Wilderness developer accused of fraud
Colorado Sen. Ben Nighthorse Campbell has asked a U.S. District Attorney to investigate Tom Chapman for fraud, following a tip from one of the developer's former business associates.
Chapman is notorious for starting to build a massive, $1 million log cabin on a private inholding in the West Elk Wilderness near Paonia, Colo. After much publicity and long negotiations, Chapman agreed last fall to drop the project and trade his West Elk Development Corp." s 240 acres to the Forest Service. In return he would receive 105 acres of federal land near the Telluride ski area in western Colorado.
The Forest Service said it approved the land exchange because the luxury cabin threatened the integrity of the West Elk Wilderness. The agency appraised Chapman's property at $640,000.
But former business associate David Forrest of Laguna Beach, Calif., alleges that Chapman and another partner, Carl Woerner, artificially inflated the value of the wilderness inholding, and then began construction to force the Forest Service to trade for much more valuable real estate near Telluride or Aspen.
"Neither Mr. Woerner nor Mr. Chapman had any intention of ever completing a structure on the West Elks property," asserts Forrest, in a March 17 letter to Forest Service Chief Jack Ward Thomas. "They believed that just a few helicopter flights to bring in building materials would be enough to convince the Forest Service that they would build if (the agency) did not agree to a trade."
Forrest and his employer were wooed as potential investors in the scheme. After initial contacts with Woerner, Forrest says he met personally with Chapman in Aspen in May 1992.
"He showed me a map of the parcels he had identified as the most valuable alternatives for the land trade. We reviewed his portfolio describing how he had used a similar plan to sell a Black Canyon of the Gunnison parcel for a client (Richard Mott). In the Black Canyon deal he said he actually had to run the bulldozers for a few days until the Park Service gave in and agreed to purchase the property."
Chapman told Forrest that he originally chose the West Elk property because of its priority on the Forest Service trade list. In 1989, Robert Minerich bought the wilderness land from the Elliott Oil Company, with Chapman serving as real estate agent and minor partner. However, Chapman explained, Minerich owned a microwave company which leased land from the Forest Service, and he was unwilling to take aggressive action against the Forest Service.
According to Forrest, Chapman and Minerich were seeking new investors. They asked him to come in on a deal to buy the West Elk property for $240,000 in cash, and $480,000 to be financed by Minerich.
"It was my opinion that the price was high, based on the county records indicating a 1989 purchase price of the West Elk property by Mr. Minerich for $240,000," adds Forrest. "Mr. Chapman explained that the price had to be high to justify a higher value for a trade ... and contended that the Alta Lakes property (which is currently proposed for the land exchange) would be worth two to four times the West Elk Wilderness' purchase price of $720,000."
Forrest says he terminated negotiations with Chapman and Minerich because of the high risk and disagreement over tactics. But Chapman found other investors and formed the West Elk Development Corp. In August 1992, Chapman's new corporation bought the West Elk land from Minerich for $300,000 in cash, and a $660,000 note financed by Minerich.
It is that transaction that Sen. Campbell, D, wants investigated for fraud. "In effect, (Minerich) sold the property to himself," said Campbell in a letter to U.S. District Attorney Henry Solano.
"As their ultimate goal was not the development of the property, but its sale or exchange to the federal government, it was necessary to find a way to inflate the appraisal," Campbell wrote. "In calculating the fair market value the Forest Service appraiser will naturally look at the last sale price - the artificially high price."
Opponents of the land exchange, who earlier appealed the proposal to the Forest Service chief, have asked the Internal Revenue Service to investigate as well. Both agencies are currently evaluating the requests.
In the meantime, Forest Service officials say they stand behind the land exchange proposal.
"We have a valid existing contract with Mr. Chapman," says Jim Dunn, lands officer for the Grand Mesa, Uncompahgre and Gunnison National Forests in western Colorado. "We aren't interested in what happened in the past."
Dunn says the Forest Service appraisal did not consider the $960,000 price claimed by Chapman or the $240,000 paid by Minerich. "Our appraisal is strictly based on the 240 acres in the West Elks and the 105 acres in Telluride. They are equal value for equal value," says Dunn.
Chapman, who has said that he sought a land exchange for the good of the wilderness, failed to return calls.