Sen. Harry Reid made cool million in shady land deal

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.

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.

THE 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.

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 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.

© 2006 The Associated Press

38 Responses to "Sen. Harry Reid made cool million in shady land deal"

  1. Doug Thompson  October 12, 2006 at 4:06 pm
  2. LoudPatriot  October 12, 2006 at 4:30 pm
  3. LawstSoul  October 12, 2006 at 6:24 pm
  4. Mike  October 12, 2006 at 7:38 pm
  5. Jeffers  October 12, 2006 at 7:54 pm
  6. Timothy Richley  October 12, 2006 at 8:27 pm
  7. Henry Blair  October 12, 2006 at 9:54 pm
  8. long memory  October 12, 2006 at 11:09 pm
  9. LfB  October 13, 2006 at 9:34 pm
  10. Steven  October 19, 2006 at 3:00 am
  11. Fred P  October 12, 2006 at 1:33 am

    This is interesting, and certaintely worth an investigation by the senate Ethics Committee, but if this is the extent of these issues, it looks like a few small fines are appropriate here.

  12. John  October 12, 2006 at 1:47 am

    An excellent job of inflating claims of wrongdoing by innuendo.

    By the way, Harry Reid isn’t running for re-election….

  13. doug  October 12, 2006 at 2:40 am

    Harry Reid in a sleazy land deal? Shocking. So is Denny Hastert? Amazing. Color me jaded.
    http://www.aei.org/publications/pubID.24996/pub_detail.asp

  14. Jeremy  October 12, 2006 at 3:14 am

    This is a phony controversy, perpetuated by John Solomon, the same AP reporter who did the phony hit-job on Reid last year about the boxing tix. Kos has a good outline of why this is a non-issue:

    http://www.dailykos.com/storyonly/2006/10/11/175829/67

  15. James Guglielmino  October 12, 2006 at 4:47 am

    Whoa….This is not the way it is being reported on Americablog> or on Firedoglake. Who has it right?

  16. david gray  October 12, 2006 at 5:49 am

    from firedog lake- The AP’s John Solomon, the go-to guy at the Associated Press for any anti-Democratic efforts, and this piece is absolute crap. The crux of the claim:

    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.

    Actually, he did own that land. It just so happened that three years ago, he transfered the property from his own personal name to that of an LLC.

    It’d be kind of like me selling Daily Kos, and someone claiming I reaped a windfall from it because I “sold it three years ago”. I didn’t. Daily Kos became an LLC. As did Reid’s piece of land.

    And btw, this was all disclosed to the ethics committee. The place were things got sloppy is that Reid continued to disclose ownership of the land as a personal asset rather than ownership in the LLC which owned the land. But that’s it. Fact is, the LLC had no other assets other than this piece of land, and Reid disclosed ownership of the piece of land.

    Solomon is either being dishonest or an idiot. But watch the wingers and GOP try to gain traction off this story to divert from their coddling of a sexual predator.

  17. Bob Johnson  October 12, 2006 at 8:51 am

    reid is a crook, no doubt. I’m a democrat but anyone who has followed this guy’s career dating back to the late 60′s when he took money from howard hughes knows that reid is not the most ethical guy in the world.

  18. Peter  October 12, 2006 at 1:29 pm

    Come on cant you read through the Bullshit. I am really Disappointed that you print a story full of lies. Hello, its election time!

    Peter
    southampton, N.Y.

  19. TruePatriotWarrior  October 12, 2006 at 1:59 pm

    Solomon is a AP hitman for the Bush administration–don’t believe a word this guy says.

    “It’s not the first time that Solomon has published a misleading story about Reid. This is the third such story by Solomon over the past six months. Each time, Solomon has hit Reid for taking actions which might create the appearance of ethical impropriety. But because Solomon writes for the most powerful news organization in the land, these very gray-shaded stories pack a wallop. It doesn’t help that on numerous occasions, he has missed or distorted key details – missteps that help blow up his stories”

    For the truth about Solomon’s false and misleading piece about Reid check out this site:

    http://www.tpmmuckraker.com/archives/001782.php

  20. Doug Thompson  October 12, 2006 at 4:06 pm

    True Patriot Warrior writes:

    Solomon is a AP hitman for the Bush administration–don’t believe a word this guy says.

    That’s bullshit. I know John Solomon. He’s a honest, ethical reporter who doesn’t play favorites and he has written many good stories about many bad politicians: Democratic and Republican. Quoting a purely partisan web site like Talking Points Memo doesn’t cut it here. We dont’ play favorites and we don’t shill for any political party. I didn’t see any of you shedding tears when we carried the AP’s story about the bribetaking and failure to report stock options of Republican Sen. George Allen on Sundan and Monday.

    Or maybe Bob Lewis, who wrote that story for the AP, is a “Democratic hit man” and, therefore, acceptable.

    The fact is both John and Bob were doing their jobs and applying the same rules to both parties — something the partisans around here can never understand.

    –Doug

  21. LoudPatriot  October 12, 2006 at 4:30 pm

    “It could probably be shown by facts and figures that there is no distinctly American criminal class except Congress.”
    Mark Twain

    “Suppose you were an idiot and suppose you were a member of Congress. But I repeat myself.”
    Mark Twain

    It is better to debate a question without settling it than to settle a question without debating it.

