West 117th Development Holdings, LLC -Response to Mitch Paul Complaint

Mitch Paul filed complaint in 2021 - report was generated in 2022 - Mitch Paul received the bogus outcome recently in 2023. See:

http://realneo.us/content/daniel-budish#comment-36291 [1]

 

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REPORT OF INVESTIGATION CASE NUMBER: 22-0057-I SUBJECT(S) INFO Employee Name: Camille Klonowski/Bob Hennessy Position: Hearing Officers County Department: Board of Revision INITIATED: August 29, 2022 DATE OF REPORT: October 25, 2022 I. SUMMARY

CASE NUMBER: 22-0057-I SUBJECT(S) INFO Employee Name: Camille Klonowski/Bob Hennessy Position: Hearing Officers County Department: Board of Revision INITIATED: August 29, 2022 DATE OF REPORT: October 25, 2022 I. SUMMARY The Agency of Inspector General (“AIG”) received a complaint that originated from a nonemployee member of the public and was forwarded to the AIG by Ron O’Leary (“O’Leary), Cuyahoga County Board of Revision Administrator. The complaint implied that County Executive Armond Budish’s son Daniel Budish (“Budish”) was given special treatment by the hearing officers who heard the valuation complaints brought by the Cleveland Board of Education (“BOE”) regarding Budish’s property located at 11600-11618 Detroit Avenue in Cleveland (the “Property”). Specifically, it was alleged that the Board of Revision valued Budish’s property approximately $1 million less than the market value. The hearing officers who heard the valuation complaints were Camille Klonowski (“Klonowski”) and Bob Hennessy (“Hennessy”). The complaint to the AIG insinuated a violation of County Ethics Code 403.03 and 403.04, as well as R.C. 102.03.

After reviewing the evidence gathered during this investigation, there is insufficient evidence to indicate that either the hearing officers or any County employee above them violated County Ethics Code 403.03 by using their County positions to undervalue Budish’s property, thereby allowing him to pay less money in taxes. There is also insufficient evidence to indicate a conflict of interest violation under County Ethics Code 403.04 or 403.06(A).

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BACKGROUND a. Cuyahoga County Board of Revision The Cuyahoga County Board of Revision is a quasi-judicial body which hears property valuation complaints as outlined and prescribed by Chapter 5715 of The Ohio Revised Code (O.R.C).1 It’s responsible for investigating, hearing and rendering decisions on all valid and timely filed valuation complaints. Additionally, the Board of Revision decides complaints regarding Homestead denials, Remission of Penalty, and HB294 Expedited Foreclosure Hearings. The Board of Revision journalizes its decisions, sends statutory notifications, receives appeals from such decisions, prepares transcripts, and notifies the Fiscal Officer of valuation changes and corrections.

2 b. West 117th Development Holdings, LLC West 117th Development Holdings, LLC is an Ohio for-profit limited liability company. It was incorporated in April 2020. Its statutory agent is 1932 Service Corp.

3 III. INVESTIGATION a. Documents Reviewed4

i. Complaint Against the Valuation of Real Property The AIG reviewed the Complaint Against the Valuation of Real Property (“Complaint”) filed by the Board of Education on behalf of the Cleveland Municipal School District against the valuation of the Property. A stamp on the Complaint indicates that the Board of Revision received it on March 30, 2021. The Complaint shows that the BOE sought an increase of the full market value of the Property from $334,300 to $1,375,000 due to the May 11, 2020 sale of the Property. The Complaint also states that the BOE did not know if any improvements were completed in the last three years. It also lists West 117th Development Holdings, LLC as the owner of the Property. Budish’s name does not appear on the Complaint.

ii. Evidence Packet Submitted by BOE The AIG reviewed the evidence packet submitted by the BOE to the Board of Revision in advance of the July 26, 2021 hearing on the BOE’s Complaint. The packet included Google Maps photos of the Property; a plat map of the Property; a CoStar (Commercial Real Estate Market Analytics) report on the Property; a Metroscan Property Profile; a General Warranty Deed from May 11, 2020; and a May 1, 2020 Mortgage on the Property. 1 https://www.cuyahogacounty.us/i-want-to-contact [2] 2 http://bc.cuyahogacounty.us/en-US/Board-of-Revision.aspx [3] 3 https://businesssearch.ohiosos.gov/ [4] 4 Referenced documents are maintained by the AIG and available for review upon request.

