Does Democratic Leadership Inaction on Rangel Render Promises of "Change" a "Bait and Switch" Tactic?

Corruption and unethical behavior by politicians is a cancer that slowly and deliberately destroys the integrity of our government institutions and ultimately threatens the stability of our Republic.

The Democratic Party which will control the Presidency, the Senate, and the House of Representatives has a unique opportunity to show that they are really serious about possible corruption and changing the way Washington does business.

However, they must start in their own backyard and immediately remove Harlem Congressman Charles B. Rangel from his position as House Ways and Means Chairman, until a full and thorough investigation of his finances is completed for possible tax and ethics violations.

Otherwise the Democrats are sending a clear message – anything goes for our friends and allies, especially powerful friends in Congress. Worst yet, inaction by the Democratic leadership on issues of possible corruption and unethical behavior will render President-elect Barack Obama's much touted promises of "change," nothing more than a "bait and switch" tactic to get votes.

The House Ways and Means Committee is in charge of writing tax legislation, and bills affecting Social Security Medicare, and other entitlement programs and Charles B. Rangel (D – NY) is the committee’s powerful chairman. As I will detail below, an examination of recent financial transactions by Rangel shows a troubling pattern of him using his office to enrich his own personal self-interests at the expense of taxpayers and voters. In addition, it has been reported that he took certain tax exemptions that he was not entitled to and failed to disclose certain income on his tax returns and congressional disclosure forms.

Campaign money steered to Rangel's son

Politico reported that from 2004 to 2007, Charles Rangel steered almost $80,000 in campaign funds to his son Steven Rangel’s internet company for a pair of web sites. Those web sites were so poorly designed that an expert estimated that they should not have cost Rangel's campaign more than $100 to develop.

According to Politico:

Steven Rangel’s design for his father’s National Leadership PAC site appears to have been slapped together in a hurry, intermittently updated and never spell-checked. An apologetic note near the top of the site warns readers that the page is undergoing “routine maintenace [sic]” and cautions that “much of our content is currently unavailable.”Another button urges visitors to “Give Contribuition [sic].”

The site “is a one pager with a third party site taking donations,” said Jamie Newell of 7AZ Web Design, a company that creates sites for a wide array of businesses in Washington. “For something of that standard, I would not pay more than $100.”

Apparently, Mr. Rangel campaign overpaid his son $79,900 or about 790 times in excess of what he could have paid anyone else for similar work. During 2006 election cycle, Rangel paid more money than any other House member to develop web sites. Rep. Ralph Regula (R-Ohio) and since-ousted Rep. Christopher Shays (R-Conn.) were distant second and third “runners-up, shelling out $44,000 and $30,000 for their websites.”

Using a rent stabilized apartment in NYC as a campaign office

The New York Times reported that Charles Rangel used a rent-stabilized apartment as a campaign office in violation of New York State and City regulations that require rent-stabilized apartments to be used only as a primary residence by tenants. Meanwhile, in that same building, Rangel occupies not just one, but four rent stabilized apartments at below market rents.
According the New York Times article:

Mr. Rangel, the powerful Democrat who is chairman of the House Ways and Means Committee, uses his fourth apartment, six floors below, as a campaign office, despite state and city regulations that require rent-stabilized apartments to be used as a primary residence.

Mr. Rangel, who has a net worth of $566,000 to $1.2 million, according to Congressional disclosure records, paid a total rent of $3,894 monthly in 2007 for the four apartments at Lenox Terrace, a 1,700-unit luxury development of six towers, with doormen, that is described in real estate publications as Harlem’s most prestigious address.

The current market-rate rent for similar apartments in Mr. Rangel’s building would total $7,465 to $8,125 a month, according to the Web site of the owner, the Olnick Organization.

The Olnick Organization and other real estate firms have been accused of overzealous tactics as they move to evict tenants from their rent-stabilized apartments and convert the units into market-rate housing.

