Campaign Releases Edwards's Earnings

By MICHAEL MOSS and KATE ZERNIKE

Published: July 10, 2004


In the four years before he joined the Senate in 1999, John Edwards made a total of nearly $27 million as a personal injury lawyer who won a string of multimillion-dollar jury verdicts and settlements.

The Kerry-Edwards Democratic presidential campaign released Mr. Edwards's income figures in a statement yesterday in response to questions about the taxes he paid after he created a tax shelter in 1995.

Mr. Edwards paid $9,353,448 in federal taxes on his income of $26,869,496, but the shelter allowed him to avoid paying $591,112 in Medicare tax, the figures provided by the campaign show.

Until now, Mr. Edwards's earnings as a trial lawyer have been a matter of speculation. He has declined to release his full tax filings on an annual basis, and his Senate disclosure forms only broadly suggest that he is worth $12 million to $60 million. The campaign said it was still considering whether to release the senator's actual tax filings, and whether it would do so only for his time in the Senate or for his legal career as well, which began in 1978. The campaign said Mr. Edwards had obtained an extension on his returns for 2003, and planned to file them this summer or fall.

The campaign also released a Jan. 14 letter from a Washington law firm, Caplin & Drysdale, that Mr. Edwards and his wife, Elizabeth, engaged to review 10 years of their tax filings. "The structure initiated by the Edwardses' tax professionals was entirely lawful, ethical and proper," the letter said.

In campaigning for the presidential nomination, Mr. Edwards attacked President Bush as favoring the wealthy with his tax policies and blamed tax shelters as undermining the Medicare program.

Asked how Mr. Edwards's use of the tax shelter squared with his campaign positions, David Ginsberg, a Kerry campaign spokesman, said: "Senator Edwards believes that no individual should pay more than they owe in taxes, but he also believes that we should make sure our tax code reflects our values. The law should make sure everybody is paying their share - not one penny more and not one penny less."

The campaign said Mr. Edwards created the tax shelter, a so-called S Corporation, on the advice of his accountant, who cited its legal liability protections as well as its tax advantages, about two years after he left a larger firm to start his own practice with a partner.

His use of the tax shelter surfaced in his 1998 run for the Senate against Lauch Faircloth, the incumbent Republican, whose campaign manager called it a "deceitful ploy."

But accountants and tax-law specialists say that S Corporations have grown increasingly popular with lawyers, contractors and entrepreneurs. The IRS received 3,191,108 such filings last year. If anything, these experts said, Mr. Edwards used it rather conservatively.

While most of his income, which included some investments, was labeled dividends on the S Corporation, for which he paid no Medicare tax, Mr. Edwards did designate $360,000 a year as wages on which he was taxed for Medicare.

But even those whose business it is to collect taxes said they could find no fault with what Mr. Edwards did. "Let's face it," said Veranda Smith, a government affairs associate with the Federation of Tax Administrators. "I work for the state tax agencies, and I'm perfectly happy to say that anyone who puts in a structure that pays more taxes than necessary is nuts."

Friends and neighbors say Mr. Edwards does not flaunt his wealth and generally avoids its trappings. The biggest extravagances seem to be homes. The Edwardses own three houses: one in Raleigh, N.C.; a beach house on Figure Eight Island, near Wrightsville Beach, N.C.; and a town house in the Georgetown neighborhood of Washington, bought last year for $3.8 million.

They do not eat out often, and friends say that when they do they choose restaurants where they can order chicken fingers for their children. The Edwardses recently vacationed at Walt Disney World, but for the most part, vacations are to Raleigh or to the beach house.

"You're not talking people who are in love with money for its own sake," said Glenn Bergenfield, a friend of the couple's since law school, and godparent to their two sons.

They have a live-in nanny. Mr. Edwards drives a Buick and Mrs. Edwards a Chrysler minivan. Aides say Mr. Edwards could no more say the brand of shoes or suit he is wearing than he could the exact distance to the moon. "He just doesn't care," one said.

