Sept. 5 (Bloomberg) -- New York Representative Charles Rangel received an interest-free loan from the developer of his Dominican Republic vacation villa, a resort official said.

Jose Oliva, director of the Punta Cana Yacht Club, where Rangel owns a three-bedroom unit, said Rangel was among non- Dominican investors known as ``pioneers'' who got the break on their loans in 1990 because the property wasn't producing sufficient income. Rangel, the Democratic chairman of the tax- writing House Ways and Means Committee, learned of the loan details in the last week, said his lawyer, Lanny Davis.

``After the first two years of operation of the rental pool, PCYC decided in its business judgment to forego the interest charges because the financial results from the rental pool of the units was significantly below what those original investors had been told to expect,'' Oliva wrote in a statement today.

``This was intended to bring the installment payments of the deferred purchase price more in line with expected rental pool payments,'' the statement said. The company was financing the units at 10.5 percent that was to have been payable quarterly over seven years.

The assertion that Rangel didn't know about the interest- free loan is one of several unusual aspects of his financial and real estate dealings. He said yesterday he failed to report more than $75,000 in rental income from the villa on his federal or state tax returns. The units rent for $500 to $1,000 a night, according to the New York Times.

Effort to Reprimand

Last month, the House rejected a Republican effort to reprimand Rangel for his use of four rent-controlled apartments in a building in Harlem, where he lives. Rangel used one of the units as a campaign office. New York City regulations say they can be used only as primary residences.

Rangel asked the House Ethics Committee to investigate that arrangement and his use of congressional stationery to solicit donors to a university center that would be named for him.

Melanie Sloan, executive director of Citizens for Responsible Ethics, a Washington watchdog group, said the growing number of cases concerns her.

``It's the third strike here,'' she said of the new disclosures about Rangel's Dominican Republic villa. ``For Rangel to have three different ethics issues out there is definitely a problem.''

The interest-free loan might be considered a gift, although the fact that others received the same treatment may insulate him from more serious treatment, she said.

`Business Judgment'

``It seems like an investigation is warranted,'' she said.

Davis said Rangel didn't receive any ``preferential treatment'' because the developer also waived the interest for other non-Dominican investors in the resort.

``It was a business judgment made by the hotel developer,'' which wanted to keep its original investors happy, Davis said. He said Rangel didn't know of the arrangement until this week because the owner hadn't been sending financial statements.

Oliva said the developer didn't waive interest for Dominican investors because they received tax benefits from their government.

Kenneth Gross, an ethics lawyer at the Skadden, Arps, Slate, Meagher & Flom law firm in Washington who advises lawmakers from both parties, said Rangel will have to demonstrate the arrangement was ``commercially reasonable'' to sidestep any legal problems or ethics violations with Congress.

The fact that he was one of several original investors who received the treatment ``adds to the bona fides of the commercially reasonable argument,'' he said.

Republicans Ponder Action

House Republicans are considering asking Rangel to step down as chairman of the ways and means committee, said Michael Steel, a spokesman for Representative John Boehner of Ohio, the House minority leader.

Davis said Rangel wasn't contemplating stepping down.

Boehner ``wins the award of the hypocrite of the year,'' for even considering making such a demand, he said.

``The ultimate irony is that hyper-partisan Republicans based on nothing but newspaper reports are trying to make political hay while their presidential candidate is saying that kind of politics has to stop,'' Davis said.

Arizona Senator John McCain, the Republican nominee for president, vowed to ``restore the principles'' of a Republican Party that has ``lost the trust'' of the American people in a speech last night accepting the nomination.

Rangel, 78, has served in Congress since 1970. He has served on the ways and means panel since 1975. He paid $82,750 in 1988 for the Dominican Republic villa, the New York Times reported today.

Back Taxes

The property yields several thousand dollars in net rental income annually for Rangel, Davis said. The congressman may owe some back state and New York City taxes, but any federal liability will be wiped out by deductible expenses and credits for taxes paid to the Dominican Republic, Davis said.

Rangel was urged to buy the property by Theodore Kheel, a New York lawyer who helped develop the property in 1984, the Times reported. Other investors include singer Julio Iglesias and fashion designer Oscar de la Renta, the Times reported.

To contact the reporter on this story: Ryan J. Donmoyer at rdonmoyer@bloomberg.net

Last Updated: September 5, 2008 16:48 EDT