No millionaire, Tisei struggles to run real estate firm while campaigning for seat in Congress
On Memorial Day weekend in 2006, then state Senator Richard R. Tisei and his business and life partner, Bernard F. Starr, celebrated more than five years of selling North Shore real estate by moving their firm into a new office building they constructed at a prime location just off Route 128 in Lynnfield.
But by then a once booming market was already slowing, and home sales in Lynnfield plummeted by 50 percent that year, burying Tisei and his firm, Northrup Associates, in losses. In 2006 and again in 2008, Tisei’s real estate setbacks outweighed his state salaries of $65,000 and $85,000, erasing his obligation to pay federal income taxes.
“We’re struggling, but we’ve made it through the worst recession since the Great Depression,” said Tisei, the Republican challenger to Representative John F. Tierney.
Now Tierney is trying to seize an advantage by portraying Tisei as a wealthy candidate living the high life while shirking his responsibility to pay his fair share of taxes.
“Campaign bombshell: Millionaire Tisei Paid No Federal Income Taxes,” read the headline of a Tierney campaign news release last month, after the Globe reported that Tisei had not paid federal income taxes in two years.
Tierney, an eight-term Democrat from Salem who is fighting for his political life after a family gambling scandal, underscored the point during a rapid-fire exchange with Tisei in a WCVB-TV debate scheduled to be aired Sunday. “You don’t want them to know you have a fancy vacation house down in Martha’s Vineyard, income properties, houses, a business property,” the congressman charged.
Matt Robison, Tierney’s campaign manager, said the campaign determined that Tisei is a millionaire by adding up the value of the assets he listed on his federal financial disclosure statement, where Tisei said that he owns property and investments ranging in value from about $2.1 million to approximately $7.3 million.
But that calculation did not include the debts, including mortgages and lines of credit, that Tisei also listed. And a more detailed examination of Tisei’s holdings and business activities by The Boston Globe, including an independent review of his personal and corporate tax returns, shows that he is hardly a millionaire.
According to the review, which was based on the city and town assessments of Tisei’s four properties, as well as publicly available mortgage data and more detailed mortgage information supplied by Tisei, the value of his assets lies somewhere between $533,000 and $774,000. A similar review of Tierney’s holdings shows that the value of his assets falls between $693,000 and $982,000.
The estimated value of Tisei’s holdings includes his estimate of Northrup’s market value — $250,000 — even though a financial expert said that number may be optimistic.
James P. Angelini, a professor of taxation at Suffolk University’s Sawyer Business School and the director of the Master of Science in Taxation program, reviewed Tisei’s corporate returns for the Globe and concluded that the net book value of the real estate brokerage — not the market value — is less than $200,000
“That’s not millionaire status,” he said.
Tisei said he benefited by buying a firm with a reputation that streches back for decades. Northrup Associates had been in continuous operation since the 1950s when Tisei and Starr purchased it, in 2000. And Tisei acknowledged that the market value of $250,000 that he set for the firm is based in large measure on the good will the firm has generated, the expertise of the 25 brokers who work there — all part-time agents paid on a commission basis — and annual sales figures.
“We’re selling $60 million worth of homes every year,” he said.
But like other real estate firms, Tisei’s brokerage receives only a commission from those sales, typically four to six percent, that is often shared with other brokerage firms and the individual real estate agents who oversee the transactions.
Moreover, the Globe found that Tisei and Starr are carrying heavy loans on their four properties: their Wakefield residence; a two-family home next door where Tisei’s mother, Beverly, lives; a rental property on Martha’s Vineyard; and the three-story commercial building in Lynnfield.
For instance, although the red brick faux colonial where Northrup is headquartered has been assessed at nearly $1.5 million, Tisei and Starr are carrying four mortgages that have left them with only $151,000 of equity in the building.
And when it comes to the Martha’s Vineyard vacation home, the two businessmen are carrying a mortgage and line of credit worth more than the property’s $460,400 assessed value.
Robison, Tierney’s campaign manager, told the Globe that Tisei may be wealthier than he appears, suggesting that the Northrup headquarters in Lynnfield is worth significantly more than the nearly $1.5 million estimated by the tax assessor.
But Peter Richardson, a senior vice president at the commercial real estate firm Jones Lang LaSalle and a specialist on the commercial real estate market north of Boston, said the official assessed value of the property, if anything, may overvalue the property based on it’s 4,900 square feet of rentable space, saying the assessment is “on the upper end of the spectrum.”
Although Northrup agents broker sales in Lynn, Peabody, and Middleton, Tisei said, most of the company’s business is centered on Lynnfield, where the firm is responsible for one out of every two sales.
And statistics supplied by the Warren Group, a Boston company that tracks local real estate, show that the fortunes of Tisei’s business have run parallel with the ups and downs of the local market.
In 2006, the first year Tisei did not pay federal income taxes, total sales of single-family homes in Lynnfield dropped by half, from 187 homes sold in 2005 to 96 homes some in 2006. In 2007 sales picked up, but in 2008, the second year that Tisei did not pay federal income taxes — and the year of national financial collapse — sales fell from 155 to 94.
“There were a lot of sleepless nights,” Tisei recalled. “We didn’t know how bad it was going to be or how long it was going to last.”
Since buying the firm, Tisei has ceded the lion’s share of management responsibilities to Starr, while he has concentrated on his public service career, which began when he was only 22. Tisei was a state legislator for 26 years and the Republican candidate for lieutenant governor two years ago. Today he is making his first run for a seat in Congress.
The Tierney campaign has also raised questions about one of Tisei’s earliest real estate deals, suggesting that he improperly benefited by selling the two-family home where he lived in the early 1990s after his parents were accused of attempting to hide their assets to keep them away from aggrieved creditors.
The story, illustrated on a state Democratic Party website called Tisei Facts, begins with a home inspection business that Tisei’s parents owned and attempted to franchise nationally.
But Tisei’s parents quickly ran into trouble with the people who were paying to be part of their home inspection business, who began filing complaints with the Federal Trade Commission. After an FTC investigation and a federal lawsuit, the FTC fined Ralph and Beverly Tisei $20,000 and $10,000, respectively, for offenses that included failing to disclose past lawsuits and a bankruptcy to franchisees.
In 1993 Tisei, then in his early 30s, wanted to sell a property on Main Street in Wakefield that he jointly owned with his parents and three siblings in order to pay for a house of his own.
The Tisei Facts website notes that the house could not be sold because a couple from the Springfield area had sued Tisei’s parents and won an $80,000 judgment, allowing them to place a lien on the home, preventing any sale.
Tisei proposed that his parents’ share of proceeds of the sale be placed in an escrow account for the creditors, a proposal that was rejected by the home buyers and a Hampden Housing Court judge, according to court documents.
But the website omits the fact that the lawsuit filed by the Springfield-area homebuyers had nothing to do with the unhappy franchisees who had complained about Richard Tisei’s parents to the FTC. Instead, the two homebuyers who filed the lawsuit against Tisei’s parents claimed that Tisei’s home inspection company failed to uncover costly structural deficiencies.
In addition, the website omits that fact that, eventually, a Massachusetts Appeals Court decision lifted the lien the Springfield couple had placed on the house Tisei was trying to sell. And that cleared the way for Tisei to sell the property legally.
The Springfield-area couple, James A. Greco and Caryn S. Goldberg did not return calls from the Globe, and their lawyer at the time declined to be interviewed.
By the time the house sold, Tisei had already purchased the Wakefield residence where he and Starr live today, a stone’s throw from the two-family home he once owned with his parents.Michael Rezendes can be reached at email@example.com. Follow him on Twitter @RezGlobe.