The Republican primary for Sen. Richard Lugar’s seat is apparently too close for comfort. Both Lugar’s campaign and the American Action Network are airing misleading attack ads against Indiana Treasurer Richard Mourdock, the senator’s challenger for the nomination. The ads strain the facts to make Mourdock look like a tax cheat who makes bad investments and does not show up for work.
- The AAN ad claims that “Hoosier pensions and other funds lost millions” because of Mourdock’s “big bet on junk bonds.” That’s an exaggeration. It’s true that three state funds that purchased Chrysler debt in 2008 lost money when that company went through bankruptcy in 2009. But Mourdock didn’t oversee the investments of the Indiana Teacher’s Retirement Fund, which is the only one that actually lost “millions.”
- Ads from both the AAN and the Lugar campaign fault Mourdock for receiving an illegal second homestead deduction on a condominium he purchased in 2006. But the previous owner of the property, not Mourdock, applied for the deduction. Mourdock claimed that he notified the county auditor’s office of the illegal deduction in 2007. And the county auditor’s office has actually said that it erred in not removing the credit.
- The AAN ad also says that Mourdock has “skipped 66 percent of his official board meetings.” That’s true, according to an analysis done by Howey Politics Indiana. In his defense, Mourdock’s office says that the treasurer or his designee sits on 13 boards and commissions, and that Mourdock is nearly always represented by a senior staff member when he doesn’t attend meetings personally.
The GOP primary contest is scheduled for May 8. The AAN ad will reportedly run until May 4.
The ad from the American Action Network, called “Problems,” questions Mourdock’s decision-making by claiming that his “big bet on junk bonds” resulted in “millions” in losses for state funds.
Indeed, two state pension funds and a state construction fund were estimated to have lost about $6 million on investments that were made in Chrysler bonds almost four years ago. But Mourdock made the investments for just two of the funds, and not the fund that actually lost “millions” on the deal.
Back in July 2008, three state funds — the Indiana State Police Pension Fund, the Major Moves Construction Fund and the Indiana Teacher’s Retirement Fund — purchased about $43 million of Chrysler’s secured debt at 43 cents on the dollar. Subsequently, each of the funds lost money when Chrysler went through bankruptcy restructuring in 2009, the terms of which provided the funds with a return on their investments of only 29 cents on the dollar. At a minimum, the Indiana State Police Pension Fund lost $147,400; the Major Moves Construction Fund lost $896,000; and the Indiana Teacher’s Retirement Fund lost $4.6 million, according to a May 2009 press release from the treasurer’s office. And the decision to purchase Chrysler debt was not without risk.
Weeks before the state investments were made, Standard & Poor’s, a credit ratings service, said that it was putting its corporate credit rating of Chrysler and other U.S. automakers on “CreditWatch with negative implications.” And two months later, Moody’s Investors Service lowered Chrysler’s corporate rating from “B3” to “Caa1,” both “speculative-grade ratings.”
But while Mourdock was the investor for the construction fund and the trustee for the police pension fund, he did not oversee the investments of the teacher’s fund. That fund was deemed “an independent body … and not a department or agency of the state” by the Indiana General Assembly in 2000, according to the state’s pension handbook. The fund’s finances are managed by a board of six trustees, which Mourdock had no role in at the time.
“By statute, the Treasurer of State did not serve on, or appoint someone to serve on, the board of trustees of the Indiana State Teachers’ Retirement Fund,” said Jeff Hutson, the chief communications officer for the Indiana Public Retirement System. “Therefore, the Treasurer was not involved in investment decisions for the fund.” And it wasn’t until 2011 that the treasurer was allowed to nominate an individual to serve on the teacher’s fund’s board of trustees.
The state funds did incur additional financial losses, though.
In May 2009, Mourdock’s office filed a lawsuit on behalf of the three funds, objecting to Chrysler’s bankruptcy proceedings. The treasurer’s office, in an attempt to recoup the money lost by the funds, alleged that holders of the company’s non-secured debt were paid back at higher values than the holders of Chrysler’s secured debt. But the case was later dismissed by a federal appeals court, and the Supreme Court also declined to hear the case.
According to news reports, the failed lawsuit cost the funds nearly $2 million in legal fees.
Illegal Tax Breaks?
Both the AAN and the Lugar campaign have made an issue of Mourdock’s past problems with state property taxes, a story that made news last year.
In its ad, the AAN claims “Mourdock took an illegal tax break three years straight even after repeated warnings.” And an ad from the Lugar campaign, released just ahead of Tax Day, claims that for years, Mourdock “received $45,000 in illegal second homestead tax deductions.”
