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Household Help: Legacy lent Healton money to buy this house, which extends far into the back. Photo: John Kelly |
In 2002, the Legacy Foundation lent almost $1 million to its CEO, Cheryl Healton, so she could buy a $975,000 home in Washington’s exclusive North Cleveland Park neighborhood.
Healton borrowed $967,500 from the foundation in September. In December, the foundation borrowed a like amount from Wachovia Bank at commercial rates to cover that loan. The foundation charged Healton the same rate it was charged by the bank, a transaction that was reported on its IRS filings. The house and other “personal assets” served as collateral for the loan.
[Related Story, The Truth About American Legacy]Asked about what the foundation itself labeled as “self-dealing” in a subsequent IRS filing, foundation officials said in an e-mail that the rate given Healton was “higher than the applicable federal rate at the time and therefore was not considered a below-market interest loan that would be taxable under the IRS rules.” The foundation’s IRS filing shows the loan was made to Healton at an “effective interest rate of 4.99 percent.”
The loan to Healton was for seven years, amortized as if it were a 15-year loan.
According to the Federal Housing Administration, the average rate for a 15-year FHA fixed rate loan in September 2002 was 5.51 percent. The average rate for all 15-year loans, including jumbo loans (more than $300,700 that year) was 5.70 percent, according to HSH Associates, which tracks mortgage rates.
In the same e-mail response, foundation officials said the IRS audited the foundation’s 2005 return in 2007-08 and “determined that there were no irregularities in connection with the loan.”
Healton paid off the loan in October 2005.
