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YOU CALL THIS GAMBLING?

It is difficult to imagine a contrast greater than the Colorado River as it roars through the Grand Canyon and that same river a hundred miles downstream as it flows tamely past Bullhead City and Laughlin.

Within the Grand Canyon, the Colorado has an almost religious presence, as if it was the manifestation of some potent deity.

Seen from the balcony of a Laughlin casino, however, the Colorado River is part of the entertainment, better than a lounge comedian but not as exciting as, say, Willie Nelson.

The real action along the Colorado these days is in the twin boomtowns of Bullhead City and Laughlin. There, jammed into 25 square miles of bleak, hot northwestern Arizona, is a late-twentieth-century version of the Gold Rush.

To people attuned to the stampede of new development centered on the embryonic gambling-entertainment empire, the harsh, dun-colored vegas (Spanish for "plains") sweeping back from the river might as well be gold.

Like its nineteenth-century precursors, this new Gold Rush is populated with hustlers as well as innocents, each pursuing their dreams guiltlessly.

For people like Walter Biewer, a 66-year-old retiree-turned-entrepreneur, those dreams revolve around land. Not a little patch on which to park an RV, but big chunks of raw land, dangled enticingly in a marketplace that, for a while at least, seemed to have no ceiling.

Biewer, a former military fighter pilot who says he got into the land business by a fluke, sells hundreds of acres at a time, obtained through trades with the federal Bureau of Land Management. He is one of perhaps half a dozen individuals who have what is known in the trade as "rapport" with the BLM.

Indeed, Bullhead City's expansion has been made possible by people like Walter Biewer and the complex trading system known as the federal land-exchange program.

Over the past three years--years in which federal land exchanges were under intense scrutiny by government investigators--Biewer and others have made millions in profits off land swaps in the Bullhead City area.

The profits were made when the traders, called "proponents" in federal jargon, sold land--sometimes within months of acquiring it in trade from the BLM--for far more money than the per-acre trade value assigned to it by the public agency.

The BLM can swap land but isn't allowed to sell land outright. So, most of the profits from sales of public lands flow not into public coffers, but into the pockets of the entrepreneurs who set them up. (State land traders have no such restrictions and can sell land directly to developers, and the money goes into state coffers.)

When questions about profiteering arose because of federal land exchanges in Phoenix, and the national investigation brought the federal land-exchange program to a screeching halt, Bullhead City's frenzied trading barely slowed. It's almost as if Bullhead City and Laughlin are on another planet.

IN LAUGHLIN, a solitary gas station in the desert only ten years ago, casinos go up at a rate of one every few months.

With them come high-rise hotels to accommodate the players. The buildings are deliberately garish, like something conceived in a child's imagination. They crowd together in a narrow band on the Nevada side of the riverbank, as if consciously ignoring the immutable emptiness unfolding behind them less than half a mile beyond.

Laughlin can sleep 8,200 visitors a night, but not a square foot of privately owned land is zoned for single-family homes. That's where Bullhead City and the federal land hemming its eastern edge come into the picture.

Bullhead City doesn't have gambling, but it is rich in the creature comforts sought by boomers gravitating toward Laughlin. It is one long, brawling, dusty stretch of franchise food outlets, discount marts and mobile-home parks. As in Laughlin, the town is elongated and close to the river. However, east of Highway 95, the main drag, residential construction is occurring at a rate unparalleled elsewhere in Arizona's somnambulant economy.

The land this is occurring on is "just junk" in some ways. That's how BLM real-estate expert Bill Ruddick describes the sere, almost featureless land. "There's nothing out there but creosote and desert pavement," Ruddick says. "The resource value is very low."

Except in a boomtown.
Where bluffs exist, formed from the soft alluvial fill, the preferred form of land preparation is to blade off the top, pushing the excess over the side, where it buries what little vegetation has managed to take root there. The effect is much like strip mining as it was done in the days before Mo Udall.

The freshly crewcut mesas sprout stucco-and-tile subdivisions that overlook the 24-hour traffic jam on Highway 95 and the casinos on the other side of the canal-like river. At twilight, when the casinos are backlighted by turquoise and violet, their lights glittering off the river at their feet, the view is romantic, even beautiful.

 

The rest of the time, Bullhead City is crass. Usually, it is also hot. Temperatures along the river, only a few hundred feet above sea level, regularly top those in Phoenix. The flood of people has taxed water lines and sewers to the limit.

None of that matters. "The growth of the casinos, which need places to house their workers, and the retirees coming in, especially from California, has slowed hardly at all, despite the recession," says Kathe Baker, the Mohave County assessor.

The Mohave planning department, an hour's drive to the east in the sleepy county seat of Kingman, lists more than a hundred subdivisions built or planned around Bullhead City.

