Senior Democrat Bucks House Ethics Rules with International Sweetheart Deal

“Our goal is to restore accountability, honesty and openness at all levels of government. To do so, we will create and enforce rules that demand the highest ethics from every public servant, sever unethical ties between lawmakers and lobbyists, and establish clear standards that prevent the trading of official business for gifts.” (Nancy Pelosi’s “A New Direction for America,” Page 21)

RINSE CYCLE: U.S. Rep Gary Ackerman Wins Big with No-Money-Down Loans and Private Stock Investments:

U.S. Rep. Gary Ackerman hosted a meeting between Israeli officials and a defense-contracting firm in which he had invested money — and made a big profit, a Daily News probe has found.

The Queens Democrat put no money down when he obtained private stock in the company, Xenonics Inc., relying on $14,000 borrowed in 2002 from the company’s top shareholder, a longtime friend.

The sweetheart loan required no collateral and had no written payback date, a potential violation of House ethics rules.

When the company went public, its stock soared. Ackerman says he repaid the loan at 6% interest and sold the stock for more than $100,000 in 2005 and 2006.

House ethics rules bar members of Congress from using Congressional resources to promote commercial enterprises, stating:”The prohibition against use of House resources to support unofficial undertakings clearly applies to support of business endeavors.”

The rules also require written repayment plans for any loans Congress members take out. Ackerman confirmed he had no such written plan for the 2002 loan.

In the last few years, Ackerman arranged a meeting in his Washington office between Xenonics founder Alan Magerman and two Israeli officials, Magerman said.

Magerman said he tried to convince the Israelis to buy Xenonics’ NightHunter, a high-powered flashlight used by the U.S. military. Magerman said Ackerman was “trying to be very helpful.”

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“What is wrong with somebody trying to help somebody with a government? He (Ackerman) has an interest in Israel,” he said. ” What is wrong with making people aware of products that save people’s lives?”

Ackerman, who said Zises suggested the investment to him, has a second loan for between $15,000 and $50,000 from Zises.

“It’s more or less the same arrangement” as the first loan, he said. “I don’t remember the exact terms.” He later said the loan, taken out in 2007, was due in 2012.

The loans are among many ties between Ackerman and Zises and his brother, Seymour. Ackerman has invested up to $100,000 in personal money and $750,000 from his campaign treasury with the Zises-run investment firm, Family Management Corp., and its affiliates.

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The Zises have been longtime donors to Ackerman’s campaign committee, donating $53,000 to his campaigns ($23,000 since June 2007).

Ackerman offered various explanations for the terms of the loans. Questioned about the 2002 loan, he first claimed he paid it off in 2005, then changed that to 2004. When The News noted no loan is mentioned on his 2004 financial disclosure form, he amended the report days later.

In response to News queries, he also changed the number of years he had to repay the 2002 loan, from five to three.

After refusing to say why he took the loan, he admitted it was for Xenonics stock. Ackerman claims both loans were “due by a date certain,” but provided no documents to back it up.

Documents he provided make clear the 2002 loan was made on favorable terms. There’s no repayment schedule, no date by which the loan is due, and no record of property or any assets pledged as collateral.

The only documents Ackerman could produce was a one-page “General Promissory Note” dated March 12, 2002 and a check to Selig Zises from his joint account dated Dec. 12, 2004. Both were signed by his wife, Rita.

Ackerman’s disclosure forms claim he “purchased” and “sold” the stock, but he never actually owned it. Zises said Ackerman “owned an interest in my stock…I was in control of the sale.”

Asked why he would borrow money from Zises and not a bank, Ackerman said, “It was easier.”

The 14-term Democrat is on two subcommittees with enormous influence over the finance industry. He said he has never done anything to tarnish the integrity of his office.