For years, the press excoriated Nancy Reagan for borrowing clothes and jewelry from designers. Yet Michelle Obama has been doing the same thing — without any outcry from the media.
Accountants say that the first lady’s practice of borrowing both clothes and jewelry raises major tax and disclosure issues, not to mention ethical questions.
“The transactions are clearly taxable,” says Richard Rampell, a Palm Beach, Fla., accountant whose clients include several of the island’s billionaires. “The designers are indirectly paying Michelle Obama to go and display their wares. And they get a huge economic value for it, just as if they were paying a model to do this. If they are paying her in this indirect way by lending her their clothes, then she is actually performing a service for the designer, and she should have to recognize as income whatever the value is of the clothes that she got.”
Aside from the tax implications, Obama is obligated to report the value of the clothes she has received free of charge on government forms mandated by the Ethics in Government Act.
The items Obama has either borrowed or received free have included a $17,313 pair of Loree Rodkin diamond earrings and clothes and gowns worth $1,000 to $6,000. In some cases, Michelle Obama’s representatives have said she will donate the items to the Smithsonian.
That makes no difference, Rampell says.
“If somebody gives her a dress and it’s worth $6,000, and she’s not expected to return it, then she has $6,000 worth of income, or she’s received a $6,000 gift,” he says. “I’m sure that the company is deducting the cost of that dress — the cost of manufacturing, the design, the materials and all that other stuff. And then when she gives it away to the charity, then she gets a charitable contribution for it.”
While some articles in the press have reported that the clothes or jewelry were given to her free of charge or lent to her, none has criticized Obama or compared her practices with Nancy Reagan’s. Instead, the articles have swooned over her fashion sense.
“All Hail the Leader of the Fashionable World” was the headline on a Jan. 21 Washington Post story. In the 14th paragraph the story mentioned that the diamond earrings had been lent to Obama. The story quoted Katie McCormick Lelyveld, the first lady’s press secretary, as saying she paid for her inauguration clothes. But a subsequent Feb. 12 New York Times story quoted the designers themselves as saying they did not charge the Obamas.
Unlike Nancy Reagan, Michelle Obama has been funneling her acquisition of clothes through an intermediary, Ikram Goldberg, who has been mum on her role and on whether she receives anything of value for her services.
Goldberg owns a clothing boutique in the Gold Coast neighborhood of Chicago. Called Ikram, it has been a favorite of Obama’s. The Feb. 12 New York Times article explored Goldberg’s relationship to Obama’s wardrobe, saying she has played an “unprecedented role since the election, serving as gatekeeper between the fashion industry and the first lady.”
Goldberg provided designers with Obama’s measurements and other information. Obama herself never had any contact with them.
While such designers as Oscar de la Renta submitted sketches to Goldberg, they never heard back from her. Instead, she and Obama chose dresses from four relatively unknown designers whose wares are carried by Goldberg’s store.
The arrangement has raised eyebrows in the fashion industry.
“It is strange to think that the wife of the leader of the free world would choose clothes from only one store, when there is a wealth of clothes out there from other designers, including me,” says Arnold Scaasi.
Others say Obama is opening the door to less well-known designers. One of them, Jason Wu, is a 26-year-old New York designer who has become an overnight star after Obama began wearing his clothes.
The New York Times article quoted both Wu and Isabel Toledo, who made Obama’s inauguration day outfit, as saying that Goldberg “broached the subject of donating their garments to the Smithsonian Institution.” The story quoted Wu as saying he was not paid for Obama’s ivory chiffon inaugural dress and made it “with the understanding that it would be donated if Mrs. Obama should end up wearing his design.”
Wu also made a fuchsia dress that Obama wears on the March cover of Vogue. “The First Lady the World’s Been Waiting For,” the cover says.
For the designers who provided Obama with free clothes, the publicity has been priceless. Nordstrom, for one, took a chance on Wu a few months before the inauguration, agreeing to stock his spring 2009 collection in select stores. The chain now says it is overjoyed at its decision.
“Clearly, the exposure he’s getting from this is something you can’t buy or ask for,” says Steven Kolb, executive director of the Council of Fashion Designers of America, referring to Wu.
Besides clothes for the first lady, the Obama family has received custom-made clothing for their two daughters from J. Crew. J. Crew also supplied Michelle Obama’s green gloves and other items. On the day that was announced, the company’s stock increased by 10.6 percent. The firm says it will send invoices for the items and that Mrs. Obama will return any unused items.
When The New York Times asked about the arrangement with Goldberg, Lelyveld said, “Ms. Obama has shopped at Ikram’s store for years and appreciates her shared interest in working with a broad spectrum of designers, including many young and up-and-coming designers.”
The press secretary would not say if Goldberg receives compensation either from Obama or from the designers. Goldberg did not respond to a request from Newsmax for comment.
The Times did not ask Lelyveld about the tax implications and disclosure requirements raised by Obama’s practice of receiving free designer clothing, nor did it ask about the ethical implications. Lelyveld’s media office did not respond to a request by Newsmax for comment on these questions and an accounting of the items Obama has received.
Michelle Obama is not exactly impoverished. Her husband has been making as much as $4.2 million a year, mostly from book royalties. In taking freebies from the fashion industry, she has introduced Chicago-style dealings to the White House and raised questions about any policies Obama may develop relating to the fashion industry. Her refusal through her press office to answer questions about the arrangement or to disclose the details conflicts with the president’s pledge to adhere to transparency.
“Why does everybody else have to buy their clothes, and she gets to have the use of the clothes for free?” Rampell asks. “They ought to stand up and pay for it.”
Ronald Kessler is chief Washington correspondent of Newsmax.com. View his previous reports and get his dispatches sent to you free via
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