Accused of Inflating Land Appraisal : Fraud Trial of Encino Developer Opens

A consultant for a prominent Encino real-estate developer testified in federal court Wednesday that he provided the wording for a fictitious letter aimed at inflating the price of a piece of Santa Monica Mountains land to be purchased by the federal government.

In the first day of testimony in the trial of developer Jerry Y. Oren, 51, a prosecutor said he would show that Oren used the letter in an attempt to inflate an appraiser’s estimate of the value of 336 acres purchased by the National Park Service for $8 million in 1985.

The 1984 letter, introduced into evidence Wednesday, informed Oren on the stationery of a New York real-estate agent that Union Pacific Railroad had offered about $9.3 million for the 336 acres in the Cheeseboro Canyon area north of Agoura.

A vice president of a Union Pacific subsidiary, who was then in charge of the railroad conglomerate’s land operations, testified Wednesday that Daniel J. Hirsch, a New York real-estate agent, had contacted him about the property but that he had no interest in it.

At the time he received the letter, Oren, owner of Oren Realty & Development Co., had already agreed to sell the land for $7.5 million to the Trust for Public Land, a nonprofit group in San Francisco that buys land in danger of being developed, then resells it to the government for parkland, according to court documents.

In a sidelight to the case against Oren, who is charged with wire fraud and making a false statement in a matter involving the National Park Service, the government’s first witness also testified that Oren and the Trust for Public Land agreed to base the price for part of the land on the amount that Congress appropriated that year for public parks.

Radoslav L. Sutnar, consultant to Oren on the negotiation, said the agreement called for the trust to buy a 136-acre parcel for $2.5 million if the appropriation was $20 million, for $2.7 million if the appropriation was $25 million and for $3 million if the appropriation was $30 million.

The trust eventually bought the entire 336 acres from Oren in 1985 for $7.5 million, paying the lower amount for the 136-acre parcel.

In his opening statement Wednesday before U.S. District Judge Harry L. Hupp, Assistant U.S. Atty. Ralph F. Hirschmann said that the sale was in jeopardy because an appraisal had set the value at only about $5.8 million and the government could not buy the property at more than its market value.

Defense attorney Bruce I. Hochman, in his opening statement, suggested that his case would be based on interpretation of the facts introduced by the government, 90% of which would not be contested. Outside the courtroom he declined to elaborate.

Unsure of Desire to Sell

Maintaining that Oren was never certain that he wanted to sell the property in the first place, Hochman said he would call Oren to the stand to offer his explanation of the events. He said the evidence would show Oren going back and forth “like a windshield wiper” on whether he wanted to sell.

Sutnar testified Wednesday that he heard Oren and a New York businessman work out the terms of the purported offer from Union Pacific in a telephone conversation.

He said Oren told the businessman, named Moshe Ziv, “Moshe, make it look good.”

Sutnar said Oren instructed him to keep notes on the conversation, then send those notes to Ziv.

Later, Sutnar testified, his outline of the conversation was copied “exactly,” down to his abbreviations and punctuation, in a letter addressed to Oren from Hirsch, the New York real-estate agent. Hirschmann said Hirsch was an associate of Ziv.

Ziv was originally accused of writing the fictitious letter but the charge was dropped in April. Assistant U.S. Atty. Charles J. Stevens, who was handling the case, said there was not enough evidence to prove Ziv knew that the offer was to be used to defraud.

$28.9-Million Offer Claimed

The letter said Hirsch was negotiating a deal in which Union Pacific was offering to pay $28.9 million for 811 acres Oren owned north of Agoura. A breakdown showed prices of $5.7 million and $3.67 million for the two parcels of that land, which Oren had agreed to sell for less to the trust. It also proposed terms for down payments and financing.

Alexis P. Victors, then executive vice president of Upland Industries, said the Union Pacific subsidiary was interested only in industrial properties. Victors said he informed Hirsch in a letter that Union Pacific was not interested.

Sutnar testified that Oren gave the letter to appraiser Thomas Erickson, who was retained by the trust after another appraiser valued the property at less than the agreed-upon price. After receiving the letter, Sutnar said, he was told that Erickson said the letter “locks the value at $25,000 per acre”--a figure greater than the eventual sale price of $22,300. His appraisal later fixed the price at $25,000.

Sutnar also repeated earlier testimony that Oren ordered him to change the date on the letter so that it would appear he had received it three months before he actually did.

Sutnar Pleaded No Contest

That testimony came during an April hearing in which Sutnar pleaded no contest to a felony charge that he helped falsify the letter. No contest is the same as a guilty plea but cannot be used as evidence in a civil suit. Sutnar has filed a suit against Oren, contending that he did not receive a 10% commission he was promised on the transaction.

The date of the letter was significant because, according to Sutnar’s testimony, Oren told a representative of the trust in August, 1984, that he had another offer and was growing impatient with the slow progress of the negotiations.

The conversation with Ziv occurred after that meeting and the letter, when it arrived, bore a September date.

In cross-examination, Hochman repeatedly asked Sutnar if he knew whether Oren preferred to develop or sell the property.

Letter Not Welcome

Sutnar said he thought Oren wanted to sell it. But, under intense questioning by Hochman, he testified that the Trust for Public Land exercised its option to buy the land on the day the offer expired--and that no one in Oren’s office wanted to receive the letter.

Sutnar also said a representative for the Trust for Public Land told him she was concerned that Oren wanted the agreement to expire.

Hochman asked if that was because she was worried Oren no longer wanted to sell the property to the government.

Sutnar said that was one reason, but that she was also worried that he wanted to raise the price.

If convicted in the jury trial, Oren faces a maximum penalty of 10 years in prison and $11,000 in fines.