Chairman Rangel, Sunny Isles and the Perils of Financial Disclosure

          Representative Charles Rangel, the chairman of the House Ways and Means Committee, has been in hot water for several matters, most recently his ownership of a beach property in the Dominican Republic.  Rangel has acknowledged that he failed to pay taxes on income from the property and failed to properly disclose that income on his annual financial disclosure report (FD).            

            Rangel’s FDs, it should be noted, were filled out by hand, presumably by Rangel himself.  If that is the case, it should hardly be a surprise if there are inaccuracies in the filings.  Filling out an FD is a time-consuming and complicated process, and the rules and guidance are often unclear.  One can imagine that a Member of Congress would not have the time to do a proper job of it.

             A look at Rangel’s FDs illustrates the legal and ethical jeopardy that Members of Congress may face when these reports are scrutinized, particularly in light of the Justice Department’s ongoing prosecution of Senator Ted Stevens for filing false FDs. Rangel’s FDs, like those of other Members of Congress, may be found at opensecrets.org (I accessed them through the CREW website).     

Rather than look at one of the previously scrutinized matters, I focused my attention on Rangel’s ownership of a condominium in Sunny Isles, Florida. This was mentioned in passing in a July 11, 2008 NY Times article by David Kocieniewski, who noted that Rangel “bought a condominium in 2004 in Sunny Isles, Fla. for $50,000 to $100,000 and sold it last year for $100,000 to $250,000.”

The article’s information presumably came from Rangel’s FDs, but a closer look raises a number of questions. Rangel’s FD for 2004 does indeed indicate, in the “Assets and Unearned Income” Section, that the Sunny Isles condominium (located in the Winston Towers 500 building in Sunny Isles) was valued at $50,001 to $100,000 at the end of 2004. However, in the “Transactions” Section, it is indicated that Rangel purchased the condominium on March 4, 2004 for $100,001 to $250,000.

It is possible that Rangel bought the property for slightly more than $100,000 and its value declined to below $100,000 by the end of the year. A far more likely possibility, however, is that Rangel marked the wrong box in one of the sections. My guess is that he paid more than $100,000 for the condo, but this is just a guess.

Another interesting fact is that Rangel’s 2004 and 2005 FDs indicate “rent” as the “type of income” for the Sunny Isles condo, but state “none” as the “amount of income.” If he received no income, one wonders why he put “rent” as the type of income. He did the same thing for several years with respect to the property in the Dominican Republic, where he identified rent as the type of income but (apparently inaccurately) put “none” as the amount. This raises a question as to the accuracy of the Sunny Isle disclosure.

Rangel’s 2006 FD is also puzzling. The “Transactions” Section shows that the Sunny Isles condo was sold for $250,000 to $500,000. The date of the transaction is put as “7-21-07.” This, however, must be wrong since the 2006 FD was filed on June 15, 2007 and, in any event, the 2006 FD is only supposed to disclose transactions that occurred during calendar year 2006. One might assume, therefore, that the transaction occurred on 7-21-06, but again, this is a guess.

If Rangel made a profit on the sale of the condo, he also probably should have disclosed that in the “Assets and Unearned Income” Section of the 2006 FD. I say “probably” because the form requires the disclosure of “capital gains” from the sale of an asset. “Capital gains” is a tax term, and it has never been entirely clear to me what happens if a filer sells an asset, and the profit is not a taxable “capital gain” (eg, if a stock is sold in a 401k).

If all of this is not confusing enough, Rangel’s 2007 FD also discloses, in the “Transactions” Section, the sale of the Sunny Isles condo. This time the date of the sale is left blank. The amount of the sale, however, is stated to be $100,001 to $250,000. Was this an attempt to correct the previous year’s filing? Who knows?

In short, Rangel’s FDs leave a number of questions regarding the Sunny Isles condo. Was it purchased for 50-100k or for 100-250k? Was there rental income or not? Was it sold in 2006 or 2007? Was it sold for 100-250k or 250-500k? Did Rangel make a profit on the sale?

The one thing that seems clear is that Rangel’s FDs were not carefully prepared or reviewed prior to filing. Moreover, the House Ethics Committee either did not review the filings, or failed to notice any of the internal discrepancies related to the Sunny Isles condo.