    “Think of the press as a great keyboard on which the government can play.”
    – Joseph Goebbels, Nazi Propaganda Minister.

  22. LawstSoul  October 12, 2006 at 6:24 pm

    You are way of the mark here Doug. I first read this article yesterday and felt there was something questionable about the analysis. After reading your piece today, I wondered what I might have missed. I’ve reread the article twice, trying to parse out the factual allegation from the conclusions drawn and suggested by the reporters. IMO, the allegations, taken as accurate, simply do not support the reporters’ conclusions, or yours for that matter. I knew very little about Harry Reid before reading this article or your piece. Not much has changed since.

  23. Mike  October 12, 2006 at 7:38 pm

    Doug, you’re mistaken. In 2001 Reid and his partner held the property as individuals in the ratio of 75% to 25%. They formed an LLC, deeded the property to the LLC, and owned the LLC in the same ratio they owned the property. There is absolutely nothing shady about this deal whatsoever. Solomon’s article is filled with far more innuendo than fact, and you do yourself a disservice by repeating his nonsense.

  24. Jeffers  October 12, 2006 at 7:54 pm

    Yeah, and Hillary is an expert in cattle futures, but has decided not to do it any more!

    Doug has been quite willing to publish articles questioning the behavior of any politician, solid, stiped, or plaid.

    Get used to it!

    There is a pretty good demonstration here that Reid has been willing to use his name to make things happen, whether it’s changing zoning or just creating the image that things are on the up and up.

    Another good story. And the headline seems pretty accurate.

  25. Timothy Richley  October 12, 2006 at 8:27 pm

    Doug, I went to the history of your “neutral” writer, and what do you suppose I found. Lots and lots of stories about the bad democracts, but few if any about republicians. And he has written several stories about Reid, none of them has stood the test of time. He has written stories about other dem senators that have also proved to be less than truthfull.
    And this story, Reid bought the land at market prices, and he sold the land, also for market prices. You insinuate “shady deals” as does your “neutral” writer, but don’t back them up with anything more than gossip.
    Five years ago I would have taken the AP article at face value, after all, they would not leave out details that would show that the politician was not venal, would they? Well I have had my eyes opened, now I question every article that accuses politicians of malfeasance in office, and guess what, most of these “neutral” reporters-how can I say this-lie. It doesn’t really make any difference who they are writing about, rep or dem, the reporters have an opinion, and that opinion makes it into their stories. They lie by both commission and omission. That is why I would rather read the blogs, at least they are up front about their political prejudice. So where do I find news that is mostly without a slant? The Guardian is one. So is The Economist. The CBC and BBC give US news without the massive slant or “spin” that all american reporters bring to their stories. So, Doug, don’t be so self-righteous about the MSM reporters, we have seen over the last 6 years their total failure at being objective, the bloggers, at least tell you up front that they will be slanting the news to make their side look better. That, in my mind, is better than your AP friend, he hides his prejudice behind the vail of neutrality.

  26. Henry Blair  October 12, 2006 at 9:54 pm

    Doug, this is rather unfair to Reid. LLC members usually elect to be taxed as partnerships. The ability to do that and yet have the limited liability of a corporation is why folks use LLC’s to begin with. Since the deal is a “pass through” there is no problem with Reid paying the property taxes personally, or acting as though the property is “his”.

  27. Fred P  October 12, 2006 at 1:33 am
  28. John  October 12, 2006 at 1:47 am
  29. doug  October 12, 2006 at 2:40 am
  30. Jeremy  October 12, 2006 at 3:14 am
  31. James Guglielmino  October 12, 2006 at 4:47 am
  32. david gray  October 12, 2006 at 5:49 am
  33. Bob Johnson  October 12, 2006 at 8:51 am
  34. Peter  October 12, 2006 at 1:29 pm
  35. TruePatriotWarrior  October 12, 2006 at 1:59 pm
  36. long memory  October 12, 2006 at 11:09 pm

    This isn’t new for Harry. He was born dirt poor in Searchlight, but became a millionaire while working as a public servant, namely Nevada’s gaming commissioner. He worked with the casino owners he was regulating and they got him into sweet land deals. That bought him a large home in McLean, Virginia, where property is among the most expensive in the country.

  37. LfB  October 13, 2006 at 9:34 pm

    I get the feeling that if it were the IRS looking at this deal, they would say that Reid was still the de facto owner of the property, and would have to pay taxes accordingly. Here is an analogy: sound mathematics are to government accounting practices as a grapefruit is to…
    a. a space-ship
    b. a giant squid
    c. intestinal parasites
    d. triplicate carbon-copy forms
    And the answer is, of course, that it is a trick question. None of the answers are acceptable because they all exist in the same universe as grapefruit.

    The real story here is that this politician pissed someone off, lost his bureaucratic shield of protection. This was the thing they found that was big enough to smear him. Rest assured that career politicians in good standing have done far worse, with much less publicity.

  38. Steven  October 19, 2006 at 3:00 am

    This article ignores the normal way that business is conducted. It is common for a person to transfer land to an LLC for ownership in an LLC. His ownership in the LLC is valued the same as the cost in the LLC so there would be no sale. By the way he will pay taxes on the gain of the sale of the land. The owners of the LLC do pay the taxes of gains in the LLC.

Comments are closed.