Senate Democratic leader Reid got $1 million for land he hadn't owned for three years
Thursday, October 12, 2006
By JOHN SOLOMON
WASHINGTON -- Senate Democratic Leader Harry Reid collected a $1.1 million windfall on a Las Vegas land sale even though he hadn't personally owned the property for three years, property deeds show.
In the process, Reid did not disclose to Congress an earlier sale in which he transferred his land to a company created by a friend and took a financial stake in that company, according to records and interviews.
The Nevada Democrat's deal was engineered by Jay Brown, a longtime friend and former casino lawyer whose name surfaced in a major political bribery trial this summer and in other prior organized crime investigations. He's never been charged with wrongdoing -- except for a 1981 federal securities complaint settled out of court.
Land deeds obtained by The Associated Press during a review of Reid's business dealings show the deal began in 1998 when Reid bought undeveloped residential property on Las Vegas' booming outskirts for about $400,000. Reid bought one lot outright, and a second parcel jointly with Brown. One of the sellers was a developer who was benefiting from a government land swap that Reid supported. The seller never talked to Reid.
In 2001, Reid sold the land for the same price to a limited liability corporation created by Brown. The senator didn't disclose the sale on his annual public ethics report or tell Congress he had any stake in Brown's company. He continued to report to Congress that he personally owned the land.
After getting local officials to rezone the property for a shopping center, Brown's company sold the land in 2004 and Reid took $1.1 million of the proceeds, nearly tripling the senator's investment. Reid reported it to Congress as a personal land sale.
The complex dealings allowed Reid to transfer ownership, legal liability and some tax consequences to Brown's company without public knowledge, but still collect a seven-figure payoff nearly three years later.
Reid hung up the phone when questioned about the deal during an AP interview last week.
The senator's aides said no money changed hands in 2001 and that Reid instead got an ownership stake in Brown's company equal to the value of his land. Reid continued to pay taxes on the land and didn't disclose the deal because he considered it a "technical transfer," they said.
They also said they have no documents proving Reid's stake in the company because it was an informal understanding between friends.
The 1998 purchase "was a normal business transaction at market prices," Reid spokesman Jim Manley said. "There were several legal steps associated with the investment during those years that did not alter Senator Reid's actual ownership interest in the land."
Senate ethics rules require lawmakers to disclose on their annual ethics report all transactions involving investment properties -- regardless of profit or loss -- and to report any ownership stake in companies.
Kent Cooper, a former Federal Election Commission official who oversaw government disclosure reports for federal candidates for two decades, said Reid's failure to report the 2001 sale and his ties to Brown's company violated Senate rules.
"This is very, very clear," Cooper said. "Whether you make a profit or a loss you've got to put that transaction down so the public, voters, can see exactly what kind of money is moving to or from a member of Congress."
"It is especially disconcerting when you have a member of the leadership, of either party, not putting in the effort to make sure this is a complete and accurate report," said Cooper. "That says something to other members. It says something to the Ethics Committee."
Other parts of the deal -- such as the informal handling of property taxes -- raise questions about possible gifts or income reportable to Congress and the IRS, ethics experts said.
Stanley Brand, former Democratic chief counsel of the House, said Reid should have disclosed the 2001 sale and that his omission fits a larger culture in Congress where lawmakers aren't following or enforcing their own rules.
"It's like everything else we've seen in last two years. If it is not enforced, people think it's not enforced and they get lax and sloppy," Brand said.
Manley said Reid believes he properly disclosed the deal but "if the Ethics Committee requests a technical correction to Senator Reid's disclosure forms we are happy to provide one."
SALE HIDDEN FROM CONGRESS
Reid and his wife, Landra, personally signed the deeds selling their full interest in the property to Brown's company, Patrick Lane LLC, for the same $400,000 they paid in 1998, records show.
Despite the sale, Reid continued to report on his public ethics reports that he personally owned the land until it was sold again in 2004. His disclosure forms to Congress do not mention an interest in Patrick Lane or the company's role in the 2004 sale.
AP first learned of the transaction from a former Reid aide who expressed concern the deal hadn't been properly reported.
Reid isn't listed anywhere on Patrick Lane's corporate filings with Nevada, even though the land he sold accounted for three-quarters of the company's assets. Brown is listed as the company's manager. Reid's office said Nevada law didn't require Reid to be mentioned in the filings.
"We have been friends for over 35 years. We didn't need a written agreement between us," Brown said.
The informalities didn't stop there.
PROPERTY TAXES LOOSELY HANDLED
Brown sometimes paid a share of the local property taxes on the lot Reid owned outright between 1998 and 2001, while Reid sometimes paid more than his share of taxes on the second parcel they co-owned.
And the two men continued to pay the property taxes from their personal checking accounts even after the land was sold to Patrick Lane in 2001, records show.
Brown said Reid first approached him in 1997 about land purchases and the two men considered the two lots a single investment.
