Toilet trouble: Watchdog says Pritzker’s tax break part of ‘scheme to defraud’

Cook County’s chief watchdog has concluded that more than $330,000 in property tax breaks and refunds that Democratic gubernatorial candidate J.B. Pritzker received on one of his Gold Coast mansions — in part by removing toilets — constituted a “scheme to defraud.”

Cook County Inspector General Patrick Blanchard also recommends in the confidential report that Cook County should try to recover the money from the billionaire.

The Chicago Sun-Times last year reported that Pritzker bought the historic mansion next door to his home, let if fall into disrepair — and then argued it was “uninhabitable” to win nearly $230,000 in property-tax breaks.

The toilets had been disconnected, and the home had “no functioning bathrooms or kitchen,” according to documents Pritzker’s lawyers filed with the office of Cook County Assessor Joseph Berrios.

But the Sept. 28 inspector general’s report finds Pritzker actually saved more, to a tune of $331,432.03.

Blanchard writes in the report — obtained by the Chicago Sun-Times — that the Cook County Assessor’s office was “the victim of sworn affidavits containing false representations.”

“Based on the information obtained during the investigation, our office determined that the [assessor’s office] received sworn affidavits containing false representations and placed significant reliance on the affidavits in deciding to grant a 10% vacancy factor for the property at 1431 North Astor Street.

“The evidence indicates that the use of these affidavits was part of a scheme for obtaining money by means of false representations and, in executing the scheme, the responsible parties caused checks to be issued by the Cook County Treasurer and delivered by U.S. Mail according to the direction thereon.

“As a result, the County ultimately fell victim to a scheme to defraud, executed in part through the use of affidavits, and which resulted in the property owner ultimately receiving property tax refunds totaling $132,747.18 for the years 2012, 2013 and 2014, as well as additional tax savings of $198,684.85 for the years 2015 and 2016,” the report states.

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The Pritzker campaign said it had not received or reviewed the report and “therefore cannot comment on it.”

Campaign officials also criticized the timing of the report.

“In the heat of a campaign season, an internal investigation was somehow initiated on a years old property reassessment and now a confidential, internal report that was apparently completed on September 28th has already leaked to the press 48 hours later,” spokeswoman Galia Slayen said. “While we have not even seen the report, from the parts released, it appears that information is being taken out of context to falsely insinuate wrongdoing.”

Under a header “Evidence of a plan to Defraud Cook County” the report includes a work order email dated Oct. 5, 2015 from a project manager to a plumbing company vice president states M.K. Pritzker, J.B. Pritzker’s wife, wanted the toilets pulled.

“She is going to have the house re-assessed as an uninhabitable structure,” the email says. “To do this, she would like to have us pull all toilets and cap all toilet lines in the house. Then after the assessment, she would like us to put the 1st Floor toilet back in and have this as the one functioning bathroom in the place (she will then be finishing out the front room for JB’s [Jay Robert ‘J.B.’ Pritzker’s] hangout/meeting are].”

The project manager that the Pritzkers hired told inspectors that M.K. Pritzker did specifically mention “reassessed” during a meeting, according to the report..

“When asked if it was clear that M.K. wanted to have all the toilets removed because it was related somehow to the home being ‘reassessed,’ the B&A Project Manager replied. ‘She did note those two areas together,’” the report says.

The toilets were removed on Oct 6, 2015, with no directive to reinstall them. A ticket from the plumbing company notes five toilets were pulled, with the five toilet supply lines also capped. A gas line was also disconnected and capped in the laundry room; toilets were placed to be “thrown away in the garage”; and two toilets were placed in the basement to be “saved.” The report features a picture of the toilets, lined up against a wall.

Toilets were removed and lined up in a Gold Coast mansion owned by J.B. Pritzker just 10 days before the house was inspected for an appraisal as part of the property tax appeals process. Source: Cook County Inspector General's report.

Toilets were removed and lined up in a Gold Coast mansion owned by J.B. Pritzker just 10 days before the house was inspected for an appraisal as part of the property tax appeals process. Source: Cook County Inspector General’s report.

The assessed valuation appeal was filed with the Cook County Assessor’s office by real estate attorney Schmidt, Salzman & Moran, Ltd. The appraisal report — conducted by Renzi & Associates — noted it was a “retrospective appraisal” and “it was assumed that the condition of the property on the date of the inspection (October 15, 2015) was generally consistent with its condition as of the date of value (January 1, 2015).”

The inspector general’s report notes “among the key observations documented in the appraisal report were references to the lack of toilets in the home” — with the toilets being mentioned five times: “Although we have given consideration to all factors of comparison, we have given primary consideration to the subject’s condition (deferred maintenance, lack of toilets, water damage, etc.),” the appraisal report said.

There were structural problems as well. The report noted there was a stairway from the second to third floor that was “sloped noticeably to the right side,” with another slope on another stairway and a “temporary brace” on a bannister to a second floor stairway.

