Tuesday, February 14, 2012

The Sacramento Bee: Natomas Unified School District to see partial refund for inflated land deal

Five years after Natomas Unified School District bought 41 acres of farmland for what school officials later conceded was an inflated price, the district is starting to see a portion of its money refunded.

On Monday, Natomas Unified officials confirmed that they had reached settlement with two different parties in the land deal. They are still seeking money from the original seller – a partnership of developer Angelo K. Tsakopoulos and Woodside Homes – and the real estate broker, Mark Skreden.
Last week, attorney Martin Steiner and the law firm where he works, Hefner, Stark & Marois, LLP, agreed to pay $2.6 million to settle a lawsuit filed by the district, said interim Superintendent Walt Hanline.

Steiner, who was hired by the district to oversee legal aspects of the $13.3 million purchase, revealed three months after escrow closed that he had a conflict of interest, according to a Sacramento grand jury report released in 2009.

The Bee reported in 2008 that Steiner had represented Tsakopoulos in other transactions but hadn't obtained a written waiver from the school board or superintendent acknowledging they had been briefed about the potential conflict.

Steiner did not return calls from The Bee on Monday.

"He stepped forward to do the right thing," Hanline said. "I hope everyone else does, too."

While Skreden is named in the lawsuit, a complaint filed by the district with the California Department of Real Estate resulted in no disciplinary action against the broker.

"All I can tell you is I have been exonerated by the DRE," Skreden told The Bee on Monday.

He declined to discuss the lawsuit on the advice of his attorney.

West Lakeside LLC, a partnership that included Woodside Homes and was managed by Tsakopoulos, also is named in the suit.

Louis A. Gonzalez, an attorney for the company, wrote The Bee in an email Monday that West Lakeside "has the option, which it is evaluating, to file a motion objecting to the settlement between the district and Marty Steiner."

Gonzalez said West Lakeside isn't part of the Steiner settlement and doesn't have the option to join it.

Natomas Unified confirmed Monday it received a $350,000 settlement from appraiser Christopher Ferguson in October, Hanline said.

A Bee investigation in 2007 cited experts who said that appraisals the district relied on for the land deal overvalued the property by millions of dollars.

On Monday, the superintendent said the land is actually worth between $4.3 million and $8.6 million. He said the district is looking for refunds totaling at least $5 million from the remaining defendants in the lawsuit.

"I'm optimistic particularly that Tsakopoulos will come forward and we can reach a settlement," Hanline said. "Everyone recognizes it is a bad situation for everyone and we need to move forward."

Hanline said it is best for the school district to settle instead of push on to court. "If we win (in court), Tsakopoulos will receive the land back," he said. "We will receive a credit of $13 million and we will get in line with the debts that are owed from a bankrupt company."

Woodside Homes filed for Chapter 11 protection in 2008.

Hanline said that any money won in the settlements or in court will go back into the district's construction fund.

The lawsuit followed two years of community outrage over the land deal. The suit was filed after a grand jury report in May 2009 alleged that the district had paid six times the value of the land and that then-Superintendent Steve Farrar didn't oversee the purchase properly. Farrar has since retired.

The district had planned to build a bioscience magnet school on the site. Nothing can be built on it now because of a moratorium on building in the flood zone, Hanline said.

The superintendent said that the district has already paid about $700,000 from its construction fund for attorneys' fees related to the lawsuit.

The district expects to receive the settlement check from Steiner in mid-March.

"I'm hopeful we can get closure on this prior to my leaving the district June 30," Hanline said of the lawsuit.

By Diana Lambert
Published: Tuesday, Feb. 14, 2012 - 12:00 am | Page 1B

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