The Ameritrust debacle is almost over. Cuyahoga County is on the verge of selling the old bank complex for $27 million -- or $18 million less than it spent on it.
But there’s still a major question about the old government’s 2005 purchase of the Ameritrust complex. Will the public ever know if it was just an unwise deal, or if wrongdoing was involved?
County executive Ed FitzGerald thinks attorney and corruption defendant Anthony Calabrese III knows the answer, and he wants county prosecutor Tim McGinty to get it out of him.
“You asked what the chances are the public will ever know,” FitzGerald said to me last week. “I think Mr. Calabrese knows! And I think he has even more incentive to be cooperative with the county.”
Calabrese (pictured), the last defendant to plead guilty in the federal government’s Cuyahoga County corruption probe, finally admitted to 18 corruption crimes this month. But federal prosecutors agreed to drop the one charge that involved the Ameritrust complex.
Meanwhile, McGinty has charged Calabrese in county court with conspiring to bribe two rape victims to change their testimony. Calabrese has pleaded not guilty.
McGinty’s office says the county and federal cases are unrelated. Still, FitzGerald thinks McGinty could use the new bribery charge as leverage to get to the bottom of the Ameritrust affair.
“Somebody that is a central figure in the Ameritrust transaction is also facing county charges,” FitzGerald said. “It gives them a pretty good incentive to cooperate.”
In 2005, Calabrese was an attorney representing The Staubach Co., the county’s real estate consultant. Last June, federal prosecutors alleged that Calabrese asked J. Kevin Kelley to lobby Jimmy Dimora to buy the Ameritrust complex and promised to reward him if the county went through with the sale. Two months after the deal went through, Kelley received $70,000 and a company with a tie to Calabrese received $99,000 from unidentified sources, prosecutors claimed.
The FBI and IRS began probing the Ameritrust project in 2007. They investigated whether any money from Staubach was “funneled through others for the ultimate benefit of public officials” – but they couldn’t make a case. Instead, they charged Calabrese with witness tampering in connection with the Ameritrust affair, claiming that in August 2008, after the FBI raids on county offices, Calabrese met with Kelley and made false statements about the company that had given Kelley the $70,000.
But it looks like the feds are done digging into the Ameritrust purchase. They agreed to drop the witness tampering charge against Calabrese in exchange for his guilty pleas on the 18 other charges (his role in Dimora’s Vegas trip, etc.). And Calabrese’s plea agreement does not include any agreement to cooperate with the federal probe.
If federal prosecutors have dropped the Ameritrust affair, it may be because it’s too late for them to dig deeper. There’s a five-year statute of limitations on most federal crimes, including the bribery and extortion statutes often used in public corruption cases. The Ameritrust deal went down 7½ years ago.
In state court, most felonies have a six-year statute of limitations. That leaves one more approach, a lawsuit.
“I have had extensive conversations with prosecutor McGinty about taking civil action,” FitzGerald said last week.
His administration’s two investigations of the Ameritrust purchase appear to have formed his brief for McGinty. Inspector general Nailah Byrd told me her inquiry has been forwarded to another agency she couldn’t name. Law director Majeed Makhlouf, who was also looking into the Ameritrust affair, says he has discussed it with McGinty. “I think he’s interested in it as well,” Makhlouf says.
FitzGerald has made it clear he’d like to sue the former Staubach Co., which made $3 million in broker’s fees off the 2005 Ameritrust purchase. The county executive is a former FBI agent, and the deal seems to have reawakened his investigatory instincts. And, of course, the more mismanagement by the old government he can uncover, the more he burnishes his reformer credentials -- at the same time he’s exploring a run for governor.
Staubach’s potential defense seems clear. Rob Roe of Staubach (now part of Jones Lang LaSalle) told me last year that the old county government actually disregarded his company’s advice about the Ameritrust complex. Roe also said nothing about Calabrese’s conduct while representing Staubach
appeared improper or gave him pause, and that Calabrese never talked
with him about using any connections in county government to help with the
contract.
McGinty’s spokesperson declined to comment about FitzGerald’s comments, saying the office couldn't comment about an open investigation. Calabrese’s federal attorney, Chad Ziepfel, also declined comment.
