Rangel Inquisitor Has His Own Reporting Problem

McCaul Fails to Properly Disclose Transactions Worth Millions of Dollars on Financial Disclosure Forms

Posted September 10, 2010 at 6:19pm

Editor’s Note: This article contains updated information not included in the print edition.

Rep. Michael McCaul, one of the richest Members of Congress, appears to have failed to fully disclose dozens of stock transactions worth millions of dollars on his annual financial disclosure reports for 2008 and 2009.

McCaul is the ranking member overseeing the ethics trial of Rep. Charlie Rangel, which is set to begin this month on charges that, among other things, the New York Democrat failed to report or misreported numerous assets or income on his financial disclosure forms between 1998 and 2008.

A Roll Call analysis of McCaul’s annual reports found the Texas Republican did not fully detail the 2008 sale of Clear Channel stocks owned by his spouse, including the date of the transaction.

McCaul spokesman Mike Rosen said Friday that the lawmaker believes he has filed accurate forms. But after his office reviewed the version of the story that appears in Monday’s newspaper, McCaul released a statement Sunday that acknowledged the forms were wrong but blamed the errors on the accounting firm that prepares his report.

“We have honestly and accurately fully disclosed all of our finances. We have always been open and transparent with all of our transactions and have provided complete, full financial disclosure through our accountant to Millan & Company, which prepares our Personal Financial Disclosures,” McCaul said in the statement.

“Our PFDs were submitted to and approved by the Ethics Committee. Millan & Company made clerical errors and has taken full responsibility for them. It is common for members of Congress to amend their Personal Financial Disclosures and we look forward to correcting these clerical errors immediately,” McCaul said.

McCaul also provided a Sept. 12 letter to the lawmaker from accountant Richard Millan, in which Millan apologizes for “inadvertent and unintentional spread sheet cut-off clerical errors.”
The lawmaker criticized Roll Call’s decision to report the story as “irresponsible” after his office was unable to address the apparent errors before press time Friday.

Members of Congress are required to disclose investment accounts, individual stocks and other assets, such as rental properties, on their annual forms. Members must sign a signature page, which is not publicly released, certifying that their forms are “true, complete and correct to the best of my knowledge and belief.”

Those annual reports require Members to detail each asset, including the account’s end-of-year value, as well as whether they earned any income. In a separate section of the reports, Members are also required to detail any transactions, including a date of a purchase or sale, and the total value of the transaction, not only the profit.

On his 2008 report, McCaul stated that his spouse, Linda McCaul, owned multiple stakes in Clear Channel, the media conglomerate founded by her father, Lowry Mays. The report indicated McCaul’s wife owned stock in Clear Channel both as an individual and via a family partnership.

McCaul indicated that his wife’s individually held stock, which he valued in 2007 at a minimum of $5 million, sold in 2008 and earned $1 million to $5 million in income. He listed the stock with no value at the end of 2008.

Similarly, McCaul reported his wife’s Clear Channel stock held by the partnership, valued in 2007 at a minimum of $500,000, had no value at the end of 2008. He did not indicate a sale — though his 2009 report states the asset had sold in 2008 — but did report more than $5 million in income from the stock.

But neither transaction is detailed in the report in the section that requires disclosure of the date of sale and the dollar value of the transaction.

In his 2008 report, McCaul reported that one of his dependent children sold Clear Channel stock, both individually and via the same family partnership, and he provided detailed transaction information on those sales.

McCaul reported that the dependent child earned $1 million to $5 million in income from the July 2008 sale of the individually held stock in a transaction valued at $1 million to $5 million. The partnership-held stock earned $100,000 to $1 million in income from a February 2008 transaction valued at $1 million to $5 million.

In his letter to McCaul, Millan stated the transaction details for the dependent child’s Clear Channel stock also included that of McCaul’s spouse.

“On the 2008 report, the Clear Channel Communications line item cell on the spreadsheet cut off the designation of SP which should have been included,” Millan wrote. “This was a cell format printing error made in our office which had absolutely nothing to do with your providing information to our office.”

In addition to those four accounts, both McCaul’s spouse and dependent child also sold Clear Channel stock in July 2008 via another family partnership, the Linda Mays McCaul Partners. He provided full details in his 2008 report on those sales.

Two private-equity firms purchased Clear Channel Communications in 2008, in a sale that was reported to have offered shareholders $36 per share.

According to his most recent financial disclosure form, which covers the 2009 calendar year, McCaul also indicated his spouse sold or purchased dozens of stocks, but he failed to detail the transactions, including the dates or values of the dealings.

McCaul, who alphabetizes his forms, provides detailed information on transactions involving stocks that begin with the letters A to E.

But McCaul’s form displays no information for more than 60 accounts that appear to have purchases or sales, beginning with Exxon Mobil Corp. and continuing through Western Union Co.

McCaul responded Sunday, stating that the missing information was the result of a clerical error and will be amended.

“According to Millan & Company, ‘This clerical error in no way stemmed from an omission by Congressman McCaul,'” McCaul said in a statement.

The Texas lawmaker, who will rank sixth on Roll Call’s upcoming annual survey of the richest Members of Congress with a minimum net worth of $73.75 million, has seen his fortunes sextuple since he filed his first financial disclosure report, which was for the 2004 calendar year.

But it is unclear whether McCaul’s latest growth spurt of nearly $36 million since 2008 is an impressive uptick in his fortunes or merely a reporting glitch.

On his most recent report, the lawmaker states that Linda McCaul owns a stake in “LLM Partners Ltd., Family Limited Partnership,” which is valued at $25 million to $50 million.

She also reports a stake in “LLM Partners, Ltd., Invest in LLM Family Investments,” valued at $25 million to $50 million.

But in his 2008 financial disclosure report, McCaul reported both of these assets under a single entity, which was valued at $25 million to $50 million.

Although it is possible the accounts were worth as much as $50 million in the previous year, Roll Call considers only the minimum value of each reported asset, or $25 million for its 2008 calendar year tally.

Because McCaul now reports the accounts as separate assets, he receives twice the credit — boosting his total by
$25 million with a single account.

Roll Call calculates each Member’s minimum net worth by adding the minimum value of each asset and subtracting the minimum liabilities reported.