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IRS: Supervisor candidate Pete Foppiano owes $1.5 million in taxes


Pete Foppiano, a candidate for Sonoma County's 4th District supervisor seat, owes $1.5 million in federal income taxes, according to liens filed against him at the county Recorder's Office.

Foppiano, a mortgage and real estate broker and former Healdsburg mayor, has owed the money to the Internal Revenue Service since 2010, the county records show.

In addition, the state and county filed tax liens against Foppiano. All 10 of those tax liens, which totaled $15,635, have been cleared, although some were paid off only two weeks ago, records show.

Foppiano, 60, adamantly disputes the amount the IRS claims he owes for the tax years 1999 through 2008. He said the liens are due to the federal agency's "misinterpretation" and "misunderstanding."

"I have paid every single dime of tax that I legally owe, not the amount they claim I owe," he said Tuesday. "I have attorneys arguing the point."

While the IRS liens stem from a standoff with the federal government, a list of other past debts and financial judgments on file against Foppiano at the county reflect his struggle through the recession, he said.

"I'm just like everybody else — the average, middle-class person on the street. I tried to persevere, there were some consequences and we're all hoping to recover," he said.

Still, questions about Foppiano's financial history could stall his candidacy just 12 days before voting begins in the June 3 primary, upending a closely fought race for the north county seat held by outgoing Supervisor Mike McGuire.

A political operative involved in the race provided the initial tip to The Press Democrat regarding the liens and other court judgments on file against Foppiano in Sonoma County Superior Court and the county Recorder's Office. The source requested anonymity before providing the information.

Two of Foppiano's four rivals in the contest said the liens raise doubts about his ability to hold public office in a system dependent on taxpayer revenue.

"My first question: Is that normal to have that many tax liens and judgments against you?" said James Gore, a candidate in the race. "When tax issues come up, it's pretty sensitive with voters and residents."

"I don't think it's going to help his chances," said Ken Churchill, another rival in the contest.

Foppiano said his dispute with the IRS arose from the way the agency calculated his income.

The IRS focused only on total deposits made into his business bank accounts, even though much of it represented commissions owed to agents working for him, he said.

Foppiano said that under state law, as a licensed real estate broker he is required "to receive and transmit commissions that belong to an agent."

For example, for 2005, he said the IRS said his adjusted gross income was $1,277,000, based on deposits into his accounts.

But he said he paid out almost $628,000 of that in commissions to agents, who were selling property or securing loans. Along with his business expenses of $126,000, he calculated his estimated adjusted gross income at $522,485.

Foppiano said the federal agency focused only on bank deposits and disallowed all his deductions.

"The IRS says you put a check in the bank, that is your earned income," he said. "Their numbers are wildly in error."

"We have a disconnect between state and federal law," he added. He said he has spent years and "tens of thousands of dollars in attorneys fees to try and correct" the amount the IRS says he owes.

Renael Thompson, the IRS officer who signed the liens against Foppiano, said she couldn't discuss details — including how much of what Foppiano owes is a result of penalties and interest.

"I couldn't disclose anything about his tax liens — what he may owe, or any specific information," she said.

Public records raise additional questions about Foppiano's other tax liabilities.

County records show Foppiano failed to pay county business taxes in a timely fashion, with nine separate "certificate of delinquency" liens filed against him totaling $8,395 between 2002 and 2013.

By April 11, Foppiano had paid off all of the liens, some of which had been pending against him for years.

He said they represented business taxes assessed for Golden Bear Financial, his mortgage and real estate company.

Foppiano said some of the county tax notices may have been delivered to an old office address, so he never received them.

"I made a mistake thinking I had paid for previous years. When I found out I hadn't, I immediately went in and paid it," he said.

Foppiano also had a $7,240 lien filed against him in 2008 by the state Franchise Tax Board representing $4,029 in income taxes owed, plus penalties and interest.

But the lien was released a year later, according to documents on file at the county Recorder's Office.

Foppiano said the state made an estimate of his salary based on typical earnings for people in his industry.

"When I showed it was incorrect, they released the lien," he said.

His opponent Gore, a former Obama administration official, said Foppiano's explanations might add up, but if they don't, "it's bad personal management in finances and business. It doesn't bode well for someone running for a position of public trust."

He referenced the 2008 west county supervisorial race involving Rue Furch, whose candidacy may have been derailed by a controversy over her $70,000 delinquent property tax bill.

"I like Pete and I'm sorry to hear this," said Churchill, a Santa Rosa winemaker. "I think it will be up to voters to decide whether it impacts their decision."

Windsor Town Council member Deb Fudge, considered a leading contender in the north county race, declined to comment Wednesday on Foppiano's tax issues.

Keith Rhinehart, a former UPS supervisor and current substitute teacher who is the fifth candidate in the race, could not be reached for comment.

Foppiano worked as a freelance correspondent for The Press Democrat's Towns section for about six months in late 2011 and early 2012.

Foppiano, who served on the Healdsburg City Council from 1984 to 1996, said his tax battle and some court judgments against him for money owed to creditors should not make voters lose faith.

He says it shows that he is a member of the middle class, which "was devastated during the recession. A lot of people are in that boat."

He noted that the mortgage and real estate industry was one of the hardest hit, but rather than close his business, lay people off, or file for bankruptcy, he chose to stay open.

"It doesn't make me any less viable as a candidate," he said of his financial history. "It makes you understand what the average person goes through."

The court judgments against Foppiano stem from real estate and banking activities.

North Bay Area Corp., doing business as Davis Restoration, obtained a $44,533 court judgment in September 2008 against Foppiano for doing mold remediation and other clean-up on property he owned on Arata Lane in Windsor.

David Osborn, head of the company, said it was clean-up for a large marijuana grow involving one of Foppiano's renters. Osborn did the work on the property, but said he was never paid.

The dispute arose because Foppiano sold the property in the middle of the job and the insurance check for the clean-up work went to the new owner.

Osborn said he was directed to collect his money from the new owner, but was unsuccessful. He maintained that Foppiano was still responsible for the debt.

He said he spent more than $15,000 in a fruitless lawsuit against Foppiano.

"He was judgment proof. He had nothing in his name that could be attached to collect," Osborn said.

But Foppiano said Wednesday the case was dismissed against him and the judgment vacated on Jan. 31, 2008.

"It never should have been entered against me in the first place," Foppiano said.

Foppiano also had a $12,311 court judgment against him in June 2007 obtained by Bankers Mortgage Realty Advisors of Santa Barbara.

He said it involved a rent dispute for a Santa Rosa branch office that his agents occupied in a substandard, "uninhabitable building" that never should have been rented out.

He said he was held responsible as a broker for the actions of his agents.

Sears Roebuck obtained a $6,469 judgment against Foppiano in 2001, but he said he cannot recall what it was about.

More recently, in 2011, Capital One Bank obtained a judgment against Foppiano for $2,482, but court records indicate a "satisfaction of judgment" in 2012. Foppiano said he paid it off.

Foppiano also had abatement proceedings started against him by the county in 2007 because permits were not issued for a minor remodel and new roof for a property he bought at 5020 Carriage Lane in Wikiup.

He said the work was started by a previous owner who failed to obtain the permits.

You can reach Staff Writer Clark Mason at 521-5214 or clark.mason@pressdemocrat.com.