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Perry Land Deal Benefited from Courtesies: Paper

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    CYPRESS, TX - FEBRUARY 7: Former Alaska Gov. Sarah Palin (C) and her daughter Piper Palin (R) watch Texas Gov. Rick Perry (L) during a campaign rally for Perry February 7, 2010 in Cypress, Texas. Perry is running against Kay Bailey Hutchinson and Debra Medina for the Republican gubernatorial candidacy. (Photo by Dave Einsel/Getty Images)

    Gov. Rick Perry's investment in a Texas resort property was enhanced by a series of professional courtesies and personal favors from friends, campaign donors and the head of a Texas family with a rich history of political power-brokering, The Dallas Morning News reported Sunday.

    Together they may have enriched the Republican governor by nearly $500,000, according to an independent real estate appraisal commissioned by the newspaper.

    Perry's aides said all transactions surrounding the governor's 2007 sale of a lot at Horseshoe Bay resort were properly handled. They cite a bank's appraisal at the time that said the buyer paid Perry slightly less than market value.

    But an appraiser hired by the newspaper this year, who has decades of experience in Horseshoe Bay real estate, dismissed the earlier appraisal as "unsupported." Llano County tax appraisals at the time also indicated the governor was able to buy the land at below market value and sell far above it.

    Perry said in a brief interview last week that every land transaction he has made while in office "has been open and honest, and at arm's length," and disclosed in public records.

    "So I would just have folks take a look at the record, and I think the record pretty much speaks for itself," Perry said.

    The 2007 deal involved a half-acre grassy lot at a Texas Hill Country resort on the shore of Lake Lyndon B. Johnson. The Horseshoe Bay development is owned by Doug Jaffe, whose San Antonio family has long and sometimes controversial ties to Texas politics.

    Jaffe's company sold the parcel in 2000 to state Sen. Troy Fraser, R-Horseshoe Bay, a longtime Perry friend and political ally. Shortly after, Fraser sold the lot to Perry for just more than $300,000.

    The newspaper's appraiser determined in a report done this month that the land was worth $450,000 when Perry bought it.

    In 2007, Alan Moffatt, a British business partner and close associate of Jaffe's, paid Perry $1.15 million for the land. The newspaper's appraiser found that price to be $350,000 above market value.

    Moffatt denied anything improper occurred in the transaction. "It just happened that the governor of Texas owned that lot," he said. "It was a good deal for me."

    If Perry were deemed to have received any gifts, he would have been required to disclose them as a state officeholder. He did not disclose any part of the land deal as a gift.

    Perry has portrayed himself as one of the most financially transparent governors in Texas history, and has attacked Democratic opponent Bill White for past business deals and for not releasing all his tax returns.

    The head of a nonpartisan, nonprofit organization that promotes transparency in government said Perry's Horseshoe Bay transactions look questionable.

    "The man on the street on this would think that this is a series of deals that smell of special favors being created for elected officials to curry their favor," said Ellen Miller, executive director of the Sunlight Foundation in Washington, D.C.

    Doug Jaffe and his late father, Morris, have built widely chronicled reputations as big-money backers of Democratic politicians going back to Lyndon Johnson's days as a U.S. senator. But the Jaffe family also has contributed to Republicans when the GOP was in power, and Doug Jaffe gave to Perry's 2004 campaign.

    Doug Jaffe found success in the vending machine business and made a fortune selling "hush kits" that allowed older commercial jets to meet government noise restrictions.

    The Jaffes were implicated in a federal investigation in the early 1990s of billionaire rancher Clinton Manges, protege of legendary south Texas political boss George Parr. Manges was convicted of using the mail to file false claims with a state land official to retain an oil lease for the Jaffes.

    In 1989, a congressional ethics committee investigating U.S. House Speaker Jim Wright subpoenaed both Jaffes to testify about an East Texas oil exploration venture that, despite producing nothing, earned Wright about $150,000. The Jaffes denied assisting Wright in return for help winning a $3 billion military aircraft contract.

    The federal Office of Independent Counsel reported that it also investigated the Jaffes as part of a probe of former San Antonio mayor Henry Cisneros, then U.S. housing secretary. The Jaffes acknowledged they had made thousands of dollars in loans to Linda Medlar Jones, a former Cisneros girlfriend.

    Horseshoe Bay is an upscale enclave started in the 1970s and bought in 1996 by Doug Jaffe, who poured millions of dollars into expanding it.

    Fraser said he offered Jaffe $700,000 for a lot in September 2000. After Jaffe accepted, Fraser said he contacted him again a day or two later and offered $300,000 for a smaller lot.

    Fraser said he told Jaffe the second lot was for Perry, though the Morning News reported Jaffe denied that in a recent interview.

    Fraser said he wrote one check for $1 million, paying for Perry's lot with the understanding his friend, who he had known since they were teenagers, would repay him with interest.

    The governor's office provided The News with a real estate closing statement showing Perry paid Fraser $310,762 for the lot February 2001. Perry used cash from the proceeds of his Austin home sale, said spokeswoman Allison Castle.

    Donna Lollar Green, owner of Highland Lakes Appraisers in Marble Falls and the appraiser hired by the newspaper, concluded her report this month that Perry paid well below market price. Using four comparable lot sales, she placed the actual value at $450,000 at the time of sale.

    Both Fraser and Perry's spokeswoman initially said an ethics lawyer was consulted at the time of sale, and the attorney deemed the transaction proper. Fraser said the governor selected the lawyer. The governor's office said Fraser spoke with the attorney.

    Castle, the governor's spokeswoman, later said there may not have been an ethics attorney involved. "There was no requirement to talk to an ethics lawyer or to get an opinion," she wrote in an e-mail.

    A county tax appraisal at the time of the sale also valued the property at above Perry's buying price. Perry immediately appealed the $414,700 appraised value for tax purposes and asked Corpus Christi corporate labor lawyer Colleen McHugh to handle the appeal. Perry had just appointed McHugh chairman of the Texas Public Safety Commission.

    An agreement was reached with the Burnet Central Appraisal District to lower the tax appraisal to the $310,762 sale price, although the district said it had no closing statement to confirm the price. The appeal saved Perry about $14,000 over the six years that the district maintained the value at purchase price.

    Perry did not compensate McHugh for the appeal because he had paid her $2,850 for earlier work on the property purchase, Castle said.

    McHugh, a former State Bar of Texas president appointed by Perry in 2005 to the University of Texas System Board of Regents, said it would be improper for her to comment.

    By 2005, weary of tax and maintenance costs, Perry approached resort vice president and 2002 campaign donor Ron Mitchell to help unload the property. Mitchell steered Perry to Horseshoe Bay Resort Realty, where he listed the property for about $1.2 million, said Michael Gordon, director of real estate operations.

    Perry pulled the property off the market after four or five months brought no takers, Gordon said.

    When Moffatt bought the lot from Perry in 2007 for $1.15 million, the land was appraised for tax purposes at $600,000. But a March 2007 bank appraisal for Moffatt's financing valued the land at $100,000 more than the $1.15 million Moffatt paid.

    Green's appraisal report for The News concluded Perry's lot was worth $800,000 when sold to Moffatt. By buying below market value, and selling above, Perry was able to add $489,238 to his profit from the investment, according to Green's appraisals.

    Perry spokeswoman Castle said she didn't understand why anyone would question the ways in which the governor bought and sold the land. Perry has reported on his federal tax returns that his profit on the sale was $823,000, the largest he has disclosed from a real estate transaction during his term as governor.