AP Exclusive: Reid Got $1 Million for Land He Hadn't Owned for 3

The AP Gets It Wrong:

Desperate to get their scandals off the front page, the Republican Party is once again trying to smear Democrats. And this time, they're using the Associated Press to do it.

The Associated Press gets it all wrong. Thediscredited reporter uses innuendo, intrigue and sensationalism to support a theory that simply isn’t true.

The story is largely derived from talking points and bizarre allegations that have been posted onright wing web sites. This is not the first time Mr. Solomon has reported RNC research as fact. In a story he wrote in 2004, Mr. Solomon took language directly from an RNC document attacking Senator Kerry.

Here are the facts:

Senator Reid owned the land he sold in 2004.

Reid’s 1998 land investment with Jay Brown was a proper and normal business transaction at market prices.

Mr. Solomon’s insinuations that this land investment was related to federal land swaps that took place in the mid 1990’s are wholly inaccurate.

Senator Reid and Jay Brown have been friends for 35 years, having met well before Senator Reid became an elected official.

Atthe end of a phone interview with AP Radio on the midterm elections and Iraq, the AP instructed its journalists -- who had no information about Mr. Solomon’s story -- to ask Senator Reid about Mr. Solomon’s allegations. This exchange came only days after our office had met at length with Mr. Solomon for a detailed discussion. The AP radio division editor later called to apologize for ambushing Senator Reid with this question.

AP Exclusive: Reid got $1 million for land he hadn't owned for 3
years

The Facts: Senator Reid owned the land until he sold it.

AP Graphic REID TIMELINE
By JOHN SOLOMON
and
KATHLEEN HENNESSEY
Associated Press Writers

WASHINGTON (AP) _ 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.

The Facts: Senator Reid purchased land in 1998, sold it in 2004, and fully reported those transactions and his holdings during those six years. The creation of an LLC to manage the investment in 2001 was a technical legal step that did not alter Senator Reid’s actual ownership interest in the land.

The reporters did the math wrong. Reid invested $400,000 in land, so his profit wasseveral hundred thousand dollars less than the $1.1 million the lead sentence states.

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 Facts: This sentence describes the transfer of land to an LLC by the LLC owners; it is not a sale. There was no sale to disclose.

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.

The Facts:

Nevada is a small state and Jay Brown has friendships and professional relationships with many prominent Nevadans of both political parties. Jay Brown is heavily involved in Nevada politics as a fundraiser and a donor to both Republicans and Democrats.

Outdated allegations about Jay Brown’s activities and associates have no bearing on Senator Reid.

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.

The Facts:

The creation of Patrick Lane, LLC, in 2001 involved a technical transfer of title from Reid and Brown. Reid and Brown continued to own the land through Patrick Lane and they continued to split the cost of property taxes and other expenses associated with the land consistent with their respective ownership interests.

The public record of the zoning hearing discussed below reflects that Senator Reid was a principal in Patrick Lane with an ownership interest in the land.

Since Senator Reid continued to own the land after the creation of Patrick Lane, LLC, he properly continued to list his ownership of the land on his financial disclosure forms prior to the actual sale of the land in 2004. It is not accurate to say that he reported that he “personally owned the land” – he reported he owned the land. There is no box on the form labeled “personal” or “corporate.”

The use of an LLC to manage land investments efficiently is routine. It makes later legal transactions easier and addresses liability issues that might arise during the course of development.

_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 Facts:

Senator Reid did not report it as a “personal” land sale. He reported the sale. There is no “personal” or “corporate” box on the form. Following re-zoning, the neighboring landowners approached Brown about purchasing the Patrick Lane property. The Reids and Browns sold the lots in early 2004 at a fair market price of $1.6 million. The development is now valued between $5.6 million and $13 million, just two years later.

The sale of the land was properly reported on Senator Reid’s financial disclosure form.

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.

The Facts: Forming an LLC is not a “complex dealing” and the company was not “Brown’s company” – the LLC was owned by Reid and Brown.

