Monday, April 30, 2012

How the county spent $3 million on Staubach’s Ameritrust contract

Jimmy Dimora, Peter Lawson Jones, and Tim McCormack were thinking big when they set out on their quest for a new county headquarters in 2004 -- a journey that ended in the $45 million Ameritrust Tower debacle.

They decided they needed a lot of advice to pull off their plan to move the Cuyahoga County government into enormous new offices of 600,000 square feet or more.

They signed a big, sprawling, 26-point contract with a big, sprawling team of consultants headed by real estate company The Staubach Co. Despite advice to scale back the contract, the county commissioners promised the consultants they’d get paid $4 million to $5 million out of the final deal. A year later, the county got out of the contract for $3 million.

That’s some of what I’ve discovered by reading public records, interviewing people on both sides of the negotiations, and reviewing interviews I conducted in 2008 about the Ameritrust Tower.

The 2004 Staubach contract is back in the news because Cuyahoga County’s inspector general and law department are reexamining it as part of their inquiries into the Ameritrust affair. County executive Ed FitzGerald is talking about suing the former Staubach, which has merged with Jones Lang Lasalle. My requests for public records about the contract led me to the inspector general’s office, where I looked through the same documents her staff is examining.

I discovered that a consultant, Neil Dick of the Dick Group in Shaker Heights, warned Cuyahoga County’s government not to pay The Staubach Co. any more than $400,000 to help acquire a headquarters site.

Ever since the Ameritrust deal went bad, Dick has been waiting for a call.

“Three million dollars to do that work is beyond anything that’s reasonable,” Dick says now.

Dick was hired in 2004 to help Cuyahoga County choose a real estate consultant team. The county wanted the team to provide a vast range of services. They would evaluate several developers’ proposals for the headquarters project and recommend a site. The county also wanted the consultants to confirm the government’s current space needs and give advice on the new headquarters’ space planning, design, architecture and engineering. It wanted advice about financing the deal and on move management.

Eight consulting teams who wanted the job responded with a wide range of pitches. One company, Allegro, offered to simply evaluate the developers’ proposed sites for $190,000 to $220,000. County staff rejected Allegro for responding too narrowly to its request. (Allegro recently worked for the FitzGerald administration. It was paid $220,000 to evaluate all of the county’s property holdings.)

Another team that didn’t make the final cut, headed by the Oliver Design Group, offered to provide all the services the county wanted for about $1.9 million to $2.2 million.

The three teams chosen as finalists had different approaches to charging for all those services. They all offered to do the first two phases of work -- recommending a site and negotiating with the chosen developer -- for between $390,000 and $500,000.

The third phase, the project’s implementation, proved harder to price.

The Staubach Co. said it wanted an initial fee of $396,000 for phases one and two -- which it would pay back if it received a brokerage commission as part of the county’s final development deal. Staubach originally proposed a commission of $5.85 per square foot of space in the new building. Since the county commissioners wanted a 600,000 to 700,000 square-foot headquarters, that meant $3.5 million to $4 million.

Dick noted in his July 2004 evaluation that Staubach was well-qualified for the job, but its fee proposal was the most expensive. Staubach, unlike the other finalists, was offering “the option of re-evaluating the entire process and development direction” for the headquarters project, he wrote.

Staubach was “offering to provide services that may be redundant and costly,” Dick warned.

“I was raising the issue of, for that high a fee, even with those additional services, are they really needed?” Dick recalls. “And what can the county really afford?”

But county staffers agreed that Staubach was one of the better-qualified firms. That July, the county commissioners -- Dimora, Jones, and McCormack -- authorized the staff to begin negotiations with Staubach.

In August, Staubach sent the county its proposed terms. The company had raised its price: it now wanted $6.85 per square foot, or $4.1 million to $4.8 million. Dick objected.

“Staubach’s charge of $6.85 [per square foot] with third party unacceptable. This should not be part of this agreement,” he wrote in 2004. “Brokerage commission – this is not a traditional approach and not appropriate.”