It’s true that until last year, Mourdock was receiving homestead tax deductions on a house in Evansville, Ind., and a condominium in Indianapolis. State law, however, only allows residents to receive the deduction on their primary residence, or in Mourdock’s case, his home in Evansville. But the exemption on the condominium, which Mourdock purchased in late 2006, was applied for by its previous owner, not Mourdock, according to the Marion County Auditor’s Office.
Last year, Mourdock told the Evansville Courier & Press that he notified the auditor’s office in person in 2007, after receiving a property tax rebate, that the exemption on the condominium should be canceled. But the exemption was not eliminated, and Mourdock continued to receive the tax credit in 2008, 2009 and 2010.
Mourdock told the paper that he was unaware that he was still receiving the tax deduction until “doing opposition research on myself” in June 2011 in preparation for his primary contest with Lugar. That’s when, Mourdock said, he again went to the county auditor’s office and signed a statement saying that the tax exemption should be canceled.
That office has since taken responsibility for the mix-up, with computer records showing that former Marion County Deputy Auditor Claudia Fuentes noted on June 3, 2011, that the condominium’s “homestead deduction was not removed in error,” and that “the deduction was applied for by previous owner.”
But the Lugar campaign questions why it took so long for Mourdock to notice and correct the error.
“Mourdock, our state treasurer, claims he didn’t ‘notice’ that he was cheating, yet he studied his tax statement closely enough to appeal his assessed value,” the Lugar ad says. And an image of a property tax notice that Mourdock received in 2010 appears on screen with the line for deductions highlighted. “Then once a candidate for U.S. Senate, Mourdock conveniently decided to pay his taxes,” the ad’s narrator says.
Mourdock did have the value of his property reassessed in 2008. He told the Courier & Press that he had suspected his property taxes were actually too high when a neighbor purchased a condominium like his own at a lower price. The value of Mourdock’s condominium was adjusted the following year from $268,600 to $175,100.
The Lugar campaign pointed out that the form necessary for requesting a reassessment asks the property owner to certify that they have reviewed their property’s tax record, and that Mourdock should have realized then that he was still receiving the deduction. But Mourdock told the newspaper that he didn’t bring up the homestead deduction at the time of the reassessment because he believed that the issue had been resolved.
Another point raised by the Lugar campaign is that Indiana property owners have been required since 2010 to submit a “pink form” with their property tax bills to verify their residency and eligibility for the homestead deduction. The form, which says that homeowners are required to notify the county auditor if they become ineligible for the deduction, was introduced to help local officials crack down on homestead tax fraud in the state. But Mourdock has said that he never submitted the form because he believed he was no longer receiving the tax exemption on his condominium.
Mourdock claimed that he tried to make payment for the taxes that he owed when he went to the county auditor’s office in June of last year. But he said he was told that the amount would have to be applied to his property tax bill for the fall.
The county auditor’s office confirmed that Mourdock paid that fall’s tax bill.
Poor Meeting Attendance?
The AAN ad also says that Mourdock has “problems showing up to work,” claiming that he “skipped 66 percent of his official board meetings.” That’s based on the reporting of Brian Howey, a political analyst for Howey Politics Indiana.
Howey reviewed the minutes of 122 board meetings and found that as of Nov. 17, 2011, Mourdock had “attended only 34% of the meetings of boards he either presides over or is a member” of since January 2010. In comparison, Mourdock had a 53 percent attendance record at board meetings in the three-year period from 2007 to 2009, when he was not running for reelection as state treasurer, or challenging Lugar in the Senate primary, according to Howey’s analysis.
In Mourdock’s defense, Ian Slatter, the treasurer’s spokesman, said that there is almost always a senior staff member representing the treasurer’s office at the board meetings when Mourdock doesn’t attend himself. In a statement released to Howey Politics Indiana back in November, Slatter said:
Slatter statement to HPI, Nov. 11, 2011: Treasurer Mourdock, or his designee, sit on 13 boards and commissions. By statute, Treasurer Mourdock appoints designees to ensure that the Treasurer’s Office is always represented on each board or commission by a person with full voting authority. Many statewide officials, including the Governor, assign designees and consequently fulfill their duties as elected officials. Sometimes the meeting times for boards or commissions overlap, but since February 2007, despite scheduling conflicts, virtually all such meetings have been attended by the Treasurer or a senior member of his staff with full voting powers.
The treasurer’s office released a similar statement on March 9, saying that Mourdock “takes his responsibilities to the citizens of Indiana very seriously,” while noting that “the Treasurer’s Office has a 99% attendance record at board meetings.”
HPI’s analysis showed that Mourdock’s attendance improved in instances where he was the chairman of the board, a board secretary or an investment manager. But analyst Brian Howey told FactCheck.org that what stood out to him was the difference in Mourdock’s attendance when he was running for office and when he was not.
— D’Angelo Gore