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Ways and Means Staff Dismiss New York Times Story Linking Rangel Fundraising, Legislation

JAN. 2, 2009

Ways and Means Staff Dismiss New York Times Story Linking Rangel Fundraising, Legislation

DATED JAN. 2, 2009
DOCUMENT ATTRIBUTES
You may see a story in the New York Times tomorrow and, if at the end of reading it you wonder how this ended up in the paper, you're probably not alone. The reporter attempts, and fails, to establish a nefarious link that does not exist.

In addition to numerous attempts to help the reporter understand the actual circumstances and timeline of events, two senior members of Congress directly contradicted the reporter's assertions and the story is still in the paper. No matter how many people told him the world was round, he kept insisting it was flat. The document the reporter believed was a smoking gun was apparently a generic letter (which the reporter refused to share despite repeated requests) written after the decision had already been made to include the tax provision in question.

Attached are documents, including materials provided to the New York Times in response to their inquiry as well as supporting documents which will provide valuable and necessary information.

We will be happy to answer any questions you may have.

Sincerely,

 

 

Matthew Beck

 

Communications Director and

 

Policy Advisor

 

202-225-1417

 

Begin materials provided to NY Times:

To the New York Times:

You have embarked on a series of articles attempting to establish what does not exist -- a link between the broad public policy agenda that Chairman Charles Rangel pursues as Chair of the House Ways and Means Committee and fundraising-related activity on behalf of City College of New York, a public institution in Chairman Rangel's congressional district that provides educational opportunities to economically disadvantaged minorities, many of whom are Chairman Rangel's constituents. Because of the broad jurisdiction of the Ways and Means Committee it is possible, indeed probable, that the New York Times can go through the list of CCNY donors and find places where they have been affected by federal law over the past two years -- and that may indeed be the paper's agenda. That agenda, however, turns the law on its head. The law expressly permits Members of Congress to engage in fundraising activity on behalf of non-profits such as CCNY and recognizes that donations will inevitably coincide in time with legislative activity. That coincidence of timing does not mean that there is any link between the two or anything improper about either the donations or the broad policy issues addressed by Chairman Rangel -- no matter how many articles attempt to demonstrate otherwise.

From the beginning of your contacts on this piece regarding AIG and the CV Starr Foundation, there have been significantly flawed premises which we have pointed out continually to your reporter:

1) While the initial questions asked about relationships and contacts with AIG, Mr. Hank Greenberg, and CV Starr, it has appeared that there has been an assumption through the questions that these are all one and the same. They are not, as any reader of the NYT business pages over the past several years can attest. The Board of AIG replaced Mr. Greenberg in 2005. For that matter, as far as we know, CV Starr employs no lobbyists and has no reported lobbying contacts with the Ways and Means Committee, and Mr. Greenberg does not act on behalf of AIG or in coordination in any way. And given that the value of AIG stock has fallen in the last year from $60 to $1.50, and that federal taxpayers are now the single largest shareholders of the company, it's difficult to argue that Mr. Greenberg personally saw much benefit from the events of the last year.

2) There was no contribution, pledge, or formal commitment from AIG to contribute to CCNY -- ever. While a $10 million dollar figure appeared next to internal fundraising documents, this represented a potential for what CCNY fundraisers thought could be an appropriate request in 2007-08 given the company's other support for non-profit educational activities. It is not unusual for fundraisers who raise money for non-profits to begin with high targets.

3) The CV Starr Foundation, which committed $5 million to CCNY, has a well-established record of charitable giving to educational institutions, particularly to help disadvantaged youth. The Starr Foundation has given much larger amounts to programs in New York in the past, including a $25 million grant to the Harlem Children's Zone Project in October 2006. Starr also gave $10 million in February 2007 to The Cooper Union for the Advancement of Science and Art in New York City, $1.5 million for an Arts-Education Program in New York City in May 2007, $25 million to the World Trade Center Memorial Foundation in June 2007, $25 million to the Weill Cornell Medical College in June 2007, and a number of other grants. The Foundation also has a record of donating to many causes also supported by the New York Times Foundation, including Brown and Yale Universities, the Harlem School for the Arts, The City Parks Foundation and the Dance Theatre of Harlem. The Starr Foundation, like the Sulzberger Foundation, has also contributed to the Rainforest Alliance.

4) Given its substantial commitment to educational causes, the Starr Foundation was a logical potential source of funding for CCNY, whose fundraisers submitted a detailed grant proposal to the Foundation's Board.