Since the landlord has discretion over renting the additional rent-stabilized apartments, amounts paid below current market value by Mr. Rangel may also violate House rules on accepting gifts in excess of $100.

Simultaneously, using both rent stabilized apartments and his Washington property as a primary residence

Worst yet, the New York Post reported that Charles Rangel claimed his Washington DC home as his primary residence and took a homestead exemption, while at the same time he used his rent stabilized apartments as his primary residence. As detailed above, NY rent laws require rent stabilized tenant’s apartments to be their primary residence. In Washington DC, only primary residences qualify for the homestead exemption. Rangel cannot it have it both ways.

Failure to federal taxes on rental income from a property he owns in the Dominican Republic

Another New York Times article reported that Charles Rangel failed to pay federal taxes, state, and local income taxes on rental income of $75,000 from a beachfront house he owns in the Dominican Republic. Rangel failed to disclose the rental income on both his personal income tax returns and his Congressional financial disclosure form. Yet, Mr. Rangel is chairman of the House Committee that writes tax legislation.

Troubling campaign contributions to further his personal interests

The Washington Post reported that Charles Rangel solicited “donations from corporations with business interests before his panel, hoping to raise $30 million for a new academic center that will house his papers when he retires.” Rangel and C.C.N.Y President Gregory H. Williams agreed to name the new academic center, the Charles B. Rangel School of Public Service at C.C.N.Y., in the Congressman’s honor.

Charles Rangel violated congressional regulations when he used his official letterhead to solicit contributions for his pet project. A New York Times editorial scolded Rangel, stating:

Mr. Rangel plainly violated congressional regulations when he used his official letterhead to solicit support for his academic center from scores of business and foundation leaders.

According to the Washington Post:

Ethics experts and government watchdogs say it is troubling that one of the nation's most powerful lawmakers would seek money from businesses that have interests before the committee he leads. Rangel's panel has broad jurisdiction over tax policy, trade, Social Security and Medicare.

It turns out that in one specific case, Mr. Rangel was instrumental in preserving a lucrative tax loophole that benefited Nabors Industries (NYSE: NBR). At the same time, the company’s chief executive, Eugene M. Isenberg, pledged $1 million to the project.

The New York Times reported, that originally, “Mr. Rangel was among dozens of representatives from both parties who bitterly opposed” the lucrative tax loopholes that companies like Nabors Industries was seeking. After receiving the pledge from Nabors CEO Isenberg, Rangel now fought to protect those tax loopholes “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.”

What should be done?

Charles Rangel claims that he welcomes an investigation into his finances. According to CQ Politics:

Insisting he has done nothing wrong despite a growing list of questions about his financial dealings, embattled House Ways and Means Chairman Charles B. Rangel said Monday he welcomes a thorough ethics committee investigation of all the allegations against him.

“Everything that’s been said they should look at ... bar nothing,” the veteran New York Democrat said.

However, Charles Rangel has not offered to step down as Chairman of the House Ways and Means Committee, while an investigation of his questionable transactions is conducted. Meanwhile, House Speaker Nancy Pelosi (D - CA) has resisted calls for Rangel to step aside as Chairman while the investigation continues.

Pelosi wants a quick investigation of Rangel's financial dealings. Instead, there should be a thorough investigation, even if it takes time to complete and Rangel should step down as Chairman of the House Ways and Means Committee, pending the outcome of such investigation. The New York Times reported that:

The relatively quick timetable that Mrs. Pelosi outlined was striking, given that previous internal inquiries in Congress have tended to drag out for years.

A hurried investigation is unacceptable and it will have no credibility, whereas a careful, detailed, and thorough investigation will have credibility.

If Rangel refuses to step down as Chairman of the House Ways and Means Committee and Pelosi continues to resist removing him from that post, it will have rendered Democratic Party promises of "change" to nothing more than a "bait and Switch tactic" to get elected.

At Crazy Eddie, we used to "bait" customers by promising to "beat any price" to get them into the store. Likewise, did the Democrats use the prospect of "real change" in Washington to bait voters to elect their candidates?