Wade Hargrove, a former law partner, said Mr. Edwards once asked for advice on buying a boat. "He wound up with a little small boat, a little runaround boat with an outboard motor on it," Mr. Hargrove recalled. "Hell, he could have bought a yacht."

The house in Raleigh is in a shaded, affluent area of winding streets and well-kept lawns. When the Edwardses moved to Washington, they bought an elegant house with a large marble staircase on Embassy Row. Friends said Mrs. Edwards worried that the staircase was dangerous for their two youngest children, who were toddlers.

The Edwardses sold that house to the government of Hungary and bought a large butter-yellow painted brick house on a cobbled street in Georgetown. Virginia Chew, the listing agent for the house, said $3.8 million was the standard price for a house of its size in Georgetown, and that others nearby were selling for $5 million to $6 million.

Chris Downey, a neighbor and friend in Washington, called the Edwardses "an average family that does not have to worry about their future."

"They don't live an extravagant lifestyle at all, we're not talking jewelry and clothes," Ms. Downey said. "They do what people do when they have kids. With a little bit of money you can give them ballet lessons and braces when they need them, as opposed to saying either braces or ballet. They don't have the hard choices that many people have, but that's good."

The Edwardses set up an endowment at the University of North Carolina, where they received their law degrees, and a program in Raleigh in the name of their son Wade, who died in 1996. Mr. Edwards bought a house for his brother, and a friend said the couple had paid at least a year's college tuition for the son of friends who could not afford it.

Teresa Heinz Kerry: Hiding Something?

The Trentonian
Wednesday, July 7, 2004
Dave Nesse, Editorial Page Editor


The naming of a runningmate hardly takes all the suspense out of Sen. John Kerry’s candidacy. Another important matter still looms involving the vast wealth of the candidate’s wife, Teresa Heinz Kerry. No, the issue in not her possession of such wealth, per se. The possession of wealth seems to be a troubling issue only among denizens of the political left and then seemingly only when the wealth in question is possessed by a Republican.

Is whether Teresa Heinz Kerry going to come fully clean on her finances or opt, as she has so far, for a modified limited hangout, to use the old Nixonian Watergate term for curbing disclosure. So far, she’s opted for the latter.

She released a summary stating her 2003 income at a tad over $5 million, which sounds low measured against her assets – for example, a $35 million Gulfstream V jet, a $14 million spread outside Pittsburgh, a $12 million place on Nantucket, etc, etc. not to mention her hubby’s 750,000 to $1 million yacht and $8,000 mountain bike. But she has not released income tax returns. If she persists in her refusal to do so, Kerry will be the first presidential candidate in three decades not to make full financial disclosure including his spouse’s income tax returns.

Teresa Heinz Kerry, who inherited her wealth from her late husband Pennsylvania Sen. John Heinz is clearly a philanthropist of magnanimous magnitude, funding myriad noble causes through various foundations. But some of the Heinz wealth also has found its way indirectly to political activist causes. Her wealth played a more direct political role in shoring up her husband’s precarious primary campaign finances with a well-timed, desperately needed loan. The political reach of her wealth is one reason for full disclosure.

Another, more compelling reason is the economic reach of her assets. The Heinz trust makes hundreds of thousands of transactions a year in stocks and bonds. Her wealth is a significant market force all by itself. This is true even assuming, as we do, that influence of the Heinz wealth is free of any taint of malevolence or impropriety.

The full disclosure issue has become all the more urgent with the Los Angeles Times estimate of her wealth as far greater previously reckoned - $900 million to $3 billion. Even the lesser of those numbers dwarfs the net worth of George W. and Laura Bush ($13 million) who are often portrayed by many of those now rallying to the Kerry banner as part of a shadow government of sinister plutocrats.

Heinz-Kerry and her candidate husband are assuming the political personas of would-be tribunes of ordinary working Americans. The Kerry campaign has retained as its hired-gun media consultant Robert Shrum, an exponent of populist themes. Yet another reason for full financial disclosure.