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The CoStar report listed a sale price of $1,375,000. No sale price was reflected in any of the other documents. The General Warranty Deed listed a sale amount of $0 and a conveyance fee of $0. The Mortgage was for an open-end mortgage in the amount of $1,050,000. None of the evidence contained Budish’s name. iii. Oral Hearing Journal Summary The AIG reviewed the Oral Hearing Journal Summary from hearing officers Klonowski and Hennessy regarding the July 26, 2021 hearing on the BOE’s Complaint. The Summary indicates that counsel for the BOE appeared, but that no one appeared on behalf of the taxpayer despite the taxpayer being properly notified of the hearing. The decision following the hearing was to maintain the $334,300 valuation of the Property. Hennessy’s comments in the Summary stated that while the BOE “provided information indicating a recent transfer of the Property, the deed does not contain a sale price and no conveyance was paid. Additional public information was provided by the BOE but absent reliable testimony as to terms and conditions of transaction, an appraisal indicating value of real estate if a business entity sale, a Purchase Agreement for transaction, Closing statement for transaction, a deed indicating sale price and conveyance, etc., no change is warranted.” iv. Decision Notice The AIG reviewed the Decision Notice sent by the Board of Revision on August 2, 2021 to West 117th Development Holdings, LLC. The Decision Notice informs West 117th Development Holdings, LLC that the Board of Revision found that no change in value was warranted following the hearing on the BOE’s Complaint. It also states that the decision may be appealed to either the Board of Tax Appeals or the Cuyahoga Court of Common Pleas within 30 days. v. Stipulation of Value The AIG reviewed the Stipulation of Value on the Property received by the Board of Revision on June 27, 2022. The Stipulation was filed in the Ohio Board of Tax Appeals on June 19, 2022. Counsel for the BOE, West 117th Development Holdings, LLC, and the Board of Revision stipulated that the fair market value of the Property is $1,300,000. The Stipulation states that the Board of Tax Appeals may terminate the appeal.

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vi. Cuyahoga County Board of Revision Rules of Procedure5 The AIG reviewed the Cuyahoga County Board of Revision Rules of Procedure. The Rules state, in pertinent part: Conflicts and Ethics: If a Board of Revision Hearing Officer determines there is a conflict of interest or the appearance of a conflict of interest with any party or any matter on his or her docket, the Hearing Officer is to remove himself or herself from the case and notify the Administrator of the Board of Revision. The parties and Hearing Officers have a duty to notify the Administrator of the Board of Revision of any conflicts or appearance of a conflict that they are aware of regarding Board of Revision cases. The Administrator may re-assign Hearing Officers from other boards to hear the complaint if needed. Types of Evidence [suggested for use at hearing] (if applicable) A) Arms-length sale, documented by recorded deed, closing statement (HUD-1), purchase contract, and/or conveyance fee statement (DTE 100). B) Recent appraisal report of the subject property made for tax valuation purposes, and authenticated by the appraiser during the hearing. Other opinions of value may be considered and given consideration. C) Certified estimates from a contractor for repairs cited on the complaint. Major structural issues may affect the value of the property while regular maintenance needs (new roof, new driveway) are typically factored into the existing current value based on the age/condition of the property. D) Dated interior/exterior photos of the property and comparable properties showing the condition. E) New construction costs certified by the builder and should include both hard and soft costs. F) Tax Map, Topography Map or Plat Map, showing the subject property. 5 https://bor.cuyahogacounty.us/en-US/rules-of-Procedure.aspx [5]

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Interviews Anne Camille Klonowski – 09/13/2022 The AIG interviewed Klonowski on September 13, 2022. Klonowski generally explained the appraisal process. She stated that the Appraisal Department sets the value of properties, and then if someone brings a complaint, hearing officers like Klonowski assess the complainant’s evidence at a hearing. She said that in addition to the evidence brought by the complainant, typically she would look for when the property last transferred, whether there is a mortgage on the property, and whether the property is actively listed for sale. Hearing officers know the Appraisal Department’s valuation and the market area of the property under review, and they have access to the Appraisal Department’s software. Klonowski stated that three hearing officers usually hear a complaint, although two is acceptable if one of the officers is unavailable; for example, if a hearing officer is on vacation, sick, or needs to recuse themselves. She said that in July 2021 she conducted her hearings with Bob Hennessy and Tim Gibbons. Klonowski felt it would be appropriate for a hearing officer to recuse themselves if they knew someone who owned the property or brought the complaint. Klonowski further stated that Board of Revision Administrator Ron O’Leary (“O’Leary”) hires the hearing officers and oversees them, and that the statutory board (consisting of County Executive Armond Budish, Michael Chambers, and Michael Gallagher) oversees the department. She said that on a practical basis, the hearing officers report to O’Leary and O’Leary’s two assistants. She said her main contact with the statutory board was to say hello in the hallways. Klonowski was unsure who had the ability to terminate a hearing officer. As for the hearing on the Property in question, Klonowski stated that she was not aware that the Property belonged to Budish until her conversation with the AIG, and that no one had spoken to her about the evaluation of the Property outside of the official hearing process. Klonowski explained that the mortgage presented by the BOE at the hearing would never be enough to change the value of the appraisal because the mortgage is not necessarily reflective of the value of real property. It could be collateralized by something else – for instance, it could be for an LLC that includes real property, among other things. The mortgage could also include funds for renovations. Klonowski also said that the CoStar report is a secondary source, not a document of sale, and that without more evidence – such as corroborating testimony from the taxpayer – a sale price from a CoStar report alone would not be enough to change the value of an appraisal. Klonowski stated that complainants have two avenues for appeal following the hearing officers’ decision – either to the Board of Tax Appeals or to the Cuyahoga County Court of Common Pleas. She said that in this case, it appeared that the BOE appealed to the