5) The text of H.R. 6049, which extended critical tax relief to American families and businesses -- including the extension of the active financing provision -- was included in the bailout bill (H.R. 1424) by the U.S. Senate. Chairman Rangel drafted and introduced H.R. 6049 as a separate piece of legislation and ultimately decided to include an extension of the active financing provision only after urging, and a vote of support for its inclusion, from fellow Democrats on the Ways and Means Committee led by Representative Joseph Crowley (D-NY) - as outlined in his comments to your reporter. The National Journal at the time also reported that Rep. Richard Neal was pushing for the inclusion of the extension. This was not a provision that affected only AIG - most major American multinationals were lobbying in favor of this. Chairman Rangel had opposed the two year extension initially but accepted it after a majority of his Committee's Democrats voted in favor of including it in an early May caucus meeting. The Joint Committee on Taxation (JCT)'s revenue estimate including the active financing provision in this legislation is dated May 12, 2008, confirming that the decision to include this provision occurred as a result of this caucus meeting and was unrelated to any purported May 13, 2008 letter from AIG to Chairman Rangel (to which your reporter has referred but has repeatedly refused to provide to us). While neither Chairman Rangel's personal nor committee office has a copy of this letter -- to which we were asked to respond without the benefit of seeing it -- it is irrelevant. Congressman Joe Crowley, Capitol Hill publications, and the evidence of the JCT's estimate all confirm that this decision, on its merits, was reached prior to the alleged letter, and the reporter appears to be willfully ignoring these facts, or discounting them because he is so wed to his premise that he is incapable of dispassionately considering evidence that conflicts with it.

6) The federal bailout of AIG was put together by the Bush Administration and Federal Reserve Chairman Ben Bernanke without any legislative activity or direction from the U.S. Congress. This bailout preceded the proposal of what became known as the Troubled Assets Relief Program (TARP). The TARP itself did not provide any direct financing of AIG. The statement of your reporter that "Mr. Rangel voted for the legislation that paid for the federally-funded bailout of AIG" is factually incorrect, again as frequent readers of your business pages or front pages this fall could easily point out. Financial Services Chairman Barney Frank spent a significant amount of time on the phone with your reporter explaining the TARP, who negotiated it, and the subsequent decision by the Administration to use some of the TARP for additional AIG assistance -- none of which involved Chairman Rangel.

7) While it is true that Chairman Rangel supported the TARP, it is worth noting that President Bush, Republican nominee John McCain, Democratic nominee Barack Obama, the House and Senate bipartisan congressional leaderships, the American and international business community, and the New York Times editorial page did so as well in the face of an international economic meltdown. Is the New York Times now suggesting that all of this support was motivated by a desire to help Hank Greenberg?

8) Your reporter has twisted Chairman Rangel's statements in July 2008 in an effort to create a conflict between the Chairman's words and the facts where none exists. Chairman Rangel said, in his July 22, 2008 letter to Chairman Stephanie Tubbs Jones of the Ethics Committee that "so far as I am aware, none of those whom I wrote had any pending requests into my office, lobbied me regarding any legislation before my committee, or asked me for assistance on legislation in which they had a special interest." This statement refers explicitly to the recipients of the letters from Chairman Rangel. No such letter was sent to AIG and accordingly it is misleading at best for your reporter to attempt to use this statement as a representation regarding AIG. At the time Chairman Rangel wrote to Hank Greenberg -- the Chairman of the Starr Foundation and the former CEO of AIG, Mr. Greenberg had been gone from AIG for two years, having been forced to resign from AIG in March 2005. Chairman Rangel's July 2008 statements are true and accurate and any reasonable and open-minded observer of the events of the past two years cannot conclude otherwise.

In sum, there is simply no connection between Chairman Rangel's advocacy on behalf of an educational institution in his district and legislation affecting AIG. We aren't talking narrowly drawn earmarks slipped into bills in the dark of night, or vaguely worded legislative language giving tax breaks to only one company that meets the specifications. Whether it was the minimum wage legislation addressed in the earlier Times article or the Bush Administration's decision to provide assistance to AIG and active financing provisions addressed here, these are huge policy matters that were debated and negotiated in full sunlight, played out under the spotlight of the national press, and covered at the time for what they were -- policy arguments. Only a newspaper desperate to compete with the tabloids can try to conclude otherwise.

