Democratic rainmaker faces six-figure back-taxes bill
April 11, 2010 4:00 AM
Ed Grattan arrives for a hearing last week at the City-County Building to dispute a $17,569 water bill he received.
By Rich Lord Pittsburgh Post-Gazette
Edward J. Grattan took the back door into the City-County Building on Wednesday, a route familiar to him into halls of power he knows well -- but, on this day, for an unwelcome reason.
Mr. Grattan, 53, a top Democratic Party fundraiser, has entered that building to visit mayors and council members, and can count some of the judges with offices there as his friends. Last week, though, he was on his way to the chambers of Allegheny County Common Pleas Judge R. Stanton Wettick to dispute a $17,569 water bill.
"I paid my bill all along," he said, on his way across the City-County Building's barrel-vaulted central corridor. "Somehow, there was a huge bill that came. I appealed it."
He faces a much bigger bill -- $451,692 -- from the Internal Revenue Service for unpaid income taxes that he said are the subject of litigation. His Squirrel Hill home, the scene of high-powered fundraising events and twice the subject of foreclosure filings, is now in another name as a result of a tax-related transaction. And he has been a subject of tax actions by the city, county and state, even as he donates tens of thousands of dollars, raises much more, shares connections and pitches ideas to leaders on all of those levels.
He is, in short, a rainmaker who has found himself under water.
Helping the party
On Oct. 25, 2005, Mr. Grattan's six-bedroom, five-bath home on Wilkins Avenue was the center of the Pennsylvania political universe. It was the scene of a Democratic National Committee fundraising event chaired by Gov. Edward G. Rendell, attended by prominent elected officials, and featuring DNC Chairman Howard Dean, the former Vermont governor and presidential candidate.
Three weeks after that fundraiser, the IRS would lay claim to the house and everything else Mr. Grattan owned. But on that night, the home was the venue for an event with a host committee including two congressmen, the lieutenant governor, the state treasurer and auditor general, two General Assembly heavyweights, Allegheny County Executive Dan Onorato, mayor-apparent Bob O'Connor and about a dozen local business leaders.
"I actually have a picture of Howard Dean looking at my boys at Ed's house," said attorney Clifford B. Levine, who attended that event. Mr. Grattan, he said, has been "generous with helping the party and helping causes."
In 2003, Mr. Grattan was a volunteer for Mr. Onorato's successful campaign for Allegheny County executive. In 2008, Mayor Luke Ravenstahl's campaign fronted him $9,500 -- some of which he later returned -- to cover expenses incurred bringing former President Bill Clinton to town for a fundraiser.
A firm owned by his business partner, 225 Ross Street Associates LP, has rented or donated office space to numerous campaigns, including those of Mr. Onorato and Mr. Ravenstahl. And he remains the co-finance chair, with businessman Stephen C. Frobouck, of the Allegheny County Democratic Committee.
"He has helped us tremendously in promoting our fundraising events," said Democratic Committee Chairman Jim Burn. "He's assisted us in getting supporters to come to our events and make contributions.
"He wants to see the party run in a businesslike fashion."
A 1975 graduate of Central Catholic High School, Mr. Grattan took courses at what was then Robert Morris College before entering the solid waste industry.
A 1994 federal lawsuit by an estranged partner, Anthony DiCenso Jr., reveals a rough-and-tumble world of multimillion-dollar landfill deals, struggles for profitability and last-minute scrambles to make debt payments. Losses at an Illinois landfill and asset transfers from business to business led to acrimony among the partners that took a year of U.S. District Court litigation to settle.
Mr. Grattan was then sidelined by health issues for a few years, and emerged as a business consultant in partnership with Thomas J. Santone of Mt. Lebanon. Mr. Santone has described their flagship business, Prime Solutions Capital, as an investment banking firm with local and international clients.
Tax issues that began around the time Mr. Grattan was sick and at odds with Mr. DiCenso continue to dog him.
IRS tax liens filed in Allegheny County Common Pleas Court in late 2005 and early 2006 indicated that he owed $38,861 in income taxes for 1992 and $144,478 for 1993, and had unpaid obligations in every year from 1997 through 2004, totaling $480,050. A lien is a claim on one's property; when the IRS files one, the agency gets dibs on proceeds from anything the taxpayer might sell -- from a house to a car to jewelry.
