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The Culture of Corruption in Las Vegas

The Associated Press has an exclusive report on a series of real estate transactions by Senate Minority Leader Harry Reid, in which he parlayed a $400,000 investment into a $1.1 million return in just six years.
The focus of the AP’s report is on the fact that Reid mis-reported the transactions in his Senate financial disclosure forms. He made the original investment personally, but transferred his land to a limited liability company in 2001, without reporting that transfer. It was actually the LLC that sold the land in 2004, but Reid reported the transaction as if it had been a personal sale of the land he bought in 1998.
Substantively, what happened is that Reid did this real estate deal with a friend named Jay Brown, a Las Vegas lawyer whom the AP describes as follows:

Jay Brown, a longtime friend and former casino lawyer whose name surfaced in a major political bribery trial this summer and in other prior organized crime investigations.

It looks like Brown did all the work and cut his friend Reid in on the deal. The AP report contains no evidence that there was anything crooked about the transactions themselves, although they apparently were never documented. Basically, the partners bought land that was zoned for residential use, and persuaded local authorities to change the zoning to commercial, then sold out to developers who put up a shopping center. Brown obtained the re-zoning in part by emphasizing Reid’s participation in the deal.
Is there anything wrong with this? Not necessarily. You can make easy money by buying land on the outskirts of a fast-growing town like Las Vegas. It helps if you have the influence to get zoning changed, but, to be fair, there’s nothing wrong with re-zoning land to permit commercial development as a community grows outward.
It does appear, though, that Reid clearly violated Senate ethics rules by failing to disclose the existence of the LLC and his partnership with Brown. He reported the income, but not the relationship. I suspect the reason for Reid’s reticence is explained by the AP’s description of his friend’s history.
Basically, Reid lent his name and perhaps his influence to a business deal, in return for which he was cut in to the tune of $700,000. That would create a considerable obligation on Reid’s part toward his business partner–a partner he chose not to disclose, and whose name apparently keeps coming up in organized crime investigations. Is that corruption? You can decide for yourself.
SCOTT adds: Ed Morrissey writes:

The AP left out a big part of this story on Harry Reid. The “developer who was benefiting from a government land swap that Reid supported” is probably Harvey Whittemore, a Nevada lobbyist with financial ties to Reid’s sons and his campaigns. I wrote about this last August on my blog and in a column for the New York Post. Reid intervened on a number of occasions for Whittemore so that he could get his hands on federal land for a massive development project. The only thing that we couldn’t see was whether Reid personally gained from this transaction, because at the time, all we had was Whittemore’s employment of Reid’s kids and his campaign contributions.
This new story closes the loop. Now we see that Reid personally profited from his interventions on Whittemore’s behalf, at least indirectly, and that he took pains to cover it up. It’s complicated, but it stinks. I’ve started breaking it down on this post.

JOHN adds: In all likelihood Ed’s inference that the seller was Whittemmore is correct. The timing is interesting, too. Whittemore (assuming it was him) sold the land to Reid in 1998. 1998 is also when Whittemore bought land in Coyote Springs Valley, from a defense contractor, which he needed Reid’s help in strong-arming environmental regulations to be able to develop. For the next seven years, Reid worked assiduously to advance Whittemore’s interests.
There are a couple of possibilities here. One is that Whittemore sold the land to Reid at a sweetheart price, and its market value in 1998 was really more than $400,000. Another possibility is that $400,000 was a reasonable price, but the land was worth much more to a buyer who had the political muscle to get it rezoned for commercial development. Either way, it sounds like Whittemore enabled the windfall profit that Reid and Brown made, and was richly rewarded by Reid’s efforts on his behalf.
It would be interesting to know, too, what relationship Brown and Whittemore had. Both are hugely powerful lawyers, lobbyists and power brokers in Nevada.
ONE MORE THING: This story also illustrates one of the reasons why so many politicians love government regulation. The harder it is to do business without multiple government approvals, and the more regulations that hobble business transactions, the more valuable are the politician’s services in helping a constituent to circumvent them.

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