Monday, August 22, 2011

SDUT's Jeff McDonald defends Darrell Issa against "most serious allegations"

It turns out that the New York Times was given faulty information by the Assessor's Office, and that there was faulty information in an Issa tax filing. Here are three corrections by the New York Times.

Correction: August 16, 2011

An article on Monday about the business empire of Representative Darrell Issa, Republican of California, misstated the worth of the companies involved in his splitting up of a holding company. The split entailed separate multimillion-dollar companies, not multibillion-dollar ones.

Correction: August 26, 2011

An article on Aug. 15 about Representative Darrell Issa’s business dealings, using erroneous information that Mr. Issa’s family foundation filed with the Internal Revenue Service, referred incorrectly to his sale of an AIM mutual fund in 2008. A spokesman for the California Republican now says that the I.R.S. filing is “an incorrect document.” The spokesman, Frederick R. Hill, said that based on Mr. Issa’s private brokerage account records, which he made public with redactions, the purchase of the mutual fund resulted in a $125,000 loss, not a $357,000 gain.

And the article, using incorrect information from the San Diego county assessor’s office, misstated the purchase price for a medical office plaza Mr. Issa’s company bought in Vista, Calif., in 2008. It cost $16.3 million, the assessor’s office now says — not $10.3 million — because the assessor mistakenly omitted in public records a $6 million loan Mr. Issa’s company assumed in the acquisition. Therefore the value of the property remained essentially unchanged, and did not rise 60 percent after Mr. Issa secured federal funding to widen a road alongside the plaza.

The San Diego Union-Tribune has not published the New York Times' accusations about Darrell Issa's use of his position as US congressman to increase his wealth. The SDUT has, however, launched a vigorous defense of Issa regarding four cherry-picked "most serious allegations."

Jeff McDonald's picks of "most serious allegations":

1) Jeff McDonald accuses the NYT of incorrectly describing the area in which Issa's office is located.

The New York Times writes, "Here on the third floor of a gleaming office building overlooking a golf course in the rugged foothills north of San Diego, Darrell Issa, the entrepreneur, oversees the hub of a growing financial empire worth hundreds of millions of dollars."

McDonald says that even though the Shadowridge Country Club golf course is a "1.5 mile drive from Issa's office," it's wrong to say that the building is "overlooking" the golf course because not enough of the golf course is visible from Issa's particular window. That was sneaky, Jeff. You imply that the New York Times said the gold course was visible form Issa's window. Would you have preferred that the NYT give the exact mileage to the golf course, using decimal points? No, Jeff, that would be focusing on the wrong facts.

McDonald next disputes the statement that the area is "in the rugged foothills north of San Diego." I went to Google maps and saw two areas of rugged foothills very near to Issa's office, to the east and west. When I zoom out a bit, I see huge areas of rugged foothills to the north, east, and south. It looks to me like the NYT got it right.

2) The SDUT admits that Issa's electronics company may be a supplier for Toyota dealers, but tries to make the point that Issa didn't have a conflict of interest when he went easy on Toyota during his investigation of sudden acceleration problems in Toyota vehicles. Does the SDUT believe that Toyota has no interest in or influence over the products that its dealers offer to customers.

The NYT wrote, "But perhaps his clearest statement on the issue [of Issa's attitude about recusing himself] came last year amid Toyota’s recalls of millions of automobiles with dangerous acceleration problems. Then, Mr. Issa brushed aside suggestions that his electronics company’s role as a major supplier of alarms to Toyota made him go easy on the automaker as he led an investigation into the recalls."

3) The New York Times writes, "In one case, more than $800,000 in earmarks he arranged will help widen a busy thoroughfare in front of a medical plaza he bought for $10.3 million."

