Two Gwinnett County real estate developers made more than $1 million in a day by buying large tracts of land and immediately selling the property to the county’s school district, an Atlanta Journal-Constitution investigation has found.
In two other transactions uncovered by the AJC, a third developer cleared $840,000 and another made $340,000 selling land to the school district the same day they bought it.
At least two of the developers got the land under contract after the school district began looking at the specific property as a potential school site.
School officials insist they have done nothing wrong and describe themselves as victims of savvy real estate investors and a hot real estate market. The transactions, which totaled $23 million, took place between 2004 and 2008. Schools have been built on two of the sites; two remain raw land for now.
Some of the developers who benefited from the flipped properties, including David Bowen and David Jenkins, were, at the time, among the most prominent and politically connected developers in Gwinnett. Bowen and Jenkins also were involved in land deals with Gwinnett’s county government that became part of a grand jury investigation that felled the County Commission’s chairman and another commissioner.
“The question is, are they looking for land, or are they looking for a payday from the taxpayers?” said Gary Pirkle, mayor of Sugar Hill, where one of the pieces of land is located. “And that’s something that can’t be tolerated. And it needs to be stamped out and exposed wherever that sort of thing happens.”
Beginning in late 2009, a special grand jury — prompted by a series of articles in the AJC — investigated five questionable land transactions between developers and the Gwinnett County government. One of those deals involved Bowen; another involved Jenkins.
No developers were indicted, but former Commissioner Kevin Kenerly was charged with accepting or agreeing to accept $1 million in exchange for arranging the purchase of land by the commission. He also was charged with failing to disclose financial partnerships with Jenkins. Commission Chairman Charles Bannister resigned to avoid a possible indictment on a perjury charge.
In the four deals studied by the AJC for this article, it is not clear whether three of the developers knew the school system was interested in the property. The fourth said he did not know of the school system’s interest before he got the land under contract.
In an interview last week, Gwinnett schools Superintendent J. Alvin Wilbanks said school officials don’t release details about properties the district is interested in before the land is bought.
“We don’t put out any information on that,” he said. “Nobody from the school district does.”
Chief Operations Officer Jim Steele, who is in charge of all land purchases for the district, described the flipped properties as a byproduct of a competitive real estate market.
“During this time the real estate market in Gwinnett County was very active,” he wrote in an e-mail. “The larger tracts of land in this county were being pursued by developers for subdivisions or other developments.”
Steele declined to grant an interview to the AJC. He also refused to allow any of his staffers who handle land purchases to talk to the newspaper. Instead, he only agreed to answer questions by e-mail.
Two of the developers, Bowen and Jenkins, did not return calls seeking comment. The third, C. Wayne Hannah, described his quick-turn deal as a stroke of luck. The fourth, James “Jay” Mikolinski, denied being involved in the same-day land deal, but his signature appears on a document transferring the property from his company to the school district.
“You’d have to talk to somebody else about that,” said Mikolinski, who acknowledged being a member of the development company that sold the land. “I didn’t handle that transaction.”
Who did?
“I have no idea,” he said, before hanging up on a reporter.
School district documents, however, list Mikolinski’s name in connection with the price negotiations for the property.
Three of the land purchases fell in the area represented by school board member Daniel Seckinger; the fourth was in board member Carole Boyce’s district. Seckinger and Boyce represent the northern and eastern parts of Gwinnett, respectively, where most of the new schools have been built.
Seckinger said it’s likely that developers find out about the school district’s interest in land on their own and without any help from school officials.
“It can — and I believe does — happen without there being anything going on under the table at all,” Seckinger said. “The minute we look at a piece of property, people know about it.”
Paying a higher price
Wilbanks and other school officials note that the school board does not pay more for land than the “appraised value.”
For each land purchase, however, the district gets two appraisals, and in numerous transactions reviewed by the AJC, the two appraisals sometimes varied by millions of dollars.
For the four flipped properties, the district always paid more than the lower appraisal price, sometimes much more. In two cases, it paid close to the amount of the highest appraisal.
In addition, the manner in which Gwinnett’s school district buys land is unorthodox.
Unlike other school districts in metro Atlanta, Gwinnett’s school board members don’t vote on buying specific pieces of land.
Instead, they vote to authorize Steele to buy the “most suitable” piece of land after he presents the board with at least three possible school sites.
Once authorized to do so, Steele and his division, Facilities and Operations, buy the land that they deem most appropriate at a price they negotiate. Steele said he reviews the final choice with Wilbanks.
Unlike school boards in Fulton, Cobb and DeKalb counties and Atlanta, the Gwinnett board does not take a final vote on approving land purchases, either in public or private. Instead, it simply gives Steele’s division the OK before any appraisals are obtained or any price negotiations are done.
Seckinger said this makes the process more efficient.
“We’re saying to staff, ‘You know what, save the dog and pony [show]. You don’t have to come back and tell us the same exact thing we’re talking about right now,’” Seckinger said.
While most boards vote to buy land during public meetings, the Gwinnett board holds its votes in secret.
$1.09 million profit
In April 2004, Gwinnett’s school board voted in executive session to authorize Steele to move forward with buying property that turned out to be a 49-acre piece of land in Sugar Hill.
Less than a month later, on May 5, 2004, Bowen and his two brothers-in-law, Eric Cape and Thomas Phelps Jr., got the land under contract for $120,000 per acre, according to school district documents.
By the end of summer, the school district had begun negotiating a deal with Bowen.
“And they made him a very handsome offer where he basically ended up making [$1.09 million] just for handing them the paperwork that he got from me,” said the property owner’s son-in-law, Elliot Hammer, who handled the sale for her.
The school district agreed to buy the land for $142,000 per acre — $22,000 more per acre than Bowen’s contracted price with the property owner, Dorothy Clark.
Bowen bought the land from Clark on Sept. 13, 2004. The school board bought it the next day.
The state Education Department, however, did not approve the site for a future school until six weeks after the school district bought the land.
“I’m somewhat surprised, yes, simply because of the possibility of it not being approvable,” said Lynn Jackson, the state associate superintendent for business operations.
In an e-mail, Steele said his department got “verbal approval” from DOE before buying the land.
But Jackson said DOE does not give verbal approval for school sites.
Two and a half years after the Bowen sale, the school district paid $3.4 million to Hannah for 25 acres outside Suwanee.
The same day of the sale, Hannah bought the land from Larry and Mary Puckett for $3.06 million.
“We closed one hour, and another hour, we turned around and sold it to them,” said Hannah, who had two business partners.
The profit for the day: $342,000.
The Pucketts had been under contract with a different development group, SF Properties, for more than a year and a half. The group wanted to build a residential subdivision.
But on Nov. 29, 2006, SF Properties terminated its contract with the Pucketts, saying it decided the land wasn’t suitable.
During the time that SF Properties had the land under contract, the school district did not approach the group about purchasing the land, said Gary Gettis, a real estate agent who represented SF Properties.
The day after SF Properties walked away, Hannah offered to buy the land, according to documents in Mary Puckett’s possession. The Pucketts quickly agreed to a deal.
Within a month, Hannah and the school district were working out a deal of their own, records show.
Hannah said he did not know the district was interested in the property before he got it under contract. Instead, he said he and his partners caught a lucky break.
“That’s what my partner said,” Hannah said. “He said, ‘Wow.’ I said, ‘Yeah, sometimes it happens.’”
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