Beltrami County assessor says property tax system wasn't compromised during alleged real estate scam

While an alleged real estate scam festered for four years without legal action, at no time was Beltrami County's property tax system compromised, County Assessor Duane Ebbighausen said Tuesday.

While an alleged real estate scam festered for four years without legal action, at no time was Beltrami County's property tax system compromised, County Assessor Duane Ebbighausen said Tuesday.

A 33-page affidavit to apply for a search warrant by the FBI last month described real estate fraud involving 157 properties that appear to have been sold repeatedly among a group of friends and associates of Ed Detwiler, then employed with Realty Executives of Bemidji.

A fear was raised by Commissioner Jim Heltzer that the so-called "flipping" by the group was artificially inflating property valuations, which could cause higher property taxes for Beltrami County residents.

Ebbighausen said at a County Board work session on Tuesday that he became suspicious of some overpriced property sales about four years ago, and reported his suspicions to the state Departments of Revenue and Commerce.

At the same time, he then worked with the Revenue Department to throw out any suspicious property transactions which are used for a monthly study of property sales. Those sales form the basis of setting average property valuations among comparable properties and then how to spread property tax levies.


"From the outset I will say this -- our tax base has not been compromised," Ebbighausen said. "I strongly feel that."

Over a five-year period, about 2,800 sales were studied to determine the county's tax base, which in total is $3 billion. The 157 sales, even if they were all fraudulent, is a small percentage, he said.

When Heltzer cited reports that as many as a third of all sales in the county were involved, Ebbighausen said it's probably true that the agency handles a third of property sales in the county, but only those involving Detwiler were suspect.

"That made me worry if our efforts were being compromised," Heltzer said of the larger figure.

"Many, many of those sales are absolutely legitimate," Ebbighausen said, presumably about Realty Executives as he would not name the agency. "But of the ones that we suspect ... that represents less than 5 percent of the sales that we use to determine our tax base. That's if they're all bad."

But because of the county's cooperation with the state Revenue Department, "we have any sale that I have asked to get out of our study that I am suspicious of, they have removed. They are not in the study to begin with."

Ebbighausen said that "we were on the front end of this from the beginning." As soon as he sees something "that doesn't fit the norm, that sale or sales is going to get looked at."

He added that he doesn't know why the Revenue Department or the Commerce Department, which licenses real estate agents, hadn't taken criminal or civil action. And he doesn't know who got the FBI involved, saying he first met with Special Agent John Egelhof on Jan. 2.


Egelhof in his affidavit listed 157 properties whose sales are suspect, as well as individuals connected to Detwiler; Realty Executives and Trust Mortgage, owned by Matt Sparby; and Action Appraisal, owned by sisters Sandra Erpelding and Julie Townsend.

Egelhof described in his conclusion that there was a conspiracy among Detwiler, whose attorney maintains his client has done nothing wrong, along with appraisers, lenders and investors, to defraud buyers and sellers.

Heltzer asked for time during the work session to read a statement and ask six questions, including why no one investigated Ebbighausen's report, why wasn't the County Board appraised of the problem, and what factor does the alleged fraud play in the rising property values in the county.

"We commissioners, along with all other property taxpayers in the county, have seen the valuations on our houses soar," Heltzer said. "My wife and I built our home in Grant Valley Township in 1991 for $90,000. On our recent property tax statement, it is listed as having a value of over $300,000. Our property taxes have correspondingly risen."

He said the house is the couple's home, not a vehicle for real estate speculation, and that he doubts he could get the valuation figure if they sold it. "Now it is alleged that fraudulent real estate practices may well have cause all of our property values, and taxes, to go up."

He said the board should have been informed, as setting property tax levies based on factual valuations "is the most important thing we do."

"But that's the point -- it does not impact" setting taxes, said Commissioner Ron Otterstad, who was acting as chairman in the absence of Chairman Quentin Fairbanks. "That's not true."

"What assessment does is distribute the levy, it does not raise it," Ebbighausen said. Even if assessed value in the county were doubled, only a certain amount of money would be levied but that money would be distributed differently.


The difference comes, he said, when values are skewed in one area, which then transfers a greater share of the burden to the higher valued homes and away from everyone else.

For example, he said one of the suspect transactions was in Grant Valley Township where value was inflated over what would be expected. He had that value thrown out, but had it stayed, the result would have raised the value of all residences in the township by 5 percent.

"That would shift an unfair tax burden to those residents in Grant Valley Township," he said, adding that the same levy amount would be collected countywide. "They would just pay a little bit more and everybody else in the county would pay a little bit less."

As an ongoing investigation, it was best that the County Board not be told, Ebbighausen said.

"We had to keep this very quiet," he said, adding that he's not an expert in fraud investigation. "I suspected these sales were perhaps wrong, but did not know for sure. They didn't seem to fall in line with what our typical market transactions for us. Plus their sale prices were way out of line."

Heltzer, who read the 33-page affidavit, said he "read about more ways of ripping your neighbors off on their properties than I knew existed. And I can't tell you how pleased I am that you caught this."

Otterstad, a former Beltrami County undersheriff, said such white-collar crimes take a lot of investigation and much needs to be behind the scene in order to collect ongoing evidence.

"I don't expect to be informed of every criminal investigation from the sheriff's office," he said. "In fact, I have no reason and no right to do that. And we don't need to be informed of other types of things that happened in that regard. That's not our role."

But, Otterstad added, "it's important that we make sure that the public understands the integrity of the property tax system is in place. That's the most important thing that we can do right now."

All of the commissioners thanked Ebbighausen and his staff for being on top of the issue, despite the delay from other agencies to take action.

"I feel very comfortable with how the department has worked on this, with us, on this matter," Ebbighausen said. "I'm not pleased with the individuals involved in this or people who may be victims of this. You've had four years of silence, and that is not pleasant.

"But I am quite pleased with the tax base end of it," he added.

The County Board, at its regular meeting, heard from one lady who encouraged the board to investigate further. Having moved from California and purchased property, "I felt I got the raw end of the deal. A lot of us feel scammed in numerous ways."

In an unrelated matter, the County Board postponed its closed session to evaluate County Administrator Tony Murphy until all five commissioners could attend.

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