When the customer finally arrived at a Crazy Eddie store, our sales people used to "switch" them to higher profit merchandise. Likewise, will the Democrats, who will control the Presidency, Senate, and House switch back to politics as usual and give special preferences to their powerful friends and allies on issues of possible corruption and ethics violations?

In an editorial today, the Washington Times, pointed out:

Almost immediately after House Speaker Nancy Pelosi threw down the gauntlet Jan. 17, 2006, saying Democrats "[w]ill create the most open and honest government in history," would those words be put to the test.

To House Speaker Nancy Pelosi, talk is cheap and action speaks louder than words.

Written by,

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Disclosure

I am a registered Democrat in New York. Convicted felons have the right to vote in New York (but they don't serve on juries, which I don't mind). I have voted for both Democrats and Republicans and have written about questionable behavior by Democrats and Republicans.

Other Blog Posts of Interest

11/30/08: New York Democratic Party Leadership Takes Money from Same-Sex Marriage Supporters and Won't Deliver on Promises

11/16/08: Advice to President-Elect Barack Obama about Combating White Collar Crime From a Convicted Felon

08/18/08: Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne Pays Utah Attorney General Mark Shurtleff to Defame a Blogger

A Crisis of Confidence: Some Small Steps We Can Take Now

The main pillar of our capitalist economic system is the integrity of financial information. When the markets loose faith in the integrity of financial information, the collective market capitalizations of all companies suffer. Today, we a suffering a loss of faith and confidence in the integrity of the financial information reported by public companies and the result has been a downward spiral in stock prices and a tightening of credit that threatens to destroy our economy.

There are some small steps we can do now to restore faith in our markets and get our economy back on track.

Continuity: We immediately need a new Treasury Secretary that both Democrats and Republicans can agree on now, to provide continuity no matter who wins the November election. That means that President George Bush, Democratic Party candidate Barack Obama, Republican Party candidate John McCain, Speaker of the U.S. House of Representatives Nancy Pelosi, and other leaders should stop their silly posturing and get together right now to select a mutually agreeable Treasury Secretary for the long haul to get us out of this mess.

Capital Formation: The government should declare a capital gains holiday for all new investments made during the next six months and held for at least three years. A capital gains holiday will result in a major infusion of badly needed capital and bolster our economy. It will reward risk taking during our uncertain times.

Bankruptcy Laws: Bankruptcy laws should be amended to allow financially responsible homeowners to regain their financial footing. Subject to certain guidelines, they should be permitted to make reduced payments on their mortgages and the amount of any reduction in payments can be added to their principal balances to be repaid over time.

I believe that the above steps will be better than the ill conceived $700 billion plus bail out plan offered. The current bail out plan should be scrapped. America requires a Sarbanes-Oxley II to enhance corporate financial disclosures, controls, and governance. For additional information about Sarbanes-Oxley, start here.

Blog Update

The Stupid Nation Blog adds:

Our allegedly "conservative" led government seems hell bent for leather to nationalize the U.S. economy, and in significant measure, dismantle capitalism (whether temporarily or permanently remains to be seen).

Later, the blog goes on to say:

We need calm, deliberate, thoughtful Congressional action consistent with capitalist principles to help right the markets. Throwing capitalism out with the rest of the bad debt trash is not the answer. The world is littered with failed socialist states, and the graveyards of Europe and Asia are chock full of the victims of socialism and it's hideous derivatives. Some deregulation may have played a part in this confluence of horrid events, but we maintain that it was big liberal government meddling in the mortgage market which is the epicenter of this calamity. Without disastrous Government intervention, the sub-prime market would never have been able to become the monster that swallowed the world.

I agree and the Stupid Nation Blog is recommended reading for every concerned voter looking for a well analyzed and informative view of events.

More to come in future blog posts.

To be continued....

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Disclosure: No preference in the election at this time. Just disgusted with the lack of leadership from both political parties and the pandering that is going on.