A Project of The Annenberg Public Policy Center

Angle Misleads on ‘Ethics Loopholes,’ ‘Shady’ Land Deal


Sharron Angle attacks Harry Reid in two new ads for being wealthy and for making $1 million on a real-estate deal, which is true enough. But one of the ads falsely claims that the Senate Majority Leader "pushed ethics loopholes," and the other makes the unsubstantiated claim that the land deal was "shady."

Angle, the Republican who’s trying to win Democrat Reid’s seat, is running both ads in Nevada as the candidates enter the final stretch of one of the closest Senate races in the nation.

A basic premise of both ads is true: Reid has come a long way from his dirt-poor, son-of-a-coal-miner childhood. His most recent financial disclosure statement indicates that in 2009, his assets (including retirement plans, but not including personal residences) were worth between $3.1 million and $6.7 million; Senate rules require values to be reported only within ranges, so a more precise number is difficult to come by. Either way, he is affluent by just about anyone’s standards – except, perhaps, those of the U.S. Senate, where Reid ranked 37th in personal wealth in 2008, and 114th in Congress overall. It’s a rarefied club indeed.

It’s also true — as both ads claim — that Reid made $1 million in a real-estate deal, nearly tripling his money in a few years during the state’s boom. But while the Associated Press described the profit as a "windfall," the ads don’t back up their claims that it was "shady" or a "sweetheart deal." The fact is Reid wasn’t accused of any wrongdoing, aside from some omissions from financial disclosure reports that were corrected.

Modern Family Ethics

Angle’s "Harry vs. You" ad alleges that Reid has been "pushing loopholes in ethics laws for his own family."

That charge, which has to do with lobbying by Reid’s sons, is false. The truth is that Reid banned family members from lobbying his staff, adhering to a stricter standard than Senate rules required.

The on-screen citation for the claim is a 2003 Los Angeles Times story about Reid’s four sons and his son-in-law. At the time, all of Reid’s sons worked at Nevada’s largest law firm, and the son-in-law was a lawyer with another firm. They all represented significant interests in Nevada that stood to gain from Reid’s actions: developers and municipalities that were seeking public-private land swaps, mining interests trying to stave off tighter regulation, gaming companies that didn’t want Congress to ban college betting.

The story certainly paints a picture of a lawmaker’s family doing well in the influence game. But it doesn’t say that Reid sought, created, backed or exploited "loopholes" in ethics laws for his relatives. Here’s what it does say:

Los Angeles Times, June 23, 2003: In September 2001, Reid sent a letter to his staff telling them that he had sought guidance from the Senate Ethics Committee and had been advised that there was no restriction on lobbying by a relative of a senator. He told his staff to treat his family members who were lobbyists no better or worse than any other lobbyist.

Soon after The Times interviewed him about his children’s activities last fall, the senator decided to ban relatives from lobbying his office entirely.

The story doesn’t even hint that Reid used ethics loopholes to his family’s advantage. Reid (who was chairman of the Senate Ethics Committee at the time) was simply following the Ethics Committee’s rules, until queried about it by the newspaper.

At that point, he changed his practice and set rules that were stricter than necessary to avoid "even the appearance of impropriety," his chief of staff said.

At the time, Republicans didn’t jump on the story. "There’s really no smoking gun there," said a Republican political consultant in the state.

The Capitol Hill newspaper Roll Call reported in January 2004 that Republican Sen. Orrin Hatch of Utah, whose son Scott was a lobbyist on pharmaceutical and asbestos issues, said he would see no problem in having his son lobby him and that Congress shouldn’t set rules in that area.

We take no position on whether restrictions on lobbying by family members should exist, but the fact is that Reid wasn’t working any "loopholes" on the matter. It was perfectly legal for his sons and son-in-law to contact his office to advocate for projects on which they were working. When Reid took the initiative to cut off any such contact, he was going beyond what the rules required.

(None of the Reid offspring is still at the firm employing them at the time the Los Angeles Times story was written. One of Reid’s sons, Rory, is now chairman of the Clark County Commission and the Democratic candidate for Nevada governor.)

Land Deal

The "Harry vs. You" ad accuses Reid of "making a million dollars from a sweetheart land deal," while on screen we see a quote attributed to the Associated Press: "Harry Reid collected a $1.1 million windfall on a Las Vegas land sale even though he hadn’t personally owned the property for three years." The second ad, "Public Servant," opens by asking, "How did Harry Reid get so wealthy on a public servant’s income?" The screen cuts to a clip of Reid from his Oct. 14 debate with Angle, in which he says: "I did a very good job of investing." The narrator snaps back, "Really? Like the shady deal where Reid made an astronomical million bucks doing nothing."

AP did call the transaction a "windfall" for Reid, but it didn’t call it a "sweetheart" deal or a "shady" one, and the evidence that it was either of those is lacking. There’s also no basis for the second ad’s implication of corruption on Reid’s part.

