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By John Solomon And Kathleen Hennessey, Associated Press
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 that was 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 to
other developers 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, who oversaw government disclosure
reports for federal candidates for two decades in the Federal Election
Commission, 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.
Concealed 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.
Taxes handled loosely
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% 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.
Land swapped
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.
Rezoning
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.
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 Herrara that Brown had taken money from a Las Vegas strip
club owner to influence the commission. Herrara 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.
Copyright 2006 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or redistributed.
Posted 10/11/2006 2:37 PM ET
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