Dane Leavitt, spokesman for the Dixie and Anne Leavitt Foundation, said he could not comment on whether that foundation was also under scrutiny from the IRS, but added, "Our records are in good shape, and we'd welcome an audit. We're confident that we've handled our transactions properly."

The Leavitts have given $578,000 since 2003 to the Southern Utah Foundation for student-housing scholarships, according to a memo written by Dane Leavitt. Cohen said he questions the ethics of those transactions because the money was then used by the foundation to pay rent for students at a housing complex owned by Cedar Development Co., a Leavitt family business.

Essentially, the Leavitt family got the tax benefits of its charitable donation but still got the money back in rent, Cohen said.

"It's a very murky kind of situation," he said. "This all might be nothing that rises to the level of illegality, or the IRS might just say it's an error. I think they're going to be more concerned about the potential self-dealing, self-inurement and conflict of interest."

Dane Leavitt said the foundation's housing-scholarship donation was in the public's benefits and no one was shortchanged by the deal. Students got free housing, the school received scholarships and Cedar Development Co. got fair-market rent for its apartments, he said.

Leavitt also said the school was under no obligation to choose the Leavitt-owned apartments for the housing scholarships.

"There were many people who were benefited from the generosity of the foundation. There was not one that was harmed," he said. "It was consistent with the law."

However, a law approved this week by Congress could change the way both foundations do business, Leavitt added. The new law, which has yet to be signed by President Bush, would prohibit groups like the Leavitt Foundation from making grants, loans or payments to the organization's substantial contributor, the contributor's family or businesses they control.

Leavitt said he is analyzing how the changes will affect the Leavitt Foundation and expects to have an answer in the next two weeks.

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E-mail: estewart@desnews.com