August 22, 2011

Setting the Record Straight

By crewstaff

In the war raging between Rep. Darrell Issa (R-CA) and The New York Times, there’s plenty of blame to go around.

At issue is the Times’ Aug. 14 story, A Businessman in Congress Helps His District and Himself.  The piece suggested Rep. Issa’s official actions had benefited his business and personal interests.  Rep. Issa complains it contained multiple errors, and has demanded a front-page retraction.  

It’s worth noting the Times story says Rep. Issa “did not respond to repeated written requests in the last three weeks to discuss his outside interests,” an interview that, had he chosen to grant it, would have allowed him to correct some of the alleged inaccuracies before the story went to press.

With the accusations flying, CREW decided to look at a few facts.  Now, we aren’t prepared to arbitrate the dispute over whether Rep. Issa’s office overlooks a golf course or not because we haven’t visited the building.  In addition, we’ll let Toyota, Rep. Issa  and the Times sort out whether Rep. Issa’s former company, Directed Electronics, is a “major supplier” to Toyota.  Here’s what we have learned:

Dispute #1

The Times reported Rep. Issa’s investments “have often produced sharp profits.  In one 2008 sale, months before the stock market crashed, his family foundation earned $357,000 on an initial investment of less than $19,000 — a return of nearly 1,900 percent in just seven months, the foundation reported to the Internal Revenue Service. It reported acquiring the security, then known as AIM International Small Company Fund, at a cost basis representing a tiny fraction of the market value.”

 Rep. Issa complains this information is “based on reporting errors by the New York Times” and “based on an incorrect form obtained by the Times.”  As proof, Rep. Issa provided a Merrill Lynch trade confirmation showing his initial investment actually cost slightly less than $500,000.  That means the foundation sold the shares at a loss, not a profit.

The Times information appears to be based on the Issa Family Foundation’s 2008 tax filing, which indeed reports the foundation bought 18,789 shares in the fund for $18,789 in April 2007, and sold them in January 2008 for $375,026.  If Rep. Issa’s trade confirmation is correct- and CREW has no reason to think it isn’t – then the foundation itself incorrectly reported the transaction to the Internal Revenue Service.  The Times’ conclusions were based on the foundation’s own incorrect public disclosures.  So Rep. Issa’s claim the error was due to “reporting errors by the New York Times” is unfair. 

That said, the page of the tax filing listing the transaction in question includes more than a dozen other purchases of shares in the AIM International Small Company Fund – all of which cost significantly more than $1 a share.  So the Times, in this case, probably should have questioned whether the foundation had made a mistake in reporting such a low share price on the transaction.

Dispute #2

The Times reported Rep. Issa bought a medical plaza in Vista, Calif., for $10.3 million in 2008 and that he secured $815,000 in earmarks to widen a road in front of it.  The article then asserts the value of Mr. Issa’s property skyrocketed due in part to the planned government-subsidized road construction.  “The assessor’s office now values the complex at $16 million, a 60 percent appreciation,” the Times stated.

In reaction to the Times piece, Rep. Issa’s office released a settlement statement showing he purchased the medical complex for $16.6 million, “the exact figure of its current tax assessment.  According to these numbers, the appreciation is not 60 percent but roughly zero,” his office wrote in the request for the retraction. 

Rep. Issa is correct about the purchase price.  It isn’t clear how the Times reached its conclusion given that the correct information has been publicly available for some time.  The difference between the price reported by the Times and the price paid by Rep. Issa seems to consist of a $6.3 million loan Rep. Issa assumed when he bought the property.  The$16.6 million purchase price, including the $6.3 million loan, was previously documented in a 2008 press release by a commercial real estate company involved with the transaction.  Further, Center for American Progress linked to the release in a March 2011 article about Rep. Issa.  

Finally, CREW is getting dragged into this.  Bloggers and others have claimed CREW has attacked Rep. Issa on some of the same points included in the Times story.  One blogger even asserted we’ve accused Times reporter Eric Lichtblau of plagiarizing our research for the story.  For the record: CREW hasn’t accused the Times of plagiarism, and hasn’t previously commented on the paper’s allegations against Rep. Issa.  Rep. Issa and the Times are going to have to finish fighting this out themselves.

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