U.S. Agency Accused of Inflating Land Appraisals

The Bureau of Land Management has come under fire from government auditors and two watchdog groups for conducting real estate appraisals that benefit private landowners at the expense of taxpayers.

Auditors for the Interior Department, which oversees the BLM, found that a senior official may have compromised the agency’s integrity by adjusting appraised land values so they would be “acceptable to landowners.”

The auditors said that the official didn’t comply with appraisal standards and that his actions “increased the appearance of conflict of interest and wrongdoing.”

The two citizens groups latched on to the report in a letter demanding that the BLM fire David Cavanaugh, who has the last word in appraisals for the government’s largest land agency.

“Removing Cavanaugh from a position where he can continue to harm the public will be an important first step in solving the grave problems in the BLM’s land exchange program,” wrote the directors of the Western Land Exchange Project and the Public Employees for Environmental Responsibility, which monitor the government’s land and environmental policies.

Cavanaugh, whom the BLM defended, said he “was trying to involve the property owners [in the appraisal] so they would trust us.”

For years, the Interior Department’s investigative arm, the inspector general’s office, has been critical of how the BLM ascertains land values. In 1986, auditors reviewed Cavanaugh’s role in a Nevada land sale that almost cost the BLM $9.1 million in lost revenue before a second appraisal was ordered.

The auditors’ newest report, issued in July to little public notice, followed complaints by two Utah-based BLM appraisers that they were coerced by Cavanaugh to bend rules to favor property owners.

“There’s no doubt in my mind that we’ve paid tens of millions of dollars more than we should for land in southern Utah,” said Kent Wilkinson, whose appraisals were overridden by Cavanaugh. Wilkinson filed a whistle-blower complaint alleging that after he protested Cavanaugh’s findings, he was harassed by his bosses.

Jack MacDonald, who was the BLM’s chief appraiser in Utah for 15 years, complained that the BLM paid excessively for property in order to win over landowners who were otherwise wary of dealing with the federal government.

“We were told to get creative and come up with values over and above fair market value,” said MacDonald, who retired in 1999.

Government Paid 30% Over Market Value

The two men and the watchdog groups complain there’s no political interest in the issue. “The Democrats don’t want problems [acquiring land for endangered species] and Republicans represent the landowners who are benefiting by the appraisals,” said MacDonald.

In response to the audit, the BLM promised to seek outside help in reexamining its appraisal process.

The BLM manages about 264 million acres, mostly in the West. The public lands evolved when territories gained statehood and property that was not owned by local government or landowners wound up by default in federal control.

The BLM manages the land for such uses as energy production, mining, grazing, watershed, recreation and the protection of natural resources. It sells or exchanges property coveted by developers and acquires other land--frequently to protect endangered species, as is the case around St. George, where Cavanaugh’s decisions have come under fire.

Federal guidelines call for appraisals before negotiating the actual price with landowners. Auditors focused on appraisals reviewed by Cavanaugh since 1996, involving land situated within the dramatic valleys, cliffs and plateaus of southern Utah.

While not examining each transaction or determining the amount of money misspent, they concluded that the BLM senior specialist for appraisals in Washington--Cavanaugh--approved paying as much as 30% more for the land than it was worth, based on initial appraisals by local BLM land-value experts.

The issue highlights tension within the BLM’s ranks.

In his whistle-blower complaint, Wilkinson said that when he protested to Cavanaugh that ignoring BLM appraisal guidelines “would require individuals to violate the law, the discussion became very heated and tempers flared. Mr. Cavanaugh indicated that, regardless of their objections, the Utah staff . . . needed to be ‘more creative’ and find ways to meet (then-Interior Secretary Bruce Babbitt’s] objectives.”

In demanding Cavanaugh’s firing, the two environmental groups wrote to the BLM earlier this month, “One of Cavanaugh’s fundamental duties is to protect the public interest, and certainly not to acquiesce to the non-federal parties whenever land values are in dispute.”

BLM officials bristled.

In its reply, the BLM said it stands behind Cavanaugh “unequivocally and without reservation. His work has been in support of complex and difficult land exchanges and acquisitions that clearly have served the public interest.”

‘Appraising Isn’t an Exact Science’

Added BLM spokeswoman Celia Boddington, “Land exchanges are a controversial and complex issue, but what concerns us is that they are targeting an individual--a public servant--who works on behalf of the agency.”

In an interview, Cavanaugh said he increased the appraised value of the private lands after meeting with the owners because “these lands have speculative development potential . . . . Within the market, you have reasonable discretion. The market doesn’t speak to you, it is to be interpreted.”

Among other complaints leveled at Cavanaugh was that he was not a certified real estate appraiser while reviewing the Utah transactions. Cavanaugh said that fact was not relevant.

As to the auditors’ complaints that his appraisal reviews lacked appropriate documentation, Cavanaugh said, “You can always do things better, but none of the alleged omissions had anything to do with the reasonableness of our recommended values.”

Allen Freemyer, chief of staff of the House Resources Committee that watches over the BLM, said he hadn’t read the audit but was not surprised that BLM critics have seized it.

“Naysayers have been griping,” he said. “We’ve tried to look at the appraisal process in the past, and it’s tough to do. Appraising isn’t an exact science. Maybe we need to revisit [the issue] and look at their appraisal guidelines.”

The Utah congressman who chairs the resources committee shrugged off the inspector general’s criticisms.

“This report is six months old,” said Rep. James V. Hansen (R-Utah). “It dealt with activities under a previous [Clinton] administration and a previous BLM director.”