Capitol Alert

California’s most vulnerable Democrat is still untangling his tax liens heading into 2020

A freshman San Joaquin Valley congressman who narrowly unseated an incumbent in November has a complicated financial history that includes multiple tax liens and a delinquent debt that caused the Fresno County Sheriff’s Office to warn him that it could seize his property.

Rep. TJ Cox, D-Fresno, defeated Republican incumbent former Rep. David Valadao by less than a thousand votes in the midterm election, making him one of the most vulnerable House Democrats heading into the 2020 election. Cox, an engineer, has been separating himself from some of his companies since taking elected office.

Some of his financial entanglements were reported during his 2018 congressional campaign, including an IRS lien against him and his wife. McClatchy has obtained new records showing that the Fresno County Sheriff’s Office was involved in collecting an arbitration payment five years ago, as well as recent liens against two of his companies.

His winning campaign promoted him as a successful businessman whose property-development and consulting companies brought hundreds of jobs to the Central Valley.

“TJ works in the neighborhoods where Wall Street and the banks just won’t go,” his campaign website reads. “These projects have created more than 1,500 well-paying jobs and have brought health care to over 40,000 Central Valley residents.”

Cox declined an interview request for this story. His office in a written statement echoed his campaign’s sentiment.

“In his two decades as a small business owner, Congressman Cox created thousands of jobs in the Central Valley,” the statement said. “As he has said repeatedly, he has been in the process of divesting from these businesses since his election, but to the best of our knowledge, these liabilities have already been paid in full.”

California tax attorneys who reviewed county tax documents with McClatchy said the documents reveal a troublesome record.

“This shows the operators of these businesses were negligent at the very least, or willfully not paying their taxes,” said Sam Brotman, principal at the tax attorney firm Brotman Law based in San Diego.

Cox has senior positions — a president, partner, director or manager — with 23 different businesses, according to his financial disclosure forms.

Records obtained by McClatchy show two liens filed against Cox businesses within the past year — $20,700 in liens against a consulting company called California Customs Processing LLC by Madera County over unsecured property taxes and about $8,700 against Sierra Meadows Senior Living LLC by the California Franchise Tax Board.

Records show the Sierra Meadows Senior Living lien was paid the day Cox’s office was contacted by McClatchy. Leighton Allen, the chief financial officer of California Customs Processing, said the lien has been settled, but did not provide documentation that showed payment.

Cox is listed as a manager at both California Customs Processing and Sierra Meadows, according to his candidate financial disclosure form.

Those are not Cox’s first experiences with liens, professionally or personally. California Customs Processing LLC has three previous assessed and then paid liens. Sierra Meadows has one previously resolved lien.

The federal government also placed a tax lien against Cox and his wife in 2017 for nearly $50,000.

Cox blamed that lien on “bureaucratic incompetence,” according to a quote in The Mercury News in March 2018 that Cox’s office did not dispute.

“My check was stuck on the back of somebody else’s payment,” Cox told the newspaper.

Both Brotman and Sacramento-based tax attorney Todd Luoma found that hard to believe.

While it’s possible the IRS misplaced a payment, Cox would have been notified at least three times that the IRS was demanding payment before it issued the lien, they said.

Members of Congress do not have to disclose liabilities against their businesses — only liabilities they are personally responsible for — according to Brendan Fischer, director of federal reform at the nonpartisan government watchdog Campaign Legal Center.

Cox’s opponent in 2018, three-term Republican Rep. Valadao, had well-documented financial troubles heading into their election. His dairy was sued in March 2018 for defaulting on $9 million in agriculture loans.

In Cox’s records, Brotman said he would be especially concerned about a 2014 notice filed by Fresno County against a property management company Cox led called CMSS I LP.

Brotman said the notice represents a serious default on an obligation. Fresno County notified CMSS of its intent to sell the property in July 2014 over unpaid taxes of about $5,400 due back in 2009, according to records kept by the Fresno County Recorder’s Office.

In order for a county to take that step, Brotman said, officials had likely notified the company, including Cox, “at least 10 times.”

“Someone had to be seriously asleep at the wheel ... this is an extreme step on the part of the county,” he said. “It’s a last resort.”

Cox’s spokesman said the notice was issued after CMSS had sold the property in 2009 or earlier to A-American Storage Management.

The sale led to several years of legal disputes after the storage company discovered a leaking roof, according to court records.

In 2014, the Fresno County Sheriff’s Office issued a levy for more than $1.5 million against CMSS I LP and CMSS Management to force Cox’s companies to pay a debt a to A-American Storage Management. It stemmed from an arbitration process that concluded Cox had personal knowledge of a leaking roof before selling the property and therefore owed the storage company $1.3 million. Cox denied he had knowledge of the defects.

Cox lists himself as the president of CMSS Management on his financial disclosure form, and in an appeals court ruling a company in litigation with Cox and CMSS Management accused Cox of using the company as his “alter ego.”

Arbitrators also concluded that Cox had “falsely testified” to try to shift blame for the damage onto another company, according to arbitration conclusions.

The arbitration agreement shows that A-American and CMSS settled in 2014, six months after the sheriff’s office issued the levy. CMSS’s insurance company agreed to pay A-American Storage $450,000.

The storage company would have had to pay a fee to the sheriff’s office to get the levy after arbitration, likely meaning they were having trouble getting paid and sought help from law enforcement, according to Brotman. The sheriff’s office getting involved is not common and never an automatic step, he added. The amount increased to more than $1.5 million under the levy because of additional interest owed.

Attorneys for A-American Storage Management Co. did not return a request for comment.

Fresno Bee reporter Rory Appleton contributed to this report.

Related stories from Sacramento Bee

Kate Irby is based in Washington, D.C. and reports on issues important to McClatchy’s California newspapers, including the Sacramento Bee, Fresno Bee and Modesto Bee. She previously reported on breaking news in D.C., politics in Florida for the Bradenton Herald and politics in Ohio for the Cleveland Plain Dealer.