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Filner rejects challenge to release tax returns

DeMaio sold private companies for $2.5 million in 2007

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Councilman Carl DeMaio released five years of personal tax returns Monday, revealing his $2.5 million profit from his 2007 agreement to sell the two companies he founded.

The Republican mayoral candidate released the returns while challenging his opponent, Rep. Bob Filner, to do the same.

“Today I’m releasing five years of my personal tax returns, setting an example as I pledge to create the most open and transparent city government in the nation,” he said.

“Congressman Filner has repeatedly rejected transparency. He has failed the transparency test while he’s tried to hold others to a higher standard.”

In the past, Filner has said he won’t release his tax returns because he doesn't want to compromise the privacy of his ex-wife. Monday, Filner challenged DeMaio to release the tax returns of both his companies and his partner, Johnathan Hale.

"If DeMaio agrees to comply with Nathan Fletcher's original challenge... I will also release my household tax returns which include the details of my former wife's finances, as well," Filner wrote in a statement to reporters, referring to a series of transparency-related challenges made by the independent Assemblyman, who lost in the mayoral primary and whose support both candidates have publicly courted.

DeMaio said he's unable to release the companies' tax returns because they no longer belong to him after the sale. He also said he can't release the purchase agreement because it includes proprietary information relating to the two companies' ongoing strategy.

He released the tax returns Monday, he said, because a 5-year non-disclosure agreement from the sale expired on Sept. 10.

The sales price of DeMaio’s companies has received heavy interest throughout the mayoral race as he’s used his personal wealth to fund his campaign, donating or loaning over $1 million to his official fund and a supporting political action committee.

He said there’s nothing specific he’s curious to see in Filner’s returns — the way others were curious of the sales price of DeMaio’s companies — but said the public has a right to take a look and decide for itself.

Releasing tax returns has likewise been a high profile issue on the national level, as President Barack Obama and his surrogates have repeatedly asked challenger Mitt Romney to produce more than the two years of tax returns he’s released so far.

DeMaio said the fellow Republican Romney, who DeMaio introduced during a Memorial Day appearance in Balboa Park, should “absolutely” release more years of tax returns.

In 2007, DeMaio agreed to sell the Performance Institute and the American Strategic Management Institute (ASMI).

DeMaio said the companies sold for roughly $6 million, but a profit-sharing deal the company had meant he didn’t receive that amount. His 2007 return shows a $4 million sales price, and $1.5 million in costs associated with the deal (investment brokers, lawyers, etc.), leaving DeMaio his $2.48 million payment. As a result of the sale, he was forced to pay $358,603 in federal taxes that year.

With the Performance Institute, incorporated in 2000, DeMaio gave training seminars on performance based budgeting for public agencies, a field he became accustomed to while working at the nonprofit Congressional Institute.

In 2002 he started the second company, ASMI, which provided similar services for private companies.

By the time of the sale in 2007, DeMaio said the two companies earned about $15 million per year, with 45 to 50 percent of it coming from government contracts and the rest coming from nonprofits and private companies. His critics, including Filner, often say DeMaio got rich on government funding even while adopting anti-government rhetoric.

The Performance Institute generated more in annual returns, accounting for $10 million per year, but ASMI was growing quickly at the time of the sale.

DeMaio earned $110,880 as the principal of his companies in 2007, his returns show, a figure he says was in line with the rest of the company’s managers.

Filner said DeMaio's refusal to disclose who he's met with during large portions of his personal schedule showed a lack of commitment to transparency.

He also used the occasion to once again push for his “Sunshine Act for City Hall,” a series of new requirements he proposed in March and which in June the city’s Rules Committee sent to City Attorney Jan Goldsmith to draft as an official ordinance. The Rules Committee did not approve the measure when it asked the City Attorney’s office to draft specific language, according to the committee’s consultant, Lea Fields-Bernard.

The law would require the city to post online all contracts over $25,000, as well as quarterly performance metrics for all departments and the compensation and pensions of all employees.

It would also require full disclosure of all campaign contributions for city officials, rather than just those over $100, as is currently the case. DeMaio already imposes this requirement on himself, and he pressed Filner to do the same for the $33,517 in contributions under that limit he’s received in the race thus far.

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