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Cost of corruption: Cuyahoga County property appraisals jumped 64% in 10 years, under Frank Russo

The Plain Dealer  Cleveland logo The Plain Dealer Cleveland 4/5/2022 John Caniglia, cleveland.com
People led by David Ellison gather in front of the County Administration Building to call for Auditor Frank Russo's resignation Wednesday, August 18, 2010 in downtown Cleveland. © JOSHUA GUNTER/cleveland.com/TNS People led by David Ellison gather in front of the County Administration Building to call for Auditor Frank Russo's resignation Wednesday, August 18, 2010 in downtown Cleveland.

With the passing of Frank Russo, we’re bringing back some of the stories of his rise and fall to remind Cuyahoga County residents of the corruption that dominated county government. This story was originally published in September 2009.

CLEVELAND, Ohio — In the decade during which federal prosecutors say Cuyahoga County Auditor Frank Russo was personally collecting $1.2 million from a company he paid to do appraisal work, the cost of that work jumped 64 percent.

At the same time, the cost of doing appraisals in Hamilton, Franklin and other large counties in Ohio went up only slightly, according to a Plain Dealer review.

Federal prosecutors say the bill to county taxpayers for the appraisal company’s work was way out of proportion to the work performed.

Cuyahoga County’s appraisal contracts with V.A.S. Enterprises are at the heart of federal charges filed Sept. 18 against a top Russo aide and two lawyers linked to the business.

To many critics, the contracts highlight a pay-to-play system run amok, where investigators say manila envelopes and empty cigarette packs stuffed with money determined who got contracts to do the most basic of governmental duties: assessing the value of property, a job at the core of funding schools and libraries in Ohio.

Russo had sole authority to award the contracts. Unlike nearly all contracts awarded on behalf of county taxpayers, the appraisal contract does not need approval from the county commissioners, under state law.

Russo selected V.A.S. Enterprises for a contract for nonresidential appraisals in 1998, months after taking office, and the company collected more than $21 million from taxpayers over the next decade. In return, Russo got $1.2 million in bribes and top aide Santina “Sandy” Klimkowski got $154,000, prosecutors say.

Russo has not been charged with a crime nor identified by name in the charges. But descriptions of a corrupt “Public Official 2″ contained in charges against other people match up with no one except Russo. He has repeatedly denied wrongdoing.

Charges filed in U.S. District Court in Cleveland against Klimkowski say the county paid V.A.S. inflated rates to oversee appraisals of office buildings, factories and other commercial properties. Ohio Attorney General Richard Cordray announced Friday that he would investigate whether crimes occurred in the appraisal process.

“Everything involving this company has to be reviewed, including the methods used to determine billing practices,” said Cuyahoga County Treasurer James Rokakis.

The contracts involve appraisals of the county’s 39,800 commercial, industrial and public-utility properties. Auditor’s office employees handle residential appraisals.

The first contract to V.A.S. was for $3.47 million, or $87.19 per property, the highest cost by far for appraisal work in the state at the time, according to Ohio Department of Taxation records.

Prosecutors say the contract came with a price: “In return, Public Official 2 needed to be paid,” say federal charges filed against Klimkowski, who oversaw the V.A.S. contracts on Russo’s behalf.

A second major contract for a similar reappraisal jumped to $4.25 million in 2004 and an increase to $106.78 per property, or a 22 percent boost.

Russo’s office approved millions of dollars in additional work for various issues involving the appraisals.

Full property appraisals are done every six years. Three years later, the auditor’s office or a firm it hires does midterm value adjustments.

As Russo awarded new contracts to V.A.S. for nonresidential appraisals and value adjustments over the years, the price went up at a rate twice as high as inflation and more than what comparable counties paid.

The last major contract Russo awarded to V.A.S. came in October 2006. It was for $5.69 million for a value update, a 64 percent jump since the first contract Russo gave the business. The contract included some additional services, such as setting the values of new construction for commercial and industrial parcels and supervising auditor’s employees on other reappraisal work.

Yet the contracts for appraisals in Lucas, Hamilton and Franklin counties went up somewhat but not at nearly the rate of increase in Cuyahoga.

For instance:

The cost of contracts in Lucas County rose from $24.44 per parcel in 2000 to $28.61 in 2007, a 17 percent increase, according to the state tax department. The contracts were for commercial and industrial in 2000 and added public utility and exempt properties later.

