Ackerman Revises Disclosure Forms to Show He Repaid Loan From Donor

Posted December 21, 2009 at 1:21pm

Rep. Gary Ackerman (D) has erased an old debt, and he wants the record to show it: The New York lawmaker recently amended his 2005 financial disclosure report to show he had repaid a personal loan.In an amendment filed Dec. 4 to correct his financial disclosure for calendar year 2004, Ackerman inserted a liabilities report, disclosing that in 2004 he paid off a “personal note— issued by financier Selig Zises valued at $15,000 to $50,000.According to Ackerman spokesman Jordan Goldes, the New York lawmaker amended the five-year-old forms on his own initiative after noticing the error.“He noticed it was omitted inadvertently from the 2004 report,— Goldes said.The December amendment marks the second time Ackerman has corrected his forms to clarify transactions involving Zises. In mid-2006, Ackerman amended his annual financial disclosure form for calendar year 2005 to erase a submission showing Zises had issued him an “asset-backed personal loan— valued at $50,000 to $100,000.At that time, Ackerman told Newsday that the original report listed the loan in error, stating it should have been listed as a sale of stock. The amended form showed Ackerman earning a profit of $15,000 to $50,000 from the partial sale of stock in Xenonics, a Carlsbad, Calif.-based company that produces high-intensity lights. Zises was at one time listed in government documents as a partial owner of Xenonics, which has received more than $15 million in federal contracts since fiscal 2001, according FedSpending.org, a database maintained by the budget watchdog group OMB Watch.According to his financial disclosure reports, Ackerman acquired his stock in Xenonics in March 2002, investing $1,000 to $15,000. That same year he also began reporting a “personal note— from Zises valued at $10,000 to $15,000.The New York lawmaker told Newsday in 2006 that he invested in the company on Zises’ recommendation, referring to Zises as a friend. Zises and his family are also prolific donors to Ackerman’s campaigns, providing $29,000 to Ackerman since 1998.“I invested in a couple of things he recommended and most of them went bust,— Ackerman told Newsday at that time. Zises was listed in Securities and Exchange Commission reports as a 10 percent owner of Xenonics until 2005.News reports and SEC records indicate that when Ackerman invested in the company in 2002, it was not a publicly traded corporation but offered stock only privately to employees and investors. An SEC report filed in September 2004 — the company became a public stock in fiscal 2004, after its purchase by a Nevada-based corporation — indicates that Xenonics issued stock to five investors in March 2002, selling stock at 75 cents per share and raising approximately $378,000.Those same five investors received additional stock in March 2003, “in lieu of making interest payments that were owed to the investors,— the report states. Although Ackerman reported a significant increase in the value of his Xenonics stock after 2002 — his initial investment had grown to $250,000 to $500,000 in value in 2003, although he reported no additional purchase of stock — there is no indication he is one of the five investors described in the SEC report.“In 2003, the Congressman properly disclosed that he held stock in a company known as Xenonics,— Goldes said in an e-mail. “He did not receive any dividends, capital gains, stock or any other distribution from that company in that year.—While Ackerman noted “capital gains— on his 2003 report for his Xenonics investment, he did not list a corresponding figure.Prior to its public availability in 2004, Xenonics sold some of its stock in “private placement— sales, including the March 2002 and March 2003 sales. Companies are not required to register with the SEC for such sales, which several finance experts explained allow smaller businesses to raise needed capital without the expenses related to composing a formal prospectus and other necessary documents.Robert Korajczyk, a professor of finance at Northwestern University’s Kellogg School of Management, notes that private placement of stocks are common in the United States.“If you think about any mom and pop entity that is growing to the point where they no longer can just rely on their bank debt and their own savings, they’re likely to go out and try and find some investor to move to the next level,— Korajczyk explained. “Probably there’s a huge amount of privately held equity in entrepreneurial ventures and small business throughout the economy.—Federal regulations allow individuals to invest in private stocks but require those investors to meet specific requirements, such as either having an individual or joint net worth “that exceeds $1 million at the time of the purchase,— or an income exceeding $200,000 annually for two years, or $300,000 for that same period for couples, and “a reasonable expectation of the same income level in the current year.—Ft. Lauderdale, Fla.-based Kovack Securities co-founder Brian Kovack, a board member of the National Association of Independent Broker Dealers, noted that individuals who meet those criteria are typically experienced investors: “They’ve been investing for 10, 20 years.—Although the December amendment erases Ackerman’s earlier debt to Zises, the New York lawmaker still reports a loan from Zises.Ackerman began reporting a new loan from Zises on his 2007 disclosure form, covering calendar year 2006. That “loan secured by stock— is valued at $15,000 to $50,000 on his most recent financial disclosure report, for calendar year 2008.