Sincerely,

 

 

Ms. Janice Mays

 

Chief Counsel and Chief of Staff

 

House Committee on Ways and Means

 

 

Mr. John Buckley

 

Chief Tax Counsel,

 

House Committee on Ways and Means

 

 

Mr. Matthew Beck

 

Communications Director and Policy

 

Advisor,

 

House Committee on Ways and Means

 

Supporting Documents:

1. E-mail transmitting JCT revenue estimate, per Ways and Means Committee staff request, for inclusion of active financing provision in H.R. 6049 -- dated Monday, May 12, 2008. (2 pages)

2. Background on active financing provision and bailout (2 pages)

3. National Journal article dated 5/14/08 reporting that the active financing provision was "initially left out of the bill, but put back in after lobbying by Ways and Means Democrats . . ." (2 pages) [omitted]

4. Comments and background material provided to NYT reporter by U.S. Rep. Joseph Crowley

                          12-May-08 12:41PM -

 

                            #08-1 077

 

                        VERY PRELIMINARY

 

                               12-May-08

 

 

                - Committee on Ways and Means -

 

 

 ESTIMATED REVENUE EFFECTS OF PROPOSALS FOR POSSIBLE INCLUSION IN AN

 

                         EXTENDER PACKAGE

 

 

                    Fiscal Years 2008 - 2018

 

 

                     [Millions of Dollars]

 

 

 Provision                                              Effective

 

 

 1. Modify film production deduction under

 

 section 199                                            tyba 2007

 

 

 2008     2009     2010     2011     2012      2013        2014       2015

 

 __________________________________________________________________________

 

   -3      -15      -25      -34      -37       -39         -42        -45

 

 

 2016      2017      2018      2008-13        2008-18

 

 ______________________________________________________

 

 -49       -52        -56         -153           -397

 

 

 2. Modify expensing of qualified film and

 

 television productions                                 qfatpca 12/31/07

 

 

 2008     2009     2010     2011     2012      2013        2014       2015

 

 __________________________________________________________________________

 

  -25     -140      -24       60       26        18          15         13

 

 

 2016      2017      2018      2008-13        2008-18

 

 ______________________________________________________

 

   11        9          7          -85            -30

 

 

 3. Exception under subpart F for active financing

 

 income (sunset 12/31/09)                               tyba 12/31/08

 

 

 2008     2009     2010     2011     2012      2013        2014       2015

 

 __________________________________________________________________________

 

 --       -960   -3,010       --       --        --          --         -

 

 

 2016      2017      2018      2008-13        2008-18

 

 ______________________________________________________

 

   --       --         --       -3,970         -3,970

 

 

 4. Look-through treatment of payments between

 

 related CFCs under foreign personal holding

 

 company income rules (sunset 12/31/09)                 tyba 2008

 

 

 2008     2009     2010     2011     2012      2013        2014       2015

 

 __________________________________________________________________________

 

   --     -143     -468       --       --        --          --         --

 

 

 2016      2017      2018      2008-13        2008-18

 

 ______________________________________________________

 

   --       --         --         -611           -611

 

 

 NET TOTAL

 

 

 2008     2009     2010     2011     2012      2013        2014       2015

 

 __________________________________________________________________________

 

  -28   -1,258   -3,527       26      -11       -21         -27        -32

 

 

 2016      2017      2018      2008-13        2008-18

 

 ______________________________________________________

 

  -38       -43       -49       -4,819         -5,008

 

 

 Joint Committee on Taxation

 

 

 NOTE: Details may not add to totals due to rounding. Date of

 

 enactment is assumed to be June 1, 2008.

 

 

 Legend for "Effective" column:

 

 qfatpca = qualified film and television productions commencing after

 

 tyba = taxable years beginning after

 

 

BACKGROUND ON ACTIVE FINANCING AND BAILOUT
  • Early in May 2008, Chairman Rangel instructed his staff to begin developing a new version of tax extender and energy tax incentive package. Previous efforts to extend expiring tax relief for individuals and businesses passed by the House had been stalled in the Senate over a disagreement pertaining to offsets included in the House-passed legislation to ensure the measure did not increase the Federal deficit.

  • Chairman Rangel convened a members-only meeting of Ways and Means Democrats on Wednesday, May 7, 2008 to discuss development of this legislation. When informed that the active financing provision was not part of the package, Congressman Joseph Crowley (D-NY), along with several other members requested its consideration and inclusion in the legislation. The Chairman put the issue to the caucus of Ways and Means Democrats during this meeting and a majority of the Members voiced support for its inclusion. Chairman Rangel instructed his staff to include the provision.