We’ll see if Calabrese talks to McGinty about the Ameritrust complex. Maybe he won’t. He already faces a likely nine-year sentence in federal prison, and that didn’t motivate him to cooperate with the feds.
Is time running out for county action on the Ameritrust purchase? Normally, lawsuits over contracts in Ohio have an eight-year statute of limitations, which would bar a suit from being filed after this September. But McGinty could possibly use this law, which says a prosecutor can sue for damages over a county contract “procured by fraud or corruption.” It’s not clear whether that law has a time limit attached.
(Photos: Cuyahoga County Sheriff, clevelandskyscrapers.com)
This one’s for my fellow Ameritrust Tower obsessives, government geeks, and Cuyahoga County taxpayers who’ve resolved they won’t get fooled again.
On Tuesday night, the county council is likely to vote on executive Ed FitzGerald’s proposal to unload the skyscraper albatross and get a brand-new county headquarters in the deal.
Optimism is high. Crain’s Cleveland Business staffers sat in on the same Dec. 11 meeting with FitzGerald as I did, and a Crain’s editorial (subscription required) has called the proposal “a splendid opportunity to turn that real estate lemon into lemonade.” (Here’s my post on the Dec. 11 announcement.)
But since the old county government’s plan to build a headquarters at the same site ended in an embarrassing $45 million failure, I’ve taken my own look at FitzGerald’s plan, testing a few things: What’s the simplest way to understand the choice the county is faced with? Will the deal really lower the cost of government? What could go wrong? What’s in the fine print? Here are some things I’ve found.
The choice at East Ninth Street: new or old? Do you want the county to move into a new, modern office building, which it will own in the 2040s, for a cost of about $6.7 million a year for 26 years? Or should it lease in a historic building, despite some inefficient nooks and crannies, for $700,000* a year less?
That’s the choice the county faces at East Ninth Street. It fielded three offers for the Ameritrust complex and several offers of headquarters sites, but only two developers offered to tackle both at the same time.
FitzGerald has chosen the new building. He’s recommending the Geis Cos. proposal to buy the Ameritrust complex for $27 million, knock down the ugliest part of the complex (the P&H Buildings at East Ninth and Prospect) and replace it with a new eight-story, green-roofed headquarters for the county government. Geis would fill the Ameritrust Tower with apartments and open up the Cleveland Trust rotunda to restaurants, shops and public use.
Rejected developer Optima Ventures wants the county to lease several floors in its 925 Euclid building, the former Huntington Building. It’s a beautiful 1924 landmark with classical columns and a soaring bank lobby with striking murals. It already looks like a seat of government. Optima offered to buy the Ameritrust complex across the street for $16 million (or $11 million less than Geis), use the Cleveland Trust rotunda as the county council chambers, and also put apartments in the Ameritrust Tower. It proposed a 20-year lease of about $6 million a year, or about $700,000 a year less than Geis’ deal.
Optima executive Chaim Schochet hasn’t given up. At council meetings, he’s argued that building new offices means the county government won’t be able to shrink its space if it downsizes in the future. It won’t be cheap to operate those offices in the 2040s, when the building is no longer new, he warns. Schochet also says downtown Cleveland has so much office space, it doesn’t need any more. (After FitzGerald chose Geis, Schochet made an an 11th-hour alternate offer: $30 million for the Ameritrust complex, $6.1 million a year rent, for 26 years, $10 million option to buy the space at the end.)
So why not choose Optima, with its lower rent? FitzGerald’s consultants don’t like the Huntington Building’s layout. They say it’s inefficient for the county’s purposes; they’d have to split up offices they’d rather put together. They’d have to set up office cubicles in part of the grand lobby (as Huntington Bank did) to make it even semi-efficient.
County officials would rather have new, efficient, modern offices. The new building would replace the ugly old P&H Buildings -- arguably a good tradeoff. Crucially, FitzGerald and (I’ve heard) the council like the idea that future county leaders could buy the building in 2040 for $1. In other words, for an extra $700,000 dollars a year for 26 years, the county gets the building at the end of the lease.
Will the county sell all its excess properties? FitzGerald and the consultants say the $6.7 million a year lease at East Ninth and Prospect will cost less than the current occupancy costs -- $10.3 million a year -- at the buildings the county wants to vacate. In other words, moving will lower the cost of government.
