Rangel Says He Will File Amended Returns to Reflect Income From Investments

I regret any embarrassment to my fellow members of Congress and colleagues on the Ways and Means Committee which may have been caused by unfair and inaccurate reports in the press concerning my handling of details of my personal finances related to my interest in a vacation home in the Dominican Republic.

Twenty years ago, I was invited by a personal friend and prominent New Yorker to invest in a beach house in the Dominican Republic, in an undeveloped area called Punta Cana. Although it had not yet been completed, it was a beautiful site for a price $88,900, requiring a down payment of $28,900.

The conditions of the transaction were that the mortgage would be reduced from rentals of the beach house. Each owner would benefit from a pooled fund of rental proceeds, with the amount for each determined by the number of rooms in their unit. I refinanced my home in order to take advantage of the opportunity. Subsequently another $23,000 was added to the mortgage for construction of a third bedroom. Until this year I had not received any personal cash proceeds from rentals of the unit. In fact, the investment reduced my mortgage by less than $5,000 a year over a period of 20 years.

What I now know is that although I have not personally received proceeds in cash, the fact is that any reductions to the mortgage actually counted as income and should have been reported as such.

The company's failure to provide timely and regular statements does not excuse my failure to more diligently pursue the actual terms of the arrangement and respond appropriately. For this I take full responsibility.

As you know, several weeks ago, I requested that the House Ethics Committee initiate two separate inquiries concerning (1) my apartments in New York; and (2) my efforts to assist City College of New York in establishing a Center for Public Service in my Congressional District in Harlem. (See attached letters and background fact statements).

I am preparing to seek an additional House Ethics Committee inquiry concerning my reporting of financial details concerning the beach house in Punta Cana and any errors that I may have inadvertently made in tax and House financial disclosure form filings. (See attached letter and background fact statement to the House Ethics Committee marked as attachments E and F respectively.)

I want to assure you that my love of our country, my own personal morals, and my devotion to the Congress of the United States prevents me from doing anything that would damage the reputation of this great body. In addition, as Chairman of the Ways and Means Committee I am held to a higher standard of propriety.

I am doing the following:

First, I will make the necessary corrections regarding past filings with amendments and corrections to House financial disclosure forms and IRS returns where needed. In the future, my lawyer and accountant will be singularly responsible for reviewing all my tax and House financial disclosure filings.

Second, I will shortly be filing amended federal, state and local income tax returns for the years 2004 to 2006. These returns will reflect modest taxes owed. (See attached.)

Third, I have asked my accountant to gather all the remaining tax information going back to the year that I first made my investment, 1988, if that is possible, and he will then inform me what additional taxes I owe, if any.

I look forward to a review of these issues by the Ethics Committee, and it is my hope that this matter will be dealt with expeditiously.

Thank you for your consideration, and I look forward to speaking with you soon.

Many of these units were internally financed by PCYC at 10.5% interest rate, payable in seven years in quarterly installment payments.

In the case of over fifteen units owned by several "pioneer" investors (very first foreign owners), after the first two years of operation of the rental pool, PCYC decided in its business judgment to forego the interest charges because the financial results from the rental pool of the units was significantly below what those original investors had been told to expect. This was intended to bring the installment payments of the deferred purchase price more in line with expected rental pool payments. This treatment was extended to all the "pioneer" foreign investors. This treatment was not extended to Dominican investors because they had received certain special tax benefits available under the Dominican Republic tourism investment law.

We confirm that Mr. Charles Rangel, as owner of Villa 412, was one of those "pioneer" foreign investors in the PCYC villas to whom PCYC extended this treatment.

I was very disturbed to read all the inaccurate facts that appeared in the recent New York Post article about your beach villa number 412 and your recent visit to Punta Cana. Allow me to set the record straight.

First, the income from the use of the beach villas by our hotel guests goes into collective rental pool where it is shared equally by all villa owners.

The rental pool income received by an owner is not a function of how many nights his/her individual villa or room. is utilized by our guests, but is a function of the occupancy of the hotel. The owner participates in a portion of the hotel rate paid by the guests attributable to room revenues less commission paid to agencies and less 10% maintenance reserve. From this total, only 47% is allocated to the rental pool and the balance to the hotel operator.

The rental pool income gets allocated among all unit owners on the basis of a point system which is a function of the relative type of each unit's owner. Each owner gets paid based in the number of points of its unit, less insurance, other charges and withholding Dominican tax.

Therefore, it is very inaccurate to say that 80% of the income received from our guests is paid to the villa owners. It is also inaccurate to say that your share of the pool income is a direct function of how often your own villa is utilized by our guests. Furthermore, the hotel rates quoted in the article are exaggerated and, of course, vary according to season.

The statement in the article about our dinner at Bamboo during your recent visit to Punta Cana Is also inaccurate. The restaurant was not closed to other guests. In fact, I remember that other guests approached our table to greet you. Nor was there any type of "security sweep" of the beach.

I regret that these facts have been distorted to embarrass you and that your privacy in Punta Cana was invaded.