I reported yesterday on ProPublica's investigation of U.S. Rep. Mike Ross' million-dollar-plus (nobody knows the full tally) windfall from a family pharmacy and, later in the day, his angry response at what he characterized as an attack from "leftists."
ProPublica, a nonprofit investigative reporting venture funded by private money has more to say in a statement from editor in chief Paul Steiger:
"The issue here is not whether Rep. Ross filed the proper disclosure forms. Nor is it whether Rep. Ross earned a large or small return on his initial investment in the building. The issue is whether the Congressman received more on the sale of his building than someone without his power and influence would have received for selling this building. As we read his statement, Rep. Ross does not deny that he received significantly more than an arms-length fair-market price for the building -- on top of the very considerable sums he and his wife received for selling and continuing to run the business."
Rep. Ross states that the buyer bought more than “brick and mortar” for their $420,000, that they also bought "a successful, trusted, centrally-located and profitable pharmacy in my hometown." But, as the story noted, the buyer paid an additional $500,001 to $1 million for the business, as well as between $100,001 and $250,000 for agreement not to compete against the new owners. Those payments brought the total value of the transaction to between $1 million and $1.67 million.
Rep. Ross declined numerous requests for interviews over a two-month period to discuss the transaction in question. He still has not disclosed whether he has discussed the pending health care reform legislation with the buyer, who owns a large chain of drug stores and has a clear and pointed interest in the outcome of the health care legislation.
The Democrat-Gazette today asked some experts in the field to assess the pharmacy sale and they tended to say, from what was known, that the deal didn't seem out of line. (Ross Twittered that he was "cleared" in the D-G story of charges by a so-called news organization.) But there's really no way to know whether Ross deserves "clearance" or not. To know for certain, we need to know, among others:
How Ross structured payment for his pharmacy building. Did he have equity in it or was it highly leveraged? What was the interest rate on his bank note? Did he reap tax benefits from depreciation? How were his other assets valued for the $500,000-$1 million purchase price for good will and the like? What was the exact amount paid for the non-compete clause? What is the dollar value of additional dividends the Ross family received for two years from the sale? Is his ongoing lease with a drug chain for another building in Prescott at fair market value? What's the rent? How much is Ross' wife paid to continue to serve as pharmacist? Is it market pay?
Congressman Ross, operators are standing by.
UPDATE: Hold the phone. I suspect Congressman Ross is going to lawyer up. A watchdog group, Citizens for Responsibility and Ethics in Washington has filed a complaint with the Justice Department asking an investigation of fraud in the real estate deal.
CREW executive director Melanie Sloan stated, “With the sale of his business and the high priced non-compete covenant, Rep. Ross has gone from accepting campaign contributions from those with legislative interests before him to accepting significant personal financial benefits of dubious legality.” Sloan continued, “The situation is reminiscent of that in which former Rep. Randy “Duke” Cunningham sold his house to a defense contractor for an amount above its value in return for legislative assistance – a sale that ultimately resulted in Rep. Cunningham’s conviction on criminal charges.” Sloan explained, “Given that Rep. Ross received a personal financial benefit conservatively valued at no less than $143,850 and probably a great deal more, both the sale of the property for $420,000 and payment of no less than $100,001 for the covenant not to compete certainly merit criminal investigation.”