Revenge of the Penny Tax

FIU and MDCC foundations draw new scrutiny from state investigators

Adding FIU and MDCC to the equation allowed Penelas to strong-arm the two schools for donations to the campaign through their private foundations. No one appears willing to say whose idea it was for the two schools to donate to the political campaign.

Maurice Ferré, who was the chairman of the Transit Not Tolls committee, says he acted as a spokesman for the campaign, debating the issue on radio and television, but insists he had nothing to do with raising money or deciding how it was spent. “It was all done by Penelas and the people around him,” he says.

The treasurer for the Transit Not Tolls committee, James Reto, is a close friend of Penelas, and currently is treasurer of his re-election campaign. In fact he has been the treasurer of all Penelas's political races except one.

State Rep. Annie Betancourt continues to question last year's penny-sales-tax campaign orchestrated by Mayor Alex Penelas
State Rep. Annie Betancourt continues to question last year's penny-sales-tax campaign orchestrated by Mayor Alex Penelas

When I asked Reto who asked him to take part in the transit campaign, he replied, “I don't recall.” He offered only vague answers to my other questions. When I asked why he was being so coy, he responded, “Why say anything if you don't have to?”

According to minutes of FIU Foundation meetings held during the summer of 1999, the donations were presented to the foundation's governing board as a fait accompli. There appeared to be no advance discussion or even a formal vote taken to approve the $299,000 expenditure.

Paul Gallagher, who is senior vice president for the division of business and finance at FIU and oversees the school's foundation, refused to answer questions when I reached him by phone last week. In a huff he declared he was far too busy to talk to me about the school's donation to a political campaign.

No one from the MDCC Foundation returned repeated phone calls.

In addition to the investigation into possible state campaign-finance-law violations, the two schools may have placed in jeopardy the tax-exempt status of their foundations. Several sources claim the Internal Revenue Service also is investigating the donations.

If it isn't it should be.

New Times has a copy of a memo from lobbyist and Penelas ally Ric Sisser in which Sisser encourages donations to the FIU Foundation so the money could then be passed along to the Transit Not Tolls campaign. “Contributions to the “FIU Foundation' will be used for public information and research related to Miami-Dade County's proposed referendum to secure a one-cent sales tax to partially serve as a dedicated revenue source for cultural activities,” Sisser wrote. (Sisser's interpretation of the campaign as a “dedicated revenue source for cultural activities” is wildly misleading but typical of the way the entire campaign was run.)

By giving to the foundation -- with the understanding that the money would then be passed along to the Transit Not Tolls campaign -- donors could reap several benefits. First, it would allow them to hide the fact that they were giving money to the transit campaign. Such foundations are not required to disclose their list of donors.

Second, it would potentially allow them to use the foundation's tax-exempt status to write off their donations on their 1999 tax returns. If these individuals had given directly to the political campaign, their donations would not be tax deductible.

“It's money laundering,” says state Rep. Annie Betancourt, who was shocked when she learned last year that the foundations for FIU and MDCC donated such large sums to the transit campaign. Earlier this year Betancourt successfully introduced legislation she says would prohibit any university foundation from making a similar donation to a political campaign in the future. Betancourt, a Kendall Democrat, argues that the money raised by these foundations should be applied to the benefit of needy students and should not be used to fund such risky political schemes. “How many students could have been helped,” she asks, “with the money they wasted on this campaign?”

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