- The Washington Times - Friday, July 17, 2009

For tax accountants, the $96,000 payment Republican Sen. John Ensign’s parents made to the family of the woman with whom he was having an affair is a tantalizing puzzle.

The situation is this: Was the payment to Cynthia Hampton’s family a “gift” as the Nevada senator maintains or was it a severance payment around the time she and her husband left the senator’s employment as the husband claims?

The answer could have grave ramifications, financial and otherwise, for all parties involved.

This is how the puzzle unfolds.

If Mr. Ensign’s parents structured the payment in eight gifts of the legally allowed limit of $12,000 each to Cynthia Hampton, her husband, Doug Hampton, and two of their three children, as the senator says, then why was it apparently made in one lump-sum check?

And if the April 2008 payments were “made as gifts, accepted as gifts,” as Mr. Ensign’s attorney says, then why didn’t Mr. Hampton check the box as required on his Senate disclosure form that asks whether he or his family had received any gifts?

The box clearly asks, “Did you, your spouse or dependent child receive any reportable gift in the reporting period (i.e. aggregating more than $335 and not otherwise exempt)?”

Mr. Hampton, on the final form he filed, checked “no.”

The details are critical because if the payment was a severance, as Mr. Hampton says, Mr. Ensign could face felony criminal charges for failing to report the transfer on campaign disclosure forms as would be required.

And if the payment was purposely arranged to avoid taxes, it could be a criminal form of money laundering known as structuring, said Melanie Sloan, executive director of Citizens for Responsibility and Ethics (CREW) in Washington.

For the Hamptons, the answer is equally critical for their financial situation.

If the payment was a severance, the family would likely owe taxes on the $96,000 - although it is entirely possible that the Hamptons have paid them. The taxes could be up to one-third of the total.

CREW has called for investigations by the Federal Election Commission, Senate Select Committee on Ethics and Justice Department.

Mr. Ensign’s office and his attorney declined to respond Wednesday to requests for more information. The Las Vegas Sun sought copies of the canceled check or checks, gift tax forms or agreements between the parties that may explain the situation.

Robert Willens, a tax consultant in New York and adjunct professor in finance at Columbia University’s Graduate School of Business, said the Ensign saga is guaranteed to be written about in the tax journals. He doubted the Internal Revenue Service would let it pass without review at this point.

“Obviously, it’s not something that’s going to go under the radar now that everyone knows about it,” Mr. Willens said. “There will be scholarly articles, I guarantee you.”

The senator disclosed last month that he had engaged in an affair with Mrs. Hampton, who was his campaign treasurer at the time, from December 2007 to August 2008.

Her husband was one of the senator’s top aides.

c Distributed by Scripps Howard News Service

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