The SDUT argues that obtaining earmarks for traffic improvements in front of his building actually hurt Issa financially by raising the price of the property before he bought it, and that the NYT was wrong about the sales price. Obviously, the building will continue to have its value enhanced by the traffic improvements. And I'd like to see more information about the history of the building and its changing sales price. It's interesting that the SDUT relies on Ernie Dronenburg, who has been known to falsify his credentials. Why doesn't the SDUT tell us about the $10.3 million figure used by the Times? Where did that figure come from? Clearly, the SDUT doesn't want to do an investigation, it simply wants to make claims without telling the whole story. In my experience, this is typical of the SDUT. Editor

4) "1900 percent profit"
Does Issa's Family Foundation produce "sharp profits"? The NYT says yes. The SDUT implies that this is not true by quoting Issa's spokesman regarding a single transaction. We need more information about this to know for sure. And the SDUT isn't exploring the issue; it's simply quoting Issa's spokesman. Not much investigation going on at the SDUT.

REPORT: Rep. Issa's Ongoing Ethics Problem

Media Matters Action Network
May 20, 2011

This week, it was revealed that DEI Holdings Inc., the car-alarm company founded by Rep. Darrell Issa (R-CA) and on whose board he sits, had for years underpaid tariffs on parts imported from China. This is only the latest ethical scandal to taint Issa since he became the chairman of the House Oversight Committee.
Issa Firm Underpaid Tariffs For Years

Issa Sits On Board Of Company That Just Paid $2.5 Million In Back Tariffs. From The San Diego Union-Tribune:

The Vista car-alarm company once owned by Congressman Darrell Issa was paying about half the required tariffs on certain parts it imported from China for years and paid an estimated $2.5 million in back duties earlier this year to rectify the situation.

Issa no longer owns DEI Holdings Inc., although he is still on the board of the company, which is being sold to Boston-based Charlesbank Capital Partners for $285 million in cash. [San Diego Union-Tribune, 5/18/11]

"Issa Said He Was Aware Of The Misclassifications And Participated In Efforts To Resolve Them." From The San Diego Union-Tribune:

In a prepared response to questions from The Watchdog, Issa said he was aware of the misclassifications and participated in efforts to resolve them.

"Once these issues came to the attention of the board of directors, we called for an independent review by expert counsel," he wrote. "My understanding is the company has made appropriate tariff adjustments and disclosures both to Customs and our independent auditors." [San Diego Union-Tribune, 5/18/11]

DEI Did Not Repay Back Duties Until After Whistleblower Filed Complaint. From The San Diego Union-Tribune: "Former DEI executive Mike Wilhelm noted that the disclosure was made a year after the fact, and only after he filed a whistle-blower complaint with Customs on March 14 of this year. 'They weren't going to do it unless I forced them to,' said Wilhelm, a DEI vice president who resigned over the issue in March after 10 years with the company. "Frankly, I became ashamed to work there.'" [San Diego Union-Tribune, 5/18/11, emphasis added]

Whistleblower: DEI "Hired A Consultant" Who Told Them Not To Pay Back Import Duties. From Wilhelm's complaint to U.S. Customs and Border Protection: "Company rejected the advice to legal counsel to file required notice and pay back import duties of ~ $3m (difference between 1.3% and 2.5%) because they hired a consultant who told them that unless there was a whistle blower, they could get away without paying." [Wilhelm complaint to CBP, 3/14/11, via San Diego Union-Tribune]

Expert: "This Company Has Not Been Meeting That Reasonable Care Standard." From The San Diego Union-Tribune:

Minnesota trade consultant John Goodrich said importers played a cat-and-mouse game with regulators to minimize their tariffs until 1993, when Congress passed the Customs Modernization Act. That law placed new responsibilities on companies bringing goods into the United States.

"Importers are now held to a hyper due-diligence level known as reasonable care," Goodrich said.

"This company has not been meeting that reasonable care standard," Goodrich said after reviewing the whistle-blower complaint and the company's financial disclosure statements divulging the problem.

He noted that every duty form states the importer "will immediately furnish to the appropriate CBP officer any information showing a different statement of facts" than those reported on the shipping records.

Goodrich said, "It is difficult to justify that waiting six to eight months to make corrections and to disclose constitutes 'immediately.'" [San Diego Union-Tribune, 5/18/11, emphasis added]

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