There are many reasons for forming an LLC:

Like a corporation, an LLC is a separate and distinct legal entity. An LLC can obtain a tax identification number, open a bank account, and do business, all under its own name. [Missouri Business.Net]

“It has the tax benefits of partnership,” while “limiting the liability of its members.” So, in the event the LLC were to go bankrupt, the members of the LLC would not be personally responsible for the loss. [“Limited Liability Company (LLC) Basics,” Business Week]

Reid hung up the phone when questioned about the deal during an
AP interview last week.

The Facts: Atthe end of a phone interview with AP Radio on the midterm elections and Iraq, the AP instructed its journalists -- who had no information about Mr. Solomon’s story -- to ask Senator Reid about Mr. Solomon’s allegations. This exchange came only days after our office had met at length with Mr. Solomon for a detailed discussion.The AP radio division editor later called to apologize for ambushing Senator Reid with this question.

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.

The Facts: Putting Land into an LLC is entirely appropriate. “[P]utting title to land in a Limited Liability Company in Nevada is not unusual at all.It fact it is not only very common, it is oftentimes preferred. It is entirely appropriate and often recommended that land investors use an LLC for the purposes of holding and transferring land.” [Statement of Chris Kaempfer senior partner at Kummer Kaempfer Bonner Renshaw & Ferrario, founder of its Land Use Practice and land use practitioner for over 25 years]

They also said they have no documents proving Reid's stake in
the company because it was an informal understanding between
friends.

The Facts: Under Nevada law, the legal default is that each member of an LLC receives an ownership interest in the LLC consistent with his or her contribution to the formation of the LLC. There is no need to have a document to record an ownership interest that exists as a matter of law.

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.

The Facts: The creation of an LLC in 2001 did not result in profit or loss to Senator Reid because it was not an actual sale. Reid continued to own the land through the LLC and continued to report his ownership of the land until he actually sold it in 2004. If the Ethics committee requests a technical correction to Senator Reid’s financial disclosure forms we are happy to provide one.

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."

The Facts: There is no issue of “profit or loss” when a person transfers land to an LLC that he or she owns.

"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

The Facts: The reporter continues to refer to the 2001 transfer of land by Senator Reid to his own LLC as a sale. There was no sale in 2001.

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.

The Facts: The company was not “Brown’s company” -- Senator Reid and Brown were owners of the LLC. There was no sale in 2001. Again, if the Ethics committee requests a technical correction to Senator Reid’s financial disclosure forms we are happy to provide one.

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.

The Facts: Throughout each year they owned the land, Senator Reid and Jay Brown paid taxes on it in proportion to their ownership interest.

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.

The reporter fails to understand his own fact: Senator Reid and Brown continued paying taxes on the land after 2001 in the same way they did before 2001 because nothing had changed. Their LLC was just a vehicle to hold the land, it had no assets or existence outside of Reid and Brown and their land investment.

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.

The Facts: When two business partners pay their proportional share of the costs of an investment, it is not a gift or income, period.

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.

The Facts: The land swaps he is referring to here were all completed four years before Senator Reid bought his land.

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.

The Facts:

Fred Lessman, part owner of one of the lots purchased by Reid and Brown and then-executive with Perma-Bilt refutes the suggestion that he had a relationship with Senator Reid. “I was first approached to sell the property at issue by my partner in the deal, who had been approached by another broker. The sales price was based upon fair market value. I had absolutely no contact whatsoever with Senator Reid or his office (or anyone acting on his behalf for that matter) about the land transaction or any Perma-Bilt land exchange. The land obtained by Perma-Bilt in its land exchange was nowhere near this property. Any suggestion that the land sale between Senator Reid and myself is somehow tied in with the Perma-Bilt exchange is completely absurd.” [Statement of Fred Lessman]

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.

The Facts: The PermaBilt land swap and the Del Webb land swap were separate land swaps involving separate companies and separate parcels of 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.

The Facts: At the time Fred Lessman wrote this letter in 1997, neither Del Webb nor Permabilt had even considered buying the land in Lake Tahoe that was involved in t he 1998 transaction.