Jay Ross, then the county’s director of central services, also objected to Staubach’s fee proposal. “NO,” read repeated notations on it in Ross’ handwriting. County staff created a counter-proposal that would’ve capped Staubach’s fees at $390,000.

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Formrer Staubach managing partner Rob Roe, in his first interview on the Ameritrust affair in years, argues that the company’s fee was a fair-market cost for the vast range of services its team provided.

“We supported our fee proposal with other contracts and similar types of things we had done with other municipal and federal and city governments,” says Roe, now managing partner at Jones Lang Lasalle. “The fee was shared amongst somewhere in the neighborhood of nine companies.”

Roe argues that observers who think the Staubach team was overpaid don’t understand the wide scope of its contract.

“A deal of this nature is not a traditional deal in the city of Cleveland,” Roe says. “You can’t look at it in just the microscope of Cleveland, Ohio. [It’s] a national, significant, headquarter-caliber transaction.”

The price dispute fell to lawyers for the county and Staubach to resolve. The question boiled down to this: Should Staubach be paid like an owner’s representative reviewing proposals? Or like a real estate broker, who lines up tenants to fill a building and is paid by the landlord?

The county’s lawyer was Kathleen Martin, then the head of the prosecutor’s office’s civil division. (Martin is now deceased.) Staubach was represented by two lawyers from the law firm Vorys, Sater, Seymour, and Pease, including Anthony O. Calabrese III, now a defendant in the county corruption case.

Calabrese’s role in the Staubach contract has raised alarms for FitzGerald, who ordered the two new inquiries into the Ameritrust affair. Calabrese’s federal indictment claims that by summer and fall 2004 -- the time when Calabrese was negotiating for Staubach -- he was already engaged in a racketeering conspiracy with Dimora crony J. Kevin Kelley involving the nonprofit Alternatives Agency.

Roe says that nothing about Calabrese’s conduct while representing him appeared improper or gave him pause, and that Calabrese never talked about using any connections in county government to help with the contract.

Staubach’s fee proposal won out. All the developers contending for the headquarters project signed agreements promising to pay Staubach $6.85 per square foot as part of a final lease deal, according to Roe. Martin’s successor at the county, David Lambert confirmed this after reviewing a file from the negotiations.

In October 2004, Dimora, Jones and McCormack approved the contract, including the fees Staubach wanted. McCormack told the Plain Dealer in 2009 that he liked Staubach’s proposal because the developer, not the county, would’ve paid in the end.

Actually, the developer would’ve likely rolled the cost of Staubach’s fee into the county’s lease payments, for the county to pay over the course of 20 or 30 years.

It didn’t work out that way. Tomorrow, I’ll post about how the county’s relationship with Staubach ended.

Update, 6/7: The FBI and IRS investigated the Ameritrust Tower purchase and the Staubach contract as part of the county corruption investigation, according to a new indictment of Calabrese. See my new post here

(photo from clevelandskyscrapers.com)

Thursday, April 26, 2012

Last thread from Nate Gray case tied up

Ah, nostalgia.  Romantics pine for lost love, sports fans recall long-ago championships, and journalists reminisce about scandal.

So I bet I'm not the only journalist in town surprised by woozy vertigo on Tuesday as old times rushed back onto the Plain Dealer's front page.

"Allega pays $500,000 to resolve complaint," the headline read.  The last legal vestige of the Nate Gray scandal is, at last, finished.

Eleven years ago, Anthony Allega Cement Contractors laid a new runway at Hopkins Airport, the biggest single construction job Cleveland City Hall ever awarded. Now, Allega is paying the Justice Department a cool half-million dollars to resolve its complaint that Allega used minority subcontractors as false fronts on the job. 