In Hamilton, the cost per parcel changed by pennies, dropping from $17.87 to $17.81 from the early 2000s through this year. The Hamilton contractor assessed all types of property, with the exception of 18,000 condominiums. The state has approved a new contract for Hamilton County’s next major reappraisal, keeping about the same price per parcel. Unlike Russo, Auditor Dusty Rhodes puts the contract up for bid.

In Franklin County, the cost went from $19.74 per parcel in 2000 to $23.83 last year for all types of appraisals. Those costs increased to $25.16 a parcel last month up 27 percent from 2000, after new contracts worth more than $9.4 million were approved, according to county contracts.

Prosecutors say the bribes were paid to Russo and Klimkowski by the law firm that handled bookkeeping and banking for V.A.S. The law firm of Armstrong, Mitchell, Damiani and Zaccagnini earned $8.9 million from V.A.S., fees that federal prosecutors say were not justified for what the firm did.

The lawyers gave bribes to Klimkowski in manila envelopes, and she funneled them to Russo, prosecutors say. Once, Russo demanded that the money be placed in an empty cigarette pack to conceal it, prosecutors say.

County officials questioned the validity of the appraisals after the charges were filed, reasoning that the bribes tainted the process.

Louis Gentile, the V.A.S. general manager in Cleveland, fired back at those allegations last week. Gentile said his employees are honest, hard workers — not a group of rogue appraisers wasting tax dollars. He stressed that his employees have never been accused or implicated in the corruption scandal.

“No one from [Russo’s office] ever called out here to lower values,” said Gentile, who has worked for the business since 1999. “Absolutely not. The integrity of the appraisal process is intact. What happened downtown didn’t happen here. We are the employees of the company.”

Tim McCormack preceded Russo as county auditor, serving from 1983 to 1997, when he became county commissioner. McCormack avoided hiring outside companies, using his own staff to handle assessments. Twice, he hired a firm to help, according to state records. McCormack said that by keeping the work in house, he could offer quality service to residents.

“We were able to meet individually with people who had questions,” McCormack said. “If someone had a complaint, I could turn to a staff member and get that person help. We did it on purpose because we knew that it is such an explosive topic, their taxes.”

In Toledo, Lucas County Auditor Anita Lopez returned to having in-house workers handle commercial appraisals after she was elected in 2007. She said her office saved $500,000 in the move.

“We did it because there is more accountability, and it is cheaper for the taxpayer,” she said.

It is unclear how much the Cuyahoga County would save if it went back to using in-house appraisers, though the auditor’s office is studying various options.

McCormack said comparing Cuyahoga County’s V.A.S. contract with contracts in other counties is difficult because many factors go into mass appraisals. State tax officials agree, saying hidden fees can be added. What happens next in Cuyahoga County is unclear. In August, Russo’s office suspended its contract with V.A.S., though its employees continue to complete appraisals. In January, the county is expected to find another company or go back to McCormack’s method of using in-house appraisers.

Gentile this summer formed a company with V.A.S. employees called Property Valuation Services Inc., a business that he hopes will offer counties experienced appraisers.

“I doubt it will ever get off the ground now,” he said, referring to the publicity about V.A.S. “This week has been gut wrenching for us.”

The next few weeks won’t get easier.

Richard Blake, a former federal prosecutor, is expected to turn over a report to county commissioners on contracts linked to the corruption scandal, and the V.A.S. contract is likely to be covered in depth. Blake declined to discuss the report last week.

Also, Klimkowski is scheduled to plead guilty to corruption charges before U.S. Judge Kate O’Malley on Friday. Klimkowski played a key role in Russo’s office, as she was the sole person who oversaw V.A.S.’ work. She is expected to cooperate with prosecutors against Russo.

Attorneys Timothy Armstrong and Bruce Zaccagnini also are scheduled next week to plead guilty to charges involving paying kickbacks. They also will cooperate.

Their testimony, along with that of Russo’s longtime aide Klimkowski, is expected to bolster prosecutors’ case against one of Cuyahoga County’s most powerful leaders.

©2022 Advance Local Media LLC. Visit cleveland.com. Distributed by Tribune Content Agency, LLC.

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