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                                                                               Document no. 2 of 100
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                                                                               Sunday, May 21, 2000
                                                                                       Deseret News



Edition: All
Page: A01


 Investigators find problems in 8 Utah land deals
 Appraisals too high, they say; landowners, state
 officials disagree
 (C) 2000 Deseret News By Jerry D. Spangler and Donna M. Kemp
 Deseret News staff writers

   Other stories in this series:
  May 14, 2000: Are Utah land deals ripping off the U.S.?May 20, 2000: Trouble over land
 trades

 Writers share opinions:
 May 21, 2000: Fairness, professionalism marked Utah-U.S. land exchange
 May 21, 2000: Too much land-deal secrecy

   Tom Blake is none too pleased with the $1.34 million he recently got for the 427 acres of
 cactus-studded grazing lands his family once homesteaded in the hills just outside of St.
 George.
   After all, the roughly $3,100 an acre price the government paid for the land -- sought by
 the U.S. government as habitat for the endangered desert tortoise -- is less than half what his
 neighbor across the fence got.
   "How would that make you feel?" said Blake, who lives in nearby La Verkin. "The attitude
 of the government is they think more of a turtle than they do a taxpayer. They think more of a
 foreign country than they do American citizens."
   But federal investigators with the Inspector General's Office of the Department of
 Interior say the Blake deal may have actually cost American taxpayers roughly $1 million
 more than it should have, all because of appraisal practices about which questions have been
 raised.
   Others -- including landowners and government officials -- counter that the amounts paid
 by the federal government were fair or perhaps even under value because the properties were
 once considered prime development real estate.
   In the case of the Blake deal, those who determined the $1.34 million value of the Blake
 lands did not take into consideration the fact a neighboring turkey farm would have greatly
 diminished the residential or commercial potential of the lands, investigators say. Auditors
 placed the value of Blake's property at $257,000, not the $1.34 million in cash and land he


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Deseret News Archives                                                                 Page 2 of 5


got in the deal.

 Requires Adobe Acrobat.

  The Blake deal and 33 others in the St. George area, which to date have been valued at
more than $35.5 million, are the subject of two federal probes, one by the Inspector General's
Office and the other by the General Accounting Office, the investigative arm of Congress. The
Inspector General's Office would not comment on ongoing investigations.
  The investigations were prompted by accusations made by Jack MacDonald, the recently
retired chief lands appraiser for the Utah office of the Bureau of Land Management.
  Draft copies of the inspector general's audits of the eight land deals related to the
Washington County Habitat Conservation Plan were obtained by the Deseret News. These
audits repeatedly point to land deals that investigators said were based on shoddy, even
misleading appraisals that did not meet professional standards. In some cases, fair market
value was determined based on negotiations with land owners, not on unbiased, documented
appraisals as is required by federal law, they said.
  The Washington County investigation is part of a much larger probe into federal land
purchases in the Las Vegas area that are also related to protection of desert tortoise habitat.

 'Subjective views'
   In addition to the Blake deal, the Utah land deals questioned by government auditors
included:
   Environmental Land Technologies: Under scrutiny are three deals with ELT, owned by
James Doyle, that totaled $5.3 million. In the case of a sale of a 213-acre parcel and another
of a 109-acre parcel, investigators say the appraisers who established the values "deviated
from applicable appraisal standards, resulting in an overstatement of the value of the two
parcels by as much as $900,000."
   The third deal, involving 40 acres, resulted in an exchange where the federal lands
transferred to ELT were undervalued by $35,000, and that the $290,000 value assigned to
ELT's land was something "not based on or supported by an appraisal that met appraisal
standards," the audits said. Two other deals with ELT were not questioned in the draft report
obtained by the Deseret News.
   Tim Anderson, the St. George attorney representing Doyle, said all three deals involved
lands that were worth far more than what the government paid. Most were targeted for or
already under development in 1990 when the desert tortoise was listed as endangered,
shutting down future development in the area.
   "The lands have been off limits to development ever since, and Mr. Doyle needed to settle,"
Anderson said, adding there have been significant costs associated with holding the lands.
   "There are a lot of subjective views with appraisals, but for this property to be viewed as
anything but prime development land would be a significant error in judgment. Government
appraisers can fight over what values they think were appropriate, but from a private
enterprise standpoint, the values they are disputing are greatly understated."

  State Trust Lands. Another deal being looked at is with the state School and Institutional
Trust Lands Administration (SITLA), involving an exchange of 110 acres of trust lands for
125 acres of federal lands. Auditors found that the official appraisal review significantly
reduced the value of the federal lands, resulting in an inflated cost to American taxpayers of
$156,000.
  Auditors suggested the "review appraiser's value conclusions were the result of
negotiations and bargaining rather than impartial and unbiased appraisal analysis."


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   John Andrews, SITLA legal counsel, said the Inspector General's Office report overlooked a
couple of key points.
   First, the state never wanted the 20-acre parcel of federal land questioned in the audit. The
land is saddled with various road rights-of-way, there are concerns about flooding and there
is some doubt as to what St. George will allow to be developed there.
   The BLM wanted the land even less than the state, he said, and the BLM insisted it be
included in the deal.
   Second, there is a financial deal in place with the BLM that if that 20-acre parcel is sold for
more than the $190,000 price tag assigned by the appraisal reviewer, then the state and BLM
will split the profits fifty-fifty.
   "That's a huge omission on their (investigators') part," Andrews said. "It is easy to
second-guess property transactions after the fact, to say you should have gotten more. And
the inspector general specializes in that kind of second-guessing."

