Response by The New York Times
Response to 1 Shortly after Sept. 11, 2001, an assortment of large United States-based corporations began opening small offices offshore in an effort to reduce their federal tax burden by declaring themselves foreign companies. Legislators from both parties were outraged and vowed to end the practice, which is known as “corporate inversion.” When Congress eventually passed a bill to tax the companies in 2004, it contained a loophole that allowed four corporations, including Nabors Industries, to continue using the tax shelter. In January 2007, the new Congress convened and the Democrats who were assuming control of the House of Representatives said they intended to reduce the deficit and pay for middle-class tax cuts by eliminating corporate loopholes. The next month, Congressional records show, the Senate passed a bill that, among other things, would close the loophole for Nabors. The issue was referred to the House of Representatives. The Committee on Ways and Means, of which Mr. Rangel is the chairman, responded by putting up a competing bill that left the loophole intact. Interviews with lawmakers, lobbyists who worked on the legislation and Congressional staff members — including aides to the top Senate Democrat — made clear that the objections that killed the move to end the tax loophole came from Mr. Rangel himself.
Response to 2 Mr. Rangel’s response appears to be conflating the efforts to close the loophole in 2007 with earlier attempts. As far back as 2002, legislative leaders from both parties, in both houses of Congress, announced plans to end the tax shelter. In March 2002, Senate finance leaders issued a bipartisan statement warning corporations that Congress was planning to pass a law that would close the loophole for any company that moved offshore from that day forward. An early and outspoken opponent of inversions, Mr. Rangel told CNN on June 25, 2002, the day after Nabors completed its move, “To flee the country during a time of war, that’s disgraceful.” But by 2003, some Republican members of the House were pushing to change the effective date of the bill, so that it would apply only to companies that moved off shore after March 2003 — carving out a tax shelter for Nabors and three other companies. Democrats in the Ways and Means Committee, led by Mr. Rangel, helped block at least two attempts to establish that loophole for Nabors and the other companies in 2003, according to Congressional records, news accounts and interviews with his staff members. In October 2004, Mr. Rangel voted against moving the effective date forward, Congressional records show, so that Nabors and the other companies would be deprived of the loophole. Republicans prevailed, however, and the tax shelter later became law.
Response to 3 Mr. Rangel first met with the Nabors chief executive, Eugene M. Isenberg, in September 2006 as he sought to attract donors for a City College of New York school to be named in the congressman’s honor. By the end of the year, Mr. Isenberg had pledged $1 million to the Rangel Center and had made a $100,000 donation. Weeks later, on Feb. 1, 2007, the Senate passed a bill that would, among other things, deprive Nabors of the loophole. The bill was sent to the House, and the lobbying firm Nabors had hired to argue its case focused its effort on the Ways and Means Committee.
Mr. Rangel’s lawyer Leslie Kiernan says the congressman “doesn’t recall any alleged meeting” with a lobbyist for Nabors on the morning the Ways and Means Committee was considering the tax bill that affected Nabors Industries, asserting that “people have breakfast all the time and don’t remember who was with them.” But both Mr. Isenberg and his lobbyist said in separate interviews that they sat down to discuss the company’s tax issues involving the loophole with Mr. Rangel over coffee in the Carlyle Hotel on Feb. 12, 2007.
That meeting took place a few hours before Mr. Rangel returned to Washington for the Ways and Means Committee’s mark-up meeting on the bill, one that ultimately did not include any closing of the loophole that had benefited Nabors. It also came 11 days before Mr. Isenberg’s second $100,000 donation to the Rangel Center at City College was deposited into the school’s bank account.
Mr. Isenberg said the meeting with Mr. Rangel and the lobbyist occurred immediately after the two of them had discussed the City College project over breakfast at the Carlyle with the Manhattan district attorney, Robert M. Morgenthau, a longtime supporter of the school. Mr. Isenberg said the meeting between the lobbyist, Mr. Rangel and himself lasted eight minutes, three of which were spent talking about the company’s tax loophole concerns, and that the congressman and the lobbyist did all of the talking. “I didn’t say a word,” Mr. Isenberg recalled.