Every time I fly out of Hopkins on that western runway, I think of Nate Gray. He doesn't appear in the PD article, but he was suspected to be all over that contract.  The FBI investigated the runway job, trying to prove that Gray, former Mayor Mike White's best friend, corrupted the city's minority subcontractors program during White's administration.  The FBI also thought Gray was the mayor's bag man, but couldn't prove it. The feds never filed charges against White, and the 45 corruption charges it leveled against Gray didn't include the runway scandal and never mentioned the mayor.

I still remember the shock I felt when, reporting on the Gray case in 2005, I laid three public records side by side. One was a FBI subpoena served on East Cleveland City Hall. The second was a letter from an FBI agent to a Cleveland City Hall official, asking for the names of the minority subcontractors on Allega's runway contract. The third was a report that listed those subcontractors: RMC, Chem-Ty Environmental, and Bradley Construction. They also appeared, in sequence, on the East Cleveland subpoena. 

That's when I knew for sure that the Nate Gray case was much bigger than his bribes to East Cleveland Mayor Emmanuel Onunwor or his dalliances in Houston and New Orleans.  The FBI was aiming right at the White Administration's biggest projects, including its $1.4 billion airport expansion.

My interview with John Allega still ranks as one of the most tense conversations I've ever had. I remember walking into his office and making small talk about I-480's towering Valley View bridge nearby, and he replied that people often committed suicide by jumping off it.

Allega, who knew the FBI had tapped his fax machine, confirmed that Gray was in the business of connecting contractors with minority subcontractors for city work.

"It was the talk of the town," Allega told me. "People would ask, 'Did Nate Gray ever come to see you?' "

Allega said he'd taken on Chem-Ty and RMC on Gray's advice. (RMC was owned by Gray and White's buddy Ricardo Teamor.) As Allega told the story, he later learned that both companies, and Bradley Construction, were paying Gray a percentage of their contract and calling it a consulting fee.
 
Gray also made an offer to Allega. "He'd say, 'I'm friends with the mayor. Maybe I can help you out with some of your problems.' I had no problems. I told him, 'I don't need no help.'"

Allega told me Chem-Ty proved incapable of finishing its work.  City and federal investigators later decided that wasn't the half of it.  They declared that Allega's minority subcontractors had performed little work on the runway, and that Chem-Ty was merely a "pass-through," a front. Allega was banned from getting Cleveland contracts for four years.

Since then, over drinks, lunch and coffee, I've heard fellow reporters spill their impressions of Gray and White's relationship, wonder if the FBI still had a final shoe to drop (despite the five-year statute of limitations on most federal crimes), theorize about the leaked affidavits that proved the FBI  targeted White, and basically reminisce about the good old days of mortal combat with an often-vicious mayor.  The standard speculation (and here I should repeat that there is no proof) centers on whether Gray could've confirmed the FBI's suspicions about White but, out of a loyalty no one can comprehend, took his secret with him to federal prison.

Today, Nate Gray is in the Terre Haute Federal Correctional Institution in Indiana, almost halfway through his 15 years. White is retired in Newcomerstown, kissing alpacas. And Allega has resolved its dispute with the feds without admitting any wrongdoing.  That is the real, quiet end to the story.
 
To follow me back to the bad old days, check out my stories "Inside the Nate Gray Case" and "Scenes and Secrets: Nate Gray on Trial."

Tuesday, April 24, 2012

Jackson, selling school plan, says he'll run for 3rd term

Check out Dan Moulthrop's blog post at the Civic Commons. Moulthrop, the Commons curator, former WCPN host, and sometime Cleveland Magazine commentator, interviewed Frank Jackson about school reform on Friday and drew out the newly aggressive mayor on why he's being so aggressive. He also got Jackson to acknowledge something I haven't seen him confirm before -- he's running for a third term as mayor in 2013.

A few weeks ago, Moulthrop was mad at the mayor for springing his school reform package on the city instead of putting it together after community forums, dialogue, etc. Moulthrop is "curator of the conversation" at the Civic Commons, a civic-journalism website that organizes public forums, so favoring consensus over conflict is practically part of the job description.

