Key West The Newspaper

by Rick Boettger…….

I went to the County Commission meeting when it came to my neighborhood on Feb 15^th in order to object to George Neugent, as the Commission’s honorary Mayor, giving ceremonial recognition to a local nonprofit that teaches leadership. My objection was threefold: First, they voted George in as Mayor within a month of his getting public censure and reprimand by the Florida Commission on Ethics. Second, the Commission sued the innocent members of a nonprofit board for two years, until it was thrown out of court a second time (worse, in closed session, they said they wanted other nonprofit board members to fear them).  Third, the leadership of the commission has been laughably inept—Hickory House, stolen iPhones, lost laptops, shallow wells, grinder pumps, approving a 175-room hotel built with 17 ROGO’s, etc. 

It ended up with my finding out the other four commissioners’ financial reports were even worse than the ones that got George in trouble—millions of dollars in under-reporting, all in all.

Why the surprise ending? When I turned in my card to speak my three minutes, County Attorney Bob Schillinger told me I couldn’t. A statute allows boards to ban comment on “ceremonial proclamations.” I imagine this is to stop ten enthusiastic supporters of the honored group from each taking up their three minutes singing the group’s praises. But that didn’t apply here. The statute does not forbid a speaker, it just doesn’t make speaking mandatory.,  I felt like Elizabeth Warren, squelched by Rule 19 and a sour Mitch McConnell.

I had intended to comment in passing on how sloppy the Commissioners’ Form 6’s were. But that got my dander up, and I needed to vent, so I spent about 15 hours going closely through their last few years’ filings, those still on the Ethics Commission website because they are within the 5-year statute of limitations. When they made George Mayor, an honorary position, they showed their scorn of the very concept of ethical public service. At his sentencing up in Tallahassee, I had formally complained to the Ethics Commissioners, in the only chance I had to write to them directly, about George’s slap on the wrist for 10 years of accepting tens of thousands of dollars of golf club memberships: just a single fine of $500, although each year of a membership is by their guidelines a separate violation, just as George’s two years of bad Form 6 filings resulted in two separate $500 violations for each year.

A Commissioner actually addressed my question!  He said that public censure and reprimand was a harsh sanction, which public officials took very seriously.  In fact, of the 250 complaints made yearly to the Ethics Commission, only a handful warrant it.

In Monroe County, though, Ethics is to laugh at. None of the county media except the Blue Paper bothered to report George’s penalties, the $1,500 or the censure. The Commissioners’ voting George Mayor was clearly thumbing their noses at the Ethics Commission, me personally, and the good citizens of our county. And this attitude is writ large in their egregiously done Form 6’s, “FULL AND PUBLIC DISCLOSURE OF FINANCIAL INTERESTS.”

When they turn in this simple, two-page document, they sign a notarized OATH: “ . . the information on this form is true, accurate, and complete.” Well, here are the facts.  You be the judge.

As a group, these four commissioners made 51 errors of form (some trivial, others important), under-reported the value of their assets by over $1.8 million, and under-reported their income by around $2 million.

The biggest individual errors were not reporting the sale of property at a gain as income.  From the Form 6 directions, “—-If more than $1,000 was gained from the sale of property then you should list as a source of income the name of the purchaser, the purchaser’s address, and the amount of gain from the sale.” Heather sold her guesthouse, Pearl’s, in late 2013 for $9,250,000. The Clerk shows a purchase in 2000 for $4,475,000.  Even counting a split with the estate of the former co-owner, and holding a note for part of the price, this has to be way north of $1,000. Especially since she reports an IRS liability of $140,000, in line with a million-dollar gain.

David Rice did not report the sale of his Oceanside slip for $130,000 in late 2014.  He paid $70,000 for it in 1999. With depreciation, it is hard to see how this was not a $100,000 gain.*

Also on the income side, David reported his income from his 5 (4 after selling Oceanside) rental properties at an average of $3,375 per year on property valued by the County RE Appraiser at an average of $872,760 per year. First, this seems to be reporting his net income after taxes, insurance, repairs, depreciation, etc.  But, from the instructions, ‘“Income” means the same as “gross income” for federal income tax purposes . . . Examples of income include . . . rents . . ‘  Sylvia Murphy properly reported her rents this way.

If this is the gross rent, that means he is renting his seven units for an average of $40/month.  If this is true, then, hey, no harm done, and David is a true Affordable Housing Hero. More likely, this is an under-reporting in the six figures. (Also, anyone who has rented residences knows this is a shockingly low net income for 7 rental properties in the Keys. I’d love to see his Schedule E’s for the IRS.)

The other major under-reporting, which they all did, was in the value of their homes and rental properties. From the Form 6 instructions, “Real property may be valued at its market value for tax purposes, unless a more accurate value of its fair market value is available.” All four report values from the Monroe Property Appraiser’s website.  The problem is, they often report the Total Assessed Value instead of the Total (Just) Market  Value.  The TJMV is the proper number to report, which they usually do. The assessed value is lower because of the Homestead Act limiting increases in assessed values. This under-reporting ranges from a high of over $800,000 for David Rice to a low of a single $45,000 error for Danny Kolhage, for a total of over $1.8 million for the four of them.

The errors of form are various.  A lot of missing or incorrect addresses for sources of income.  Boxes indicating attached sheets or having taken ethics training not checked.  One case of forgetting to get the form notarized! But the major error of form is, to me, actually more than just form.  From the directions for Form 6, “Note that the product contained in a brokerage account or IRA. . . is your asset, not the account . . . itself…. Do not list simply “stocks and bonds” …For example, list “Stock (Williams Constructions Co.)” . . .[Emphasis in original].