  Warren Cox Trust. Auditors are examining two deals with the trust totaling $551,000 for
28 acres. Auditors determined that the appraisal was not adequately documented and that
appraisers used a technique that professional standards dictate should not be used to
determine fair market value because it is "highly speculative and prone to error."
  At $19,222 an acre for a 9-acre parcel and $19,895 an acre for a 19-acre parcel, the Warren
Cox Trust received among the highest per-acre prices of any private landowner in the tortoise
preserve.
  But the price the government paid was nothing close to what the land was worth as
expensive residential view lots, Cox said. In his negotiations with the federal government, he
paid for his own appraisals, using appraisers from a list approved by the BLM. But in each
instance, the appraisals -- which ranged from $690,000 to $750,000 -- were rejected by the
BLM as too high.
  "We felt our land had been condemned, and we could either continue to spend lots of
money fighting the government or we could settle with them," said Cox, whose family
acquired the lands in the 1950s. "We chose to settle and be done with it. It was worth more to
settle it and take the $200,000 hit."
  Added Cox, "I am not the kind of person to take advantage of the government or the
American people. But I did and do want fair market value."

  DeMar Limited. Auditors are also looking at one of two deals with the family of
Washington County Commissioner Alan Gardner, involving $1.33 million for 198 acres of
private land exchanged for 673 acres of federal land. They questioned why the appraisal did
not contain statements as to how appraisers reached the conclusions they did and why
appraisers first rejected certain information and then changed their minds.
  The change of heart "was not based on any new information about the property, but rather
on the persuasive but undocumented arguments of the non-federal landowner," the draft
report states.
  Gardner said the auditors failed to consider that the land exchange, a complicated three-
way deal involving another landowner, took four years and countless hours of aggravation to
complete. It was the first of the tortoise-related land deals to be started, and no one was in
agreement at that time about how the lands should be valued.
  A BLM-approved appraiser hired by the Gardner family determined the value of the land
to be about $9,000 an acre, but a government appraiser said it was worth only $1,000 an
acre because the presence of tortoises made it undevelopable.
  Gardner and his brother entered into arbitration with a three-member team from the
Interior Department and settled on a price of about $7,000 an acre. The deal was reached


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Deseret News Archives                                                                  Page 4 of 5


with appraisals as guidelines but not as the determining factors in the agreement.
  "We didn't feel we got a sweetheart deal by any means," Gardner said. "We were so glad to
have it over with we were almost willing to settle for anything."

 Target of blame
   A key figure in the appraisals under scrutiny is David Cavanaugh, the "senior specialist for
appraisals" in the BLM's Washington, D.C., office. Cavanaugh is listed as the official
"reviewer" of the appraisals, the person charged with making sure the appraisals are fair and
equitable.
   Throughout the Inspector General Office's report, the appraisal reviewer is taken to task
for questionable decisions the reports say have cost the American taxpayer hundreds of
thousands of dollars.
   Cavanaugh disagrees. "I think we were fair and equitable, and those were the tests we had
to apply when acquiring private property," he said.
   "It was the three years of inaction that cost the taxpayer money. It was the fact I had to
even come out there to resolve it," after years of frustration and mistrust, he said.
   The entire habitat conservation plan was made possible because of the new BLM approach
whereby Cavanaugh got the confidence of local landowners by going to local appraisers
familiar with the disputed lands. That set up a process to win their trust and get momentum
to get the transactions accomplished.
   "It was because of what took place before (low appraisals) that dictated this strategy," he
said. "I was brought in to help restore the public's confidence in the process, and I feel we
stopped the hemorrhaging."
   Cavanaugh also discounted complaints by MacDonald and others that he should not have
been reviewing the Washington County appraisals because he is not a licensed appraiser or
reviewer. He has been reviewing appraisals for various government entities since 1967, and
until last November it was not required that reviewers be licensed or certified.
   It was at his insistence that the requirement was added, and he is now in the process of
becoming certified.
   Although the audit reports focused primarily on questionable appraisals, at the heart of the
dispute over the value of lands affected by endangered species are fundamental differences in
how federal law should be interpreted.
   Government appraisers prefer a strict interpretation of a law that specifies the lands will be
valued "as is," meaning diminished value because of endangered species must be factored in.
Landowners say it is the federal government that decided to protect the endangered species,
and therefore the government, not the landowner, should bear the financial brunt of that
protection when it affects the development potential of private lands.
   Congress has sided in recent years with the landowners, but court rulings on the dispute
are inconsistent if not downright confusing.
   But they aren't any more confusing than the entire appraisal process, one where qualified,
licensed appraisers can come up with values different by thousands of dollars per acre. In
fact, both sides of the debate agree that appraisals are calculated opinions, and opinions are
hardly foolproof.
   "Appraising is not science," Cavanaugh said. "You get outstanding reports, good ones and
some not as strong as you would like."
   That is why the Inspector General's Office and GAO probes irk those in Washington
County who have spent years in frustrating negotiations with the federal government over
fair compensation. According to Anderson, investigators never bothered to talk with the
owners of the property to learn the history of the negotiations or why certain values were
assigned that may have been different from the appraisals.


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Deseret News Archives                                                                Page 5 of 5


  "It is a classic case of government bureaucrats doing their work in a vacuum," he said. "Yet
somehow their view of valuation is accepted as appropriate, despite the fact we have had
some of top appraisers in the United States looking at these lands."
  As for Cavanaugh, he just wants the matter settled and the public to be assured that
everything was done fair and proper.
  "People's reputations are on the line, as is the integrity of the agency (BLM)," he said.



 E-mail: spang@desnews.com or donna@desnews.com



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