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Dems see 'character assassination.' BYLINE: MATT STEARNS, The Star's Washington correspondent SECTION: B; Pg. 1 LENGTH: 1070 words WASHINGTON | Claire McCaskill is having a hard time pleasing the Senate Ethics Committee, and that's making Missouri Republicans mighty happy. McCaskill, a Democratic U.S. Senate candidate who expects to face incumbent Republican Jim Talent in November, has had to file two amendments to her personal financial disclosure report because the Ethics Committee said her initial report was inadequate. McCaskill At issue: The committee wants more precise information about the complex holdings of Joseph Shepard, McCaskill's wealthy husband, which include hundreds of seemingly worthless real estate partnerships and a Bermuda reinsurance company. McCaskill's campaign aides say that the two requests for more information from the Ethics Committee are not unusual and that the committee simply needs clarification. But in a tight, high-profile race, every misstep is magnified and any advantage counts. Republicans hope to sow doubt in voters' minds. "If you do not disclose what is required that does reflect negatively on your character," said Lloyd Smith, a senior strategist for Talent. "It is a character question and it is an honesty question." What Smith called a character question McCaskill aide Adrianne Marsh called "character assassination" of "a good woman from a rural area who stands for things Missouri families care about." "They're grasping at straws here," Marsh said. McCaskill filed a report with the Senate in January that listed a net worth of at least $13 million and possibly more than $30 million - most stemming from Shepard's extensive real estate interests. "We've told everything we have to tell an incredible amount of detail," McCaskill said in a radio interview last month. But McCaskill's campaign conceded Friday they have not yet been given the all-clear by the Ethics Committee. Talent has filed self-initiated amendments to his own personal financial statements in the past because of reversed numbers on a form and to clarify contributions by his wife to a 401(k) retirement plan. Earlier this year, Talent made a point of publicly releasing his family's tax
returns. His campaign spokesman criticized McCaskill for not doing the same (McCaskill released her tax return but would not release Shepard's). Shepard's wealth and its sources came up in the 2004 governor's race, with McCaskill's foes both in the primary and in the general election trying to use his business dealings against her. What's different now is that the Senate requires much more disclosure than Missouri, giving Republicans far more information to comb - and the Ethics Committee much to digest. McCaskill attorney Marc Elias said her disclosure was among the more complex he has worked on. This is how McCaskill's filing describes Shepard's holdings: "There are numerous instances where the spouse has an interest of nominal value in a government assisted housing project as the general partner of an investment limited partnership that is the limited partner of the limited partnership that owns the project." Indeed, more than 150 of the 242 private partnerships and businesses in McCaskill's January filing are reported to be worth less than $1,000; nearly 200 of them produced less than $201 income, the lowest bracket for Senate disclosure. In February, the Ethics Committee staffers asked for more information, specifically on the underlying assets of several investment funds worth millions of dollars. Then in April, the committee demanded a list of the underlying assets of 58 of Shepard's partnerships and businesses. When the campaign complied in June, it also listed 40 additional partnerships that it did not identify in its first filing. But it did not provide the values of and income from the additional partnerships. Marsh said the additional partnerships either didn't meet the minimum value that require reporting or were entered into after the initial filing was made in January. Most of Shepard's assets are real estate partnerships dotted about the United States, but one holding the committee asked about stands out: The Rural Housing Re-Insurance Co. of America Ltd., based in Hamilton, Bermuda. McCaskill reported the company has a value of between $250,001 and $500,000, but produces less than $201 in income. Bermuda has strict secrecy laws, no tax on dividends or corporate income and few disclosure requirements, making it a favored place for the wealthy to put money. Marsh wrote in an e-mail that Shepard owns less than 6 percent of the company, and that despite its high value, "the investment has never returned a dividend in the 20 years it has been in business." "That doesn't pass the smell test," scoffed Smith. "You can't have an investment of that magnitude without getting more than a couple of hundred bucks from it. That doesn't ring true with most voters." Such companies are a way to cut expenses because you're essentially insuring your own holdings, said Mark Geoghegan, editor of Reinsurance magazine. They
also are a popular investment vehicle because tax-free profits that would go to an insurance company go to you, and because you can generate tax-free investment income using the firm's reserves. Another unusual area of McCaskill's report involves liabilities. Listing liabilities, such as liens or loans, is important in such filings because it shows to whom the candidate is financially beholden. The only liability listed in McCaskill's Senate filing is a line of credit of more than $1 million at Enterprise Bank in St. Louis. But records from the Missouri secretary of state's office indicate that one of Shepard's most valuable assets, the Missouri Tax Credit Fund LP - valued at more than $1 million - is indebted to the Washington Bank of Missouri. Collateral for the financing includes the fund's interest in a Shepard partnership and Missouri Low Income Housing tax credits. Another Shepard partnership, Festus Associates I, LP, is indebted to the Missouri Housing Development Commission, which has made low-interest loans to Shepard in the past, according to state documents. The collateral is a Jefferson County apartment complex. In an e-mail, Marsh said that because the liabilities are "incidental to the trade or primary business of the entity," they do not need to be reported, and "Senate filers are not required to report contingent liabilities." Smith said the spirit of the law demands more, to ensure that no influence or conflict would affect the potential senator.