Kest waived millions in penalties as treasurer

5/6/2006

The Lucas County Treasurer s Office has discovered penalty and interest waivers totaling at least $2.8 million that were granted to delinquent property taxpayers under former Treasurer Ray Kest.

They include over $222,300 in breaks given to people who contributed to Mr. Kest s campaigns.

The treasurer s office is checking to see if any of the money can be recouped.

Under Ohio law, a county treasurer does not have discretion to waive penalties and interest fees for delinquent taxpayers. The law requires penalties first be assessed before a formal review process can be conducted to determine which individual cases may or may not qualify for waivers.

The waivers were discovered during an internal audit that Lucas County Treasurer Wade Kapszukiewicz ordered when he took over from Mr. Kest in September, 2005.

Mr. Kest was county treasurer for 20 years.

The audit spanned 2000 to 2004 and found $8 million in waivers.

I don t know if Ray Kest was improperly interpreting the law or intentionally bending the law. Nevertheless, he was wrong to do it, we found out about it, and we re correcting it, Mr. Kapszukiewicz said.

When reached by phone, Mr. Kest said he is not interested in talking to anybody at The Blade.

While many of the waivers granted were to nonprofit organizations and others who legally would be entitled to them, Mr. Kapszukiewicz said at least $2.8 million in waivers appear to have been improperly granted to property owners whose fees totaled $500 or more.

Because those uncollected penalties and interest represent money lost to the county, Mr. Kapszukiewicz contacted county Prosecutor Julia Bates office in November. Mrs. Bates said that although the treasurer s office produced a list of properties that had been put on the so-called no-penalty list, the problem is how to proceed.

There are people on that list that are legitimately exempt that need to be taken off. There has to be evidence that this person legitimately owes money and this person does not, Mrs. Bates said.

On Wednesday, Mr. Kapszukiewicz sent a letter to county Auditor Larry Kaczala whose office maintains electronic records requesting the creation of a list of entities and individuals for whom previous treasurer administrations inappropriately waived penalties and interest.

With that, the treasurer hopes to collect from those who were inappropriately given waivers.

Mr. Kaczala said the former treasurer never requested that a reason for waivers be input into the system.

He said it might not be possible to determine which fees were inappropriately waived.

Some of those who received the waivers and contributed to Mr. Kest s political campaign between 2000 and 2004:

• Dan DiSalle and William Thees of 405 Madison Limited, who had $54,816 waived and donated $1,100.

• Toledo entrepreneur Basem Mufleh received $42,860 in waived penalties and fees and contributed $1,450.

• Scott Sutter, whose Juscot Realty Ltd. buys and sells properties in the Toledo area, was afforded $40,038 in waived fees and contributed $1,580.

• John Ulmer of the Westhaven Group, who is accused by the Ohio Department of Commerce of engaging in securities fraud, contributed $4,175 to Mr. Kest and received $4,494 in waived penalties and fees.

Mr. Kapszukiewicz noted that between 600 and 1,000 property owners each year do not get any such waivers and ultimately lose their properties at delinquency sales. Others lose homes to mortgage foreclosures.

Mr. Kapszukiewicz admitted that some of those on the no-penalty list may have been told that the program was allowed under state law.

Mr. Sutter, for example, said he believed a no-penalty classification could be given to those who worked out a payment plan.

Because he buys dilapidated properties on which back taxes are owed, Mr. Sutter said he often would seek payment plans so that he could fix up the buildings and then pay off the taxes when he sold or refinanced them.

I thought everyone was given that option, he said, adding that he has contributed to several campaigns.

Mr. Thees explained that he challenged the reassessed value on the 405 Madison building soon after he bought it; so he only paid the lower tax rate until the matter was settled.

He eventually secured a lower property value and said he then paid in full what he was told he owed.

I m not aware of any fees being waived, he said. I m not aware that anybody did me any favors. As far as I m concerned, we re still paying too much money.

Mr. Ulmer and Mr. Mufleh did not return calls seeking comment.

John Irish, former chief deputy director of the treasurer s office under Mr. Kest, could not be reached for comment.

Domenic Montalto, former director of collections under Mr. Kest and current executive director of the Lucas County Democratic Party, said that taxpayers could go on a payment plan but no penalties were waived.

If someone came in and were behind, they were on payment plans and those fees were incorporated into the plan, he said, adding that waiving fees was nothing that I had any authority to do or knew about.

Ruth Koretsky, a former treasurer s office employee under Mr. Kest, said waiving fees for elderly or those who fell on hard times was a common practice in Mr. Kest s office. Ms. Koretsky said waivers allowed residents to keep their homes. She denied that Mr. Kest granted them in exchange for contributions.

A landlord herself, Ms. Koretsky had $1,200 in fees waived. She admitted she never was formally put on a payment plan.

Ray was being nice to me. He was not doing anything unethical because he got nothing for it, she said. I never knew what the legalities were. I knew we had the ability to put people on the no-penalty lists. When I felt there was a situation or someone with a good, solid story, I went to a supervisor, such as Domenic Montalto.

Recognizing that some will have difficulty paying their taxes, Mr. Kapszukiewicz said there are a number of programs to avoid delinquency. He said his office will work with any resident trying to pay taxes but only within the confines of the law.

Contact Erica Blake at: eblake@theblade.com or 419-724-6076.