Officials in Maricopa County, Ariz., have rejected an offer of $595,000 from Jerry Buss and Frank Mariani to settle an investigation of alleged underpayment of property taxes, and are instead insisting on $1 million.
Buss owns the Lakers, the Kings and the Forum, and Mariani is his business associate.
According to computations by the Maricopa County Assessor's and Treasurer's offices, Buss and Mariani underpaid their taxes on 206 Arizona properties by $522,435.05 over a seven-year period. That figure, plus the demand for $1 million, to be paid by May 10, were included in a letter, hand delivered Friday, from Deputy County Atty. Joe Abodeely to Jordan Green, a Phoenix-based attorney for Buss and Mariani.
"I was caught by surprise," Buss said Monday, "because I thought negotiations were still going on. I am sure we will be able to reach a satisfactory conclusion within the next few days."
Green, contacted in Phoenix, said he was just beginning to study the figures sent by Abodeely and would have no comment for several days.
"This isn't a grocery bill," Abodeely said. "This is a question of a negotiated settlement of an investigation to avoid litigation.
"We feel to settle this and avoid any type of litigation, $1 million is appropriate under the circumstances. We are trying to settle this matter in a civil context and avoid potential litigation. If the matter is litigated, the subjects in question could face treble damages--that's three times the amount--even with civil litigation under RICO (Arizona's Racketeer Influenced and Corrupt Organizations Act). And that is not counting attorneys' fees, penalties, uncomputed interest compounded, and the cost of investigation and the cost to the treasurer's office and the assessor's office."
Under Arizona law, there could also be a fine of as much as $1 million. The total bill, with all factors included, could reach $2.5 to $3 million.
Abodeely said there also was the possibility of pursuing a criminal indictment "for theft by misrepresentation and/or a fraudulent scheme . . . and/or conducting a criminal enterprise."
If tried and found guilty on criminal charges, Buss and Mariani would face a maximum penalty of 14 years in prison.
"I feel a cashier's check for $1 million under the totality of circumstances is more than reasonable," Abodeely said. "We haven't filed a criminal action, even though we have a right to go that way if we believe we can show criminal intent. The ball is now in their court."
The alleged underpayment of taxes by the Marshall Co., the management firm that handles the properties in question, was brought to the attention of Maricopa County officials by an informant known only as Walter. Identifying himself as a former employee of the Marshall Co., Walter claimed first-hand knowledge of a deliberate attempt by the Marshall Co. to underpay property taxes.
Buss and Mariani, through 20 limited partnerships in which they are the general partners, have owned 537 Arizona properties over the past seven years. In that state, owner-occupied units are required to pay 10% of assessed valuation, but rental units are taxed at 18%. On 206 of the Buss-Mariani properties, the owner-occupied rate was allegedly paid.
When asked about the situation a month ago, Green said: "If my clients owe taxes that Mr. Abodeely demonstrates we did not pay and shows the legal theory by which they are entitled to recover, my clients will pay, and want to pay."