Dinkins Tells Why He Cut Value of Stock Before Selling It to Son

Democratic mayoral candidate David N. Dinkins, conceding that his campaign had become “an accounting morass,” sought Friday to explain why he had valued shares of stock differently on forms he filed with New York City and New York state.

In 1983, Dinkins listed the value of the stock he held in the Inner City Broadcasting Co. at more than $1 million in a state background questionnaire he filed because he was a candidate for a seat on the board of the New York State Urban Development Corp.

But, in the same year, he valued the stock at $20,000 to $60,000 in a public financial disclosure form he filed with the city. In January, 1986, he transferred the stock to his son for a $58,000 promissory note due by 1991, with interest.

With an accountant at his side, the Manhattan borough president told a packed news conference that he had placed the $1-million-plus figure on the stock after consulting with Percy E. Sutton, Inner City Broadcasting’s chairman, who is a longtime friend and political mentor. The company is not publicly traded.

He said that the price he charged his son for the stock was consistent with the price that Inner City had offered to redeem the securities for--$94 a share--during the same period.

“There is nothing I value more than my integrity,” Dinkins said. “ . . . I’m here to answer every question and to make as full a disclosure as I possibly can.”

Dinkins said he had viewed Sutton’s valuation of the company with a touch of skepticism because it was applying for cable television franchises in four or five cities, and, “if those deals fell apart . . . it might have been less.”

But, over the years, Inner City has prospered. Some financial analysts have placed the value of the company’s radio stations at as much as $200 million.

“I did not sell it (the stock) to my son at a below-market price,” the candidate said. “I’m selling it to my son. I’m not out to make a profit. I just wanted to make a reasonable transfer.”

When stock sales are reported, capital gains taxes are paid on the difference between the purchase price of shares and the market value when the securities are sold. This computation is relatively simple with publicly traded companies. But, when a company is not traded in the securities markets, valuations become more complex. Accountants study such items as earnings and the balance sheet to fix a sales price.

Dinkins will not have to pay capital gains taxes until his son pays him for the stock.

Even though he has a substantial lead in the polls over former U.S. Atty. Rudolph W. Giuliani, a Republican who is also running as the Liberal Party candidate in the Nov. 7 election, the question of Dinkins’ finances is sensitive to his campaign.

Two decades ago, Dinkins did not pay his income taxes for four years in a row--a fact Giuliani has stressed in commercials. Because of his tax problem, Dinkins had to step down as the choice of then-Mayor Abraham D. Beame to become a deputy mayor. Dinkins later paid the taxes, including penalties, and has repeatedly apologized for his actions.