The AP’s story about Reid’s land transactions with his friend Jay Brown came out in 2006. According to the article, Reid bought what the AP called "undeveloped residential property on Las Vegas’ booming outskirts" in 1998 for about $400,000, and bought a second, adjacent parcel jointly with Brown, a former casino lawyer. In 2001, Reid sold the first parcel for the same price to a holding company that Brown created, AP said. Then in 2004, Brown’s company sold the land to other developers, and Reid got $1.1 million of the proceeds. So according to the records that AP looked at, it seemed as though Reid got his $400,000 back when he sold the land to the company in 2001, and also got $1.1 million on top of that when the company sold the land several years later, even though he no longer owned it.

On top of that, AP reported, Reid never disclosed on his Senate financial disclosure statement the 2001 sale of the land to the holding company, and when he collected the $1.1 million in 2004, he reported it on that year’s statement as a sale of land he owned personally.

Reid’s office, however, said no money changed hands when Reid transferred the land to the holding company in 2001; instead, Reid got an ownership stake in the company equal to the value of his land. If true, that means Reid didn’t get paid for the property until the company sold it in 2004, when he received nearly triple what he paid for it originally. Reed’s aides said he continued to pay taxes on the property and didn’t disclose the change in ownership because he considered it a "technical transfer."

Reid asked the Senate Ethics Committee whether he should amend his annual financial disclosure statements to reflect what had actually happened with the land. Then several days later, without waiting for a response from the panel, Reid did adjust his disclosure statement to reflect the circumstances of the land transfer, and also reported two much smaller land deals that had previously been unknown to the public. That pretty much put an end to press stories about the deal, until the matter was recently revived by the Angle campaign.

Collecting a profit of almost twice the original investment may indeed qualify as a "windfall." Many who bought land in Las Vegas as the real estate bubble swelled during this time had similar good fortune. But was it a "sweetheart land deal," as one of Angle’s ads claims, or a "shady deal," as the other one says? The AP story contains no interviews with witnesses or any other information that indicates anything fishy took place, only that there was a discrepancy between records in Nevada and Reid’s Senate financial disclosure statement on this parcel of land. Reid was never charged with any ethics or legal violations, nor – at least according to public records – was he even investigated in connection with the matter.

Reid’s most recent financial disclosure statement and his previous ones list numerous pieces of property, mining patents, municipal bonds, mutual funds and other investments he’s made over the years. There’s no public record that questions have been raised by ethics or law enforcement bodies about his handling of any of them — and certainly nothing to justify the implication in Angle’s ad that Reid took advantage of his position as a public servant to get rich.

Ritz-y Digs

"Harry vs. You" claims that Reid is "living large in the DC Ritz-Carlton," while "you" are "worried about paying the mortgage." The other ad, "Public Servant," claims Reid "lives in a $1 million Washington Ritz-Carlton condo."

That’s true, but there’s more to the story. Reid does own a condo at the Residences at the Ritz-Carlton where he stays when he’s in Washington – and given the Senate calendar, that’s quite a lot. He bought it in 2001 for $750,000. Its current assessed value is just over $1 million, property tax records show. Those same records indicate that he does not claim the homestead exemption for the condo. His campaign says that’s because his principal home is in Searchlight, Nev., where he and his wife, Landra, own a two-bedroom, one-story house that they built on 4.7 acres of land in 2002. The Clark County tax assessor valued the property at $260,846 for 2010-2011 — about $5,500 less than the previous year, perhaps due in part to the real-estate bust that has hit the state so hard. Searchlight (population 576, according to the 2000 census) is where Reid grew up.

Reid’s office issued a statement Oct. 19 in response to Angle’s attacks: “Harry Reid was born, raised and still lives in Searchlight today. Period. Everyone in Nevada knows that and no matter how hard Angle may try, she can’t take that away from him.”

Context, Please

Finally, one of Angle’s ads shows Reid saying, "I’ve been on a fixed income since I went to Washington." He said that after being attacked by Angle during their Oct. 14 debate for becoming "so wealthy on a government payroll." Most people wouldn’t think of a senator’s salary (as majority leader, he now makes $193,400) as a "fixed income." That term is usually applied to people living on much smaller payments, such as those from Social Security.

The quote has certainly flown through the blogosphere. But Reid, who generally has an awkward way with words, said more than that.

Reid, Oct. 14: I think most everyone knows I was a very successful lawyer. I did a very good job in investing. I’ve been on a fixed income since I went to Washington. I’ve lived off of what I made in the private sector. I put my five kids through 100 semesters of school, and I paid for every penny of it. So her suggestion that I made money being a Senator is simply false, and I’m really disappointed that she would suggest that.

We’ll let readers judge whether Reid’s full response tempers his "fixed income" quote.