But, challenged on the collaboration question, Jackson expressed his tough view of what it takes to create change. "I'm trying to get something done," Jackson replied. "I'm not trying to be politically correct or soothe anyone's feathers. That's how we got in the predicament we're in now."

I hear a lot between the lines of Jackson's quote. I think he means that trying to please everyone often creates inertia that defeats reforms, because reform always threatens someone's interests. (For instance, we wouldn't have the new Cuyahoga County government we have now, with an executive and council, if the charter had been written to please the local Democratic Party.)

I also think the mayor knows he got more concessions out of the teacher's union by putting his plan before the legislature than if he'd given the union a veto over his ideas and negotiated on its timeline. (I think union president David Quolke knows that too.)

Moulthrop, a former teacher who supports reforms in how teachers are paid and evaluated, sounds mostly persuaded. He isn't endorsing Jackson's plan, but he says all Greater Clevelanders should have an opinion about it, because we all have a stake in how the reforms turn out. He says the Cleveland reforms could influence other struggling urban school districts across the country.

Finally, he notes a step in Jackson's evolution: "He is enjoying the opportunity to try to fix a Big Problem." Seeing the fix through, he reports, is why Jackson's running for re-election next year.

Wednesday, April 18, 2012

What about campaign finance reform?


Ed FitzGerald and the county council want to make 10 changes in Cuyahoga County's charter, and they want to do it soon.

They want to write the inspector general into the charter (good idea), give the law department more power (a revival of their turf war with prosecutor Bill Mason), put the fiscal officer in charge of the treasurer's office (OK), and make some minor shifts in who does what. They aim to put all their ideas on the ballot this fall. 

But one big issue is missing from their to-do list.  What about campaign finance reform?

Political donors face limits on how much money they can give to federal candidates, state candidates, and candidates for Cleveland mayor and city council.  But there are no limits for giving to candidates for county-wide office.

That's why the late Dick Jacobs was able to donate $36,000 to Jimmy Dimora's first campaign for county commissioner in 1998, and give Peter Lawson Jones $25,000 when he ran for commission in 2002.  Dimora, Jones, and Tim Hagan then bought the Ameritrust complex from Jacobs in 2005 for $21.7 million. It was the unwise purchase of the decade.

Maybe gratitude for that early seed money played no part in the Ameritrust decision.  But isn't it at least a cautionary tale about how no one person should play such a dominant role in a politician's campaign fund?

The big money got even bigger in 2010. Matt Dolan, Republican candidate for county executive, got contributions of $400,000 and $300,000 from his uncle, Charles Dolan of Cablevision, and his father, Indians owner Larry Dolan. 

The charter's framers should have created campaign finance limits up front, rather than leave it to politicians who rely on contributions to run for re-election.  They didn't.

How about contribution limits of $750 per election cycle to county council candidates and $1,000 to candidates for executive and prosecutor? That's what an advisory group working on the charter transition proposed. The idea went nowhere.

Instead, county councilman David Greenspan proposed an ordinance in July that would set the contribution limit really high -- at $12,000.  And even that extremely mild reform has been languishing in the rules committee, which Greenspan chairs, ever since.

You would think that FitzGerald would push for campaign contribution limits, if only to protect himself from a financial assault similar to Dolan's in 2014.  Not so.

If FitzGerald and the council don't take action, citizens will have to.  Campaign finance reform should be the first thing the charter review commission tackles when it convenes in September.

Wednesday, April 4, 2012

The last year of MLK’s life, from Cleveland to Vietnam


When I started my interviews for “King’s Speech,” my new oral history about Martin Luther King, Jr.’s 1967 Cleveland campaign, I expected to hear about how King’s views evolved and grew more radical in last year of his life.

Weeks before King spoke in Cleveland in April 1967, he delivered his famous speech against the Vietnam War at New York City’s Riverside Church. By fall, as King was helping to get out the vote for Carl Stokes, he was also planning the Poor People’s Campaign, a massive civil disobedience effort in the nation’s capital.

