FBI Probes California GOP Congressman's Land Deals

LOS ANGELES, Feb. 9 -- A Republican congressman from California defended his reputation this week, as FBI investigators look into charges that he improperly delayed paying taxes on several lucrative land deals.

Rep. Gary G. Miller told fellow House Republicans behind closed doors Tuesday that he "has done nothing wrong, his business dealings have all been above-board and that these allegations are baseless and have no merit," his spokesman Scott Toussaint said.

The FBI investigation follows an article in the Los Angeles Times and a complaint from the nonprofit Citizens for Responsibility and Ethics alleging that Miller, a wealthy real estate developer, unlawfully avoided paying taxes on a land deal.

According to the newspaper's account, confirmed by Miller, he sold 165 vacant acres to the city of Monrovia, Calif., in 2002, after trying for years to build housing on it. He then delayed paying taxes on $10 million in profit by claiming that he sold under threat of eminent domain.

Miller used money from the sale to buy two other pieces of land in nearby Fontana, Calif., from a campaign contributor. He sold both to the city of Fontana, and once more delayed paying taxes by claiming the city threatened to take the land.

The threat of eminent domain allows a landowner to invoke Section 1033 of the federal tax code, which delays the payment of capital gains taxes if profits are reinvested within two years.

For all three of the land deals, Miller requested and obtained a letter from the city referring to eminent domain, a spokesman for the congressman said. But city officials later said the letters were meaningless because they did not actually threaten to take Miller's land.

"Eminent domain was not initiated," Monrovia Mayor Rob Hammond said in an interview, referring to the land deal in his city. "Was it discussed? Yes. Do you make a decision [about whether to sell the land] based on what was discussed? That's a question for the IRS."

"All I do is real estate transactions, and I've never heard of anything like this ever happening. It doesn't make a lot of sense," Los Angeles real estate and taxation lawyer Stephen Fainsbert said of Miller's multiple 1033 exemptions. "Even once it's something. But to see it three times -- well, as they say, the smell test is violated."

FBI investigators have interviewed current and former Monrovia officials, and reviewed video of a City Council meeting in which Miller asked the city to buy his land, city officials have said.

Last week, Miller sent a letter to Monrovia officials threatening a lawsuit for telling reporters that the city never intended to use eminent domain to take his land. "He felt that city officials had been speaking out of both sides of their mouths" by giving him a letter referring to eminent domain, then denying to the news media that they planned to take the land, Toussaint said.

Toussaint said Miller paid taxes on all three land deals in quarterly installments over 2005 and 2006. He did not say how much Miller paid, and did not provide documentation of payment.

Miller has not been contacted by the IRS or the FBI, Toussaint said. Miller voluntarily turned over documents related to his business to the House ethics committee and to Minority Leader John A. Boehner (R-Ohio).

A spokesman for Boehner, Brian Kennedy, said he did not know whether Boehner reviewed the documents.

In response to a question, Kennedy said: "I don't know that there's been any discussion of removing" Miller from his seat on the Financial Services Committee, in which Miller is the ranking GOP member of the subcommittee on oversight and investigations.

Melanie Sloan, executive director of Citizens for Responsibility and Ethics, said Miller is "doing what Duke Cunningham and Bob Ney did before him. He's going to the Republican Conference and proclaiming his innocence."

"This is just the last thing in the world" House Republicans want, said Barbara Sinclair, a University of California at Los Angeles political science professor.

"The whole ethics business did play a part in the Republicans' disastrous performance in the 2006 elections. That makes it even more of an important story. Clearly Republicans do not want this to be an ongoing problem and continue on to 2008."