Questions Concerning Land Sold by the Tennessee Valley Authority to the Deltona Corporation for a Lower Offer

Published by the Government Accountability Office on 1971-07-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

     B-114850                LM089733

     Dear Senator      Chiles:
           This is in reply    to your request     of April   12, 1971, that
     we report  on a statement     made to you in a letter      from Mr. F. J.
i    Palmer that the Tennessee Valley      Authority     (TVA.) sold land to                 'I,-
     the Deltona Corporation     for $511,600 although      a higherdffer    of
     $599,000 was made by a competing bidder.

            Certain    lands owned by TVA in the State of Florida              were
     sold at public       auctions    on November 19, 1970, January 21, 1971,
     and March 25, 1971.           The sale questioned        by Mr. Palmer occurred
     on January 21, 1971, in Hernando,             Florida.        The public announce-
     ment for that sale listed          46 individual       tracts    and showed, for
     each tract,     the estimated      acreage and the minimum acceptable            sale
     price.     Also, the announcement stated that the sale procedures
     would be as follows:

           "Each property          will    be offered     separately.        The
           auctioneer       will    identify      each tract offered         for
           sale by tract number, size, and general                    location
           and upon request will               show a map of the property.
           When the auctioneer             has concluded      the offering         of
           each tract       separately         and all bids on each separate
           tract have been received               and recorded      as to the
           name of the highest             bidder    and the amount of. his
           bid, the auctioneer             will   request    anyone present          to
           offer    to bid on combinations              of tracts.      The bid-
           ding on combinations              accepted by the auctioneer              for
           bidding     will proceed at the new minimum price es-
           tablished       by the auctioneer          as a result     of the prior
           bidding     and will        proceed until      all such bids have
           been made and recorded               as stated above.        Finally,
           the auctioneer          will    ask for a bid on all of the
           tracts     of land.         When the bidding       is concluded         the
           auctioneer       will    determine       which bid or bids, in his
           sole opinion,         is most advantageous           to TVA and will
           thereupon       adopt such bid or bids as the final                   bid
           and declare       the bidder or bidders,             as the case may
           be, to be the purchaser               or purchasers      of the land."

                                        50 I-H ANNIVERSARY   1921 -.I971

       According   to a memorandum prepared by the auctioneer
(Mr.   J. R. Perry, Chief,   Land Branch, TVA), the January                 21
sale   proceeded as follows:
       1. The 46 tracts   were offered  for bidding            separately        and
          bids were received   on 24 tracts.

       2. The auctioneer   then invited         the audience     to suggest
          combinations   of tracts   for      bidding.

       3. A group, which included          the Deltona Corporation,        proposed
          a 36-tract      combination    and offered    $511,600 for the com-
          bination.       Other combinations      proposed involved      18 tracts
          for $261,850,       three tracts    for $101,000,     two tracts     for
          $23,500,     four tracts    for $53,000,     eight tracts    for
          ~;~+O~I~ four tracts        for $210,000,     and seven tracts       for
                 ,   .

       4. The auctioneer,       upon analyzing       the 36-tract     combination
          proposed by Deltona Corporation,              found that the combina-
          tion included       11 tracts    in which no interest         had been
          manifested     previously     and concluded       that many of the
          tracts   included     in the combination         might not be sold un-
          less in combination.          Therefore      he announced that he had
          determined     that the 36-tract        combination      was the most
          advantageous      to TVA and was accepted for bidding.               Of
          the other combinations         proposed,      the auctioneer     announced
          that the combination         of seven tracts        proposed by the
          Rainbow Springs Corporation           involved      the least overlap
          with any other combination           and that he also would accept
          that combination        for bidding.      The Rainbow Springs Cor-
          poration    and the group which included              the Deltona Corpo-
          ration   were the highest       bidders      on the combinations       they
          had proposed,      and the properties         were sold to them.
       5. One of the bidders,    a Mr. Kauffman,    then stated that he
          wanted the record to show that his group would have bid
          $599,000 for 30 tracts    which he named for the first      time
          as a combination.    The auctioneer    responded    that some

. .   r.


                      of the tracts   in the combination  proposed by
                      Mr. Kauffman had been sold and therefore     were ineli-
                      gible for inclusion   in another grouping.

                 6. Mr. Kauffman then announced that he would take the names
                    of any persons who wished to sue to have the sale set
                    aside as being against  the public interest.