King died 44 years ago today, on April 4, 1968. His last year alive is fascinating because he moved far beyond his fight against legal segregation and the call to conscience of his “I Have A Dream” speech.

In 1967, King confronted complex dilemmas we still face today: American society’s obligation to the poor, the persistence of war, and the morality of American foreign policy. He talked about “wiping out the triple interlocking evils of racism, exploitation, and militarism,” creating “an era of revolution,” and changing “the whole structure of American life.”

Here in Cleveland, I discovered, King stressed a more immediate theme, also relevant 45 years later: How black Americans in northern cities could improve their lives. Rev. E.T. Caviness, one of the ministers who had invited King to town, said King focused on Cleveland issues while here.

CAVINESS: We were concerned about eliminating discrimination, integrating ourselves into the educational system, making sure we were able to work at City Hall and the like. At that time, you didn’t have anybody of color at City Hall in any major decision. Those global issues kind of took a back seat for us.
Hoping to prevent more riots in Hough, King worked to channel the rage of black Clevelanders into economic and political activism, boycotts and voting drives. King's uneasy solidarity with Carl Stokes gave him a role in the birth of modern black American political power.

King didn’t talk often about Vietnam while in Cleveland. His anti-war stance was controversial among civil-rights activists. Many feared it could rupture their coalition.

CAVINESS: That was a no-no at the time. [President Lyndon] Johnson was amenable to Dr. King. He had done everything he asked him to do. We were all together, saying, ‘Dr King, don’t do that, you’ll really kill us. We’ll not have access to the White House.’

But ultimately he said, you can’t have fragmented justice. War is wrong. You can’t talk about nonviolent activity and then support violent activity against people of other [countries].

How many battles do you take on? We trying to obliterate segregation and discrimination, and that was our battle. Vietnam was another thing.
Still, Jesse Jackson and Andrew Young, who accompanied King to Cleveland in 1967, both told me they remembered King speaking against the war here. Jackson recalled King talking one night at Olivet Institutional Baptist Church:

JACKSON: He was speaking about the war and the [relationship of] the war on poverty at home to the war in Vietnam. [He said,] “The bombs dropped in Vietnam explode in American cities, reinforcing alienation.

“When I was down South and my home was bombed, we told blacks, ‘Don’t shoot back.’ They were willing to. [When I said that,] I was a great guy!

“When I said whites shouldn’t kill blacks, blacks shouldn’t kill whites, [it also means] we shouldn’t kill brown people in Vietnam!”
The best samplings of King’s latter-day ideas include his late 1967 speeches on Canadian radio, collected in the book and CD The Trumpet of Conscience, and this episode of Eyes on the Prize, the classic PBS civil-rights documentary. His later speeches provoke the listener to imagine how King might react to American society today. It's a fraught question, because it risks revealing more about the person who answers it than about King. But Jesse Jackson, a young aide to King in 1967 and 1968, knew his thoughts during that era better than all but a few people still living.

So I closed my interview with Jackson by asking him: If King were still alive at age 83, what would he be doing today? His answer compared King’s activism to the Occupy Wall Street movement.

JACKSON: He’d be occupying. His last act on Earth was [organizing] the Poor People’s Campaign … to occupy the Mall. He said we should choose the war on poverty at home and healing over the war in Vietnam and killing. He’d be very concerned about our foreign policy, which has become so violent, and so expensive -- while at home, we have too much wealth concentration on Wall Street, created by government policy.

There’s so much poverty. Fifty million Americans are in poverty, 44 million on food stamps. There’s too much violence, too much wealth concentration, and too many expensive wars. He’d be in middle of this economic struggle.
For more about the Poor People's Campaign, see these stories from NPR and CNN, this video of King, and this photo collection.

To link to my oral history, "King's Speech," use this shortcut: tinyurl.com/MLK-CM.

(photograph: Cleveland Public Library)