Showing posts with label ameritrust complex. Show all posts
Showing posts with label ameritrust complex. Show all posts

Tuesday, June 3, 2014

FitzGerald files suit over 2005 Ameritrust deal -- but can he answer the biggest question?


Ed FitzGerald says he’s kicked off the “hopefully the last chapter” in the Cuyahoga County corruption saga. He’s filed a lawsuit to try to prove longstanding suspicions that Jimmy Dimora and his cronies corrupted the county’s ill-fated 2005 purchase of the Ameritrust Tower.

The lawsuit could answer questions about the old county government’s controversial $3 million deal with a real estate consultant. It also hints at an even deeper possible scandal -- that Dimora may have manipulated the search for a new county headquarters site so that the Ameritrust site would come out on top.

For years, FitzGerald has vowed to get to the bottom of lingering questions about the former Staubach Co.’s real estate consulting contract. He thinks its $3 million payment was inflated, and he questions why Staubach liked the Ameritrust site.

“This whole thing started because when you look at the transaction on its face, it doesn’t make sense,” FitzGerald said yesterday. After the FBI probe of the Ameritrust deal didn’t result in convictions, FitzGerald asked county prosecutor Tim McGinty to look into it. “As the years went by, we got some additional information from the prosecution,” FitzGerald said.

Now, FitzGerald’s administration claims Staubach paid $500,000 to people close to Dimora, who helped Staubach get Dimora’s ear and then get the contract. The alleged cast of characters includes Vince Russo, corrupt ex-auditor Frank Russo’s son, and Vincent Carbone, a contractor implicated in the county corruption probe. The suit says Staubach hired them as “government relations” consultants.

“The amounts involved here are pretty astronomical,” FitzGerald said. “Over a half million dollars -- a huge portion of the total contract -- is all in government relations. Whether or not they’re true experts in government relations is a real question.”

The suit also claims Anthony Calabrese III played a major role in corrupting the Ameritrust project. Calabrese, a central figure in the federal corruption case, worked as an attorney for Staubach.

The suit (pdf) alleges that Staubach hired Calabrese so that he’d help them get meetings with Dimora and win the county’s business. It claims Calabrese got $99,000 of Staubach’s alleged “government relations” payments.

Last year, county prosecutor McGinty got Calabrese to plead guilty in state court to paying a $70,000 bribe for inside information about the Ameritrust sale. McGinty also called Dimora, Frank Russo, and others to testify before a county grand jury. Info from McGinty’s criminal investigation helped the law department file suit.

The complaint even tackles the most explosive question about the deal: Why did the county choose to buy the Ameritrust complex? The suit clearly implies that Dimora steered Staubach’s site search for a new county headquarters toward the Ameritrust complex, then owned by the late developer and Indians owner Dick Jacobs.

Dimora met with Staubach officials at the Holiday Inn Rockside in Independence on January 21, 2005, the suit claims -- four days before Staubach delivered its recommendation.

“Ameritrust all of a sudden became the first recommended choice,” county law director Majeed Makhlouf said yesterday. Earlier, Staubach had ranked the site fourth. Makhlouf says Staubach hasn’t provided any records about why it moved the Ameritrust site to first place.

The lawsuit claims the county wouldn’t have chosen the Ameritrust site if not for Staubach’s alleged wrongdoing. Makhlouf suggested the county may seek damages for its $1 million annual upkeep of the complex and the $10 million it spent to remove asbestos from it. (The county sold it last year at a loss of about $18 million.)

But Staubach didn’t tell the county to buy the building – it recommended leasing it. The company, now part of Jones Lang Lasalle, pointed that out in a statement yesterday. It accused FitzGerald of filing a “baseless” lawsuit for political purposes (to burnish his reformer credentials while he’s running for governor, presumably). The company denied any wrongdoing and noted that it cooperated fully with McGinty’s investigation. Update: The company also says Russo and Carbone's company provided "legitimate services" that included "much more than government relations," and that the county has ignored documents that prove as much.

“Isn’t it rather interesting,” Makhlouf said, “[that] all these expenses are allegedly charged to see how suitable the building is, so you can tear it down?” Sure. And that’s a question for Dimora. Staubach never wanted to tear it down.

The decision to buy the Ameritrust Tower lies with Dimora, Tim Hagan, and Peter Lawson Jones, the county commissioners in 2005. Hagan and Jones explained their reasoning in my 2008 story “Tower Play.” Dimora’s reasons are less clear.

Given what we now know about Dimora’s corruption -- how he repeatedly nudged the county toward decisions that benefited his friends and benefactors -- the question of whether he nudged this search toward a benefactor’s site is worth asking. Dick Jacobs, who died in 2009, seeded Dimora’s first campaign for county commissioner with a $36,000 donation.

An FBI wiretap caught a Dimora crony claiming vaguely that the county chose the Ameritrust site because the owner of a competing property wouldn’t pay a kickback. But the FBI couldn’t build a case on that. Learning the truth or untruth of that story may be beyond the reach of FitzGerald’s lawyers -- the real last chapter in the county corruption saga, one that no one may be able to write.

