A now-defunct charitable foundation registered to the scandal-ridden Democratic donor Dr. Salomon Melgen may have breached federal tax law, tax experts say.
The Sal Melgen Foundation’s assets were signed over to Melgen when it was dissolved in 2010, according to disclosure forms, in a move that experts say is highly unusual and inconsistent with tax law.
Recent Stories in National Security
"When a charitable organization such as a private foundation dissolves, it has an obligation to use its assets or distribute its assets for charitable purposes, and often that is a distribution to another charitable organization," said Kelly Simone, a legal expert at the Council on Foundations, who said she could not comment on the specific case.
Melgen, a South Florida doctor, is under investigation for Medicare fraud and political corruption linked to his relationship with Sen. Robert Menendez (D., N.J.).
While the Sal Melgen Foundation claimed to have $1.6 million in total assets on tax forms during its last year of operation, the foundation also disclosed $16 million in corporate stock sales—a puzzling and highly troubling discrepancy, according to a tax attorney who reviewed the tax documents.
"You wonder if he actually got $16 million," said one attorney, who called the situation "really quite extraordinary … even really, really bold people don’t try this."
One of the corporations the foundation held stock in was Metropolitan Health Networks, Inc., a company that Melgen sat on the board of until 2005.
Private foundations are often exempt from certain tax obligations, including capital gains taxes on investments.
An Internal Revenue Service spokesman said the IRS could not comment on specific cases.
Luis O. Rivera, an accountant whose name is signed on the Sal Melgen Foundation’s tax forms, declined to comment for this story. Jose Marrero, whose name also appears on the tax forms, did not return a request for comment.
The Sal Melgen Foundation was established in 2007. Like an array of other companies and organizations registered to Melgen, the foundation dissolved after just a few years, in 2010. It also shared an address with Melgen’s West Palm Beach medical office, which was raided by federal agents in January.
The foundation does not appear to have been very active. Its charitable distributions consisted of $52,351 in educational grants to the University of Miami and an establishment called the Instituto Educativo Liceo Del Norte in 2009, according to disclosure forms.
Melgen has had brushes with the IRS in the past. The agency filed a tax lien in 2011 against him for over $6.2 million in unpaid taxes. He was also hit with tax liens in 2008 and 2002, both of which were resolved.
Sen. Menendez has drawn scrutiny for contacting top federal health care officials on behalf of Melgen, a key campaign donor, in 2009 and 2012 over a government audit of Melgen’s ophthalmology practice.
The South Florida doctor’s connections to Menendez and other high-profile Democrats have drawn attention in recent months since the January office raid. Melgen has posed for photos with the likes of President Obama and House Minority Leader Nancy Pelosi and used his private jet to fly Senate Majority Leader Harry Reid to a fundraiser.
Menendez has also come under scrutiny for failing to pay for flights he took on Melgen’s plane to the Dominican Republic. The senator reimbursed Melgen $58,500 for the flights in January after they were publicly revealed, saying it was an oversight.
A Miami grand jury is reportedly investigating Menendez for political favors he may have provided Melgen.