Did Rangel the rulemaker wangle the rules?

The tax woes of New York Congressman, Charles B. Rangel (Democrat, 15th district) differ, depending on who does the telling. The IRS says he failed to report rental income of more than $75,000 over a period of 20 years. Rangel – the Chairman of the House Ways and Means Committee* and chief tax-writer in Congress – says he didn't know that the money he received for the use of his luxury condo in the Dominican Republic was taxable income. And his attorney says Rangel is just learning of all these errors.

The facts of the case continue to roll out almost daily. The New York Post reports that in 1988, Rangel purchased a three bedroom, three bath villa in the Punta Cana Yacht Club in the Dominican Republic. The purchase price was reported first as $82,750, then as $88,900. The managers and staff at Punta Cana say that Rangel's villa has been one of the most popular rentals at the Club, renting in low season for $500 per night and up to $1,100 during high season. When first asked by Post reporters about the rental income, Rangel denied receiving rental income, then later said it was a “private matter.”

Not only was the rental income not reported to the IRS, but it also didn't show up on Rangel's Congressional financial disclosure forms. His attorney, Lanny Davis (former spokesman for the Clinton Administration) said that Rangel will re-file those forms. According to the Office of the Clerk of the House of Representatives Web site, financial disclosure reports are submitted by House members every year and "include information about the source, type, amount, or value of the incomes of Members, officers, certain employees of the U.S. House of Representatives and related offices, and candidates for the U.S. House of Representatives."

Filing a false disclosure form can result in civil penalties and a possible five-year prison sentence. The disclosure forms filed by all House members can be viewed online for the most recent six years.

Even media sources that tend to shower favor on Democrats have taken Rangel to task. The New York Times reported that he also failed to pay interest on the loan to buy the villa, for more than a decade. The loan was originally for 10.5 percent interest, to be paid off in seven years. Within two years, the interest was waived and the loan was paid off in 2003, about eight years late. Why does it matter? Because the principal owner of the resort, Theodore Khell, made the loan to Rangel, and also has contributed tens of thousands of dollars to Rangel's campaigns.

Rangel's key defense seems to be that he had no idea of the details of the loan to buy the villa or the taxes that should have been paid, because someone else handles those matters. Lanny Davis told reporters that Rangel has hired a forensic accountant to take care of his financial dealings and keep them in order. The House Ethics Committee is looking into the details…at the behest of Rangel.

Rangel Investigates Himself

Surrounded by controversy, Rangel has filed three complaints against himself with the House Ethics Committee asking them to probe these matters:

  • The use of his Congressional stationery to solicit support for a planned education center that will be named after him.
  • Unreported rental income and a possible sweetheart loan from a political contributor on the villa at Punta Cana Yacht Club.
  • His lease of four rent-stabilized apartments, on Lenox Terrace in Harlem, one of which is used as a campaign office.

State and city ordinances require rent stabilized apartments to be used as primary residences. The New York Times reported that Rangel's discount on these apartments amounts to about $30,000 per year. Rangel has reported his annual income to be around $175,000, but the recent disclosures of additional income push him up to around $200,000. That higher amount would put him in violation of the rules for having rent stabilized apartments at all, let alone four. Because of the controversy, he has given up the apartment he used as an office and is under pressure to give up the other three, which form a sprawling residence for himself and his wife.

Democrats in power seem to be looking on the matter as a series of unfortunate mistakes or oversights, which Rangel needs to correct as he goes on with his work in the Congress, helping decide the tax rules we must live by.

Some Republicans and even the ultra-liberal New York Times, have called for his resignation, expressing disbelief that a person in Rangel's position as chief tax-writer was not aware of the laws he helped make.

On Thursday, Rangel sent six checks totaling $10,800 to pay back taxes for 2004, 2005, and 2006. Of that, $4,803 was for federal tax and $6,022 for New York state taxes. These amounts did not include penalties and interest. Rangel says that if the IRS assesses penalties and interest, he will pay them.

The most recent addition to the Congressman's woes happened just a couple of days ago, when, according to the New York Post, a 1972 silver vintage Mercedes Benz owned by Rangel was towed from the House of Representatives indoor parking lot. Though a House member with his level of seniority is entitled to several indoor and outdoor parking spaces, the parking lot rules (see House Parking) forbid the use of the lot for storage. The car's registration expired four years ago, breaking another rule which requires that cars in the lot must display proper identification and plates.

If all this isn't enough, Rangel and his wife of 42 years have been in the midst of divorce proceedings, though the New York Daily News reported this month that the petition for divorce has been withdrawn. Part of the divorce proceedings involve the necessity to file a statement of Rangel's net worth.

Rangel was quoted in the Washington Post as saying that he has not lived up to the "higher standard" that the public expects of Congress, but, he says, he should not be punished politically for his failings. He also sent an e-mail letter to his constituents in recent days, attributing his barrage of troubles to Republicans pursuing him with "guerilla warfare"... in spite of his admissions of wrongdoing.

Just last year Rangel published his memoirs in a book entitled, And I Haven't Had a Bad Day Since: From the Streets of Harlem to the Halls of Congress. Chances are, he's rethinking that title right about now.

*The House Committee on Ways and Means has the responsibility for raising the revenue required to finance the Federal Government. This includes individual and corporate income taxes, excise taxes, estate taxes, gift taxes, and other miscellaneous taxes.

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