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.)

Friday, September 6, 2013

Campaign finance reform: an activist who won't give up, a county councilman who never understood

Coleridge
Greg Coleridge won't stop. After the Cuyahoga County Council made it clear it doesn't want to regulate the flow of money in county politics in any way, the longtime activist penned an opinion piece for cleveland.com about the lost opportunity to protect our new county government.

Cleveland.com got councilman Michael Gallagher to write a response. In July, Gallagher took the lead in arguing down the charter commission's proposal to give council the power to regulate campaign donations.

Sadly, embarrassingly, Gallagher's op-ed piece shows he didn't even understand what he and the council rejected. He spends the entire piece arguing against limiting the total amount of money any one political candidate can spend.

No one proposed that.  It's illegal. Courts ruled long ago that you can't stop a candidate from spending money.

What you can limit is how much money any one donor can give a politician. That's the rule in national, state and city of Cleveland elections, in order to keep one or two or three wealthy donors from paying for almost all of a candidate's campaign.

Coleridge sums up Gallagher's mistake with a headline on his blog: "Politician confuses political contribution limits with political spending limits."

County politicians have gotten checks for $25,000, $36,000, $50,000, $300,000, and $400,000 in the past.  Once a candidate takes office, what sort of debt do they feel to the writer of checks that big?

Now ought to be the perfect time to ban jumbo-sized donations.  Jimmy Dimora, the poster boy for county reform, testified last week before a grand jury about suspected illegal activity around the 2005 purchase of the Ameritrust complex. Dimora voted to buy the Ameritrust property from the late Dick Jacobs, who seeded Dimora's first campaign for county commission with a $36,000 check.  The county sold the Ameritrust complex this year -- at an $18 million loss to taxpayers.

Coleridge still hopes the county council will change its mind on campaign finance reform. But what are the odds, when Gallagher doesn't even understand what's possible, and most councilpeople clearly want the issue to go away?  It looks like there's only one way for reform-minded people to create a sane campaign finance system in Cuyahoga County -- a citizens' petition for a charter amendment.

Thursday, August 22, 2013

McGinty likely wants to question Dimora about 2005 Ameritrust deal


What's Jimmy Dimora doing in the Cuyahoga County jail? He was moved there from federal prison last night, and in his jail booking photo, he doesn't look too happy about it.

Journalists' Twitter feeds lit up with the news this afternoon. Several reporters said Dimora will go before a county grand jury. Why?

"Prosecutors apparently want to question Dimora about lawyer Anthony Calabrese/Ameritrust deal," WKYC's Tom Meyer tweeted.

I think Meyer's right.  County prosecutor Tim McGinty is trying to get to the bottom of the last big unanswered question in the five-year-old county corruption scandal: Was the county's 2005 purchase of the Ameritrust Tower corrupted in some way?

This January, county executive Ed FitzGerald told me he'd asked McGinty to investigate the Ameritrust purchase, especially corruption defendant Anthony Calabrese III's role in it.  McGinty did just that.

The prosecutor hit Calabrese with a six-count indictment last month, including conspiracy and corruption charges that include the 2005 Ameritrust deal.

The indictment charges that Calabrese -- then an attorney for The Staubach Co., a real estate consultant for the county on the Ameritrust deal -- got Dimora crony J. Kevin Kelley to provide him with "non-public information ... from Dimora relating to the then-forthcoming purchase of Ameritrust by Cuyahoga County." After the sale went through, McGinty alleges, Calabrese arranged for an unnamed businessman to pay Kelley a $70,000 bribe for his help.

Now, the reports that Dimora will be put before a grand jury to testify suggest that McGinty is considering further charges against someone. Where's he going with this?

Dimora is named as an unindicted co-conspirator in the Calabrese indictment. It mentions him in connection with the Ameritrust sale and Dimora's famed trip to Vegas.  Why rehash Vegas?  Because conspiracy charges can reach back beyond Ohio's six-year statute of limitations on bribery. To charge anyone with crimes related to the 2005 Ameritrust deal, McGinty needs to prove that it was part of a larger conspiracy that was still active six years ago.

Federal investigators also looked into Calabrese's ties to the Ameritrust deal, and they charged Calabrese with witness tampering in relation to the $70,000 payment to Kelley -- but they dropped that charge when Calabrese agreed to plead guilty to 18 other crimes. Significantly, Calabrese's federal plea deal included no agreement to cooperate with the feds. Does that mean he still has secrets to keep?

==

To read more coverage of the 2005 Ameritrust purchase, follow these links:

"FitzGerald: Calabrese holds key to 2005 Ameritrust inquiry," Jan. 30, 2013

"FBI, IRS investigated Dimora, Kelley, payment to Staubach Co. over Ameritrust Tower purchase," June 7, 2012


Wednesday, July 17, 2013

After Cuyahoga council kills campaign finance reform, what's next?

