Report: Democratic Candidate for Illinois Governor's 'Scheme to Defraud' Led to $330,000 in Tax Breaks
By Todd Lighty, Hal Dardick And Mike Riopell
Billionaire Democratic governor candidate J.B. Pritzker improperly received $330,000 in property tax breaks on one of his Gold Coast mansions as part of a "scheme to defraud" taxpayers, Cook County's top watchdog concluded.
Inspector General Patrick Blanchard's finding came in a report issued after his office looked into whether Pritzker's relationship with Assessor Joe Berrios played a role in Pritzker's property taxes being lowered.
During the investigation, Blanchard found that Pritzker's wife, M.K. Pritzker, asked a contractor in 2015 to remove the mansion's five toilets to make the home uninhabitable so it could be reassessed at a lower value. M.K. Pritzker's brother and her personal assistant later made "false representations" in sworn affidavits to the assessor about the mansion's condition and when the toilets were removed, Blanchard found.
"The evidence indicates that the use of these affidavits was part of a scheme for obtaining money by means of false representations," Blanchard wrote in his report, a copy of which the Tribune obtained Monday.
Blanchard, who declined to comment about his findings, recommended in his report that the assessor's office try to recover the money. In describing the alleged scheme, the inspector general also included references to the state perjury law, and the federal conspiracy and mail fraud statutes. Blanchard, however, stopped short of saying whether he referred the matter to law enforcement.
Blanchard's report comes just five weeks before Election Day, and Republican Gov. Bruce Rauner's political team immediately seized on it as a campaign issue.
J.B. Pritzker, who had just finished a Monday afternoon campaign event with former presidential candidate Hillary Clinton, told reporters that "we followed the rules" and suggested the release of Blanchard's report was a political hit.
"This is an internal, confidential document by the inspector general's office, which was looking into the assessor's office, that was leaked for political purposes in this last month of a campaign," Pritzker said.
Pritzker, who owns side-by-side mansions on North Astor Street, had begun a $24 million renovation on the properties and a carriage house in 2006. Work halted in 2010 during a dispute with the general contractor that ended up in court.
"About halfway through that renovation project, we halted, not knowing which direction the home should go, whether we should rent it out or maybe put it up for sale," Pritzker said. "And we sought a property tax reassessment, we received that reassessment, and then subsequently we restarted the renovation project."
Pritzker said Monday he no longer receives tax breaks on the mansion. The candidate did not directly respond to questions about the report's contention that his wife instructed that the toilets be removed to make the mansion unlivable to lower their taxes.
M.K. Pritzker, her brother Thomas Muenster and her personal assistant, Christine Lovely, could not be reached for comment.
Tom Shaer, spokesman for Berrios, said the office had not seen Blanchard's report and could not comment. A spokeswoman for Cook County State's Attorney Kim Foxx said the office had not seen the report and offered no further comment.
Blanchard's report does not say whether he attempted to interview the Pritzkers or Muenster and Lovely. But Blanchard's office did interview the renovation project's manager, the project's structural engineer and the plumber, among others.
Through a subpoena, Blanchard obtained a key email that forms the backbone of his report. The Oct. 5, 2015, email is between the project manager for contractor Bulley & Andrews and a vice president for F.J. Kerrigan Plumbing about the Pritzker mansion that was being renovated.
"MK (Pritzker) is now getting back into the task of cleaning up (the mansion). She is going to have the house re-assessed as an uninhabitable structure," according to the email from the project manager. "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 hangout meeting area)."
Days later, Muenster sought a retroactive property tax break from 2012 through 2014. Appraisals and affidavits were submitted as part of the Pritzker effort to get the tax breaks.
The appraisal noted that "there were no functioning bathrooms in the house since all the toilets were removed," adding that there were appliances in the "cooks' kitchen" in the basement. It also noted that one stairway banister was braced and another one "sloped noticeably to the right side."
Blanchard's report goes on to describe what he calls "false representation in affidavits" submitted to the assessor by Muenster and Lovely. Their affidavits state that "there are no functioning bathrooms or kitchen. The interior stairwells are unsound."
Lovely's affidavit was notarized by Elizabeth "Beth" Stolberg, who is identified in the report as J.B. Pritzker's executive assistant.
Blanchard said the thrust of the affidavits was that there were no working bathrooms from January 2012 to mid-October 2015. However, Blanchard noted, the toilets were removed "per the instructions of M.K. Pritzker" just 10 days before the affidavits were submitted as part of the property tax appeal. Berrios' office lowered the 6,378-square-foot mansion's assessed value from $6.3 million to about $1.1 million.
"The county ultimately fell victim to a scheme to defraud, executed in part through the use of the 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," Blanchard concluded in his 33-page report, which was dated Friday.
Blanchard launched his investigation after a May 2017 Chicago Sun-Times story that detailed the property tax appeal.
The inspector general's report comes amid Rauner's repeated attempts to portray Pritzker as "corrupt."
The report, however, states that "no credible evidence" was found that Assessor Berrios' relationship with Pritzker led to the tax break. Berrios, as the former chairman of the Cook County Democratic Party, played a key role in Pritzker's endorsement for governor in the Democratic primary.
Rauner has used the issue of the toilets in past advertising that accused Pritzker of being a "tax cheat." One ad featured workers carrying toilets out of a mansion as a Pritzker lookalike wore a crown as an announcer dubbed him the "porcelain prince of tax avoidance." Another ad touted a faux "Pritzker Plumbing" company to "disconnect your toilets" and "dodge your taxes."
"This inspector general report proves what we knew all along _ J.B. Pritzker is a fraud," Rauner campaign spokesman Will Allison said. "From the very beginning, Pritzker was devising a corrupt scheme to defraud Illinois taxpayers by ripping toilets out of his mansion."
Blanchard identified a number of potential improvements in assessor's office operations, including a "veracity check" on claims made in affidavits _ given that the inspector sent out to look at the mansion said he could not get inside to verify the conditions outlined in the affidavits.
Blanchard also suggested that in the interests of honest and fair assessments that the office, which has sustained a series of layoffs amid county budget cuts in recent years, have "adequate staff." He also suggested more formal, written guidelines for decisions made by office staff.
And Blanchard recommended the office have "knowledgeable and experienced appraisers on staff" to review outside appraisals submitted to the office and establishing a requirement that interior inspections be required during field checks of expensive properties. "Better scrutiny is needed of high-value properties seeking multimillion-dollar assessment reductions, particularly those purporting to be 'vacant and uninhabitable,' " Blanchard wrote.
(Chicago Tribune's Gregory Pratt and Rick Pearson contributed.)
(c)2018 Chicago Tribune