  • Pursuant to that instruction on May 7, 2008, Chairman Rangel's staff added the items to the draft legislation and requested an estimate of the revenue effects from the Joint Committee on Taxation (JCT). This revenue estimate was provided by JCT on Monday, May 12 at 1:51 PM.

  • Chairman Rangel convened another caucus of Ways and Means Democratic Members on Tuesday, May 13. This Caucus confirmed the addition of the active financing provision to the legislation.

  • Chairman Rangel introduced H.R. 6049 on Wednesday, May 14 2008.

  • The Ways and Means Committee favorably reported H.R. 6049 on Tuesday, May 20.

  • The House of Representatives considered, and passed, H.R. 6049 by a vote of 263-160 on Wednesday, May 21, 2008.

  • On September 22, 2008, the Federal Reserve, chaired by Ben Bernanke, provided an $85 billion credit line to AIG. AIG granted the Federal Government an option to acquire 79.9 percent of its stock. This action was taken by Chairman Bernanke independent of any legislative direction or authority provided by Congress. At no time was Chairman Rangel involved in the Fed's decision to provide assistance to AIG. He learned of the Fed's action like everyone else, from media reports at the time of action. This fact is supported by information provided to the New York Times Reporter during a conversation with House Financial Services Committee Chairman Barney Frank (D-MA), who told the reporter that Chairman Rangel played "no role" in the Fed's action.

  • The U.S. Senate amended and passed H.R. 6049 on September 23, 2008.

  • The House did not take up the Senate Amendment to H.R. 6049, nor did the two bodies enter into a formal conference on the measure.

  • On September 29, 2008, the House defeated legislation developed by the Administration and Congressional leadership (H.R. 3997, the Emergency Economic Stabilization Act of 2007) to provide $700 billion to stabilize the financial sector.

  • The Senate combined the text of the legislation defeated in the House (H.R. 3997) with the Senate version of the tax extender legislation (H.R. 6049) and added them to an unrelated House bill (H.R. 1424). This legislation became the Emergency Economic Stabilization Act of 2008

  • The Senate passed this legislation on October 1, 2008.

  • The House concurred with the Senate Amendments of H.R. 1424 on October 3, 2008 and the President signed the measure into law on the same day [PL 110-343].

 

Information provided to NYT reporter on 12/24/08

Quote from Congressman Crowley: "The extension of Active Financing and the inclusion of it in the bailout bill was a result of my efforts and the majority of other Democrats on the Ways and Means Committee. Any suggestion otherwise is wrong -- period. While Chairman Rangel opposed extending the provision this year, a majority of the Democrats on the Ways and Means Committee supported doing so and the Chairman listened to his membership."

BACKGROUND PROVIDED BY CROWLEY OFFICE

* Congressman Crowley, along with several other members, brought to the attention of Chairman Rangel at two Democratic Ways and Means, Members-only meetings, the first on May 7, 2008 and the second on May 13, 2008 -- to include an extension of Active Financing in the extenders package.

* Congressman Crowley heard initial drafts of the extenders bill did NOT include an extension of Active Financing, which is an important tax law for the financial services firms of New York City, including Citibank which is the largest private sector employer in Queens County.

* Chairman Rangel resisted, arguing that they should not be included as the extenders bill was only going to include expiring tax provisions.

* Several members lobbied the Chairman to include this extension of active financing in advance and NOT let this provision expire.

* Congressman Crowley argued, as did others, that if the Congress did not fix this issue by extending Active Financing in the 2008 tax extenders package, banks like Citi, would have to reflect that new tax increase on their balance sheets starting in the first quarter of 2009 (Jan-March 2009).

* This is because without a guaranteed extension of Active Financing in law, banks would need to hold significantly more cash reserves to make up for this substantial tax change, even if Congress later extended Active Financing retroactively in 2009.

* Although AIG was nominally a member of the financial services coalition, due to other distractions, AIG was not active in lobbying the issue.

* In a private meeting, the Democrats on the Ways and Means Committee discussed this issue along with others, and voted in favor of including the extension of Active Financing in the tax extenders bill, which was later enveloped into the bailout bill by the U.S. Senate and presented to the House of Representatives in a take-it-or-leave-it maneuver.

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