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Board of Tax Appeals, and that at that point counsel for West 117th Development Holdings, LLC became involved and entered into a stipulation with the BOE and counsel for the Board of Revision. She explained that there were no further steps that could be taken to change the valuation of a property following such a stipulation. Bob Hennessy – 09/20/2022 The AIG interviewed Hennessy on September 20, 2022. Hennessy confirmed Klonowski’s description of the general appraisal process. Hennessy stated that hearing officers report to O’Leary, and that it is likely that O’Leary makes firing and promotion decisions about the hearing officers. Hennessy explained that while he wasn’t sure if the hearing officers were subject to a written conflict of interest policy, he remembers conflicts of interest being covered in training and said that if there is any chance a hearing officer could be biased when hearing a complaint, the hearing officer should recuse. Hennessy stated that there were various reasons that the hearing officers declined to change the value of the appraisal of the Property. He said that the warranty deed here did not include a sale price or conveyance fee; that an open-ended mortgage could be cross-collateralized with other property; and that when a property is in an LLC, the hearing officers don’t get consideration information for the real property as opposed to the business name, business info, etc. Hennessy stated that the hearing officers would never change the value of an appraisal based solely on a mortgage, and that a CoStar report is not considered an official document – rather, it is a report done for realtors. He further explained that since no one testified on behalf of the taxpayer, the hearing officers did not know the terms and conditions of the sale. Ultimately, he said that the hearing officers simply did not have enough solid information to change the appraisal. Hennessy stated that he was not aware that the Property belonged to Budish until his conversation with the AIG and was not aware that Budish was Armond Budish’s son until that same conversation. He said that no one had spoken to him about the evaluation of the Property outside of the official hearing process. Tim Gibbons – 09/28/2022 The AIG interviewed Gibbons on September 28, 2022. Gibbons confirmed that in July 2021, when the Complaint regarding the appraisal of the Property was heard, he was the third member of the team of hearing officers assigned that Complaint. Hennessy and Klonowski were the other members of that team. Gibbons stated, however, that the week the Complaint was heard he was on vacation, and therefore did not participate. Gibbons stated that he did not know that the Property belonged to Budish, and that he found out during his conversation with the AIG. He said no one outside of the official evaluation process spoke to him about the Property’s appraisal. Upon reviewing the

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evidence provided by the BOE at the hearing, he agreed that the evidence did not support a change in value. IV. Analysis and Findings a. Misuse of Official Position Pursuant to Section 403.03(A) of the County Ethics Code, no elected official, employee, or board member shall knowingly use his or her official position or official powers and duties to secure a financial or material benefit, or promise of a financial or material benefit, for himself or herself, a relative, or any private organization in which he or she has an interest. In the instant matter, there is no evidence that Klonowski or Hennessy knowingly undervalued the Property in order to secure a benefit for themselves, a relative, or any private organization in which they have an interest. In fact, there is no evidence that Klonowski or Hennessy knew the Property belonged to Budish at the time of their valuation. In addition, their explanations regarding why they found that no change in the valuation of the Property was warranted at the time of the hearing are both reasonable and bolstered by the Board of Revision’s Rules of Procedure, which detail the types of evidence that might be used at a hearing. In this matter, the BOE presented only one of the kinds of evidence suggested – a deed – and that document did not contain a sale price or a conveyance fee. Furthermore, there is no evidence that County Executive Budish attempted to use his official position to influence the Property’s valuation, thereby trying to secure a financial benefit for his son. Accordingly, the AIG is of the opinion that there is insufficient evidence to indicate a violation of Section 403.03(A). b. Conflict of Interest Pursuant to Section 403.04(C) of the County Ethics Code, no elected official, employee, or board member may participate in any decision or take any official action with respect to any matter involving the exercise of discretion, including discussing the matter and voting on it, when he or she knows or has reason to know that the action could confer a direct financial or material benefit on himself or herself, a relative, or any private organization in which he or she has an interest. Again, there is no evidence here that Klonowski or Hennessy made their valuation decision based on anything other than the information presented by the BOE at the hearing. There is also no evidence that they were aware that the Property was owned by Budish or that they knew or had reason to know the action could confer a benefit for themselves, a relative, or any private organization in which they have an interest. Accordingly, the AIG is of the opinion that there is insufficient evidence to indicate a violation of Section 403.04(C). There is also insufficient evidence to indicate that Klonowski or Hennessy should have recused themselves under the Board of Revision’s

