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Shocking: AP got the story wrong?
Posted by: mcq on Thursday, October 12, 2006

According to Paul Keil at TPMmuckraker, AP's John Solomon's story about Harry Reid making $1.1 million on land he hadn't owned for 3 years is just wrong:
Yet, as Solomon obliquely acknowledges, Reid, who had bought the land along with a friend in 1998, transferred his ownership in the land to a limited liability company in 2001. The company, which was composed solely of this land owned by Reid and his friend, in turn sold the land in 2004. That's when Reid collected his $1.1 million share of the sale. Since Reid had originally put down $400,000 on the sale, his profit was $700,000, not the full $1.1 million, as Solomon states in his lead.

Solomon persists in straightforwardly describing the 2001 land transfer as a sale, even though no money changed hands; Reid's share of the land after the transfer was the same as before. In his financial disclosure forms, Reid did not disclose his transfer of the land to the LLC, although he did continue to disclose his ownership of the land through 2004, when it was sold.
Keil asks "where's the story"?

If true, and it sounds likely, I'd have to ask the same. There is no "there" there.

But then, it's AP we're talking about here, you know, with all those editors and the like who ensure they get the story right?

Another example of the old saying: "believe nothing of what your read and only half of what you see". Especially if it involves AP. And with the technology available today, it's almost down to believing nothing of what you see as well.
 
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Huh???

Using political influence for a personal profit of 1.1 Million is bad but only $700,000 is OK?

Reid Offers To Disclose His Land Deal ... Five Years Late

 
Written By: Jay Evans
URL: http://
I have to agree with Jay on this one. I read the details of the land dealings and walked away thinking Harry definitely played a game normal (non politicians) people don’t get to play.
 
Written By: meagain
URL: http://
Captain Ed explains what the "there" is. This isn’t the post cited above.
 
Written By: Good Lt
URL: http://
From what I can tell he made $1.1M from nothing. He sold the land to the LLC for the same price he had bought it for, therefore the sale was a wash. Clearly, however, it wasn’t because he then received a financial stake in the LLC, but how much is not known. His profit was $1.1M not $700k.
 
Written By: chuckshick
URL: http://
I think Keil is right. This is, at worst, the failure of Reid’s staff to file the right form. There is no ’there’ there.

What’s even more bizarre, though, is that this is Solomon’s third attempt to take rather innocuous facts and cook them into some sort of scandal about Reid. Did Reid pee in Solomon’s cheerios or something? Why is he so obsessed.

And by the way, Good Lt., Capt. Ed—bless his soul—doesn’t know what he’s talking about here.
 
Written By: Anonymous Liberal
URL: http://www.anonymousliberal.com
I read that post of Capt. Ed’s and his story that was printed in the NY Post and I must say, there still does not seem to be much "there" there.

Capt. Ed’s story is confusing as to what land had restrictions etc. For example, he claims that Whittemore owned property with a power line easement on it as well as federally protected turtles (call this Parcel A). According to Capt. Ed, the "Bureau of Land Management agreed to swap the land for another parcel abutting a federal preserve elsewhere." When the land was swapped, that means Whittemore got land (call it Parcel B) without turtles or easements elsewhere that was previously owned by the BLM (the BLM manages all gov’t land and does swaps like this on a fairly routine basis). If Capt. Ed is correct, Whittemore now owned Parcel B (no turtles or power easements), and the remainder of the story does not make any sense.

As far as I can tell, the original land (Parcel A) was now owned by the gov’t (managed by the BLM) and Reid worked towards getting the development restrictions removed so that Parcel A could be sold:
Less than two years later, Reid tried again to give Whittemore the land for a song ($160,000), but Congress balked again. He finally settled for freeing the land for development and allowing Whittemore to buy it at a fair market rate, and forcing the government to relocate the power corridor.
There may have been some funny business with respect to the eventual sale of the property (Parcel A), but that has not been shown yet.

