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Sunday, June 22, 2008

Spotlight on easements

Grand jury probe should lead to tougher penalties for lawbreaking
Rocky Mountain News
Friday, June 20, 2008

Some real estate appraisers, property owners and land trusts have manipulated tax credits available from Colorado's conservation easement program in ways that seem downright criminal.
So we welcome Wednesday's decision by Attorney General John Suthers asking a statewide grand jury to look into the more questionable deals. An independent probe is essential.

A grand jury can subpoena witnesses and compel testimony; the AG would not have that authority for this investigation. Subpoena powers will help the grand jury unravel any scams.
The probe should publicly highlight the worst abuses. Exposing obvious loopholes should prod state lawmakers to close those gaps.

No single agency has direct oversight of easement credits, which have drained more than $274 million from state coffers since 2000. Articles in the Rocky have uncovered a host of dubious transactions, some involving what looks like excessive appraisals and multiple tax credits claimed from the same parcel of land.

For some people the temptation to game the system must have been irresistible. It was possible to collect millions in tax credits without drawing any attention. With little risk of getting caught, pushing the limits may have seemed a gamble worth taking.

Indeed, the penalties for illegally cashing in easements are little more than a slap on the wrist - low-level misdemeanors which carry modest fines and minimal jail time, if any.

To be sure, the grand jury might discover evidence of conspiracy, tax fraud or securities fraud - offenses that carry much stiffer penalties. And for months the IRS has conducted its own probe of easement deals that could violate federal tax laws.

If those wider offenses aren't prosecuted, don't count on stiff sentences for those who illegally manipulated easements. Another reason to welcome the grand jury's independence: Tax attorney Rodney Atherton, now under investigation by the Colorado Supreme Court for potential ethics violations related to the easement program, is likely to get a look.

A Rocky investigation of a land trust he organized found that Atherton got two open-space agreements on land he owned in Jefferson County and that these deals led to $360,000 in state tax credits for the attorney and his wife. Atherton may have attracted attention because the state Republican Party is a client of his law firm Zakhem Atherton. Suthers is Colorado's highest-ranking GOP official.

Michael Huttner of ProgressNowAction called for Suthers to recuse himself from the investigation, claiming Suthers had "a conflict of interest with one of his major contributors."
Atherton is hardly a "major contributor," since he did not give Suthers any money for his 2006 campaign. And while Atherton's law partner John Zakhem gave $900 to Suthers' campaign, Atherton did not join the firm until 2007. The most direct link Huttner can make is a contribution from Atherton to Gov. Bill Owens' 2002 re-election campaign.

Huttner's allegation is ludicrous. We have no reason to question Suthers' independence.
Besides, if Suthers wanted to protect Atherton, or any Republican, why wouldn't he take charge of the investigation, so he could cherry-pick who was scrutinized and who was left alone?
We trust the grand jury probe will be thorough, giving lawmakers plenty of ammunition to stiffen the penalties for looting public coffers and abusing a program meant to conserve valuable open space.

Jesse J. Richardson, Jr.
Associate Professor and Program Chair Urban Affairs and Planning
Virginia Tech