Of course, in the end, there is no legal requirement that Heinz Kerry disclose her income tax returns. She would be fully within her rights to persist in telling Americans, in effect, “My wealth is none of your business!” In which event Americans will be perfectly justified in wondering what she and her candidate husband are hiding.

See where Edwards puts his millions

Pundits seem taken with the idea that Sen. John Edwards is a man of the people. But maybe they should read the fine print about Edwards that's appearing in their own publications so that they can see what he's really all about.

Writing in yesterday's New York Times, Nicholas Kristof enthused, "He'll help with the Democrats' most crucial task: reconnecting the party to Middle American voters." The Washington Post's David Broder praised Edwards' stump speech as "a thing of beauty - a populist depiction of 'two Americas' divided between the privileged and the working people." USA Today editorialized rhapsodically about Edwards' "youthful good looks, personal charisma and a golden tongue."

But a look elsewhere in the newspapers shows a different Edwards. It reveals where Edwards puts his money, as opposed to his mouth. It shows an Edwards connecting with big multinational companies to create jobs offshore. It shows an Edwards who divides himself between his political ambitions here at home and his financial ambitions overseas. It shows that his tongue isn't so much golden as it is forked.

In 2003, as he sought the presidency, Edwards pledged to take the fight to "big corporations, pharmaceutical companies, big insurance companies, big HMOs." But what he didn't tell his audiences is that at the same time he was investing his own money in big corporations - big foreign corporations.

How do we know this? We can peruse Edwards' 2003 senatorial disclosure forms, reprinted in yesterday's USA Today. On page five of the paper is a list of Edwards' assets, including a holding worth between $1 and $5 million - that's the deliberately obscuring style of "full-disclosure" forms - in "American EuroPacific Growth Fund." Actually, once we look at the prospectus, we learn that it's really the "EuroPacific Growth Fund." And that's honest billing; on page eight, the prospectus tells readers, "Normally, the fund will invest at least 80 percent of its assets in securities of issuers located in Europe and the Pacific Basin."

That's the truth. On page 10, we see a list of the fund's holdings by country: Japan accounts for 21.5 percent of its assets, followed by the United Kingdom at 13.4 percent. And in a breakdown by industry, as opposed to country, we see "commercial banks," 9.40 percent, and pharmaceuticals, 8.67 percent. And specifically what companies are involved? The top five listed are AstraZeneca, Vodafone, KPN, Mitsui Sumitomo Insurance, and Nestlé - foreign companies all.

Is this populism? Is that what a "man of the people" does with his money? Maybe it's standard procedure if you're like John Kerry, who married a multimillionaire, divorced her and then married a billionaire. And as for the Bush-Cheney administration, don't expect it to worry too much, either, about job-exporting foreign investments. After all, the chairman of the President's Council of Economic Advisers, Gregory Mankiw, said earlier this year that such globalization is "a good thing."

But Edwards, by his own repeated proclamation, was supposed to be something different. In February, reacting to the Mankiw comment, he wrote Bush a mocking open letter, asking, "Is it a 'good thing' that high-paying manufacturing jobs are leaving America and being replaced with low-paying services jobs?"

No, it's not a good thing. But deeds speak louder than words. So the next time the North Carolinian asks his standard rhetorical question about the American people - "Will they have a president and an administration who understands their lives and who will stand up for them?" - he might be met with a counter- question: "Sen. Edwards, when will you divest your holdings in the EuroPacific Growth Fund? And in all other investments that create jobs overseas?"

Edwards is a hypocrite who got caught in a contradiction. Now it's a test of the press, as well as the public: Will he be able to get away with preaching job-creation here at home while practicing job-creation abroad?

We Need More Affordable Hair Care



One is a Billionaire, One is a Multimillionaire

The question is, how did each get their money?

Prediction: Kerry and Edwards will lose. But they will look good doing it.