Fast forward to the Reid purchase of the land, investment in the LLC, and eventual sale of the entire project for a profit. There is simply nothing that I can see that is untoward about this part of the deal. I help my clients conduct deals exactly like this all the time. It doesn’t take any special access, etc. Just a willingness to constantly make appearances before review boards and to glad-hand the committee members.

To be sure, Capt. Ed is good at ferreting out pertinent details in political scandal stories, but as of yet I don’t see it.
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
Also mentioned in today’s WaPo.
 
Written By: Good Lt
URL: http://
From what I can tell he made $1.1M from nothing. He sold the land to the LLC for the same price he had bought it for, therefore the sale was a wash. Clearly, however, it wasn’t because he then received a financial stake in the LLC, but how much is not known. His profit was $1.1M not $700k.
How it works is that Reid became a Member in the LLC, and his capital investment was the Land (worth $400K). There’s no sale here, he simply invested the land in exchange for a Membership Interest in the LLC worth $400K which, depending on how the operating agreement for the LLC is worded, entitles him to a specific percentage of the profits (and losses) of the LLC.

The LLC then sets about to getting the zoning changed, developing a site plan, getting all necessary approvals, maybe doing some preliminary site work (grading, etc.) and selling the project to a developer that will do the actual construction and/or management of the property.

Again, this sort of deal is typical and goes on all the time. That, of course, says nothing about how the property got into Reid’s hands in the first place, but there is only meager conjecture at this point that anything shady went on.
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
There clearly is a "there" there, despite the attempts of Democrat partisans to minimize it. The disclosure forms are necessary so that the public knows who Senators have business dealings with - we need to know that so we can evaluate whether Senators are promoting their own financial interests (through their financial ties) when they engage in public acts. Reid failed to disclose this important financial ties to his "friend", so the public was unaware of those ites, and could not evaluate whether any of Reid’s public acts may have been to promote Reid’s own financial interests (through his financial ties).

It really is no different than when George Allen failed to disclose some underwater stock options...
 
Written By: A.S.
URL: http://
I think Keil is right. This is, at worst, the failure of Reid’s staff to file the right form. There is no ’there’ there.
The problem I see is in Reid using his position to influence the Federal land swap and endangered species regulations to increase the value of his property.

Culture of corruption, indeed.
 
Written By: Pablo
URL: http://
A.S. and Pablo:

You may both be right, but that’s not what is being reported.

With respect to disclosure, I don’t know what the relevant rules are for declaring that you’ve invested property you own into a project designed to maximize the value of that property.

And as for getting restrictions removed on the property, there may be a problem there, but so far it has only been hinted at.
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
Harry definitely played a game normal (non politicians) people don’t get to play.

Normal people don’t have $400K to plunk down on a land spec deal.
 
Written By: Geek, Esq.
URL: http://
You may both be right, but that’s not what is being reported.

With respect to disclosure, I don’t know what the relevant rules are for declaring that you’ve invested property you own into a project designed to maximize the value of that property.


Of course that’s what’s being reported. Did you even read the article?

The relevant rule is that when you transfer property you own personally to an LLC, of which you own but a membership interest, you’ve got to report that. What’s so hard to understand?

Again, it’s no different than the George Allen failure-to-report-stock-options scandal.
 
Written By: A.S.
URL: http://
From what I can tell he made $1.1M from nothing. He sold the land to the LLC for the same price he had bought it for, therefore the sale was a wash. Clearly, however, it wasn’t because he then received a financial stake in the LLC, but how much is not known. His profit was $1.1M not $700k.

Written By: chuckshick
URL: http://


Utter nonsense. You don’t seem to have any concept of how an investment of this type works. The land was acquired for $400 thousand. It was then contributed to an LLC. That is a simple equity contribution to a business enterprise and is not a taxable event. What the hell are you talking about it is "a wash". There was no sale.

You don’t have a clue. Nothing personal, you just don’t.
 
Written By: Pug
URL: http://
"And with the technology available today, it’s almost down to believing nothing of what you see as well"

After every ’breaking news’ story, I’m left wondering what really happened.
(This being the campaign season, one would have to become a full time investigaror to get to the bottom of land deals by Hastert, Reid, et al.)


