http://www.nytimes.com/2008/11...nyregion/25rangel.html
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.
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.
Not surprising, really. Donating to Democrats gets you this kind of treatment. Just look at the labor unions.
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.
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.
Not surprising, really. Donating to Democrats gets you this kind of treatment. Just look at the labor unions.
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