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A Fraud Fighter O.C. Isn't Using : $2 County Filing Fees Fund Land-Scam Prosecutors

November 10, 1996|JAMES S. GRANELLI | TIMES STAFF WRITER

SANTA ANA — Prosecutors in four California counties are using millions of dollars from a recent state law to fight real estate fraud, and more plan to take advantage of the statute.

Orange County, however, isn't one of them.

The county could pick up as much as $600,000 under the law, which allows county supervisors to tack a $2 fee on most real estate documents filed with local recorder's offices. The proceeds are strictly dedicated for combating real estate fraud.

But in Orange County, which emerged last summer from the nation's biggest municipal bankruptcy, such a fee is tantamount to a tax, and Dist. Atty. Michael R. Capizzi won't ask for it.

"Pure and simple, I just don't think that in Orange County, in this post-bankruptcy era, there is an interest or a will on the part of anybody to suggest an increase in fees," Capizzi said.

Real estate fraud--especially foreclosure scams that are more prevalent in Orange County--is being handled adequately under the major frauds unit, he said.

Several insiders, however, say that Capizzi has another reason for passing up the chance to hire more prosecutors and investigators: the strained relationship between him and the county Board of Supervisors.

Capizzi's investigation of the board over its role in the county's bankruptcy led to last December's grand jury charges of willful misconduct in office against Supervisors Roger Stanton and William G. Steiner and a county manager. Capizzi is prosecuting the case. In turn, the board, at Stanton's urging, is threatening to launch a financial audit of Capizzi's office.

"We're interested in the fee, but there's concern that it might be perceived as a tax; and there's concern over the whole situation between the board and Mike," said Deputy Dist. Atty. John Conley, head of legislative issues and major crimes unit.

Given the current frosty relations between Capizzi and the supervisors, Conley said, "I'm not sure Mike wants to go in front of the board on that issue right now."

However, Capizzi insists the existing conflict plays no role in his reluctance to ask for the $2 fee.

"I determined last fall when it was signed into law that it was not something that would be looked upon favorably." Capizzi said. "When I reached that conclusion, I didn't know we would be bringing any cases against the board."

At the time the bill was signed, he said, his office was investigating the board but hadn't formed any opinions yet. The cases weren't developed until December, he said. The law, signed in September 1995, took effect in January.

*

The issue may be clouded further by the passage Tuesday of Proposition 218, which requires voter approval for increases in certain property-related fees, assessments and taxes.

Jonathan Coupal, legal affairs director for the Howard Jarvis Taxpayers Assn., said Proposition 218 probably would apply to the fraud fee, but it was questionable whether the fee qualifies as "an incident of property ownership" as garbage and sewage fees are.

But both the state legislative counsel and the state legislative analyst offices say that Proposition 218 doesn't apply because the fee depends on the recording of documents, not the ownership of property. If a court determines, though, that the fee is really a tax, Proposition 218 would apply, said Marianne O'Malley, a legislative analyst.

Meanwhile, prosecutors in Los Angeles, San Diego, Santa Clara and Contra Costa counties have hired more prosecutors and investigators to curtail home equity scams and other frauds that prey especially on less sophisticated homeowners.

"We have seen results already in the sense that we now have a higher profile in the community," said San Diego County Deputy Dist. Atty. Jeffrey Brodrick, who helped to draft the law.

"We hope to be able to prosecute real estate fraud cases more quickly, and hope that that will deter others," he said.

Real estate fraud in Los Angeles County has been "mushrooming" in the last few years, said Don Tamura, a deputy Los Angeles district attorney who also helped to draft the state law.

Indeed, real estate fraud has become so prevalent statewide that even smaller counties are looking into the $2 levy. "Bakersfield already is beginning to see the same kinds of things that have been going on in Los Angeles," said Kern County Deputy Dist. Atty. C.M. "Bud" Starr II. "We're going to have to have a response to that."

From rent skimming to title stealing, the frauds typically are viewed as a civil matter by local police, who often don't have the time or the expertise to investigate such cases. But civil lawsuits usually are too expensive and time-consuming for private attorneys to handle.

Victims too often are the elderly, the poor or the uneducated who don't understand real estate transactions, aren't sure what happened to them and don't have the money to find out.

"Real estate fraud has fallen through a law enforcement crack," Starr said. "It has come to the point that government has to intrude to file charges to stop the frauds."

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