The question of new technologies only bringing a wider array of distortion is very interesting, though.

On the whole, we can hope that the increased scrutiny and counter-scrutiny will bring a higher and welcome level of transparency to current events. If more and more people become sceptical, it could even lead to the long lost rational approach to evaluting events and issues.

On the other hand, this super scrutiny can itself contribute to a kind of distortion. While watching the Israel-Hezbollah war unfold on my TV screen, I wondered how our undisputed ’good’ war, WWII, would have fared with an equal amount of instant coverage. ’Collateral damage’ takes on a whole new meaning with that kind of instant feedback (and sometimes obviously staged scenes).
How would the bombing of Dresden have played out on the national consciousness? Would some reporter have unearthed the human rights violations of the SSR as it took on the role of an accuset at the Nuremberg trials? And Hiroshima...

Interesting.
 
Written By: Laime
URL: http://
Normal people don’t have $400K to plunk down on a land spec deal.
Normal people with $400K to plunk down on a land spec deal aren’t the Senate Minority Leader.

Culture of Corruption!
 
Written By: Pablo
URL: http://
The relevant rule is that when you transfer property you own personally to an LLC, of which you own but a membership interest, you’ve got to report that. What’s so hard to understand?
What rule? I haven’t seen it referenced. This is what the AP reported:
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."
There was no "2001 sale" since investing the property in the LLC is not a "sale". Technically it’s a purchase of a security (the LLC interests), and maybe that should have been reported, but it’s not entirely clear. The AP even says that Reid "continued to report to Congress that he personally owned the land." That is technically incorrect, with an emphasis on "technically." But it does not necessarily rise to an ethics violation, and again, no rule is cited.
Again, it’s no different than the George Allen failure-to-report-stock-options scandal.
As I understand it, Allen did disclose the options:
Our complete response to yesterday’s story is here. The short version is:

1. Senator Allen disclosed the stock options in his first year in the Senate, after which…
2. …on the advice of Ethics Committee Staff, Allen’s office believed that worthless (”underwater”) stock options need not be disclosed again, and…
3. …the only compensation Allen did get was specifically approved by the Senate Ethics Committee.
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
Given the standard being pushed by the Dems today, Reid should immediately resign, and any Dem who may have had an inkling of this shady dealing should immediately resign as well.
 
Written By: Shark
URL: http://
There was no "2001 sale" since investing the property in the LLC is not a "sale". Technically it’s a purchase of a security (the LLC interests), and maybe that should have been reported, but it’s not entirely clear.

Of course there was a sale in 2001!

He sold the property to the LLC and received, in exchange, the membership interest. After the transaction, Reid did not own the property any longer; the LLC did (and Reid owned an interest in the LLC).

 
Written By: A.S.
URL: http://
BTW - I did not know that Allen perhaps did not need to disclose the underwater options. If that’s true, then the Reid case (where the disclosure obligation is clear) would seem to me to be far worse than the Allen case.
 
Written By: A.S.
URL: http://
Of course there was a sale in 2001!

He sold the property to the LLC and received, in exchange, the membership interest. After the transaction, Reid did not own the property any longer; the LLC did (and Reid owned an interest in the LLC).
You are entitled to think of it that way but, legally speaking, there was no sale.
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
I am a US Senator

I buy a piece of land that is part a large proposed development. I then use my political power to have government restrictions removed that dramatically increase the value of the property. I profit personally from the use of my power.

How is this not a conflict of interests!! I thought there were specific laws against this.
 
Written By: Jay Evans
URL: http://
It is nice to know that our overworked and underpaid public servants can scrape up $400k to put into a speculative land investment.

In today’s(Thursday) Wash. Times it said that there was no documentation of Reid’s equity interest in the company he "sold" the land to. Even if true, that would be exceedingly stupid. Whose name was on the land title or deed? I am assumiong, of course, that Nevada requires such things, for tax liability if nothing else.

"Again, this sort of deal is typical and goes on all the time."

