By Ben Goad, Press-Enterprise (CA)

February 18, 2007

A Southern California congressman accused of improperly avoiding taxes on a series of land deals in Fontana and elsewhere said he has done nothing wrong and described the allegations as an attempt by Democrats and the media to sully his name.

Fontana officials also have been criticized over their handling of the deals.

Amid negotiations to buy land from Rep. Gary Miller in 2005 and 2006, city officials provided the congressman with a series of letters advising him to sell and suggesting they could use eminent domain to further their plans.

The city, however, never intended to use the measure to acquire Miller's land, officials there said.

Under the law sellers don't have to pay capital gains taxes on profits from land sales if they were forced to sell by threat of eminent domain and as long as they reinvest the profits within two years.

Miller, R-Diamond Bar, denied accusations that he improperly used the letters to avoid paying capital gains taxes on profits from a trio of Fontana deals under the rarely used tax code section.

But even if Miller paid the taxes as he maintains, the letters show both an abuse of congressional power and inappropriate behavior on the part of city officials, critics say.

"It sounds like a sweetheart deal for the local congressman," said Ned Wigglesworth, a policy advocate for watchdog group California Common Cause. "If he used his position as congressman to pressure local officials, that undermines the credibility and integrity of his office."

Fontana officials insist that Miller's position had no bearing on the deals and maintain they did nothing wrong.

The deals are now part of an FBI inquiry and the subject of a formal complaint filed with the IRS.

'Not Hiding Anything'

Miller, whose district includes a sliver of western San Bernardino County, along with portions of Los Angeles and Orange counties, said neither the FBI nor the IRS has contacted him about the deals.

"I'm not hiding anything," he said.

Miller said he has asked the House Ethics committee to review the deals, as well as a disputed 2002 Monrovia land sale in which he did use the eminent domain tax code section to shelter a roughly $10 million profit. Committee staff did not return calls seeking comment.

The Monrovia deal involved 165 acres of Miller's property, which the city wanted for a wilderness preserve. Miller agreed to sell the land for about $11.7 million, city spokesman Dick Singer said.

Using a letter from Monrovia officials similar to the ones he later obtained from Fontana, Miller invoked tax code section 1033 to sidestep taxes capital gains taxes.

"I had no choice," Miller said, adding that his appraisal of the Monrovia land valued the property at roughly $4 million higher that what he sold it for.

He disputed published reports suggesting that the eminent domain claim was bogus, Singer called some of the reports erroneous and said the city would have certainly used eminent domain to acquire Miller's land if he refused to sell.

Fontana Deal

Miller, having to reinvest his earnings from the Monrovia deal, bought more land, including lots in Fontana.

Among his new holdings was a piece of land south of 210 freeway in the north end of town that the city had coveted for years, Fontana Redevelopment Director Ray Bragg said.

Talks began between Miller and city officials the next year. During the negotiations, Miller asked the city for letters suggesting the city could use eminent domain to acquire land. The city complied.

Not only did the city have no intention to use the measure, the redevelopment agency didn't have the authority to enforce eminent domain without the approval from the city, said Bragg, who described such approval as a lengthy process.

In the letters, signed by City Manager Ken Hunt, officials stated that the city wished to acquire the property. The letters stated that the city was in the process of amending its plans to use eminent domain, though they did not state that the amendments would not affect Miller's property.

"The Redevelopment Agency would like to avoid an adversarial acquisition and instead suggest that you and the Agency enter into a contract for the Agency to acquire your property," the letters state.

Bragg said an FBI agent called him in recent weeks and that he answered general questions about the deals involving Miller. He said he has heard nothing since.

Letters Questioned

Both Bragg and Hunt stand by the city's role in the deals, which were handled as three separate transactions. Bragg said the language in the letters was sufficiently vague and didn't say anything inaccurate.

"He asked for a letter, we gave him one that was passed through our city attorney," Bragg said.

While factually correct, the letters could be perceived as misleading, Wigglesworth, the policy advocate, said.

"It sounds like a fig leaf," he said. "It sounds purposefully drafted to provide a fig leaf of cover in absence of the city's intent to use eminent domain."

Beyond that, the letters are evidence that Miller received special treatment because of his office, said Wigglesworth and Bob Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles.

"I don't think I could have gotten that letter," Stern said. "...City government responded to his pressure in a way that they wouldn't have to other people."

Miller maintained that the city did nothing inappropriate by providing him with the letters, saying, "Cities do it all the time."

Bragg also said he believed such requests were common, though he conceded writing such letters on fewer than five occasions since 1990.

Miller said he only made $12,400 on the Fontana deals, and decided not to invoke the tax code section he used in Monrovia.

Citing the troubles he's had over the deals in Monrovia and Fontana, Miller vowed to never again sell land to a city.

And if one approaches him with a threat of eminent domain, he said, "get ready to go to court."

At a glance

May 2002: Rep. Gary Miller sells 165 acres to the city of Monrovia for more than $11.7 million.

December 2004: Miller buys parcels of land in Fontana, reinvesting the Monrovia profits.

March 2005: Fontana provides Miller with letters, at his request, saying they could use eminent domain to acquire his property.

April 2005: In two transactions, Miller sells his property in northern Fontana to the city. He says the profits were $12,400.

March 2006: Again at Miller's request, Fontana officials send a letter indicating they could use eminent domain to take property.

April: Miller sells property in downtown Fontana to the city.

August: Citizens for Responsibility and Ethics in Washington files complaint with the IRS, claiming he wrongfully avoided taxes on the deals.

February: Amid an FBI inquiry into the deals, Miller and Fontana officials maintain they did nothing wrong.