Monday, September 9, 2013

FitzGerald prepares to sue over 2005 Ameritrust purchase

The years of controversy over Cuyahoga County’s 2005 purchase of the Ameritrust Tower may be about to reach a climactic moment.

Cuyahoga County Executive Ed FitzGerald's law department is preparing to file a lawsuit over the controversial real estate deal. The county’s board of control voted today to hire two law firms as special counsel for “potential litigation related to the County’s purchase of the Ameritrust Complex.”

County law director Majeed Makhlouf says the county may sue the former Staubach Co., a former real estate consultant to the county, and Anthony Calabrese III, a lawyer who represented Staubach.

Prosecutor Tim McGinty may become involved in the case as well. The “primary avenue” for a suit, according to Makhlouf, would be an Ohio law that allows county prosecutors to sue for damages over a contract “procured by fraud or corruption” or to recover money “illegally drawn” from the county treasury.

FitzGerald has talked about suing Staubach, now part of Jones Lang LaSalle, since early 2012. He has complained about the $3 million the old county government paid Staubach over the Ameritrust purchase and the allegations Calabrese was involved in criminal wrongdoing related to the deal.

Cuyahoga County’s old government paid $21.7 million for the Ameritrust complex in September 2005 and spent roughly $23 million more on the project, including the $3 million broker fee, asbestos removal, and the purchase of a second parking garage. The new county government sold the complex to the Geis Cos. this year for $27 million, or a loss of about $18 million.

McGinty indicted Calabrese on corruption charges related to the Ameritrust affair this summer. The indictment claims that Calabrese got J. Kevin Kelley to give him “non-public information” from then-commissioner Jimmy Dimora about the pending deal, and that after the sale, Calabrese arranged for Kelley to receive a $70,000 bribe for his help. A county grand jury is also reportedly investigating possible connections among Dimora, Calabrese, and Vincent Carbone, whose company was the construction manager on the Ameritrust project. Calabrese has pled not guilty.

Rob Roe of Jones Lang LaSalle says the company has cooperated with all prior investigations into the Ameritrust transaction and will cooperate in any future inquires. "We believe our efforts on behalf of the County met the highest standards of quality and ethics that our clients have come to expect from us, and no one connected with any prior federal or County investigation into the transaction has ever suggested that they did not," Roe said in a statement Tuesday.

In an interview with me in spring 2012, Roe defended Staubach’s broker fee (which was shared with other companies) and its advice to the county (which was to lease the Ameritrust complex, not buy it). Roe said nothing about Calabrese’s conduct while representing Staubach appeared improper or gave him pause, and that Calabrese never talked about using any connections in county government to help Staubach.

A lawsuit now would come eight years after the controversial real estate deal. In fact, the county may be racing against the clock. If it files suit before September 30, it could avoid a legal battle over whether an eight-year statute of limitations applies.

The investigation of the deal has been long and complex, Makhlouf says. Now, with the federal corruption investigation mostly complete and the Ameritrust complex sold, the county is close to ready.

“This is a very important piece of litigation for us,” says Makhlouf, “but we couldn’t do anything that risked what we were doing in the sale of Ameritrust and the potential for the rejuvenation of that entire quarter.”

To assemble a case, the county’s lawyers have looked at the Jimmy Dimora trial, the federal and county indictments of Calabrese, county documents that federal investigators seized and have now returned, and an employment discrimination lawsuit against Jones Lang LaSalle that alleges senior management improperly destroyed records after learning about clients’ roles in federal corruption probes.

“It wasn’t the kind of investigation you went into, and there were all these records, and you went through them, and [found] the smoking gun,” Makhlouf says. “It was the type of investigation that needed many pieces to fall together from different places.”

The county hired business law firm Brennan, Manna & Diamond of Akron, and Giffen & Kaminski of Cleveland, which has business litigation and white-collar criminal defense practices. It was hard to find law firms who could help the county, Makhlouf says. Almost every local law firm had represented clients in the county corruption investigation, he says, and many firms did not want to sue a real estate broker because they see them as sources for referrals.

A suit under prosecutors' power to protect public funds is now easier because of the new agreement between the prosecutor and the law department over how they will split and share the job of representing the county in court. That law has no statute of limitations, Makhlouf says.

(Updated, 2:50 pm, to reflect the prosecutor's potential role, and 9/10, with details on the law firms hired and a new statement from Roe.)


Unknown said...

This is a very interesting case as it took years to gather evidence and file a lawsuit. I wonder where this would lead or what the outcome would be.

Anonymous said...

Maybe, I missed it. Which are the two outside law firms to be hired?

Erick Trickey said...

Anonymous, thank you for your question. I've updated the post with info about the law firms.