                 7. The auctioneer         concluded    that,    although    some of the pro-
                    posed combinations          of tracts     which were not accepted for
                    bidding     would have provoked keen competition,               there was
                    so much overlap         with other combinations          that the selec-
                    tion of any one combination              would have led to charges of
                    unfairness.         Also he pointed       out that successive       selec-
                    tions of combinations           of tracts     would have compounded
                    the situation        and, in his judgment,          would have led to
                    chaotic     conditions.

                   In a letter    dated April    15, 1971, to a Congressman,         the
           Chairman of the Board of Directors             of TVA pointed     out that the
           $599,000 offer was not made on the 36-tract               combination    sug-
           gested by the group which included             the Deltona Corporation.
           He stated,     rather,    that, after    the 36 tracts     had been sold, an
           individual     at   the sale wanted the record to show that a group
           of persons "would have" bid $599,000 for a combination                  of 30
           tracts,    26 of which were in the combination            of tracts   that had
           been sold to the Deltona Corporation              group and four of which
           were in a group of seven tracts            that had been sold to the
           Rainbow Springs Corporation.

                 We interviewed      Mr. Palmer on May 4, 1971, and he provided
           us with a signed statement        that he believed     that,   by accepting
           suggested bids of the small and medium bidders,              more money could
           have been received      by TVA. He further      stated    "1 do not have fac-
           tual support     for this,   however."

                   Also, on the basis of the class suit filed             against    TVA--
           which was referred        to in Mr. Palmer's    letter--it       appears that a
           principal     complaint     relates to the bidding       procedure    which al-
           lowed the bidders       to suggest combinations        of tracts     for bidding.


      The complaint against    TVA           (71-S-CIV-OC)     filed     on Feb-
ruary 8, 1971, in the District               Court of the United States for
the Middle District  of Florida,              Jacksonville     Division,       states,
in part,  that TVA performed    the           following    wrongful      acts.

      'l(b)   devised and implemented       the 'combination'    bid
              mechanism which by its nature and particular
              use herein rendered      the true statutory     mandates
              of 'public    auction'   and ‘highest   bidder’   mean-
              ingless    and virtually    impossible  to apply;

      “Cc) through        the use of the”combination’             bid mech-
              anlsm, granted         the total    and discretionary
              power to DELTONA and RAINBOW SPRINGS to end
              competitive       bidding    and any semblance of a pub-
              lic auction      by the simple device of incorporating
              in their      'combination'      bids a tract or tracts       not
              bid upon by any member of the class in the indi-
              vidual    tract bidding       period;   ***.I’

      Since the legality    of the bidding     procedure   appears to
be at the heart of the suit filed       against    TVA and since the en-
tire matter is currently     before the court,       it appears that the
issues in question     will be resolved    by judicial    action.

     Pursuant to your         request,    we are returning           the letter
from Mr. Palmer.
                                         Sinc%rely       yours,

                               Be&P.     Comptroller  General
                                         of the United States


The Honorable      Lawton    Chiles
United States      Senate

.-                  -                                               _    _    _   . _   _    -.   .   .   -   __-.-     _.____^.        .-.    _   _   ._~.   _-.     a*.,_>   __   _-_   _I-------
                                                    .-    --

       OCR                         FORM    39-76)
                                                                                                                                                                                    Too&$ g
                                                                                                      RELEASE                      OF GAO          REPORT

                                                                                                                                                                                                       DATE:                   12/14/78
                                                                                                                                                                                                       No.            79-55

             TITLE:                             Letter report concerning    real                                                   property            exchanges                by the
                                                General Services Administration                                                       (GSA)

               PUBLiCATlON                               NUMBER:                                                                   B-NUMBER:                        B-16551 1                                   DATE:                7114/71

               ADDRESSEE:                                      The Honorable Donald G. Brotzman
                                                               House of Representatives


               The above                                                                    letter report has been released as follows:

                xx                        To anyone            requesting         a copy.

               n                          To the individuals                 listed below only                        (This is not a blanket                         release).

     --------c-----------------------                                                                                                                                                                                       --w--m


               Authorization                        for Release:

                                                          The Congressman                                 is no longer                  in office.

               cc:                                  Division        Director,

                                                    Associate           Director,

                                                    Assistant           Director,

                                                    I nforrnation            Off ice (3)
                                                    Distribution             Section (2)

                                                                                                                                                                                                      Research Assistant
                                                                                                                                                                               AS5:--             -5     e-m...--,--:,,-%               Dol-.t;nnr