5 Arrested in the Theft of Property Tax Checks : Crime: An ex-employee of the county tax collector’s office is among those taken into custody. Altered checks worth more than $400,000 were cashed.

Law enforcement authorities have arrested five people, including a former employee of the Los Angeles County tax collector’s office, in connection with the theft of more than 70 property tax checks that were altered and made out to “cash.”

Forty-six checks, worth more than $400,000, were cashed at local banks, said Joseph Spillane, the county’s tax compliance auditor. Sheriff’s investigators said other former county employees are suspects in the case.

Several altered checks were deposited in banks to the accounts of fictitious businesses, said Detective Early Lincoln of the Sheriff’s Department Forgery Fraud Detail. One man wired the money to Hong Kong and fled the United States before he could be arrested, Lincoln said.

The Times reported in January that sheriff’s officials were investigating the case, which at the time involved just a half-dozen checks sent in by unsuspecting taxpayers. One complaint came from a man who had sent his property tax check for a home in the San Fernando Valley, but then received delinquency notices. He discovered the payee on the check had been altered from the county tax collector to “cash.”

The case has mushroomed and more altered checks may come to light after the county begins mailing delinquent tax notices in June.

“It’s expanding very fast,” Lincoln said of the investigation. “I was under the impression that we were going in one direction, and now we find ourselves going in a 360-degree circle.”

Taxpayers who do not receive or review their canceled checks may be unaware that they have been sucked into the scandal until their delinquent notices arrive, said Capt. Lee Davenport of the Sheriff’s Commercial Crimes Bureau.

“We have no idea if it’s zero (additional altered checks) or a large number,” Davenport said. “We won’t know until after the delinquent notices go out how many more people are involved.”

The case has led to an internal review of check-processing procedures in the tax collector’s office, which receives more than 3 million checks each year. Security has been tightened in check-processing facilities.

“We are very concerned,” Spillane said. “We are taking additional measures to safeguard our checks.”

One of the arrestees was a former temporary employee of the county treasurer and tax collector’s office, hired to handle the high volume of checks that passes through the office in November and December, when the first of two annual tax installments are due, officials said.

Lincoln said the former employee had access to the check-processing area. Officials said the former employee was allegedly linked to checks totaling about $10,000, a fraction of the altered checks involved in the case, officials said.

The five suspects have been arrested in the past few months as they attempted to cash the checks at banks in Alhambra, Santa Barbara and elsewhere. Sheriff’s investigators have found no connection among the suspects but said some might be working in “teams” with former county employees.

Davenport said banks have been warned that the altered checks may be in circulation.

The arrested suspects have been charged with a variety of crimes, including forgery and grand theft of property. Lincoln declined to release their names, or to discuss many details of the case, saying the investigation is ongoing.

Although officials said it is possible some checks were stolen while in the mail, investigators have evidence that at least some checks did arrive at the tax collector’s office--taxpayers mailed them in via certified mail and received return receipts.

Sheriff’s officials began investigating after receiving complaints from a handful of taxpayers, including Kent Condon, a 58-year-old Riverside County businessman. Condon said he realized something had gone wrong with his property tax check when he began receiving a slew of delinquent notices from the tax collector’s office.

Condon said he had mailed two property tax checks in December, for two homes he owns in the San Fernando Valley. One check was cashed by the county. But he discovered that the second check--for $675.39--had been altered.

In the space marked “Pay to the order of”--in which Condon had typed “L.A. County Tax Collector”--was the word “Cash” and a line of asterisks.

A stamp on the back indicated that the check was cashed at a Walnut bank, three weeks after Condon mailed it.

“I thought: ‘Hey, wait a minute, what is this?” Condon told The Times in January. “I’m the victim. I thought: ‘Everything is fine. The taxes are paid.’ Now I’m sitting here and I still owe the county money.”

Spillane said county attorneys believe that most of the financial liability for the altered checks rests with the banks that cashed them. Property owners, such as Condon, whose tax checks were altered and cashed will have to contact their banks; the money should then be credited to their account.

A small number of taxpayers told county officials they left the space for the payee blank on their checks. These taxpayers will likely lose the money from the altered checks, Spillane said.