"During the years of ownership, there may have been occasions that he advanced the property taxes, or that I advanced the property taxes," Brown said. "The bottom line is that between ourselves we always settled up and each of us paid our respective percentages."
Ultimately, Reid paid about 74 percent of the property taxes, slightly less than his actual 75.1 ownership stake, according to canceled checks kept at the local assessor's office. One year, the property tax payments were delinquent and resulted in a small penalty, the records show.
Ethics experts said such informality raises questions about whether any of Brown's tax payments amounted to a benefit for Reid. "It might be a gift," Cooper said.
Brand said the IRS might view the handling of the land taxes as undisclosed income to Reid but it was unlikely to prompt an investigation. "If someone is paying a liability you owe, there may be some income imputed. But at that level, it's pretty small dollars," he said.
FEDERAL LAND SWAPS
Nevada land deeds show Reid and his wife first bought the property in January 1998 in a proposed subdivision created partly with federal lands transferred by the Interior Department to private developers.
Reid's two lots were never owned by the government, but the piece of land joining Reid's property to the street corner -- a key to the shopping center deal -- came from the government in 1994.
One of the sellers was Fred Lessman, a vice president of land acquisition at Perma-Bilt Homes.
Around the time of the 1998 sale, Lessman and his company were completing a complicated federal land transfer that also involved an Arizona-based developer named Del Webb Corp.
In the deal, Del Webb and Perma-Bilt purchased environmentally sensitive lands in the Lake Tahoe area, transferred them to the government and then got in exchange several pieces of valuable Las Vegas land.
Lessman was personally involved, writing a March 1997 letter to Interior lobbying for the deal. "This exchange has been through many trials and tribulations ... we do not need to create any more stumbling blocks," Lessman wrote.
For years, Reid also had been encouraging Interior to make land swaps on behalf of Del Webb, where one of his former aides worked.
In 1994, Reid wrote a letter with other Nevada lawmakers on behalf of Del Webb, and then met personally with a top federal land official in Nevada. That official claimed in media reports he felt pressured by the senator. Reid denied any pressure.
The next year, Reid collected $18,000 in political donations from Del Webb's political action committee and employees. Del Webb's efforts to get federal land dragged on.
In December 1996, Reid wrote a second letter on behalf of Del Webb, urging Interior to answer the company's concerns. The deal came together in summer and fall 1997, with Perma-Bilt joining in.
In January 1998 -- just days before he bought his land -- Reid applauded the Lake Tahoe land transfers, saying they would create the "gateway to paradise."
None of Reid's letters mentioned Perma-Bilt. Reid's office said the senator never met Lessman nor discussed the Lake Tahoe land transfer or his personal land purchase. A real estate attorney handled the 1998 sale at arms-length, aides said.
"This land investment was completely unrelated to federal land swaps that took place in the mid-1990's," Manley said.
Lessman said he never talked to Reid or asked for his help before the 1998 land sale, and only met the senator years later at a public event. "Any suggestion that the land sale between Senator Reid and myself is somehow tied in with the Perma-Bilt exchange is completely absurd," Lessman said.
Clark County intended for the property Reid owned to be used solely for new housing, records show. Just days before Reid sold the parcels to Brown's company, Brown sought permission in May 2001 to rezone the properties so a shopping center could be built.
Career zoning officials objected, saying the request was "inconsistent" with Clark County's master development plan. The town board in Spring Valley, where Reid's property was located, also voted 4-1 to reject the rezoning.
Brown persisted. The Clark County zoning board followed by the Clark County Commission voted to overrule the recommendation and approve commercial zoning. Such votes were common at the time.
Before the approval in September 2001, Brown's consultant told commissioners that Reid was involved. "Mr. Brown's partner is Harry Reid, so I think we have people in this community who you can trust to go forward and put a quality project before you," the consultant testified.
With the rezoning granted, Patrick Lane pursued the shopping center deal. On Jan. 20, 2004, the company sold the property to developers for $1.6 million. Today, a multimillion dollar retail complex sits on the land.
On Jan. 21, 2004, Reid received more than $1.1 million of the sale proceeds. Reid disclosed the money the following year on his Senate ethics report as a personal sale of land, not mentioning Patrick Lane.
A BUSINESS PARTNER'S PAST
Brown has been a behind-the-scenes power broker in Nevada for years, donating to Democrats, Republicans and charities. He represented a major casino in legal cases and dabbled in Nevada's booming real estate market.
Brown befriended Reid four decades ago, even before Reid served as chairman of the Nevada gaming commission and decided cases involving Brown's clients.
Brown's name has surfaced in federal investigations involving organized crime, casinos and political bribery since the 1980s.
This past summer, federal prosecutors introduced testimony at the bribery trial of former Clark County Commission chairman Dario Herrera that Brown had taken money from a Las Vegas strip club owner to influence the commission. Herrera was convicted of taking kickbacks. Brown was never called as a witness.
Brown declined to discuss past cases where his name surfaced, including Herrara. "The federal government investigated this whole matter thoroughly, and there was never any implication of impropriety on my part," he said.