Appraiser named in $2 billion tax fraud suit surrenders license in his home state

An appraiser named in a federal lawsuit alleging more than $2 billion in tax fraud has voluntarily surrendered his license in his home state.

Claud Clark III, based out of Magnolia Springs, Alabama, surrendered his license to the Alabama Real Estate Appraisers Board effective May 16, according to a consent order on file with the board.

Clark is one of six defendants named in a lawsuit filed in December by the Department of Justice, which is alleging they are overvaluing and fraudulently distributing conservation easement tax deductions, including at least one easement on a property in North Myrtle Beach.

Also among the defendants are Ralph Teal, of Myrtle Beach, and EcoVest Capital Inc., an Atlanta-based company with Teal on its board.

Attorneys representing Teal and EcoVest have denied any wrongdoing in court documents and touted their work in conserving land.

Clark’s decision to surrender his appraiser’s license is in lieu of an administrative hearing for a complaint filed against him in January, according to the consent order.

Alabama complaint

The complaint, also on file with the appraisers board, details several alleged violations in Clark’s methodology for a 2015 appraisal of a conservation easement located in Mobile County, Alabama.

Thomas Wingard, a Columbia, S.C.-based appraiser, recently explained to The Sun News that the value of an easement is typically the difference between the value of the land if it were to be developed as its highest and best use versus its worth after encumbered by an easement, which restricts future development in perpetuity.

Determining a property’s highest and best use includes four primary criteria: what’s legally permissible, physically possible, financially feasible and maximally productive, he said.

Forest and wetlands north of Long Bay Road in North Myrtle Beach are now part of about 1000 acres that have been placed in conservation easements over the last few years. JASON LEE jlee@thesunnews.com

According to the complaint, Clark appeared to overstate the value of the easement by misrepresenting demand for development housing in the area, not addressing wet soil issues and failing to consider the availability of sewer and public utilities or the financial feasibility of building a substantial amount of roads that would be needed in such a development.

“The assumptions of economic feasibility … are not supported by factual evidence in the appraisal report nor evidence of sufficient housing and economic demand data,” the complaint states.

Federal lawsuit

Allegations of Clark overvaluing easements are also central to the DOJ’s lawsuit, which alleges that the other defendants often use Clark’s inflated valuations to essentially market and sell tax deductions to customers at a rate typically greater than or equal to $4 in deductions for every dollar invested.

The suit lists a specific example of Clark’s involvement in this alleged “scheme” with a 28-acre conservation easement in North Myrtle Beach initially owned by Christian Academy of Myrtle Beach.

The DOJ alleged the process involved the academy conveying 95 percent of the property in 2015 to Cypress Cove Marina Holdings LLC, operated by EcoVest, for $1.04 million and then EcoVest selling ownership stakes of the property to customers at about $9,500 per unit.

Clark eventually valued the easement on the property at nearly $39.7 million, and it created a tax deduction for customers of $4.12 per dollar invested, according to court documents.

The DOJ lawsuit is currently in a holding pattern as the judge recently ordered a temporary stay on discovery pending the court ruling on motions by Clark and another defendant to dismiss the cases against them, according to court documents.

North Myrtle Beach conservation

The Sun News reported in June that EcoVest was involved in putting easements on about 1,400 acres of property in North Myrtle Beach, including more than 1,000 acres west of Intracoastal Waterway that were annexed into the city and rezoned through a 2011 agreement with the property owner, SLF IV/SBI Sandridge LLC, which lists Teal as its co-manager.

Some city leaders have alleged that they were misled to believe Teal and his partners planned to develop that land into a mix of high-density residential and commercial properties.

It is not known whether Clark issued appraisals for any of EcoVest’s other conservation easements, though the suit claims he was specifically involved in 58 of these transactions totaling more than $1.8 billion in fraudulent tax deductions.

Clark’s career

According to Clark’s business website, he began his appraisal career in 1985, opened his own firm in 1991 and has completed more than 200 conservation or historic easement appraisals. The website, which doesn’t state anywhere that he recently surrendered his license in Alabama, touts Clark’s successes in defending his easement appraisals against IRS audits.

Margaret Davis, a legal assistant serving the Alabama Real Estate Appraisers Board, clarified that Clark made no admission of guilt in surrendering his license, and he can apply for reinstatement after two years.

Clark, who did not respond to a request for comment, still holds active appraiser licenses in other states, including South Carolina.

Lesia Kudelka, a spokeswoman for the S.C. Department of Labor, Licensing and Regulation wrote in an email that states report information regarding their licensees to a national database, and South Carolina’s board can investigate if it becomes aware of an action involving a licensee in another state, but law prohibits them from saying whether such an investigation is taking place.

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Investigative project reporter David Weissman joined The Sun News after three years working at The York Dispatch in Pennsylvania, where he earned awards for his investigative reports on topics including health, business, politics and education.