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own conflict of interest policy, since neither hearing officer knew to whom the Property belonged at the time they heard the BOE’s Complaint. c. 403.06(A) Pursuant to 403.06(A) of the County Ethics Code, all individuals shall comply with the requirements and prohibitions applicable to public officials and employees as stated in Ohio Revised Code Section 102.03. The standard for a violation of 102.03(D), which prohibits County employees from participating in matters where they have a conflict of interest, requires an employee to anticipate a definite and direct benefit as a result of their participation in a matter. As the OEC has explained, “Not all ‘conflicts of interest’ are prohibited by Division (D) of Section 102.03 of the Revised Code, but only those in which a public official has a dual interest that would impair his independence of judgment in making decisions . . . Furthermore, it is not sufficient merely to identify some indirect or indefinite benefit that a public official may accrue from the performance of an official act. A public official should not be precluded from participating in such decisions that he was duly elected or appointed to make, unless he would secure a particular benefit for himself that creates a conflict of interest. . . The standard in judging such conduct is whether the matter before council would provide such a definite and particular benefit for the council member that his private interest could impair his independence of judgment or unbiased discretion in making his official decisions . . . The Commission interpreted [102.03(D)] as prohibiting a public official from participating in his official capacity in matters that would benefit the property, business, or other interests of his spouse or his employer, since he would derive some benefit as a result of his actions . . . R.C. 102.03(D) still requires that the thing of value, whether it is secured for the official or for someone else, be of such a character as to manifest a substantial and improper influence upon him with respect to his duties . . .” OEC Advisory Opinion No. 88-004 (emphasis added). See also OEC Advisory Opinion No. 92-013 (“R.C. 102.03(D) prohibits a public official or employee from participating, formally or informally, in a particular matter which would result in a definite and particular, personal pecuniary benefit being realized by the official or employee, his family member, business associate, or other party where the official or employee would be subject to a conflict of interest”). As discussed above, there is no evidence here that Klonowski or Hennessy anticipated any sort of benefit to themselves, their relatives, business associates, or employer when they determined that no change in value of the Property was warranted.

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In addition, the AIG’s opinion is that it is simply not reasonable to conclude that because Armond Budish is the County Executive there is automatically a conflict of interest in the tax assessment of his property, let alone his son’s. In an opinion in which the OEC found that a city council member was not prohibited from appearing as a private individual before the city council to protect his own private property interests, the OEC stated that: “the Ethics Commission, in interpreting the Ethics Law, must ensure that reasonable and justifiable limits on public officials and employees, reasonably related to the public interest served, are imposed and also that the rights afforded to all citizens are realized by public officials and employees to the greatest extent possible. A public official or employee does not, by virtue of holding a public office or public employment, and within the limits established by the Ethics Law, waive all of his rights and privileges as a citizen of this State . . . A public official or employee will not be considered to have ‘use[d] the authority or influence of his office or employment’ if he appears, as an individual, before council to protect his own property interests, and if he pursues a course of action, with respect to his own property, that is available to any other citizen who is not a public official or employee. When pursuing a course of action, the public official or employee must follow the same procedures, comply with the same requirements, and be limited to the same access to other officials and employees as any citizen who is not a public official or employee. For example, if an application to appeal a matter must be accompanied by a fee, the public official must submit the necessary fee. The official may not pursue the matter through any channels other than those available to any other citizen.” OEC Advisory Opinion No. 92-019. There is no evidence here that any person involved in this matter went through any channels other than those available to any other citizen. Since there is no evidence that Klonowski or Hennessy anticipated receiving any sort of benefit for the decisions they made, or that any person involved pursued a course of action outside those available to any other citizen, the AIG’s opinion is that there is insufficient evidence of a violation of 403.06(A). V. Conclusion After careful review of the evidence collected and reviewed in this investigation, there is insufficient evidence to indicate that Klonowski or Hennessy improperly valued Budish’s property in violation of County Code 403.03, or to indicate that Klonowski or Hennessy violated County Code 403.04 or 403.06(A) by participating in a matter in which they had an impermissible conflict of interest.

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Beth Kavouras Date Deputy Inspector General / Counsel

 

Approval as to analysis and conclusion: October 25, 2022

Alexandra R. Beeler Date Inspector General, Cuyahoga County