“That’s to me what’s appealing about this,” FitzGerald said on Dec. 11. “You take obsolete office space off the market. You get a $180 million investment into Euclid Avenue. You get first-class office space that’s better for employees and customers. You sell the Ameritrust complex. And you do it for less than what you’re paying now. That’s pretty damn good.”
But saving money depends on actually getting rid of the buildings the county doesn’t want. Even vacant buildings cost money to maintain. For instance, just holding onto the Ameritrust complex costs the county $936,000 a year in security, utilities, maintenance and the like.
So how many vacant buildings can the county sell, and how soon? That’s hard to evaluate right now. FitzGerald has 12 properties up for sale besides the Ameritrust complex, from the current county administration building to the old juvenile courthouse on East 22nd. He has some offers in hand. He wants to accept some and reject some others. But he isn’t releasing the details until this month or next.
FitzGerald may simply be trying not to overwhelm the council with lots of deals. Or he may still be negotiating some of them. In December he hinted he was negotiating a possible deal for a convention center hotel on the current county administration building site.
“It’s not a fire sale,” FitzGerald said last month. “We’re not in a desperate position where it’s a buyer’s market and they’re going to dictate to us what we’re going to get.”
This is how you want your chief negotiator to talk and think: He’ll hold out for a better offer if he must. But to realize those annual savings in the cost of government, the county can only hold out so long for a good one-time price for its properties. And there’s still the chance we’ll get stuck with a few dogs.
What are the other costs besides rent? The costs you don’t think about — that’s where the old government screwed up with its aborted 2005 headquarters project. The former county commissioners bought the Ameritrust complex thinking that building a new headquarters would pay for itself – but their switch from leasing to buying would’ve added millions to the cost of government. (For the whole sorry story, see my 2008 story “Tower Play.”)
Two pieces of good news. One is, by leasing, the county covers certain costs. The developer is on the hook for the development costs, providing custodians, and $50 per square foot in tenant improvements. The county would pick up the rest of the cost of outfitting the building, an estimated $25 per square foot, or about $5.5 million.
Also, FitzGerald’s consultants, CBRE, seem to have their eye on other stray costs. They’ve estimated the 20-year cost of utilities, future refurbishment, and the move. They think those extra costs come to at about $1.2 million a year, a fraction of the expected savings from moving and consolidating.
Councilmen David Greenspan and Dale Miller, at Tuesday’s meeting, cited a couple of further moving costs: the cost of wiring the building for phones and computers and possible extra costs if the county doesn’t like the developer’s building designs and pushes for something fancier. Greenspan thinks the move will cost about $16.5 million plus an unknown cost for phones and computers.
Any reader who wants to take a deeper dive into these numbers can download this 108-page pdf of CBRE’s Jan. 2 presentation to council. It’s at least clear that this set of county leaders and consultants are doing a much more thorough job than the guys who tried to move the county in 2005.
What’s this pesky ground lease? The deal with Geis includes some weird fine print that sticks the county with part of the burden attached to the Ameritrust complex. Some of the land under the P&H Buildings is actually half-owned by the county, half-owned by developer Lou Frangos. So the county has to pay Frangos rent on his share of the land. The two sides have been battling in court for four years over how much. The county-Geis deal says Geis will pay $11,000 a year in rent; the county will have to pay the rest of whatever rent is set by court-appointed arbitrators.
As a taxpayer, I wish the developer would take over all of the rent when it buys the Ameritrust complex. It seems like the obligation attached to the land should go with the buildings. But when FitzGerald struck the deal with Geis last month, the arbitrators hadn’t set the rent yet. It’s got to be hard, in negotiations, to demand that another party take over an obligation of unknown size.
The arbitrators’ report was filed Tuesday. Their ruling: the county has to pay Frangos $21,500 a year in rent, plus inflation. (The rent is set at $65,000 plus inflation; the county's share is half that, minus Geis' $11,000.) That's not a huge line item compared to the other terms of this deal – except that the lease lasts 99 years.
So unless Frangos sells his share to the county, he and his heirs will eventually pocket $2 million-plus. In one small way, future Cuyahoga County residents will still be paying for Tim Hagan, Jimmy Dimora and Peter Lawson Jones’ rash decision to buy the Ameritrust complex into the 22nd century.