Is it typical that such deals involve real property and no documentation? According to the other partner(Brown?) it was done on a handshake; no contract, partnership agreement, terms or conditions, receipt, or paperwork of any kind. How could the company make any kind of sale of the land unless it had a clear title? This deal certainly piques my curiosity. I hope it piques someone elses, too; someone with more knowledge of Nevada and Las Vegas law than I have.
 
Written By: timactual
URL: http://
You are entitled to think of it that way but, legally speaking, there was no sale.

That’s just completely false. "Legally speaking", it most certainly is a sale.

Just out of curiosity, are you a lawyer who has engaged in similar transactions? I am.
 
Written By: A.S.
URL: http://
From an article in the Wash. Times from the AP;

"Mr. Reid and his wife, Landra, personally signed the deeds selling their full interest in the property to Mr. Brown’s company, Patrick Lane LLC, for $400,000, records show."

I would say it was a sale. If I remember my one course in business law correctly, the Statute of Frauds requires any transaction involving real property or a certain sum of money(much less than $400,000 even allowing for inflation) to have a written contract.

"Mr. Reid isn’t listed anywhere on Patrick Lane’s corporate filings with Nevada,..."

I have heard of silent partners, but not invisible ones. It appears to me that Reid was paid $400,000 for the land in 2001, then received another $1.1 million in 2004, with a rather unusual and convoluted paper trail(or no trail). I may be wrong, but I sure am curious. I think we shall hear more of this in future.
 
Written By: timactual
URL: http://
That’s just completely false. "Legally speaking", it most certainly is a sale.

Just out of curiosity, are you a lawyer who has engaged in similar transactions? I am.
Yeah. I am. I deal with it every day. You?
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
"Mr. Reid and his wife, Landra, personally signed the deeds selling their full interest in the property to Mr. Brown’s company, Patrick Lane LLC, for $400,000, records show."
I truly doubt that what the records show. Instead, I’ll bet there is an assignment of the land evidenced by a deed transferring the property to the LLC. It’s not a sale. It’s not a taxable event. To be sure, Reid did not own the property after that (the LLC did), and it appears he should have reported his ownership that way.
I then use my political power to have government restrictions removed that dramatically increase the value of the property. I profit personally from the use of my power.
If that is what happened, the Reid probably did run afoul of ethics rules and the law.
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
If that is what happened, the Reid probably did run afoul of ethics rules and the law.
And if the ethics laws haven’t been broken, they should be changed so they will have been broken by such behavior in the future.

Yours, TDP, ml, msl, & pfpp
 
Written By: Tom Perkins
URL: http://
It’s not a sale. It’s not a taxable event.
I don’t know why you keep referring to the transfer’s characterization for tax purposes. That doesn’t seem relevant to me. A sale is a transfer for value; whether the transaction is taxable or not is beside the point. In this case, Reid transferred the property to the LLC for value (the membership interest).
 
Written By: A.S.
URL: http://
What did Harry Reid know?
And when did he know it?


CH
 
Written By: Charles Hugh
URL: http://
I don’t know why you keep referring to the transfer’s characterization for tax purposes. That doesn’t seem relevant to me. A sale is a transfer for value; whether the transaction is taxable or not is beside the point. In this case, Reid transferred the property to the LLC for value (the membership interest).
Because that is how a "sale" is normally determined. In any event, this was an exchange (land for Membership Interest) which should have been reported according to the instructions for Senate Financial Disclosures (pdf; see pp. 11-12):
NON-PUBLIC SECURITIES OR
PARTNERSHIP INTERESTS: To report interests held by you, your spouse, or your
dependent child in a business, a partnership,or joint venture, give the complete name of the interest and its location (city, state), identify the character of the interest, and the nature of the business or, property. You must disclose the primary trade or business of non-public entities, as well as interests and activities which are not solely incidental to such a trade or business. For example, if you hold an ownership interest in a private real estate rental company which primarily owns (and rents) real estate and which also buys stock in a bank, you must disclose not only the real estate owned (by type and location), but also that the company holds stock in a bank (name
and location).
The above is from the instructions for disclosing non-publically traded assets and unearned income sources (Part IIIB of the disclosure form). Part IV pertains to transactions (p. 13):
Report the identity, the date, and the category of amount of any purchase, sale, or exchange of any real property, stocks, bonds, commodity futures, excepted investment fund shares, and other securities, by you, your spouse, or your dependent child when the amount involved in the transaction exceeded $1,000. This includes reporting any sale or exchange of an asset involving an amount exceeding $1,000 when the sold or exchanged asset did not yield income of more than $200 (and therefore was not reported on Part IIIA or B). It also includes reporting the purchase of an asset involving an amount exceeding $1,000, but at the end of the reporting period having a value of $1,000 or less and earning income of $200 or less during the reporting period (and therefore not appearing on Part IIIA or B).
To be honest, the instructions are far from clear (it’s a government document after all), and there may be some exception or exemption for either an asset or an exchange that yielded no income (or loss).

