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GEPHARDT DID NOT PAY HIS CAPITAL GAINS TAXES

by Staff Writers -The Daily Republican OnLine Newspaper

SACRAMENTO - House Minority Leader Richard Gephardt(D) has opposed any reduction of capital gains taxes but has failed to report his own capital gains and has refused to pay taxes he owes. Rep. Jennifer Dunn of Washington has filed an ethics complaint against Mr. Gephardt for evading capital gains taxes he owed in property transfers.

The Dunn ethics complaint asserts Gephardt made contradictory claims about a $900,000 luxury beach house to avoid capital gains taxes and to obtain favorable bank financing. Mr. Gephardt says there is nothing to the charges, but last week it was revealed that he has suddenly transferred his half-interest in the North Carolina property to the co-owners.

Gephardt's complex real estate transactions may attract the notice of the Justice Department and the Internal Revenue Service as well as the House Ethics Committee. Insight magazine quotes Justice Department sources as saying they have opened a preliminary file on the case and are following it closely.

In the late 1980's Gephardt and his wife purchased a condominium on North Carolina's Outer Banks. Then, in 1991 Gephardt exchanged it for a vacant lot in an exclusive resort nearby called Corolla Light. By making a false statement that the sale was only an exchange Gephardt didn't pay the $17,680 in capital gains taxes that he owed.

In 1992, Gephardt then sold a half-interest in the Corolla Light lot to a Washington insurance broker and his wife. The Gephardt then obtained a $493,100 loan to build a three-floor, six-bedroom house on the vacant lot. In this way Gephardt also got a lower down payment and better interest rate by saying it was a secondary home instead of an investment property. Then as part of the loan, Gephardt signed a deed of trust pledging he would use the property only as borrower's second home and would not rent it out.

Examination of Gephardt's financial disclosure forms shows that, in fact,Gephardt earned between $15,000 and $50,000 a year in rental income from the property in 1993 and 1994. To make matters worse, in early 1994, Gephardt refinanced the house and again signed a deed of trust in which he stated the property was no used as a rental.

Ms. Dunn challenges Gephardt's character as the Democratic leader and that Gephardt violated the Ethics in Goverment Act requiring truthful financial disclosures by making false statements on a bank loan document. She also says that in the 1991 exchange of his condo, Mr. Gephardt may have violated IRS rules by telling the IRS it was an investment property for the purpose of avoiding capital gains taxes, but then telling the American people that the very same property was a secondary residence on his ethics financial disclosure forms.

Staff of Representative Gephardt said that the ethics complaint is a rehash of old and discredited allegations. However, Congressman Gephardt has not beeen forthcoming with a full and complete explanation of the diecrepancy that has been made public by Mrs. Dunn that includes a number of fund-raising expenses the Gephardt campaign incurred on the Outer Banks beginning in 1991. The most curious aspect of Gephardt's conduct is that there was no discernible income ever generated by the fund-raisers. However, Gephardt's campaign committee reported spending $70,000 for catering and lodging expenses paid to companies owned by Richard A. Brindley or his associates. Is it just a coincidence that Brindley owns Outer Banks Ventures, the company that developed the Corolla Light development, the same corporaton that made Gephardt the loan of the $304,000 Gephardt used to buy that vacant lot. Incidentally, the record also shows that Gephardt was unable to make his payments on the vacant lot. It was Brindly who gave them a generous extension of nearly six months past the due date of the note. Is there a connection between the Gephardt campaign money spent with companies linked to Brindley and the favorable financial terms of Mr. Gephardt's loan from Outer Bank Ventures?

Congressman Gephardt's staff is now saying the issues in the Dunn ethics complaint are very technical matters that cannnot be discussed by the Congressman in public.

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