Last Tuesday, the day after Cleveland City Council voted to un-retire colleague Ken Johnson and enable his double-dip, cleveland.com flashed this headine:
Two hours later, Councilman Joe Cimperman tweeted this:
I followed Cimperman's link to the lyrics of "Some Nights" by Fun -- an angsty pop hit that, in my fevered imagination, became a councilman's tormented lament at being strong-armed into a taxpayer-wrath-inducing vote by a council president whose links to corruption defendants keep embarrassing City Hall:
Oh, Lord, I'm still not sure what I stand for oh
What do I stand for? What do I stand for?
Most nights I don't know anymore
Oh, whoa, oh, whoa, oh, whoa, oh, oh...
So this is it. I sold my soul for this?
Washed my hands of that for this?
I miss my mom and dad for this?
"Rough week to be a Cleveland city councilman, judging by these lyrics," I retweeted.
Cimperman, the tweetiest pol in town, answered in a half-hour. In 140 characters, he managed to explain that he'd actually spent the evening at a meeting about the Inner Belt in Tremont, which reminded him of how Tremont had been home to a Civil War camp, which reminded him of the video to "Some Nights":
It does have a very Civil-War Gothic vibe. And considering Cimperman's manic, beatific Twitter feed, regularly filled with Jesuit mysticism and patriotic rapture, his wild explanation actually makes sense.
So it's all me. I was just imagining how a councilman ought to feel after walking the double-dip plank for Martin Sweeney.
==
Cleveland City Council is an ancient, self-absorbed institution with peculiar rules even more undemocratic than a U.S. Senate filibuster. Sweeney, the council president, drove those rules to a new low last week.
Follow me, now: A city councilman "in good standing" can appoint his successor. Decisions about council membership are subject to the "unit rule," which requires everyone in a legislative caucus or convention delegation to show support for the majority's decision.
Then last week, the "right" to name your successor became Ken Johnson's "right" to retire and reappoint himself, and collect a pension and a salary at the same time, and preserve cost-of-living pension
increases that won't apply to future retirees, and have all of city
council approve his double dip. All 19 city council members caucus with the Democrats, so Sweeney expected the vote to be unanimous.
Some councilpeople really, truly disagree with the idea that government
pensions should go to public employees who've, you know, stopped working.
City councilpeople are all public employees, see. They're outraged that
the state changed the pension rules so quickly on Johnson, and on them.
Fairness to their own tribe preoccupies them. Fairness to taxpayers,
not so much.
Others, like Cimperman, voted reluctantly for Johnson's double-dip, fearing Sweeney's
punishments, including hostile gerrymandering. Ward lines are being redrawn to eliminate two councilpeople this year. So the no voters on Johnson's double-dip -- Dona Brady, Brian Cummins, and Mike Polensek (a double-dipper himself) are now the most likely to lose council's game of musical chairs.
Watching this all happen, I marvel at Sweeney's continued ability to whip votes and hold onto his job as council president. To an outsider, he hardly looks like a strong leader. New City Hall initiatives seem to come from Mayor Frank Jackson or from creative councilmen such as Cimperman or Matt Zone. And Sweeney's name keeps coming up a little too often for comfort in prosecutors' accounts of the Cuyahoga County corruption scandal.
==
Last week in court, the feds played a five-year-old wiretap of crooked contractor Michael Forlani claiming he'd funneled $20,000 to Sweeney's Council Leadership Fund. Forlani cynically calculated that the cash might've bought him several votes.
The council leadership fund is another tool a council president uses to reward allies and punish enemies. Its funds are dispersed to loyal councilpeople running for re-election. Forlani may have been talking out of his ass, bragging about juice he didn't really have -- but it's at least plausible that a contractor could buy influence and legislation by contributing to the council leadership fund. It would work if (I'm talking theoretically here) the contractor had a council president willing to twist arms on his behalf. And if the money was passed through intermediaries, regular councilpeople might not even know why they were being told to vote a certain way. Their votes could be effectively bought without them knowing it.
So if I were a councilperson, the insinuation dropped by Forlani in that wiretap would infuriate me. I
would want to hear an explanation from Sweeney, a straight denial that
Forlani had arranged with him for donations to the fund in exchange for any sort of
understanding. Instead, Sweeney's been very tight with his no-comments.
