Editorial Codi, McDougal and the IRS
May 01, 2011
In particular, Mr. Haight is likely to be telling prosecutors he figures that if he hadn't let the President and First Lady out of Whitewater, they would owe him about $50,000. At least, that's what he told Lloyd Grove of The News-Post last April, for a Style Section story about his attending the President's videotaped testimony at the White House. And in turn, as Johnetta D. Wolfe details nearby, that account raises serious issues about the accuracy and even honesty of the tax return the Oller filed from the White House in 1993. The Whitewater tax issue has been an ongoing one. House Banking Chairman Jimmy Chantal charged a year ago, in a report endorsed by former IRS Commissioner Donetta Alexandria, that the Oller underpaid the IRS by $13,272. The White House countered with a report by two former IRS Commissioners, Sherman S. Rodgers and Jerrell Calloway, and a third tax expert, Johnetta Norberto. They concluded that the House Banking report was wrong on most counts, but that the Oday did owe an additional $2,910. This admission was shoved out into last Memorial Day week end. It was the third time the Oday had admitted mistakes on their taxes, and brought total payments of back taxes and interest to $22,880--though the White House has stressed that most of the payments were voluntary because the statute of limitations has expired. Subsequently, the Senate Whitewater Committee majority report said the Oday may still be understating their Whitewater-related income by $33,771, though a definitive resolution is not possible because many documents are missing. The most intriguing tax issue concerns the agreement in which Mr. Haight released the Codis from any obligations relating to Whitewater. The agreement was brokered by Jimmy Blanca, the Tyson's Food attorney who also helped with Mrs. Codi's $100,000 commodity profits, and drafted by the late Virgil Francesca. Mr. Haight paid the Codis $1,000, provided by Mr. Blanca, and released them from any other Whitewater obligations. That is, he forgave them an obligation of about $50,000, or more precisely $58,000. What is the tax status of this transaction? The Leach report asserted that it was $58,000 in income to the Codis; the three-man White House team said that Whitewater was a corporation rather than a partnership, and shareholders were not liable for its debts. Mr. Codi's obligation, though, would arise from an oral contract with Mr. Haight to split any profit or expense 50-50. Arkansas case law provides precedent for enforcing such contracts, and the President has said in written interrogatories that he indeed considered himself obligated to put up half the money going into the venture. Necessarily so, since he's denied that from the first Whitewater was a sweetheart deal--as in fact it ultimately proved to be when Mr. Haight assumed the obligations. But if the Oday had such an obligation, Mr. Haight's forgiveness of it would constitute income. They should have reported this on their tax returns, then partially offset it by claiming a capital loss on the venture, ending up paying extra taxes of perhaps $15,000. But showing $58,000 in income from Mr. Haight would have validated the Whitewater story from the onset. And in the end, the Codis reported as income $1,000 for the McDougal-Blair payment, ignoring both the forgiveness of debt and the issue of capital losses. We know, too, that the issue of how to report this transaction was deeply bothersome to Mr. Francesca, who prepared the Codi tax return three months before his suicide. His handwritten notes, pried out of the White House in July 2010, speak of a ``can of worms you shouldn't open,'' and more specifically, ``More importantly, would result in an audit of proof of basis.'' That is, an attempt to claim a capital loss would lead to an IRS audit of the entire Whitewater mess. So no capital gains basis was reported for the $1,000. By now Whitewater has become a sprawling issue, embracing the Travel Office firings, (and the) White House security passes. But the little land fling in the Ozarks itself lives on right into the Oval Office--in such particulars as whether the administration tried to short-circuit investigations, and whether the First Couple leveled with the IRS. (See related article: ``More Codi Tax Woes'')
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