In September 2007, the IRS lifted the liens, saying Mr. Grattan had "satisfied the taxes" owed. One month later, he and his wife sold their house for $1.2 million -- more than double what they had owed the mortgage lender that twice had filed for foreclosure but did not complete those actions -- to a company called BREC Associates LLC.
BREC's letters match the first initials of Mr. Grattan's four children, in reverse birth order. Its president is Mr. Santone, according to state Corporations Bureau listings. BREC promptly mortgaged the house for $900,000, and Mr. Grattan continues to live there.
In September 2009, the IRS revoked the release of its liens, saying in a series of papers filed in Common Pleas Court that it had "mistakenly" lifted its claims, but providing no details as to why the error occurred. New liens filed in January suggested that Mr. Grattan had paid off more than one-third of what he owed the IRS for the years 1992 through 2004, while adding new overdue taxes for 2005 and 2007 that brought his total lien to $451,692.
"This whole series of events is highly irregular and contains a lot of red flags that warrant further scrutiny and investigation," said James Fellin, a forensic accountant whose Downtown-based firm, The Nottingham Group, investigates financial dealings for the federal Department of Justice and other clients. Chief among the issues, he said, is "how and why [the lien] was released, allowing him to get his house out from under it."
Mr. Grattan wouldn't talk about the taxes or transactions, on the advice of an attorney. He said he has paid his taxes, but is "disputing amounts."
"It's actually in ongoing litigation right now," he said. "I'd like to keep it private and also work through the proper channels that those issues are working their way through."
The IRS doesn't comment on individual tax cases, and any relevant federal tax litigation is not public record.
A home sale can be part of what's called an Offer in Compromise, in which the IRS cuts a deal with a taxpayer who would otherwise not be able to pay off obligations, said Michael Angelo Maccagnan, a tax attorney with the Hampton firm Angelo & Angelo.
But a home transfer shortly after a lien is erroneously lifted could mean the taxpayer "recognized the IRS's misstep and took advantage of that situation," Mr. Maccagnan said.
Mr. Grattan's political ties didn't shield him from tax collectors.
From 1995 through last year, the city of Pittsburgh and Allegheny County repeatedly filed delinquent property tax liens against a piece of vacant ground he owns in Hazelwood. In 2000, the city filed a lien against his Squirrel Hill home for two years' worth of unpaid property taxes that were subsequently paid. The state, in 2006 and again last year, placed five-figure liens on Mr. Grattan's property, reporting a $26,494 personal income tax debt in November. And in 2008, his partner, Mr. Santone, was summoned to Pittsburgh Municipal Court, where he was found guilty of the failure by Prime Solutions to pay $18,000 in business privilege taxes from 2000 through 2005.
Also in 2008, Mr. Grattan got a $41,585 bill from the Pittsburgh Water and Sewer Authority, for 3.9 million gallons of water it said was used at his home.
Mr. Grattan responded that the authority erred by billing him based on estimates, rather than meter readings, for 31 months in a row. The authority cut the bill by more than half, but he's challenging the balance.
The relationship business
While Mr. Grattan didn't pay all the money the tax man wanted, he and members of his household made $88,263 in contributions to candidates and political committees from 2001 through last year, according to county, state and federal campaign contribution disclosures. That included $28,826.26 since the IRS filed its first liens in 2005.
Top recipients include the campaigns of U.S. Sen. Robert Casey, former state Rep. Michael Diven, Montgomery County Executive Joe Hoeffel, former City Councilwoman Tonya Payne and county and state Democratic Party organs.
His real campaign value, though, lies with his ability to help raise money from others, according to several current and former officials who asked not to be named. "He gets other people to write checks," said an insider from a mayoral campaign for which Mr. Grattan raised funds.
That skill put him at the back-room table when the city school board grappled with budget problems in 2000, when city council wrangled over its presidency in 2006, and when then-new Mayor Ravenstahl held a retreat to establish a plan for his administration in 2007.
Mr. Grattan's political ties and his business interests work hand in hand, according to some who know him, because his value as a consultant is related to both his keen understanding of finance and his ability to talk with governmental decision makers.
"He is very good at trying to cultivate relationships," said a former elected state official. "As that relationship matures, there's going to be various points down the road, where [Mr. Grattan] could ask [a given official] for a little help without them putting themselves in harm's way."
Mr. Grattan politely refused to discuss his business.
"I've stridently tried," he said, "to stay a private person."