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A deal in the desert for Senator Reid?

A bill he wrote could have affected the friend who sold him the land.

January 28, 2007|Chuck Neubauer and Tom Hamburger | Times Staff Writers

Development slowed in the late 1990s, and Reid and the Haycocks say the property became a cash drain. In 1999, according to Reid's office, the senator began working without success with developer Craig Johnson on a plan for the property. At some point, Reid's office said, he offered to give the land to Johnson, who declined. Johnson has confirmed that offer. In a statement Reid's office provided, Johnson described the listless market and the property's challenges.

In 2001, Haycock Distributing Co. decided to convert its existing pension fund into a 401(k) retirement program. In liquidating its assets, the firm decided that the plan must quickly sell its share of the property.

Lawyers advised the Haycocks that the family could not buy it from the pension fund, so Clair Haycock approached Reid. At first, Reid said "he and his wife were not interested due to the property's past history," Haycock wrote in a letter to The Times.

"Eventually, he gave me $10,000 for my share," Clair Haycock wrote. "I was just happy to have been able to liquidate the property from my pension plan." Reid's office said the senator and his wife purchased it reluctantly. "Because it had minimal value to them, they were willing to pay only a minimal price," a Reid staffer wrote in response to questions.

How good a deal?

How good a deal did Reid get? Paying $166 an acre for Mohave County land is "a super deal," said the county assessor, Ron Nicholson. But the precise answer in this case, Nicholson said, is complicated by the fact that only a minority portion of a partnership was for sale; minority shares can be difficult to sell. Other experts who reviewed the transaction for The Times acknowledged the complexity of the deal but said the senator appeared to have acquired valuable property for a fraction of its value.

"The price strikes me as low," said professor Crocker H. Liu, McCord chair of real estate at Arizona State University's W.P. Carey School of Business. "But I don't know what other considerations -- valuable or otherwise -- were part of this transaction. Usually when a purchase price is that low, there is other juice in the deal."

Calculating the precise amount of Reid's discount is difficult because of varying values assigned to the property around that time, including some by the senator himself. In his 2001 Senate financial disclosure, Reid valued his Bullhead City acreage at $5,000 to $10,000 an acre. When questioned about the filing several months ago, Reid's office said he might have overstated the value. A Reid spokesman said the senator was in the process of amending his ethics statements to more accurately describe the terms of the deal.

At least twice, Reid appealed to the Mohave County assessor to lower the land valuation and decrease his taxes, in 2002 presenting a 2001 appraisal that valued the land at $1,000 an acre. The assessor's office made a downward adjustment for 2003 but still places the value at about $1,748 an acre.

On a recent property tour, the assessor acknowledged that Reid's land had problems.

"There are topographical issues on this property," Nicholson said as he drove a county-owned four-wheel-drive vehicle through the tract. He pointed out the property's steep wash and another streambed.

An adjacent parcel with similar topography sold in April 2004 for $4,260 an acre.

Reid's spokesman said the senator had paid a fair price for the pension fund's minority interest.

"When a willing buyer pays a willing seller to buy an asset, that is a sale, not a gift," Summers said.

Real estate experts say that minority interests in partnerships are often sold at a discount, sometimes of 20% or more. But they say that such discounts do not necessarily apply in a case like Reid's where he is the majority owner and gains 100% control by the purchase.

"We were happy to get out of the deal as we did," John Haycock said, adding: "Would we have liked to make more money on the Bullhead City land? Of course."

Reid's office produced statements from three Haycock retirees who attested that they believed they had been well-served by the pension plan.

Since taking full control of the parcel in 2002, Reid has pushed for federal funding for a new bridge over the Colorado River a few miles from his property, a spending request The Times disclosed last November.

Reid said he secured funding for the bridge, which would connect fast-growing Bullhead City with the gambling town of Laughlin, Nev., because local residents wanted it. He said the bridge would not affect his property's value.

Losing business

Reid has long been known as a champion of Nevada interests, particularly gambling and mining. But he seemed an unlikely choice to advocate for the beleaguered lubricants industry when he took up the issue in 1994. He did not sit on the Energy Committee.

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