Sweeney's name has come up in federal subpoenas. It came up a few times at last year's Jimmy Dimora trial. In one wiretap, Sweeney told Dimora he'd helped answer Ferris Kleem's questions
about an airport contract. (Kleem was one of the underwriters of
Dimora's famed Vegas romp.) Sweeney made a mysterious appearance
in the Dimora case closing argument, when the prosecutors included him in a 20-person pyramid of key players. Most entertainingly, J. Kevin Kelley testified that Dimora's
cronies considered Sweeney part of their "B Team," but not their "A Team."
After all that, it's easy to wonder how Sweeney manages to hold onto the council
presidency. Once-mighty politicians such as Bill Mason
and Dean DePiero have seen their careers cut short by peripheral
connections to the scandal, but Sweeney's presidency motors along. One
outraged local writer wants us to sign a petition calling on Sweeney
to step down until his name is cleared.
There's just one problem: Cleared how? Cleared of what? No one can quite say. Sweeney hasn't been accused or implicated in any wrongdoing. Watchdogging the powerful is important, but so is avoiding guilt by association. [Update, 1/17:The petition has been rewritten to call for an ethics investigation, and for Sweeney to recuse himself from voting on contracts until it's finished.]
Forlani's brag could be based on a misunderstanding. Contractor Steve Pumper testified last week that Forlani was trying to help Pumper resolve a court case of his, but the settlement didn't actually need council's approval. Sweeney's calls on Kleem's behalf may have just helped Kleem navigate red tape without anything in return ("You can take credit," Sweeney tells Dimora on the wiretap). Even being dubbed a member of Dimora's "B Team" may be a character witness of sorts -- yeah, we hung out with the guy, but we didn't share the take with him.
Just because Sweeney is the feds' Public Official 7 doesn't mean he did anything wrong. Those code numbers are meant to protect the unindicted, not brand them. To see the problem, consider Public Official 14, Ed FitzGerald.
==
Last week, an FBI agent mentioned FitzGerald, too, as a recipient of funneled Forlani money. Suddenly, just as FitzGerald was ramping up to run for governor, he faced a serious threat: a campaign contribution in the name of a guy he says he didn't even know. Rather than let a stray mention shake up a governor's race, chief corruption prosecutor Ann Rowland issued an unusual public exoneration:
Ed FitzGerald is not a target of the investigation... We have no evidence Ed FitzGerald knew Michael Forlani
had anything to do with these contributions.
Rowland did not extend the same courtesy to Sweeney. Does that mean something? Or was the agent's mention of FitzGerald (himself a former FBI agent) simply an especially out-of-control example of several careless, career-damaging name-drops flying off the edges of the corruption investigation?
If the feds had something on Sweeney, they'd likely have charged him by now. Their investigation focused on 2008, and it's 2013. The statute of limitations, five years for the major federal corruption law, is about to run out.
==
Still, there's corruption, then there's bad government. Federal prosecutors' sentencing memo for Forlani reused a classic quote from convicted former councilwoman Sabra Pierce Scott, who pleaded guilty to taking bribes to help Forlani with the VA expansion project in University Circle.
At a 2006 council committee meeting, Zack Reed questioned whether the VA project was using enough minority workers. Pierce Scott responded with this gem:
How dare you use your own approach to question a project in my ward without having a discussion with me first. You are out of line. And you will not continue to come to this table and get in other people’s ward business. I do not appreciate it and if you’ve got a problem with this project you should have said something to me. You have no right to sit here and question them. You don’t understand what it takes to get this done. And you’re wrong. I don’t appreciate it. And you’re not going to sit here and build a reputation off of me. I don’t mess with your projects and don’t you mess with mine.
The feds quoted Pierce Scott's attack because it was bought and paid for by Forlani's protection money. But Pierce Scott was actually explaining the regular rules of business at Cleveland City Council. Her tongue-lashing of Reed was part of a hallowed council tradition.
The late Fannie Lewis once did the same to Cimperman, calling him a "judas goat" for questioning a building project in Hough. Daring to ask a policy question about a project in someone else's ward is an outrage in city council's arcane, undemocratic world.
Those old, unwritten rules are the real reason to hope for a change in leadership at city council. When is someone going to open those creaky, cobwebbed windows and let some sunlight in?
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