Justice Will Examine Charges against Gephardt

Article excerpt

House Minority Leader Richard Gephardt not only could face a reprimand by the House ethics committee, if it determines he failed properly to disclose transactions on a million-dollar beachfront home he owns, but the Missouri Democrat also could face stiff civil penalties if the Justice Department files separate charges under the Ethics in Government Act.

Such charges carry stiff penalties -- up to $5,000 per violation. And Justice officials say the department probably will file charges against Gephardt. "We will have to wait until the ethics committee decides what to do," says one Justice official. However, the official adds, "we probably will look at it [the Gephardt case] no matter the outcome."

Besides possible ethics and Justice Department probes, the 10-term Democratic congressman also appears likely to undergo scrutiny by federal bank and tax investigators for possible civil and criminal violations, say public-integrity and ethics law-yers contacted by Insight. These separate investigations would stem from issues at the heart of an ethics complaint filed Feb. 2 by Rep. Jennifer Dunn, Washington Republican.

Dunn, a second-term member now on the House Ways and Means Committee, asked the bipartisan ethics panel, formally called the Committee on Standards of Official Conduct, to determine whether Gephardt broke House and federal rules by failing properly to disclose a series of complicated transactions involving his swap of a condominium in Duck, N.C., for an expensive vacant lot in nearby Corolla. Gephardt, who avoided paying capital-gains taxes by using a tax loophole called a Starker Exchange, appeared to violate several laws, according to Dunn, including financial-disclosure requirements, banking and tax regulations. The crux of the Dunn complaint, which bank and tax investigators also may probe, involves two deeds of trust signed by Gephardt; his wife, Jane; and two business partners, in which all four pledged to build on their lot a house that they would use "only" as their second home.

In that the house, a seaside mansion called Northern Star, was and has been used as a rental unit from virtually the first day of occupancy, Dunn's complaint alleges that Gephardt not only violated federal bank laws (and possibly tax regulations), but also broke House rules requiring all business transactions to be revealed fully on annual financial-disclosure reports. At first, the Dunn complaint states, Gephardt failed to mention the investment tax swap, and when he finally did he failed to report all banking transactions, including a second trust taken on the Corolla property for use as collateral on the congressman's primary residence in Northern Virginia. …