The appraisal firm’s president was interviewed by the inspector general’s office and said “he was unaware the toilets were removed about 10 days prior to their inspection of the property on October 15, 2015.” He also told inspectors he had been informed the toilets were in place on Jan. 1, 2015, and also said he “recalled” the property was in “very, poor condition” but said that he considered it “unoccupied but functional and it could be habitable.” But he stressed it’s not the job of the appraiser to determine whether a property is habitable. The appraiser said the property owner’s name wasn’t disclosed to them but online background research revealed it was owned by the Pritzkers.

The associate appraiser, too, noted he was not aware the toilets and various appliances were removed shortly before the inspection, adding with no toilets, the residence was uninhabitable because the owner could not have gotten an “occupancy permit” from the City of Chicago.

There were two affidavits signed which say “the property has been vacant and uninhabitable from January 1, 2012 to present. There are no functioning bathrooms or kitchen.” That was signed on Oct. 15, 2015.

One affidavit was signed by Tom Muenster, J.B. Pritzker’s brother-in-law. Another was signed by Christine Lovely, who is identified in the report’s footnotes as M.K. Pritzker’s personal assistant.

The inspector general’s office talked to several assessor’s office employees, including the Director of Residential Valuations, a residential group leader/analyst, the deputy assessor of valuation and appeals, among others.

The deputy assessor told inspectors they “rely on the totality of the evidence,” which was affidavits, pictures and a certified appraiser.

“Well, I would say this. With the scenario that you give us [that in October of 2015, the toilets were still at 1431 contrary to the representations in the affidavits], if there were other counteravailing evidence that implied that the property was otherwise habitable, or that was the only thing that was done and there wasn’t anything else that had to be considered, you could get a different result.”

The assessor too, told the IG’s office, “this is not unusual. … I’m just saying that taking stuff out in order to achieve the goal of rehabbing is a normal part of the process, okay.”

While the report outlines the process in which toilets were removed before the assessment process, the report also concludes they identified “no credible evidence to support the allegation that a relationship between J.B. Pritzker and Cook County Assessor Joseph Berrios allowed Mr. Pritzker to obtain property tax relief on the 1431 North Astor residence.” Still, the law firm Schmidt, Salzman & Moran has contributed more than $25,000 to Berrios.

The inspector general’s report was, in fact, looking into Berrios for an allegation of “Failure to Fulfill Fiduciary Duty to the County in Performance of Public Duties.” Instead, it found that allegation was “not sustained.”

Blanchard’s report emphasizes a flawed assessment system, noting there was a high volume of appeals when the home was being looked at in October 2016.

A field inspector told the inspector general’s office that she conducted an on-site inspection on Oct. 31, 2016: “She advised that she physically inspected the exterior of the residence but was unable to determine the condition of the exterior.” She instead looked at assessor’s office records, which included a Taxpayer’s Brief and other appeal file documents, in addition to computer data. She determined the property has received Certificates of Error for three previous years based on vacancy and were already certified to the Treasurer’s Office for refund six months prior to her inspection.”

“She advised that based on the residence’s history of granted vacancy and the information submitted with the appeal itself, she gave the taxpayer the benefit of the doubt and determined that the residence was again vacant for 2016,” the report said. Ultimately the 2016 appeal was also reviewed by the Residential Valuations Director who again granted a 10 percent vacancy factor based on the residence being vacant and uninhabitable.

Among other factors, the report found the assessor’s office frequently receives appraisals to justify the reduction of an assessed valuation, but has no licensed appraisers on staff to review the adequacy or shortcomings of the appraisal.

The report also notes that the assessor’s office placed substantial reliance on affidavits which misrepresented the condition of the property during the prior three years.

“In placing such reliance on the affidavits going back three years, the review process in this case became particularly vulnerable to deception,” the inspector general’s office says in the report, noting it raises a concern about the lack of an established process for determining the veracity of affidavits submitted in support of Certificates of Error.

The report notes while there are remedies against someone who gives a false affidavit — being charged with perjury — although the report notes the Cook County State’s Attorney’s office have been referred “maybe one or two in the last eight years.”

“Under the current system, there is lack of any potential for deterrent or identification of false affidavits used to support property tax refund requests, the report says.

Under a footnote, it also notes a potential federal violation — Federal Mail Fraud Statute — devising or intending to devise a scheme to defraud.

Other recommendations include increasing staffing for valuation and appeals, as well as field operations. The inspector general also recommends putting a system in place for high-value properties and subjecting certain affidavits to a veracity check procedure, as well as reconsidering its practice of not requiring interior inspections of residential properties during field checks “at least in regards to high-value residential properties.”

Blanchard declined to comment on the report on Monday afternoon. The Pritzker campaign also did not immediately respond to requests for comment on the report.

Source: Chicago sun