All four Commissioners missed this, just reporting, say, “Ameriprise.” Why is it important? In 2010, a candidate for the Monroe County School District campaigned as a much better finance manager than his opponent, whom he characterized as a “bartender.” (In fact, she had held a Fortune 500 executive job, and he had an MBA in International Business, with little financial training.)

His form 6 showed his exact brokerage holdings. Combined with his reporting a home equity loan, I was able to deduce he had mortgaged the family home for $200,000 to basically gamble in the stock market.  One particularly risky derivative bet on the direction of interest rates. This investment alone lost $80,000 in one year.  Overall, his $200,000 portfolio was worth $80,000 two years later (the candidate admitted in public that the analysis was accurate).

Entering the run-off with a 10% lead, he only ended up winning by 25 votes, only because the Blue Paper did not reach the Upper Keys, where he won handily.

In this case, the candidate exhibited irresponsible financial decisions even with his own family’s money, hardly a good recommendation for managing multimillions of public funds.  He did in fact exhibit no financial acumen whatsoever in his four year tenure, after which he left office to do information technology, which I’ve heard he is quite good at.

As it is, I have no idea what actual holdings the Commissioners have.  What if they have a big position in Grinder Pump stock? (I doubt it.)  But I could never have imagined the wild stock shenanigans of the School Board candidate until I saw them.  As it is, it is hard to evaluate the performance of the Commissioners’ investments because I can’t tell how much of a portfolio, in most cases, is in a retirement fund, much less what specific holdings are.

This would matter because I totaled the Commissioners’ reported holdings  versus their reported income from these investments. Their total reported brokerage holdings were over $12 million dollars for the four years. The income ported from these investments was only $66,396. This means a yield of 0.54%, that is, barely half a percent.  Even if they all had additional income every year just below the reporting threshold of $1,000 per bank, it would still only come to 0.66%, that is, just 2/3 of a percent.

This is low.  First of all, I am appalled to think of how they report and manage the public exchequer given how they read the directions and report on their own sworn statements about their own.  The directions for the Form 6 are three pages long, with lots of clear emphases. They encourage you to hire someone to help you out—there is a section to report their name. The Commissioners are always hiring consultants with our tax dollars.  If they can’t be bothered to read three pages of simple directions and follow them, why not pay an accountant or tax preparer to do it for them?

I once worked as a campaign volunteer for a renowned CEO turned philanthropist. Even with his Harvard MBA, he had me double-check his own financial disclosure form the time he ran for office. Why didn’t any of these Commissioners bother to have someone like me look theirs over?  I think this explains why we get such terrible financial management and such low returns on the tens of millions of our tax dollars lying fallow in various reserve and dedicated funds—that’s the sloppy and indifferent way they handle even their own money and reporting.

Sadly, I imagine I am surprising none of my readers with this sad account.

But to end on a happy note, George has learned a lot from his $1,000 fine.  He turned in the best Form 6 of them all for 2015. Full addresses, exact amounts for bank accounts. He only missed checking the ethics training box, which may mean that he is honestly reporting that he refuses to take that training. He has no brokerage accounts or IRAs to report the holdings within.  While he mis-reports in his own hand the value of his home, he includes a copy of the RE Appraiser’s sheet on it, which I count as reporting the real TJMV, especially since it seems to be the true number he uses in calculating his net worth.

I am especially glad he included a copy of one of his pay stubs.  It shows that he is contributing $10/month to the United Way.  George naively made a couple of his tax returns public record in his response  to the Ethics Commission’s investigation of him.  It showed him reporting zero charitable contributions for 2012, even though he itemized and reported medical and sales taxes on Schedule A, itemized deductions.

Linda Gottwald always wondered why George came at her so hard.  All she could think of was that at a fund-raising event for SUFA she told the entry person, “Now make sure that cheapskate George pays his $20.  He’s always trying to get into everything for free!”  The man’s eyes widened, looking over Linda’s shoulder. There was George.  Now we know.  Linda was right.

And lest we forget why I got onto the County Commission all these years . . . Led by George, the County used a trumped up audit falsely reporting financial errors which in fact were NOT at all erroneous, a bad audit they used to freeze her funds and put her and the best-led and arguably most successful nonprofit in the Keys out of business, while slandering her reputation permanently. As I have written before without challenge, I estimate we the taxpayers are out around $1 million in lost SUFA donations, extra pay for the now out-of-business shelter made up of George’s friends that replaced SUFA, years of legal wrangling (losing at every turn), and long investigations that revealed nothing but innocence by the FDLE, State Attorney, and a high-priced forensic accountant.

Every one of the sitting Commissioners made more real mistakes on every one of their sworn Form 6’s than Linda made in her seven years of financial records for SUFA, which I closely audited myself before I wrote a word about her case. She was ruined. Her innocent Board of Directors, except for George’s long-time friend Lynn Mapes, was sued by the heavy hand of the County, for years. We suffered a diminished shelter for years in the Middle Keys. And we are out a million bucks.

But the Commissioners reign on, proudly led by their Publicly Censured and Reprimanded Mayor, having been given the County’s highest honor by them all. Does this show what they respect? Screwing up badly and getting off with a slap on the wrist?

Commissioners: Have you no shame?

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Note: Commissioner Rice’s property values and income calculations click here.