The lobbyist, Kenneth J. Kies, acknowledged that he discussed the loophole and the pending legislation with Mr. Rangel at the Carlyle that morning.
Response to 4 For weeks after the Senate passed its minimum wage bill in February 2007, which called for closing the tax loophole, members of the Senate Finance Committee issued press releases and made public statements urging Mr. Rangel and the Ways and Means Committee not to block their attempts to close the tax shelter for Nabors and the other companies. The chairman of the Senate Finance committee, Max Baucus, a Democrat from Montana, had sponsored the Senate version of the bill. After it passed, he said he was proud of the efforts to shut down the tax shelters. Senator Baucus’s staff members and Republicans in the Senate said that they pushed the House to adopt the loophole-closing provisions, but the Ways and Means Committee would not agree, citing Mr. Rangel’s objections.
Mr. Rangel’s letter appears to be suggesting that the precise language the Senate approved in its effort to close the loophole never received a formal hearing before the Ways and Means Committee. What he does not mention is the reason for that: because Mr. Rangel and his aides prevented the issue from being brought up.
As to Mr. Rangel’s contention that “at no time was the issue of offshore inversion raised in the development of this legislation,” it is also contradicted by a letter Mr. Kies sent to The New York Times the day after the Nov. 25 article was published. Recounting the Feb. 12 meeting at the Carlyle, Mr. Kies wrote, “We spoke, among other things, about legislation affecting Nabors.”
Response to 5 The article makes two references to Mr. Rangel’s efforts to pass the Doggett bill and notes that — if it had passed the Senate — it would have resulted in a substantial increase in taxes for Nabors.
Response to 6 The article makes prominent mention of Mr. Rangel’s assertion that he is unilaterally against retroactive tax increases. In addition, it describes the Congressman’s explanation that he opposed the Senate bill because he considered it to contain retroactive tax increases and was, therefore, bad policy. It also points out that Mr. Rangel said he was particularly opposed to the attempts to close the loophole for Nabors because it would require changing the effective date of a bill that had already been enacted into law.
Response to 7 Congressional records indicate that Mr. Rangel has voted for numerous retroactive tax increases in the past — including one instance in which he voted for a retroactive tax increase that changed the effective date of an existing law. The article also pointed out that in 2004, Mr. Rangel was among those legislators who specifically rejected the argument that closing the loophole for Nabors was a retroactive tax increase because Congress had warned corporate leaders in March 2002 that it intended to shut down that tax shelter.
Response to 8 Mr. Rangel did allow one of his staff members, the Ways and Means Committee chief tax counsel John Buckley, to speak on a not-for-attribution basis. Mr. Rangel’s lawyers later sent an e-mail statement, attributed to Mr. Buckley, for use on the record. The e-mail message was mentioned in the article, to confirm the congressman’s effort to pass the Doggett bill. But the message was not quoted directly because Mr. Buckley’s three main assertions — that Mr. Rangel has never supported any retroactive tax increases, that the proposal to close the loophole for Nabors was never considered by the Ways and Means Committee and that the Senate had abandoned efforts to close the loophole without any involvement from the House — were either addressed by Mr. Rangel’s lawyers, directly contradicted by our reporting or both.
Response to 9 In interviews, Mr. Morgenthau said he introduced Mr. Isenberg to Mr. Rangel because he thought Mr. Isenberg could help the congressman raise money for the City College project. Mr. Morgenthau said he arranged and attended two meetings between Mr. Isenberg and Mr. Rangel: one in the Manhattan district attorney’s office on Sept. 18, 2006, the other at the Carlyle on Feb. 12, 2007. The article reported Mr. Morgenthau’s assertion that money was not discussed at either meeting. It also reported Mr. Isenberg’s statement that he wrote a $100,000 check to the Rangel Center on Feb. 7, 2007 and it was deposited into the school’s account on Feb. 23, 2007, but he does not recall when, or how, it was actually delivered to C.C.N.Y.
David Kocieniewski
Dec. 3, 2008 |