Bullhead City is crawling with real-estate agents who are busy as blackjack dealers. "Starting in about late '88 and going until early '90, properties here flipped for major bucks," says Nancy Robbins, an assistant to Baker. "It was like the whole county just turned over, and it continued right up until August, when the Persian Gulf War started."

Real-estate experts marvel at the meteoric rise in land prices. "We'd been studying the [Bullhead City] market for about two years, and in that time, prices went from about $3,000 per acre to $9,000 per acre," says Dave Brown, Phoenix-based president of Homes by Dave Brown. "Now the same land is worth $25,000 to $30,000 an acre."

Brown says he expects to break ground soon on a 200-acre planned community located south of Bullhead City in an area called Mohave Mesa, where land values are highest. Set back from the raucous highway, Mohave Mesa is distinguished by lush golf courses, custom homes and large lots. It is the area's prime draw for those with upscale tastes.

Phil Jost, a broker with Sun Desert Realty in Bullhead City, says he's heard of some raw land in the neighborhood going for $15,000 an acre, "but that's the absolute cheapest that I know of."

The only apparent exception in this trend is a 585-acre parcel being offered for trade to Walter Biewer by the BLM. The feds' asking price? Just under $7,000 an acre.

"Seven thousand dollars per acre??" Phil Jost can hardly believe his ears. "Gosh, if a guy bought land in that area for $15,000 an acre, he could cut it into forty-acre parcels and it'd sell like hotcakes at $25,000 to $30,000 [an acre].

"There's a parcel right next to there that just sold for $18,000 an acre, unimproved, so how the heck can this other be worth only $7,000?" Jost says. "Seven thousand is 25 percent of the going rate. And knowing the government, it wouldn't surprise me if somebody talks them into it."

DOCUMENTS RELATING to eleven land trades over a three-year period near Bullhead City reveal a consistent bottom line. And the biggest beneficiaries of the exchanges seem to be the people who arrange them, not the taxpayers, who are the nominal owners of public land.

The trend is all the more startling in Bullhead City because, long after the real-estate crash in metropolitan Phoenix, the Mohave County enclave continued to be a red-hot market.

BLM land swaps are always an easy target but the criticism isn't always fair, counters one thirty-year veteran of the agency.

"In a land exchange, you're making a closed deal with a private individual, while in any other land transaction, you do it at public auction," says Glenn Collins, now deputy commissioner of the Arizona Department of Land. "So it can always be subjected to that criticism, `Did the public get cheated?' and BLM all over the West has been criticized.

"In fairness, you have to recognize their management objectives. BLM's goal is to use land with development potential to acquire land, usually remote, that needs to be protected."

The dimensions of the speculative profits made by land traders are fairly easy to quantify--at least $7 million on trades involving fewer than 3,000 acres of land in Mohave County alone since 1988. But numbers alone cannot tell the whole story.

The real value of the trades can only be measured against their purpose, which is to acquire for the national patrimony other lands deemed richer in natural treasures. These decisions are made by the gatekeepers in the federal agencies, primarily the Bureau of Land Management.

The gatekeepers--appraisers, managers and scientists charged with valuing the lands--do not concede they have erred. By their definition, the land-exchange program is a success. Through it, they have added thousands of important or unique acres to the nation's system of wilderness areas, parks and refuges.

 

Bill Ruddick, a tall man with leathery skin and penetrating blue eyes, looks more like a rancher than a bureaucrat. Yet he is one of the agency's most seasoned land-exchange managers. He is in charge of the ambitious trade involving 585 acres of public land near Bullhead City and a group of scattered private holdings acquired by Walter Biewer throughout the state.

Ruddick's job is to evaluate the land to be traded in terms defined by the BLM. "Resource value," he explains, includes not only commodities such as timber, but biological diversity or uniqueness. "The overriding value on all the lands we designate for acquisition is their significance to the public," he says. "What do you do when you have a major prehistoric site like the one recently discovered near Springerville? Do you want to leave a resource like that in private ownership?"

He contends that "each of the parcels we would acquire in this exchange has already been identified as having an important value worth preserving. Each would add significantly to the public's natural heritage." Among them are two ranches in southeastern Arizona adjacent to the BLM's Empire-Cienega resource-management area; some acreage on Burro Creek, a federal wilderness area west of Prescott; and some land to enlarge southern Arizona's San Pedro River management area, crown jewel of the agency's habitat restoration projects.

"The only way we can add to these resources, or protect newly discovered ones, is by trading out land we've identified as having low resource value," Ruddick notes.

