AUDIT: CRA LAND BUYS CRIMINAL?

Byline: Rick Orlov Staff Writer

The Community Redevelopment Agency may have illegally overpaid for numerous properties, City Controller Rick Tuttle said in a scathing audit Monday that he forwarded to the District Attorney's Office for criminal investigation.

The Tuttle audit, which examined agency practices without pointing blame at any individual, is the latest in a long series of questions regarding the CRA's acquisition of properties, particularly one parcel in the Hollywood area needed for the Capitol Records redevelopment project.

That property is located at 1751 Argyle St., and was originally valued at $795,000 by appraisers. But the agency staff - after receiving a subsequent appraisal - recommended it be purchased for nearly double the price, $1.46 million.

It is owned by a company called Ullman Investments. Efforts to contact the company were unsuccessful.

Earlier this month, after hearing complaints about the land purchase, Councilman Joel Wachs asked the county grand jury to investigate.

Jerry Scharlin, who is the acting administrator of the long-troubled agency, hired a private investigation firm earlier this year to also look into the matter while urging Tuttle to review the CRA's real estate division.

CRA spokesman Thomas Knox said he could not say whether any employees had been disciplined or whether there could be an effort to try to renegotiate the sales prices on the parcels.

In his audit, Tuttle said there are serious weaknesses in the CRA's real estate division and that the investigation has shown ``the possibility of questionable or unlawful activity'' within the agency.

Because of the complexity of the matter, Tuttle hired a private firm, Thompson, Cobb, Bazilio and Associates, to conduct the audit.

In addition to the Argyle Street property, the firm found the city had overpaid the appraised value on four other properties. Those were at 6272 and 6270 Yucca St. in Hollywood, where the CRA overpaid by $166,000; 252 S. San Pedro St. in downtown Los Angeles, with an overpayment of $226,000; and a group of parcels in Wilmington in which there was an overpayment of $233,238.

The audit also found a lack of paperwork documenting some payments and a regular practice of going outside for appraisal work rather than working within guidelines.

``Our review of the real estate acquisition process found that appraisals are sometimes obtained outside of the CRA's Appraisal Department,'' the report said. ``Based on our discussions with the manager . . . we were informed that appraisals have been obtained by CRA staff without his knowledge.''

It also found that neither the CRA nor city officials were told of the different appraisals, which could have resulted in further negotiations on the price of the land, the report said.

Among the recommendations are to require that all appraisals be approved by the CRA's Appraisal Department, require at least two appraisals for all land and require the appraisal amounts be disclosed to the CRA board and the City Council.

It also called for tightened procedures on contracting, relocation and records management.

Scharlin said in a memo to the agency's staff that he was immediately putting Tuttle's recommendations into effect.

Also, he said he will seek an outside consultant to develop better controls over how the agency operates and will have annual audits of its activities.

District Attorney's Office spokeswoman Sandi Gibbons said the audit would be reviewed and referred to prosecutors to determine whether any laws were violated.

CRA Commissioner Doug Ring said the Tuttle audit was long needed.

``I think Mr. Scharlin and Mr. Tuttle have done the city and the Redevelopment Agency a tremendous service,'' Ring said. ``Clearly, we have a lot of work that needs to be done, but identifying some of the problems is the starting point we need to fix the agency.''