Queens, NY – Congressman Ackerman’s Ties to Firm Questioned

Queens, NY – Rep. Gary Ackerman hosted a meeting between Israeli officials and a defense contracting firm whose stock he later sold at a big profit, in which he had invested money – and made a big profit, a Daily News probe has found.

The Queens Democrat put no money down when he obtained private stock in the company, Xenonics Inc., relying on $14,000 borrowed in 2002 from the company’s top shareholder, a longtime friend.

The sweetheart loan required no collateral and had no written payback date, a potential violation of House ethics rules.

When the company went public, its stock soared. Ackerman says he repaid the loan at 6% interest and sold the stock for more than $100,000 in 2005 and 2006.

House ethics rules bar members of Congress from using Congressional resources to promote commercial enterprises, stating:”The prohibition against use of House resources to support unofficial undertakings clearly applies to support of business endeavors.”

The rules also require written repayment plans for any loans Congress members take out. Ackerman confirmed he had no such written plan for the 2002 loan.

In the last few years, Ackerman arranged a meeting in his Washington office between Xenonics founder Alan Magerman and two Israeli officials, Magerman said.

Magerman said he tried to convince the Israelis to buy Xenonics’ NightHunter, a high-powered flashlight used by the U.S. military. Magerman said Ackerman was “trying to be very helpful.”

“He was nice enough to arrange the meeting,” he said. Israel did not buy the product. Magerman said he was unaware Ackerman had invested in his company.

Ackerman released a statement saying he “bought and sold his interest in Xenonics stock at its proper and fair-market value,” and the transactions were “consistently, continually disclosed on his annual disclosure forms.”

The statement also said Ackerman “never profited from any transaction between Xenonics and the government of Israel, and, to his knowledge, no business between the two occurred.”

He gave various explanations about the loan from longtime friend Selig Zises, then Xenonics’ top shareholder.

Zises said he “can’t recall” if he discussed the meeting with Ackerman or Israeli officials.

“What is wrong with somebody trying to help somebody with a government? He (Ackerman) has an interest in Israel,” he said. ” What is wrong with making people aware of products that save people’s lives?”

Ackerman, who said Zises suggested the investment to him, has a second loan for between $15,000 and $50,000 from Zises.

“It’s more or less the same arrangement” as the first loan, he said. “I don’t remember the exact terms.” He later said the loan, taken out in 2007, was due in 2012.

The loans are among many ties between Ackerman and Zises and his brother, Seymour. Ackerman has invested up to $100,000 in personal money and $750,000 from his campaign treasury with the Zises-run investment firm, Family Management Corp., and its affiliates.

Ackerman said he has about $15,000 in FMC and has gotten “mixed results.”

“Over a great number of years, my friend Selig Zises has made investment suggestions – winners and losers – and separately Seymour Zises has managed some of my portfolio, also with mixed results,” Ackerman wrote in response to questions.

He described the Zises brothers as close friends. Over the years he’s hired Selig’s daughter as a legislative assistant and praised Zises family members and employees in the Congressional Record.

The Zises have been longtime donors to Ackerman’s campaign committee, donating $53,000 to his campaigns ($23,000 since June 2007).

Ackerman offered various explanations for the terms of the loans. Questioned about the 2002 loan, he first claimed he paid it off in 2005, then changed that to 2004. When The News noted no loan is mentioned on his 2004 financial disclosure form, he amended the report days later.

In response to News queries, he also changed the number of years he had to repay the 2002 loan, from five to three.

After refusing to say why he took the loan, he admitted it was for Xenonics stock. Ackerman claims both loans were “due by a date certain,” but provided no documents to back it up.

Documents he provided make clear the 2002 loan was made on favorable terms. There’s no repayment schedule, no date by which the loan is due, and no record of property or any assets pledged as collateral.

The only documents Ackerman could produce was a one-page “General Promissory Note” dated March 12, 2002 and a check to Selig Zises from his joint account dated Dec. 12, 2004. Both were signed by his wife, Rita.

Ackerman’s disclosure forms claim he “purchased” and “sold” the stock, but he never actually owned it. Zises said Ackerman “owned an interest in my stock…I was in control of the sale.”

Asked why he would borrow money from Zises and not a bank, Ackerman said, “It was easier.”

The 14-term Democrat is on two subcommittees with enormous influence over the finance industry. He said he has never done anything to tarnish the integrity of his office.

“I’ve spent an entire lifetime doing what I do trying to help people,” he said. “To even have one person think that I did something to compromise what I do for the public in my career to get a personal benefit for me, my family or anybody I know I find personally troubling because it just ain’t so.”