Take, for instance, our April 25, 2002, story "Sweetheart Deal" by Thomas Korosec and Rose Farley, about how Virginia McGuire, the politically wired daughter of former U.S. House Speaker Jim Wright, arranged a state-sponsored deal using $12.8 million in bonds to purchase the Williams Run apartment complex in East Dallas, in part to provide low-cost housing for the poor. Because of the quasi-public-housing nature of the sale, the bonds used to finance it were tax-exempt, which means that whoever bought them doesn't have to pay taxes on the interest they earn. The deal netted McGuire and her husband's company nearly $600,000 in fees at closing and arguably did not provide much in the way of low-income housing. The story suggested that the whole deal was--forgive the hypertechnical jargon here--stinky-poo.
The IRS later audited the arrangement--not because of our story. Because the McGuires' cut was higher than allowed and too few low-income tenants lived at the complex, $40,000 of bonds were ruled no longer tax-exempt. Green Bridge Development, McGuire's former company, was hit with a whopping $3,000 penalty ("The Taxman Cometh," by Thomas Korosec, May 29). Score one, a very small one, for the good guys.
Well, not quite.
It turns out...heh, heh, boy are our faces red...that in response to the IRS audit, which probably had absolutely nothing to do with our story, the attorneys who reviewed the original deal for Williams Run and a similar apartment complex had to do some work. The lawyers represented the Texas Department of Housing and Community Affairs (TDHCA), a state agency. They naturally wanted to be paid for their time--around $350 an hour in many cases--which included strategizing with McGuire and preparing responses to pesky media inquiries (cost: $960). Total fees and expenses for getting the McGuires off the hook: around $137,000, according to invoices from TDHCA. The bondholder, Charter Municipal Mortgage Assistance Corp., kicked in roughly $80,000, a TDHCA official says. The rest was billed to, you guessed it, the state. Spell that Y-O-U.
As our boss put it: "Why do we even do investigative stories?"
Good question. Think we'll switch to sports. In the meantime, we plan to make Korosec available to do $960 worth of lawn mowing, window washing, etc., for qualified Texas taxpayers. Just our way of making it up to you, assuming Tom agrees. He might not.