Friday, March 9, 2012

CD6: State Senator Rob Garagiola Questions John Delaney on IRS Investigation

Today, Maryland Juice printed a press release from 6th Congressional District candidate John Delaney. The announcement included three new ads highlighting his endorsement from President Bill Clinton, as well as a mention of Delaney's company CapitalSource. The campaign of State Senator Rob Garagiola has now issued a press release questioning Delaney's characterization of CapitalSource:


Not So Fast, John Delaney

GERMANTOWN, MD – As news breaks that John Delaney and his company, CapitalSource, are under investigation by the IRS, voters of Maryland’s Sixth Congressional District are demanding answers. John Delaney must explain why he and CapitalSource are being investigated by the IRS for violating Real Estate Investment Trust (REIT) requirements, failing to qualify as a REIT, and underreporting tax liabilities. 

“John Delaney’s response that an IRS investigation is ‘fairly standard’ misses the point. There’s nothing fairly standard about a multibillion dollar company admitting to the Securities and Exchange Commission that its executives mismanaged the company and were not competent,” said Sean Rankin, Garagiola’s Campaign Manager.

According to CapitalSource’s 10-K form submitted to the SEC, CapitalSource wrote that “senior management had limited experience in managing a portfolio of assets under the highly complex tax rules governing REITs and we cannot assure you that we operated our business within the REIT requirements.”

“As a lender of last resort, John Delaney made his money foreclosing on homeowners and bankrupting small businesses with high interest loans, and now  it looks like he undermined his own company by trying to make a quick buck. In 2005, at CapitalSource’s conference, a shareholder asked Delaney about rigging the system, and Delaney basically said to trust him because his Wall Street lawyers and accountants said it would be fine. It isn’t – legally or ethically. Voters will not make the same mistake,” stated Rankin.

According to a transcript of CapitalSource’s conference on  September 21, 2005, an unidentified audience member asked Delaney, “And then the obvious question, obviously you addressed this internally with your own accounting and legal professionals, but is this going to wave a red flag in front of the IRS and do you think you’ll run into a lot push back, or where are the politics on this?”

Delaney responded by saying, “We don’t believe this will raise any red flags with the IRS. We’ve obviously had very sophisticated tax counsel advise us on this, both at our legal firms and our accounting firms.”

John Delaney needs to release his full tax returns for 10 years to show voters how much money he made while trying to game the system.

Attached to the press release PDF is page 26 from CapitalSource’s 10-K that shows they are being investigated by the IRS along with the page from the transcript.


Rob Garagaiola Press Release Attachment Page 1

Rob Garagaiola Press Release Attachment Page 2

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