Inexplicable tax breaks for the wealthy: investigation expands

For months, prosecutors have been investigating allegations that a former county appraiser lowered tax bills for wealthy Westside property owners in a bid to drum up campaign cash for his boss, Los Angeles County Assessor John Noguez.

Now, that corruption probe has expanded to include tax reductions allegedly made by the appraiser long before Noguez was elected assessor in November 2010. In fact, the appraiser, Scott Schenter, is suspected of engineering improper tax breaks for nearly a decade, according to documents obtained by The Times and interviews with former co-workers.

Retired assessor’s office supervisor Dale Edgington said he warned several of his superiors in 2009 that Schenter was inexplicably lowering the assessed values — and by extension, property tax bills — on dozens of properties in Marina del Rey, Torrance and Redondo Beach. There is no indication the department took any action against Schenter based on those allegations.

One of the properties Edgington said he raised concerns about was the Jamaica Bay Inn, a waterfront hotel in Marina del Rey. Records show that it was assessed for $2.8 million in 2004. Then, as real estate prices were rising in the county, Schenter reduced the inn’s assessed value to $1.9 million in 2005 and $1.5 million in 2006, county tax bills show.

When asked about Jamaica Bay, assessor’s spokesman Anthony Crump said the office has “identified some irregularities” with the valuation and referred the matter to prosecutors about a month ago.

Prosecutors declined to comment on the case. But after Schenter’s arrest in May, Dist. Atty. Steve Cooley called the magnitude of Schenter’s alleged crimes “almost inconceivable,” adding, “We believe his actions were not isolated.”

Schenter’s attorney, John Powers, said his client was “a low-level employee acting at the behest of others.” He did not elaborate. It is unclear what Schenter’s motive would have been for reducing many of the property values before Noguez’s election.

Schenter is the first, and so far only, person arrested as part of a wide-ranging corruption investigation centered on Noguez. Schenter faces up to 30 years in prison on fraud charges stemming from secret, improper tax breaks prosecutors say he granted wealthy property owners in Beverly Hills, Pacific Palisades and other Westside communities.

In an interview with The Times shortly before his arrest, Schenter said Noguez had promised him a promotion and then exerted pressure on him to raise campaign contributions. Schenter said he unilaterally reduced the value of some properties in an effort to generate donations to help Noguez retire debt from his campaign, which raised and spent more than $1 million while his closest competitor raised less than $50,000.

Noguez, who is on an indefinite paid leave of absence, has denied any wrongdoing. He has, however, acknowledged asking Schenter to help raise money and “check the status” of some of the properties whose assessed values the appraiser later reduced. Noguez denied offering Schenter a promotion.

Schenter, who spent more than a month in jail before prosecutors agreed to lower his bail from $1.5 million to $100,000, is now cooperating with the investigation and is likely to be one of the prosecution’s star witnesses if charges are brought against others.

Schenter came under scrutiny shortly after an internal transfer in 2007. The employee who replaced him noticed suspicious values on properties his predecessor had handled, according to Edgington, who had been Schenter’s boss in the mid-2000s. The replacement, Jason Scholz, recently appeared before a grand jury hearing evidence in the corruption probe. Edgington said he has been interviewed by prosecutors.

After Scholz raised concerns, Edgington said he asked for a list of properties whose values Schenter had reduced. His staff came up with more than 50. At least three reductions were “beyond the level of common sense,” Edgington said, and one property’s taxable value had mysteriously been reduced to zero.

Edgington said he then asked appraiser Paul Olvera to investigate Schenter’s reductions. Olvera, he said, failed to do so.

Reached by phone, Olvera declined to comment. “I’m not going to acknowledge whether there even is a list,” he told a reporter. Scholz did not return a call requesting comment.

Responding to a Times public record request for the list of “suspicious” reductions Schenter made while he worked for Edgington, the assessor’s office released four pages listing more than 220 properties worth more than $625 million. It’s not clear from the documents how many of those parcels received reductions. The Jamaica Bay Inn was among the properties on the list released last week.

Lori Keller, a spokeswoman for Pacifica Hotels, which owns Jamaica Bay, said the people who might know why the assessed value had been reduced have left the company, are on vacation or have not returned her calls. She said she wasn’t aware of any inquiries from investigators.

In 2009, a few months before Edgington retired, he said, he decided to raise the subject of Schenter’s reductions in a meeting with some of the department’s top brass: then-Assistant Assessor Robert Quon and directors Kurt Gensicke and George Renkei.

When he finished speaking, Edgington said, he was confronted with strange looks and told that Schenter was already under investigation. His bosses did not tell him what Schenter was being investigated for, Edgington said.

Quon, who is also now retired, said last week that he didn’t remember the meeting. “I do remember Dale saying he had some suspicions about some things Scott had done, but nothing specific,” Quon said. Renkei and Gensicke declined to comment.

It would have been up to Edgington, as Schenter’s direct supervisor, to take formal written action against Schenter to open an investigation into the mysterious reductions, said department spokesman Crump, adding, “We looked at our records and nothing exists.”

Schenter was suspended for a month in 2009 after a family member offered to buy a property he was responsible for appraising, sources said, a violation of the department’s code of ethics.

There’s no evidence that anyone made an effort to stop him from secretly altering property values until early last year, when a supervisor in Culver City caught him allegedly lowering assessed values improperly for Westside owners. Schenter resigned in lieu of termination in January 2011.

Times staff writer Doug Smith contributed to this report.