By such a measure, the BLM's thousands of scrub acres near Bullhead City are nearly worthless. Nevertheless, Mike Werner, a BLM appraiser assigned to the current Biewer trade, says, "If we're diligent, it can be a win-win situation. The public's natural heritage is enhanced, and developable land is made available in areas that need to grow."

That's the way Walter Biewer sees the land-exchange system. "I thought by arranging these trades," he says, "I was helping to save important resources for the public and free up land in places where it was needed for development."

Biewer says big-time land speculation was the furthest thing from his mind when he retired to Hemet, California, on the western fringe of the Mojave Desert, after a career in business and the military.

His new career began in 1986, courtesy of a two-line ad in the Sunday Los Angeles Times classifieds. A private party was offering 300 acres in the Black Mountains near Oatman, which is outside Kingman.

"I just decided on a whim to check it out," Biewer recalls. "The price was unbelievably low--it was part of an estate sale or something. I decided to take an option on it.

"Turns out, it was a lambing ground for desert bighorn sheep, and the BLM wanted to acquire it as part of their plan to protect the native sheep population. That's how I got into the federal land-exchange program. It was such a fluke I've always said the good Lord must have just pointed my nose in that direction."

Since then, Biewer has engineered four trades for BLM land near Bullhead City, three of which have been completed. He sold the first parcel, 160 acres, within six months for more than ten times the value assigned by BLM in the trade, making an apparent profit of more than $600,000. (Biewer contends that his actual profit was closer to $225,000.)

"I don't deny I made a good profit. I mean, I'm not in this for my health," Biewer says. "The amount of work it takes to put one of these things together, going out and getting options on all of the lands the BLM wants to acquire, which involves getting agreements with multiple owners, is such that there has to be a profit in doing it or no one would bother."

Biewer, however, maintains his luck began to turn bad with the completion of a second trade in 1988, when he sold a half interest in his newly acquired land to a Phoenix partnership. The partnership went sour, resulting in a crossfire of lawsuits in Maricopa County Superior Court, and Biewer claims that unrelated dispute has now so badly damaged his latest pending trade with the BLM that it may never be completed.

Whatever profits he made as a land trader have been devoured by the delay and its related complications, he claims. "The effect on me personally has been devastating, if you want to know the truth," Biewer says.

BIEWER'S LATEST TRADE with the BLM--the one that's in limbo--typifies the questions that continue to arise about the land-exchange program.

The BLM's Bill Ruddick acknowledges that land adjacent to the parcel Biewer wants, land which is identical in every respect and indeed was part of a former trade with Biewer, sold recently for $18,200 per acre. (Officials commonly refer to that deal as the "18K sale.")

 

BLM officials nevertheless insist their current appraisal value of $7,000 per acre reflects a fair price, noting they have twice updated the appraisal since Biewer first proposed the trade several years ago. Comparisons with higher sales prices in the area are not valid for several reasons, they contend.

"This is a much larger parcel than most, and the price per acre is always cheaper for large parcels," explains BLM appraiser Mike Werner. "In addition, factors like water and sewer availability, zoning, and sale terms affect price greatly."

Werner says the BLM did search for other transactions against which to compare its land, but found few sales of such large acreage. In its appraisal, the BLM quotes sales for other sizable parcels from $8,000 to $15,000 per acre.

The so-called "18K sale" involved around sixty acres, a sizable parcel, but Ruddick says it can't be considered representative. "We rejected that sale as a comparison because we have doubts that it was an `arm's length' transaction," Ruddick asserts. He declines to elaborate, saying the parcel is subject to pending lawsuits between its former owners.

In his lawsuit in the incredibly complex case, Biewer claims his former partners, Mark Shapiro, Alan Jones, and Jay Cooper, concealed information on the sale of land owned by the partnership, in which Biewer had a 50 percent interest. Biewer's suit claims his ex-partners breached a noninterference agreement signed by the four after their partnership fell apart by protesting his current pending trade with the BLM.

In a letter to Ruddick dated December 12, 1990, Biewer accuses former partner Mark Shapiro of trying to scuttle the pending trade.

He claims his former partners "threatened to go to BLM and screw up the [pending] exchange."

In their formal response to Biewer's lawsuit, Shapiro and the other partners deny breaching any obligations to the partnership or interfering with the pending trade. In their countersuit, Shapiro, Jones, and Cooper claim Biewer has interfered with the subsequent, $18,000-per-acre sale of their land, and ask unspecified damages. Biewer has not yet filed his response to the countersuit.

The BLM's Ruddick, however, claims the agency was not influenced by Biewer's assertions regarding the 18K sale, and rejected the sale solely on the basis that other deals leading up to it seemed to involve interconnected partnerships. "It wasn't a clean sale," Ruddick emphasizes. "By `clean' I mean where there is no connection between buyer and seller."

