Texas Gov. Rick Perry's Real Estate Windfall Attracts Public Scrutiny
Some of the richest Texans vacation at Horseshoe Bay in mega-million-dollar homes: West Texas ranchers, oilmen, Roger Staubach, Jim Lovell, even the late Red Adair. Horseshoe Bay, once a goat ranch, is so attractive to Lone Star wealth that it is one of the reasons why Ilano County has been crowned as one of the top five places in the U.S. by Forbes magazine where, based on IRS data, the rich are moving.
Perry, a Republican, faces Democratic challenger Bill White of Houston (who Perry is grilling for not releasing tax returns) after defeating Texas Sen. Kay Bailey Hutchison in the Republican primary. But a recent story in The Dallas Morning News diagrams just how Perry may have had a little help from his friends, pocketing more than $500,000 from a Horseshoe Bay real estate deal.
According to an independent appraisal by the News, Perry's land appraisals were also a bit fuzzy. Critics charge that as governor of Texas, Perry should not use the influence of the governor's office to pad his pockets.
Did he? Or did he make a really great real estate deal, buying and selling at the perfect time?
Horseshoe Bay was developed by a San Antonio man named Doug Jaffe, who bought it in 1996. Ironically, Jaffee has decades-old Democratic Party ties in what used to be considered a "yellow dog" Democratic state -- if a yellow dog was on the Democratic ballot in most parts of Texas, he'd be voted in. That's how loyal constituents were.
Jaffe was known as a wheeler-dealer. Though he started making buckets of money in the vending machine business, it was the airline industry where he had real success, selling aircraft "hush kits" that enabled older commercial jets to meet new, tighter, federal aircraft-noise standards at about the time those laws came out. He had some infamous clients: the government of Nicolae Ceausescu, communist dictator of Romania, and Samuel Doe, a notoriously repressive president of Liberia.
After Jaffe poured millions into Horseshoe Bay, it quickly became known as one of the hottest playgrounds for the rich. It caught the eye of Republican State Sen. Troy Fraser, a wealthy investor, who liked two lots of a unique10-acre estate on the water called The Peninsula, which had been subdivided into 11 home sites. There was only one home on the estate, and the original owner had installed sensors along the road leading to his house, with speakers elaborately mounted in the woods, emitting rain-forest sounds. The lone home even had walls lined with fur.
In September 2000, the senator offered Jaffe $700,000 for one waterfront lot and, a few days later, $300,000 for a smaller lot with less water frontage, near the entrance. Jaffe accepted. Fraser had apparently encouraged his childhood friend, Rick Perry, to buy up the smaller lot so that they could retire together at The Peninsula. He negotiated a great deal: $300,000 for the "cheapest" lot, a piece of property that The Dallas Morning News now claims was worth $450,000 at the time.
Perry held his $310,000 lot until 2007, when he sold it for 1.5 million. And that's where Perry's scruples really come into question: Did he find a willing buyer fair and square, or did he take advantage of the contacts he made while governor of Texas?
Perry sold the lot to a man named Alan Moffatt, a British national and, since he owns an aviation firm, also a business partner and sometimes associate of the original owner, Jaffe. Moffatt was questioned but never prosecuted for his company's international arms shipments to Africa in the 1990s. He paid Perry $1.15 million for the lot, then turned around and tried to flip it for $2.65 million.
An appraiser hired by TheNews thinks Moffat paid $350,000 over market value, but Moffatt denies anything improper. Perry's asking price was $1.2 million. Moffat currently has the lot he bought from Perry on the market for $1.65 million.
Did Perry use his influence as governor of Texas to buy the lot at a discount price and sell it for a hefty profit? The story of how he sold the land to Moffat is also a little murky.
Although Horseshoe Bay procured a buyer, Perry paid no real estate commission. But in Texas, real estate commissions are negotiable. And when he sold the land, it was appraised for tax purposes at $600,000. Of course, since Texas is a no-income-tax state, property taxes are among the highest in the nation and most everyone fights to whittle down their appraised values with the taxman. Even, apparently, the governor.
And did Perry use his weight as governor to keep that county tax appraisal low while he owned the lot, saving $14,000 in property taxes? Perry used a Corpus Christi attorney to help him fight his tax appraisal -- again, fighting tax appraisals is very common in Texas -- whom he had appointed as chairman of the Texas Public Safety Commission. That was Colleen McHugh, a corporate labor lawyer. McHugh was not paid for her work but appealed the county tax appraisal because Perry had already paid her $2,850 for legal work on the property purchase. That appeal, says The News, kept Perry's value at purchase-price level while he owned the property.
The question is, could any real estate investor get real estate deals this juicy, or just Rick Perry, because he is the governor of Texas? "The man on the street on this would think that this is a series of deals that smell of special favors being created for elected officials to curry their favor," said Ellen Miller, executive director of the Sunlight Foundation in Washington, D.C.
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