The New York Times really goes off the deep end this morning with an article suggesting, on the basis of not a scintilla of evidence, that the former district attorney of New York County, Robert Morgenthau, was motivated by personal greed in putting a donor together with City College.
I rang Mr. Morgenthau this morning (it so happened we were in the same town in Massachusetts), to find out what the Times smear-hatchet job left out.
If you just read the Times story, you'd think that Mr. Morgenthau and the CEO of Nabors Industries, Eugene Isenberg, hatched the gift to City College as a plot to ingratiate themselves with Rep. Charles Rangel, who was in a position to help Nabors with what the Times calls a "tax loophole" and a "tax shelter." As the Times puts it, Mr. Morgenthau "was an investor in Mr. Isenberg's oil drilling company at the time he arranged and attended two meetings between the two men, meaning his finances stood to be affected by the fate of the tax break." There was just one meeting, in September 2006, but more about that later.
Among the things the Times left out is that Mr. Isenberg has a long history of helping educational institutions in conjunction with Mr. Morgenthau when there are no tax issues at issue. He gave millions of dollars to the school of management at the University of Massachusetts, which is known as the Isenberg School of Management; Mr. Morgenthau gave the keynote speech there. Mr. Isenberg bought a building for the Parkside School in Manhattan for children with learning disabilities; Mr. Morgethau helped smooth the deal with a call to the lawyer representing the archdiocese of New York, which was selling the building. If all Mr. Morgethau and Mr. Isenberg were out in search of was a tax break, what explains the rest of their activity on behalf of education?
Or, for that matter, what explains Mr. Morgenthau's decision to be sworn in for his final term as D.A. in the great hall of City College, at a podium given by the class of his grandfather, who came to America in 1866 at age 10 not speaking a word of English and entered City College five years later, with the class of 1875? Readers of the Times article would know none of this, which provides a far better explanation for Mr. Morgenthau's desire to help City College than some search for a tax break.
As for that tax "break," "loophole," or "shelter," it's hardly as exceptional as the Times makes it out to be. Plenty of American companies that do business internationally make tax or regulatory-driven decisions to move to Bermuda. Nabors wound up paying more American taxes after the move than it did before (up to $391 milllion in 2006 from $175 million in 2001), because its business expanded. It's not a loophole or a shelter to pay the tax rate that legally applies to you; it's the rule of law.
Nor is it clear that Mr. Rangel would have been in a position to do anything about it. When the topic of the gift to City College was first raised, the Democrats did not control Congress, and Mr. Rangel was not chairman of the Ways and Means Committee. Even if he had been chairman of the Ways and Means committee, it's not clear that a committee effort retroactively to change the rules to prevent companies from moving their headquarters offshore for tax reasons would have withstood a legal challenge. Nabors had made the move in 2002, the same year that Leucadia and Cooper Industries decided to do so and Stanley Works considered it; by the Times's theory, Congress should have somehow had in 2006 or 2007 the power to undo a corporate location decision by a company that had been made and implemented several years earlier. Again, none of this is in the Times article.
Mr. Morgenthau's holdings in Nabors were disclosed in city financial disclosure forms all along. They represent less than 10% of his overall portfolio. As for the idea that he profited greatly from what the Times describes as "Mr. Rangel's decision to help preserve the tax shelter in 2007 — an action that saved the company $650 million" — it's absurd. Nabors stock was trading at around $20 at the end of 2003, before the company moved to Bermuda. Today it's trading at around $16. Nabors stock was trading at around $33 in August of 2006 before the City College gift; now it is trading at around $16. I believe these numbers, from Yahoo! Finance, are adjusted for a 2:1 stock split in April 2006. The stock doesn't pay a dividend. Wherever this supposed $650 million is, it isn't in Mr. Morgenthau's pocket.
The Times article claims about Mr. Rangel, Mr. Morgenthau, and Mr. Isenberg that "After Mr. Isenberg donated $100,000 in December 2006, the three men met for a follow-up discussion about the contribution, this time at the Carlyle Hotel in Manhattan. That meeting took place on Feb. 12, 2007, the day the bill that affected the tax loophole was up before Mr. Rangel's committee." That's nonsense. There was no "meeting" between the three men on that date. Mr. Morgenthau and Mr. Rangel, who began his career as a lawyer working for Mr. Morgenthau when Mr. Morgenthau was U.S. attorney, were having a meal at the Carlyle as they sometimes do, and Mr. Isenberg, who likes the place because the manager is a graduate of the Isenberg School of Management at U. Mass., stopped by the table and said hello. In any event by then the Isenberg/Nabors gift to City College had already been signed, sealed, and delivered; Mr. Isenberg had notified the president of City College of that in a December 8, 2006, phone call.
It takes an imaginative Times reporter to turn a charitable donation to City College into some kind of nefarious conspiracy motivated by personal or corporate greed. Imagine what such a reporter could do with this set of facts: Major stockholders in a publicly traded company who are sisters of its chairman emeritus give a $4 million gift to part of the City University of New York to endow scholarships named after the chairman emeritus — scholarships that will subsidize the training of students who may go on to work for the publicly traded company. Sound suspicious?
That set of facts describes the gift by Marian S. Heiskell, Ruth S. Holmberg and Dr. Judith P. Sulzberger to create the Punch Sulzberger Scholars program at the CUNY Journalism School.
So long as the Times is going to be in the business of concocting ridiculous theories of self-interested motives for gifts to fund scholarships at City University, it may want to have a look at its own practices before smearing the reputation of a guy with Mr. Morgenthau's lifetime record of integrity and public service.
Disclosures: I own some Leucadia. The New York Sun editorial mentioned in the Times article mentions this site, and I used to work at the New York Sun and own part of it, though I no longer do.
Some minor edits made to this post Wednesday afternoon.