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Tuesday, August 20, 2002
Bush May Have Evaded Taxes On Sale Of Baseball Team
A review of George W. Bush’s 1998 tax return reveals that he reported the sale of his share of the Texas Rangers baseball team as a long term capital gain. As a result, he paid a tax on the more than $15 million proceeds at a tax rate of 20%, as opposed to the 39.6% rate on ordinary income. According to a press release dated June 18, 1998 from the Dallas Morning News, Bush paid $606,000 for about 1.8% of the team and became the managing general partner of B/R Rangers Associates, Ltd., a limited partnership that owned the team. Under the terms of the agreement, Mr. Bush was given an additional 10.2% of the proceeds as additional compensation if the team was sold.
The team was purchased for $86 million in 1989 and sold in 1998 for $250 million to Tom Hicks, a person with whom Bush had prior official business while governor. As reported by Tom Kruger in his July 16, 2002 article, Tom Hicks had a relationship with Mr. Bush that afforded Hicks the opportunity to use $9 billion of the University of Texas endowment fund without any accountability. The management fee to Hicks for investing the $9 billion could have exceeded the $350 million he paid for the Texas Rangers. In effect, Bush handed Hicks the money to buy the team as part of his official duties as governor.
Last I heard, in order to have a capital gain, you had to make an investment, not receive compensation for services rendered. The IRS agrees, stating in Revenue Procedure 93-27: "…The receipt of a partnership capital interest for services provided to or for the benefit of the partnership is taxable as compensation.”
Sounds like a conflict of interest. Sounds like public corruption. Sounds like tax evasion. Sounds a hell of a lot bigger than Whitewater.
But wait, there's more:
As reported in the Houston Chronicle on April 22, 1997, “The tax reform bill supported by Gov. George W. Bush would have saved at least $2.5 million in school property tax for a company founded by Bush’s billionaire business partner and top campaign contributor, Richard Rainwater of Fort Worth.” Mr. Rainwater headed a public company that was a real estate investment trust traded on the New York Stock Exchange. Bush himself had 4,222 shares of this stock when he proposed the tax reduction that would have benefited this company, Crescent Real Estate Equities, by more than $2.5 million. This same company owned psychiatric hospitals throughout the country that were closed down because of scandalous and fraudulent activities as reported by 60 Minutes and various publications, all before the presidential election of 2000.
As if that was not enough, Bush’s policies as governor further benefited Crescent by:
1. Allowing it to receive an extra $10 million stadium tax for a sports stadium used by the Dallas Mavericks
2. The State of Texas sold three office blocks belonging to the teachers’ retirement fund—to Crescent—the sale of one block costing the pension fund system $44 million.
3. The trust fund for the Texas University Public School invested $20 million in Crescent during Bush’s first term as governor.
Sounds like a conflict of interest. Sounds like public corruption. Sounds a hell of a lot bigger than Whitewater.
Should he be prosecuted? Ahh, here's a precedent:
In 1972, [Illinois] Gov. [Otto] Kerner was convicted of income tax fraud for influencing public policy that benefited his holdings in a race track corporation. On the advice of his accountants, Gov. Kerner treated the proceeds ($180,000) of his race track stock as long term capital gain subject to the reduced tax. The U.S. Attorney, James Thompson, prosecuted Gov. Kerner for falsely treating these proceeds as a capital gain because Gov. Kerner’s public policies had a substantial effect on the appreciation of the stock. Gov. Kerner was a Democrat, and Mr. Thompson was appointed U.S. Attorney by President Nixon. Thompson later became governor of Illinois.
According to an IRS agent who worked on the Kerner case, the government’s theory was based on the idea that a true capital gain is based on the assumption that natural market forces enhance the value of the property sold. Natural market forces can include the legitimate contributions of managing partners. However, the government concluded, and the jury affirmed, the fact that people in official policy positions who enhance the value of their own property in whole or in part are guilty of a corrupt practice, and accordingly the gain is not capital gain. This is consistent with the theory behind giving tax incentives only for legitimate capital appreciation.
This has all been public knowledge for some time now. Why has there been no prosecution or investigation of these activities? This isn't the same as the Harken Energy deal, involving some murky notions of trading on inside information. These are purposeful activities on the part of a sitting governor that increased the value of his assets and direct transfers of public wealth to his contributors and business partners. This is the very essence of public corruption, and a flagrant case of law enforcement negligence.
If we don't enforce laws, they become meaningless. No wonder Bush feels no obligation to them as President.