Rep. Charles Rangel saga continues
by AccountingWEB on
The future is not looking bright for Rep Charles B. Rangel (D-N.Y.). The chief tax writer has been fighting a variety of ethics charges for quite a while.
A few months ago, under pressure from House Republicans and Democrats, alike, Rangel temporarily stepped down from his post as Chairman of the Ways and Means Committee pending an investigation. The committee is charged with 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.
With the investigation phase over, the committee has issued a report. Here is a rundown of some of the charges which have rolled out the last two years:
Rangel and five others from the Congressional Black Caucus were admonished by the Ethics Committee in February for breaking House rules by accepting corporate-sponsored trips to St. Maartens in the Caribbean, according to the New York Daily News. The other Congressmen were cleared of the charges. Rangel’s spokesman acknowledged that, following the admonition, the money would be paid back to the sponsor.
"I don't want to be critical of the committee, but common sense dictates that members of Congress should not be held responsible for what could be the wrongdoing or mistakes or errors of staff," Rangel told reporters.
Politico reporters asked Rangel if he should have passed on the trip. "Hell, no," he told them. "I'm satisfied that when you read the report, that you will see that I have not been found guilty of anything."
Rangel owns a three bedroom villa in the Punta Cana Yacht Club in the Dominican Republic. It is estimated that he received roughly $75,000 in rental income from the villa. Staff and managers at Punta Cana told reporters that the villa was one of the most popular rentals at the club, going for $500 per night in the off-season and $1,100 in the high season.
No rental income was reported to the IRS and no tax was paid. The income did not show up on Rangel's Congressional financial disclosure forms. His attorney, Lanny Davis, 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 five-year prison sentence. The disclosure forms filed by all House members can be viewed online for the last six years.
When first asked by the New York Post about the failure to report the income, Rangel denied receiving any rent, and later called it a “private matter.”
In a separate but related matter, The New York Times reported that Rangel also failed to pay interest on a loan to buy the villa for more than ten years. The loan originally was 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 – approximately eight years late. Why should we care about this? Principal owner of the resort, Theodore Khell, who made the loan to Rangel, has contributed tens of thousands of dollars to Rangel's campaigns.
Speaking for Rangel when the charges were first made, Davis told reporters a forensic accountant has been hired to take care of his financial dealings and keep them in order. 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.
Rangel has leased four rent-stabilized apartments on Lenox Terrace in Harlem – one of which was used as a campaign office. This violates state and city ordinances which require rent stabilized apartments to be used as primary residences. The New York Times reported that Rangel's discount on these apartments amounted to approximately $30,000 per year. Rangel had reported his annual income to be around $175,000, but the recent disclosures of additional income pushed him up to roughly $200,000. That higher amount would put him in violation of the rules for having rent-stabilized apartments at all, let alone four.
As a result of the controversy, Rangel gave up the apartment he used as an office and is under pressure to give up the other three, which form a sprawling residence.
Another issue that might seem minor by comparison is the use of his Congressional stationery to solicit support for a planned education center that will bear his name, the Charles B. Rangel Center for Public Service at the City College of New York. He is accused of violating the House gifts ban in connection with donation of funds for the center.
Rangel also is charged with violating postal service laws and franking commission regulations, presumably to avoid the payment of postage.
All House members are expected to adhere to a code of conduct, which requires them to behave at all times in a manner that shall reflect creditably on the House. The charges assert that Rangel has breached this code.
What does Rangel have to say about all this? His attorneys have released his answers to the charges against him.
Here is an excerpt:
“Congressman Rangel acknowledged publicly, prior to the establishment of the Investigative Subcommittee, that his tax returns omitted rental income derived from his investment in the Punta Cana resort located in the Dominican Republic and that he had filed amendments and paid additional taxes. Congressman Rangel has done everything within his power to fulfill his legal obligations in this regard, and to the best of his knowledge, nothing further is required."
Everything within his power might refer to 2008 when, after the charges of unpaid taxes were first made public, Rangel sent six checks totaling $10,800 to pay back taxes for 2004, 2005, and 2006, according to a report that appeared in the New York Post in 2008. 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.
When all this began a couple of years ago, some Democrats seemed to consider the matter a series of unfortunate mistakes or oversights that Rangel needed to correct as he went on with his work in the Congress helping to decide on tax rules.
Some Republicans and the New York Times 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. Time and the mounting number of charges might have forced the hand of House leaders. The Ethics Committee had been in talks with Rangel, hoping to avoid a trial. But as talks broke down over which charges Rangel would admit to, it was decided that Rangel would go to trial in September.
Crain’s New York Business reports that Rangel’s Ways and Means staff will continue to work, and leaders in the House will exercise tight control over them.
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