Apparently, Reid continued to disclose that he owned the property, and the income he derived from its ultimate sale by the LLC. That could be chalked up to a misunderstanding of the legal fictions involved (i.e. the LLC owned the property, not Reid, even though Reid owned interest in the LLC whose only asset was the property), but there are questions about whether or not Reid was hiding his relationship with Jay Brown:
Reid’s avoidance of disclosure hid two aspects of his business relationships. The first was his association with Jay Brown, who has a history of being involved in scandal. The NY Times describes him as "a prominent Las Vegas lawyer," but they never get around to mentioning his involvement in a federal bribery case in Las Vegas. Nor do they mention Brown’s work as a lobbyist, as the AP did, nor do they follow up on the AP’s report of connections between Brown and organized crime
Curiouser and curiouser.
 
Written By: MichaelW
URL: http://asecondhandconjecture.com
TPM has the numbers right.

Reid got 700,000 in profit, by selling land for 1.1 million for which he paid 400,000.

Now, if that increase in land value was due to Reid changing laws to his benefit, then that *is* a scandal. If not, then it’s not. That’s all there is to it.
 
Written By: Nathanael Nerode
URL: http://
He is a Democrat, the "free press" gives him a "free pass" - OJ Simpson in politics - and so the other politicians can keep continuing the pillage. Not that the Republicans are any better - but worse than both parties is the "free" (like in, free for sale) press. Shame on you for making it sound that stealing is the normal part of conducting business in congress. Con-gress - the aggregation of con artists. Best of breed.
THIS ELECTION VOTE NEWCOMERS or just stay home. NO MATTER WHAT PARTY - NEW FACES! PLEASE ...
 
Written By: Joe Doe
URL: http://
Harry Reid appears to have lied to the American public. Which is normal in his retoric. It is time he reigns form the senate and senate minority leader ship. As a democratic I am appalled that he lie to his democratic constiuents.
 
Written By: Sandy Davisson
URL: http://
Harry Reid appears to have lied to the American public. Which is normal in his retoric. It is time he reigns form the senate and senate minority leadership. As a democrat I am appalled that he lie to his democratic constiuents.
 
Written By: Sandy Davisson
URL: http://
I am curious about where Reid got the original $400k. Was it lying in his sock drawer? Did he borrow it? Did he save his lunch money?
******************

"Because that is how a "sale" is normally determined."

How, exactly? Does that mean that if he didn’t make a taxable profit then it wasn’t a sale? What is your definition of a sale?

************************

" I help my clients conduct deals exactly like this all the time."

Does that include $400k deals made on a handshake, with no documentation?
 
Written By: timactual
URL: http://
Folks are quibbling over the numbers and not the corruption - he got a sweet deal as a quid pro quo from a developer..

"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."

If Foley resigned over creepy emails, why won’t Democrat Menendez resign over his corruption scandal? Why won’t Democrat William Jefferson resign over the $90,000 bribe money found in his freezer? Why wont Democrat Senator Harry Reid resign over his land deal?
 
Written By: Pa
URL: http://

 
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