No interest paid on Rangel's villa

Democrat says didn't know to report on taxes

By Devlin Barrett ASSOCIATED PRESS | Saturday, September 6, 2008

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House Ways and Means Committee Chairman Rep. Charles B. Rangel paid no mortgage interest on a beach resort property for more than 10 years, a lawyer for the powerful Democrat said Friday.

The New York congressman's lawyer, Lanny Davis, said that Mr. Rangel got his no-interest deal for the villa in the Dominican Republic because he was an original buyer in the resort development, and in the early days after Mr. Rangel's 1987 purchase the rental income it generated failed to meet expectations.

Punta Cana Yacht Club Director Jose Oliva issued a letter stating that the developers initially charged interest on the loans to Mr. Rangel and a small group of fellow investors called "Pioneers," but after two years the company stopped charging interest because of the lower-than-expected rental income. The removal of interest charges was extended only to the foreign investors, Mr. Oliva said.

Earlier in the day, the congressman's lawyer said Mr. Rangel paid no interest at all on the mortgage, but later said company records show there was interest paid in the first two years.

Mr. Davis, who writes a regular opinion column for The Washington Times, said Mr. Rangel did not know until very recently he had not been charged interest for more than a decade.

"Mr. Rangel received no special preference," Mr. Davis said.

The chairman of the key tax-writing committee has come under scrutiny for his vacation property and apartments he rents in his home district of Harlem.

Mr. Davis said Mr. Rangel failed to report rental income from the resort property on his taxes, but didn't realize it was necessary because of the way the deal was structured.

Mr. Davis said it is unlikely the congressman owes any back taxes under the federal tax code, although he may owe a small amount to the state of New York, on unreported rental income of about $75,000.

Republicans call Mr. Rangel ethically challenged and have sought to censure the 78-year-old lawmaker. Even an unintentional tax error is highly embarrassing for Mr. Rangel, since he chairs the committee charged with updating the nation's complicated tax code.

News of Mr. Rangel's no-interest mortgage comes on the heels of reports that two other powerful Democrats in Congress, Sens. Christopher J. Dodd of Connecticut and Kent Conrad of North Dakota, got preferential mortgages with lower interest rates through a "VIP" program for friends of former Countrywide CEO Angelo Mozilo. Mr. Dodd heads the Senate Banking Committee.

Both lawmakers have denied any impropriety.

Mr. Rangel bought the beach house 20 years ago for about $80,000, with a down-payment of $28,000. Instead of making payments himself for the property, Mr. Rangel used his share of collective rental money generated by the resort to pay down the mortgage, according to his lawyer.

The congressman's personal finances have come under scrutiny and spawned a House ethics committee inquiry, leading to a showdown last month on the House floor between Mr. Rangel and Republicans.

The ethics committee is examining Mr. Rangel's use of four rent-controlled apartments in Harlem, including one that was used for campaign work. This week, the New York Post raised questions about Mr. Rangel's beach villa, which it dubbed his "cash cow." The New York Times reported Friday that Mr. Rangel failed to report rental income on the property.

Mr. Rangel's lawyer said the congressman received no sweetheart deal or favoritism in purchasing or renting out the beach house, because it was essentially a financial investment made in a real estate development project.

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