Shapiro, reached at his Phoenix office, declines comment. "I have client-partnership confidentiality requirements which prevent me from discussing anything," Shapiro says. "If you check the records, you'll see everything is in order and in the record."

BLM officials argue they can't be faulted if, somewhere down the road, a land trader manages to find someone willing to pay inflated prices. "An appraisal is good for that one date and one date only," Werner says. "It can describe the current market and sales environment, but it can't anticipate a value two years down the road."

The pattern of low acquisition costs and high profits is repeated again and again in half a dozen unrelated swaps involving BLM land in Mohave County both before and after the investigation. Among the most profitable deals are:

* A 103-acre parcel acquired from BLM for $1,100 an acre in 1988. It was sold by the trader to investors for more than $8,000 an acre a year later. Estimated profit: $700,000-plus.

* A 160-acre parcel acquired for $2,500 an acre in 1988. It was sold in 1989 to an investment group for $11,400 to $11,700 an acre. Estimated profit: $1.45 million.

* A 354-acre parcel acquired in 1988 for $2,250 per acre by investors. A total of 281 acres of it was sold to a builder last year for $8,673 per acre. Estimated profit: $1.8 million.

BLM officials acknowledge that large speculative profits continued to be made on land even after the reform effort. But they dispute assertions that land valued at $7,000 per acre will lead to yet another windfall for private traders. "Our best information is that the market has kind of plateaued," Werner says. "The combination of the war, the S&L crisis and the recession has had far-reaching effect. The market has taken a rest.

"People may be asking $25,000 an acre, but how many are getting it?"
Some experts in the Bullhead City area agree with the BLM on that point.
BLM argues that in some cases where windfall profits were made, the trader performed at least some development, such as planning or zoning the acreage. Agency officials contend they evaluate "development potential" in making appraisals on land. But they admit they do not attempt to skip the middleman and trade directly to developers, thereby reaping maximum value for the trade.

 

At the state level, it has long been recognized that millions of dollars in additional revenues could be netted simply by zoning land before it is put on the block.

The goal of the state land commissioner is to generate as much income as possible from state trust lands, which then is spent on public education, says Glenn Collins, deputy commissioner of the Arizona Department of Land. The BLM, by contrast, is supposed to obtain environmentally important wild lands, which gives their program a very different focus, Collins contends.

Nevertheless, even Collins agrees that the BLM could use the same technique--land-use planning--to net the resources now being bled off by speculators.

Biewer's 1988 trade, along with numerous others, was temporarily frustrated when the federal land-exchange program was halted by controversy over a larger trade of BLM land elsewhere in Arizona. The controversy involved 41,000 acres of BLM land in Sun Valley, fifty miles west of Phoenix, that had been traded to speculator Huddie Bell for a few hundred dollars an acre in 1986.

Before even completing the BLM transaction, Bell had optioned most of the land for thousands per acre to Phoenix developer Robert Burns, who immediately began selling it for even more money to other investors. One of Burns' assistants at the time was Mark Shapiro, who later left Burns to go in business for himself.

Once uncovered by the media, the Sun Valley swap, along with similar deals near Casa Grande, drew accusations of mismanagement. The scandal prompted suspension of the BLM's land-exchange program while investigators from outside agencies examined the books.

"This place was crawling with people from the FBI, the General Accounting Office and I-don't-know-who-all," Ruddick says. "For a few months there, I spent more time with the FBI and the GAO than I did with my wife."

BLM officials deny the land-exchange program was ever formally suspended, but they concede that most trades were put on hold pending new regulations, which are still being written. The investigation did not result in criminal charges but led to administrative changes based on concerns by the investigators that the private-sector traders were too influential in determining appraisal values.

Not only would trade proponents initiate the swaps, which is still the case, prior to the investigation they often supplied the appraisals, as well. Now, appraisals are more closely supervised by the BLM, which uses in-house experts often brought in specially for one project, to review contractors' work. Ruddick, for instance, was handed the current Biewer trade despite being assigned to the Phoenix district. The BLM doesn't want another ruckus, he says, adding, "We're real sensitive to bad press."

Jammed into 25 square miles of bleak, hot northwestern Arizona is a late-twentieth-century version of the Gold Rush.

It's almost as if Bullhead City and Laughlin are on another planet.

The freshly crewcut mesas sprout stucco-and-tile subdivisions that overlook the 24-hour traffic jam on Highway 95 and the casinos on the other side.

"Seven thousand dollars per acre??" Phil Jost can hardly believe his ears.

"I've always said the good Lord must have just pointed my nose in that direction," Biewer says.

"I don't deny I made a good profit. I mean, I'm not in this for my health."

"People may be asking $25,000 an acre, but how many are getting it?


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