‘Connected’ taxpayers got breaks with L.A. County assessor’s office, whistleblowers allege

The Los Angeles County assessor’s office has given favorable treatment to connected taxpayers, allowing them to pay lower property taxes for years and costing the county millions of dollars in lost revenue, according to a whistleblower lawsuit filed by three employees.

Stephen Adamus, Yvonne Austin and Scott Woods say County Assessor Jeff Prang, his top managers and county lawyers have violated tax codes to benefit property owners with ties to elected officials by giving them favorable decisions on reassessments. The trio alleges the county has intentionally lost legal cases, reversed property tax decisions and reimbursed millions of dollars to individuals and corporations in back taxes.

In a lawsuit filed Friday in Los Angeles County Superior Court, the three say they were “pressured to unlawfully change unfavorable tax decisions they made during a taxpayer’s reassessment.” When they did not go along with their bosses, they were punished and effectively turned into clerks, the suit states.

“This is the county’s dirty little secret when it comes to property taxes. It is one rule for the connected and another for the public,” said Greg Smith, a veteran labor lawyer representing the employees. “They threaten them, ostracized them, told them not to discuss the scheme on emails, and when they would not go along with the conspiracy, literally put one of them — a top manager — to work in a windowless room.”

Prang’s office said the lawsuit is without merit, calling the assessor a reformer who took over in 2014 in the wake of a scandal.

“Simply put: This lawsuit is groundless,” spokesman Steve Whitmore said. “It’s been filed by three disgruntled assessor employees alleging members of the assessor executive team and county counsel conspired to provide preferential treatment to connected taxpayers that resulted in millions of dollars in illegal tax refunds.

“We are certain that the claims will be found meritless once the facts of the case are presented. We want to emphasize that we do not retaliate against our employees, and we have taken great measures to prevent what happened in 2012 from ever reoccurring in the office.”

Allegations of corruption have long plagued the county assessor’s office. Criminal charges are still pending against former Assessor John Noguez, who in 2012 was accused of taking $185,000 in bribes from a tax consultant in exchange for a reduction in property values for clients.

Prang took over two years later. He previously was a special assistant in the office and a West Hollywood councilman.

According to the lawsuit, the assessor’s office has repeatedly reversed property tax decisions of connected owners, even when those residents have lost challenges with an assessment appeals board, a decision meant to be binding.

Court documents show several groups and individuals have received special treatment, including the Rand Corp., various apartment complex owners and property developers, and a San Marino property swap involving John Barger, the brother of County Supervisor Kathryn Barger.

The suit states the assessor’s office used executive referrals from county supervisors or others that circumvented the usual system of determining a property’s value and its appropriate taxes. Upon receiving an executive referral, the three employees were told to drop all of their work and complete an “exclusion, exception and/or exemption with 10 days.”

Whitmore disputed that Tuesday.

“Executive referrals stopped in 2012 and [were] not replaced. We don’t do that anymore. It was scrubbed immediately after Noguez,” he said.

The suit alleges that special tax treatment was a “quid pro quo” for campaign contributions, although it doesn’t give specific examples of contributions. The trio says they were “urged to find in favor of individual or entity if it was an executive referral notwithstanding the law and regulations.” And it was common for the assessor’s top brass to order a review of an assessment or turn it over to another staffer who was “more amenable” to changes in taxation findings.

The employees also say the county routinely violated the law by “intentionally losing cases” when a property owner challenged a decision in court.

In one instance the county is accused of returning $1.5 million to Rand Corp. after the company, arguing that it was a charitable organization, requested a welfare exemption on property taxes. According to the suit, the plaintiffs determined that Rand did not meet the standard of a community benefit organization because it typically does research for private entities and the U.S. government rather than local work.

Rand, however, wanted no further assessments on a parcel of land as well as a refund of approximately $1.5 million in back taxes. In 2015, the company sued, and while the county had noted the statute of limitations had expired for the firm’s claim, it settled the case, giving an unending exemption on Rand property and returning $1.5 million to the company, according to the lawsuit.

“As a result of the decision to settle, Adamus complained by email to Chief Deputy Santos Kreimann and Assessor Jeffrey Prang that the county had intentionally lost the case and that the public had been harmed by the loss,” the suit states.

After Adamus complained, he was told by his manager: “If you care about your career and employment, you’ll stay away from the case.”

In a statement Tuesday, Rand said that as nonprofit “whose contracts and grants fund policy research that serves the public interest,” it is entitled to the exemption. The statement said that interpretation of the law was confirmed by the California Board of Equalization in 2013 and a judge in 2016.

Smith said that despite the denials of Prang’s office, there has been clear retaliation against his clients.

Adamus, who once worked at the assessor’s headquarters in the ownership operation, has been relegated to the work of a clerk in a branch office since March. Woods, a 23-year veteran who worked in the legal services department until March, also was reassigned to clerk duties. And Austin, once a manager in the assessor’s legal services department, was relieved of her positions on the real estate fraud task force and investigations team and is now assigned to special projects.

“Austin sits alone in a former computer service room with no windows, no staff, no colleagues, and she has been completely isolated,” the suit states.