Evidence of Tax Fraud in the Transaction
“Here are the changes my tax counsel is requesting to make sure that there is no obvious trail to the $1.5 M. In addition, our funds are available so to further assure all the parties we will be opening escrow for the $1.5 million now (hopefully by Friday if not by Monday). I hope the closed session went well.”
“…Terry please do not forget that the donation piece has to be in a different press release and announced at another time. We have successfully so far avoided the written linkage of the two events and of course we would like to be consistent. We are opening escrow for the $211.5 M with Guaranty Escrow tomorrow. I have a personal meeting with Wendy Bond, the owner of Guaranty Escrow to set this up based on the Pledge agreement and the Instructions.”
“1.5 Million Donation: I assumed that you removed all mention of the 1.5 million in order to create distance (for tax purposes) between the real estate transactions and the donation. However, the donation agreement is contingent on this MOU so I added a minimal mention. The fact of that donation is an important motivation in the City’s participation in this agreement.”
“The donation will be made individually by the Luglianis, by their IRAs, or by an entity associated with them. We prefer that the donation remain outside the purview of the MOU all together. We think we can accomplish this by a separate pledge and escrow instructions (drafts attached) and the actual deposit of $1.5 Million with Wendy Bond at Guaranty Escrow, Inc.”
“I am preparing a draft Staff Report for the Council hearing on May 8th. I have eliminated all references to the Luglianis by name, but their property address is obviously included in the draft (e.g. explaining the portion of the MOU dealing with Area A, etc.). Also, the donation is mentioned as a positive goal and reason for the execution of the agreement.”
“In the first paragraph, we cannot refer to the Luglianis as having approved the agreement, i.e., the MOU. The Luglianis are not party to that agreement. The release should just refer to “a PVE property owner” (or “PVE resident”) as I suggested yesterday.”
“All I have received is copies of Gary’s emails to David [Lugliani] regarding setting up an account in my name as trustee. I understand that this account will then wire funds to escrow to close this purchase. In order to do this, I assume I will need to sign bank sig cards and authorization. The trust will need a federal ID number and the bank may need to season funds before wiring. What is the timetable for all of this? I assume the funds are ultimately coming from the Lugliani’s. What bank is to be used? Do you expect me to be available or to personally attend to setting up the account? I have not done anything. I am available for all of this, but only receive copies of Gary’s emails second hand via David’s ipad. What am I missing here? ”
Evidence of Appraisal Manipulation to Support Property Valuation
Note appraisal inspection is dated 5/28/12 and appraisal was completed on June 21, 2012 but the deal was approves by PVHA and PVE City Council on 5/8/12. How could they approve the price without a third party valuation?
“We think that it will be a stretch to value this land [Lots C & D] for $500,000 but we will pay that regardless as that is the deal we are striking. I will be happy to speak with you more about this but PLEASE PLEASE THIS IS A HIGHLY CONFIDENTIAL MATTER AND HAS NOT YET GONE TO THE PUBLIC.”
“Howard, I will be calling you with some minor changes to the appraisals you provided us awhile back that will help us close this part of the deal.”
“Comps #1, #3 and #4 need to be adjusted lower by 90% from land value price per sq.ft. for having superior R1 zoning.” [Note it was explicitly stated in the MOU (and agreed by all parties) that R1 re-zoning was intended within six months of transaction closing.]
“Comp #5 is a bank REO land sale of 19.8 acres of open space land with ocean views in the City of Rolling Hills.” [Note: appraisal failed to note that the low selling price was because of concerns over build ability due to proximity to an active landslide area] ”
““I will talk to you later but it is not wise to give the public a speculative price and accept what will amount to ¼ of the price.””
“Remember that the appraisals must be approved by the City and we are happy to speak directly with Bolton to clarify that everyone is on the same page. I know the appraisal issue is somewhat confusing, but there is not sense in preparing them if they don’t work or do not cover all the bases.”
Parties Knew They Were Doing Wrong
“The 1940 deed transferring title in certain parklands from Bank of America to the Homes Association includes a use restriction that goes further than what is contemplated in the CC&Rs: ‘Except as hereinafter provided, said realty is to be used and administered forever for park and/or recreation purposes only (any provisions of the Declarations of Restrictions above referred to, or of any amendments thereto, or of any prior conveyances of said realty, or of any laws or ordinances of any public body applicable thereto, to the contrary notwithstanding), for the benefit of the (1) residents and (2) non-resident property owners within the boundaries of the property heretofore commonly known as “Palos Verdes Estates” (that is to say, within the boundaries of the Grantee municipality…and of any other property that may be under the jurisdiction of said Palos Verdes Homes Association) under such…’”
“I spoke with Christi [Hogan] and she firmly believes the appraisal must account for the highest and best use of the land (Lots C & D), which would be residential. It can acknowledge the applicable deed restrictions and zonings, but explain that the City can re-zone and the highest and best use is the value of a residential lot.” [Note: City has maintained in all staff reports and Council hearings that they intend to maintain Lots C & D as open space parkland, but this comment suggests they may be planning to re-zone and sell it once the dust settles.]”
Evidence of Intent to Obscure True Nature of the Transaction from the Public
“My clients wanted a more cryptic press release. A copy is attached.” [Note the press release issued on the MOU did not mention the sale of parklands to a private person]”
Questionable Validity of Transaction Evident from Difficulty Finding Title Insurance
“This is the 4th title insurer we are approaching. They are all spooked by the litigation and the reversionary rights along with the actual recognition that Christi brilliantly master minded in the MOU.”
“Chicago [Title] found the HOA too litigious to insure.”