A Sacramento County grand jury that probed Natomas Unified School District’s (NUSD) 2007 purchase of 41 acres of farmland for six times its value has recommended the sale be investigated by the local, state, and federal authorities, writes the Sacramento Bee. The report charges that Superintendent Steve Farrar failed to exercise proper oversight over the $13.3 million purchase and that a lawyer representing the school district in the purchase, Martin Steiner, did not reveal he had a conflict of interest until three months after escrow closed. The grand jury report followed a Bee investigation that found the district paid for the property based on an inflated appraisal. The single appraisal of $24.6 million presented to the school board was based on property with houses that had sewer and water service and could be annexed to the city, said jury foreman Donald Prange Sr. However, none of those conditions existed. The appraisal purported to reflect fair market value of the property and failed to disclose it was based on a hypothetical situation. In fact, the unimproved farmland sold by West Lakeside LLC, a partnership headed by developer Angelo K. Tsakopoulos, had environmental issues that prohibited building on much of it.
A senior property appraiser from the California Office of Real Estate testified before the grand jury that the property was actually worth about $2 million. The property was originally appraised by Chris Ferguson, who was hired by Steiner, an attorney hired in turn by then Assistant Superintendent Franking Harding, who handled the transaction for the district. That arrangement meant the attorney was legally bound to keep his conversations with the appraiser confidential, making the district's actions protected instead of transparent. Ferguson's attorney said that the buyer and seller arrived at a price based on conditions that everyone knew. He said Ferguson appraised the land based on assumptions he was directed to use, was never questioned about his appraisal by the school district, and wasn't asked to attend the meeting when it was presented. Last year, district officials acknowledged they had spent too much for the land and hired a malpractice attorney to help bring the parties together to agree on a remedy.
The grand jury also questioned hundreds of thousands of dollars contributed to the Natomas School Foundation by a partner in West Lakeside LLC and Tsakopoulos' AKT Development firm during the property negotiations. The report said that Superintendent Farrar, who established the foundation and sat on its board, actively solicited the donations. The grand jury also expressed concern that Steiner waited until three months after the close of escrow to reveal that he had previously worked for West Lakeside LLC.
Source: Sacramento Bee, 5/27/09, By Diana Lambert
http://www.sacgrandjury.org/reports/08-09/Natomas-Report.pdf
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