Rangel was now defending Nabors and the other companies.
Senator Grassley denounced the hearings, saying that they “left no lobbyist behind.”
“What changed?” Mr. Grassley demanded in a public statement, pointing out that Mr. Rangel and other Democrats previously “voted for exactly these same provisions.”
Mr. Rangel never formally responded, and by late April, he had killed the effort in committee, striking the language that would close the loophole from the bill that Congress ultimately passed.
Ms. Kiernan said Mr. Rangel did not know that Mr. Isenberg had made a pledge for $1 million or any donations to City College until this summer, after an inquiry from a reporter, well after the legislation involving the loophole had been settled. And even if he had known, she said, there was no need to recuse himself from the matter, because House rules require such a step only when a member has a personal financial interest in legislation.
Officials at C.C.N.Y. declined to say when they informed Mr. Rangel of Mr. Isenberg’s financial commitment or discuss contributions to the school.
Ms. Kiernan stressed that the money from Nabors had no effect on Mr. Rangel’s position on the tax shelter legislation. She also noted that in 2007, Mr. Rangel helped win House approval of a measure that would have significantly reduced the tax benefits received by hundreds of foreign-based companies, including Nabors. But that provision died in the Senate.
Still, the next time Mr. Isenberg and his lobbyist, Mr. Kies, met with Mr. Rangel at his office in Washington, on June 27, 2007 — to discuss what Mr. Isenberg described as education and other tax issues — Mr. Kies said he also took the opportunity to thank Mr. Rangel for quashing the effort to end the Nabors tax loophole.
Mr. Isenberg, in last week’s interview, acknowledged that he, too, “possibly, probably, did” thank Mr. Rangel, but emphasized that his gratitude was not for preserving the loophole, but instead “for keeping consistent with his position against retroactive tax increases.”
TH
Watching Out For The Village!
