Audit Finds Irregularities in Land Deal for Capitol Records

The Community Redevelopment Agency staff failed to clearly disclose to the agency’s board that no appraisal existed to support the $1.45-million price paid for a parking lot as part of a deal to keep Capitol Records in Hollywood, an audit concluded Monday.

City Controller Rick Tuttle had asked for the audit from a private firm after The Times reported on the land deal.

The purchase, the audit found, “was not conducted in a prudent business manner.”

As a result of the audit and a continuing examination of other agency transactions, Tuttle will recommend more stringent controls over the way the agency buys land, according to Louisa Lund, a spokeswoman for the controller.

“The consultant did find some irregularities,” she said.

The CRA Board voted in 1998 to spend $1.45 million for a small parking lot on Argyle Avenue for development as a parking garage to serve Capitol Records.

The Times reported that at the time of the purchase, an agency-hired appraiser had set the value of the lot at $795,000. An agency administrator, who has since resigned, went outside normal procedures to secure a second appraisal that justified the purchase price, but that appraisal was not completed until after the board voted to pay $1.45 million.

The auditors said that in a July 1997 board report to the City Council requesting approval of the purchase, “CRA staff gave an erroneous impression by stating that ‘staff have completed independent appraisals of this property.’ ”

Tuttle forwarded the audit findings to the City Council, where some members have called for a thorough review of the deal. The council is expected to take up the Capitol Records deal next week.

Although the parking lot was purchased to serve Capitol, the record company decided later to build a garage elsewhere.

Under the new deal, Capitol will buy the parking lot back from the CRA for the full price paid by the agency, which will then put more than $400,000 from the sale into refurbishing a building for Capitol.

CRA administrator Jerry Scharlin, who took over the agency after the parking lot purchase, could not be reached for comment Monday, but he has said that stronger internal controls have been put in place.