If you want to get really depressed about our local representative democracy, I invite you to watch this video of the Cuyahoga County Council, petulantly refusing to regulate donations to county political campaigns in any way whatsoever.


By a 9-2 vote last week, the council members left the door wide open for gargantuan checks to flood the 2014 race for county executive, and maybe even their own re-election funds. They rejected a charter amendment that would give them the power to regulate donations in races for county executive, council and prosecutor. Single donations of $20,000, $50,000, $100,000, $400,000? It’s all legal!

Take a look at the video, from 43:00 to 1:11:00.  You'll see that allowing a single wealthy donor to dominate a politician’s campaign fund -- and wield way too much influence on them once elected -- doesn’t faze the council.

Councilmen Michael Gallagher and Dan Brady said there’s no evidence of a problem to fix. Sunny Simon said she doesn’t want to limit candidates’ ability to compete with self-funding millionaire candidates. Gallagher and Jack Schron complained that they, as elected officials, already have to follow too many campaign regulations. Council president Ellen Connally said regulating more could create a “chilling effect” on candidates running for office. Some said they didn’t want to be stuck making rules that applied to themselves.

All in all, the council showed lots of concern about themselves and other politicians, and little for the voters who want elected officials to listen to them, not one or two wealthy patrons.

The council’s decision means five- and six-figure donations can play a big role in the 2014 race for county executive. It happened in last year’s race for county prosecutor. One man, local businessman Robert Kanner, gave winning candidate Tim McGinty $50,000 – a quarter of all the money, $203,000, that McGinty raised for the Democratic primary race. That doesn’t necessarily mean Kanner will have undue influence over McGinty –- but doesn’t it at least create the potential for influence, or the appearance of influence?

What about the $36,000 that the late Dick Jacobs gave to Jimmy Dimora’s 1998 campaign for county commissioner? We can’t say that early seed money influenced Dimora’s bad decision to buy the Ameritrust complex from Jacobs in 2005. But since prosecutors alleged yesterday that Dimora leaked secret information about the Ameritrust deal, isn’t this at least an example of why one local businessman shouldn’t be able to give that much money?

Two councilpeople voted yes on the campaign finance amendment, Julian Rogers and Dave Greenspan.

“I think it helps to build trust if people know that they can’t necessarily buy influence from their county council person,” says Rogers. “The way it’s currently set, one person can make a contribution that funds an entire campaign for a county councilperson.” (Rogers says he spent about $47,000 on his campaign.)

“Where the county has come from, appearances mean a lot,” he adds. Donor limits are “an opportunity to continue the good effort we’ve begun to bolster our standing in the community and bring back some trust.”

Local activist Greg Coleridge, who’s worked for years to try to regulate money in local elections, says the council’s refusal was disappointing and surprising. He says rejecting the power to regulate campaign finance at all sends a terrible message.

“Hey, we’re open for business!” Coleridge says. “We’re the Wild West! There’s no limits, no enhanced disclosure… Pay to play! Here we are!”

Amid the council members’ self-serving arguments, I also heard resigned cynicism. They know it’s hard to create campaign finance reform in the wake of court cases such as the U.S. Supreme Court’s Citizens United decision. Gallagher said he feared donor limits would lead the wealthy to form PACs to go around them – a possibility, but one that’s rare on the local level. Brady complained about Citizens United’s protection of anonymous campaign literature. He and Chuck Germana voted no on the charter amendment, saying public financing of campaigns is the only way to make a difference.

“In a sense, we agree with council,” says Coleridge. He’s part of the Move to Amend effort to overturn Citizens United with a constitutional amendment. “You’re not going to find an absolute loophole-free set of campaign contribution limits.

“In the meantime, to throw up your hands and say we shouldn’t even do anything is sending the message that those who have the most money will have their voices heard loud and clear. And it sends the perception that those who don’t have money, their voices are not going to be heard.”

Coleridge served on a transition panel that recommended sweeping ideas for clean county elections to the new government in 2011, including public financing for county campaigns. The panel’s ideas were ignored.

I think council’s refusal to act on donor limits opens up a chance for reformers to go big. They could start a petition drive for a clean elections charter amendment much like the 2011 proposal: donor limits, electronically searchable campaign reports, and public financing that helps candidates without wealthy supporters to compete.

It wouldn’t be easy. It takes more than 33,000 signatures to get a charter amendment on the ballot. But it’s not impossible. The charter’s framers gathered more than 70,000 signatures to get our new form of government on the 2009 ballot. Coleridge’s group recently collected more than 3,000 signatures for its Move to Amend petition in Cleveland Heights alone.

So far, I’m not hearing anyone in town who’s ready to take this issue directly to the voters. But campaign finance limits are exactly the sort of issue the initiative process was created to address. Voters know that a single wealthy businessperson shouldn’t be able to singlehandedly fund a candidate’s campaign. But the political system won’t do anything about it. Will we?

Friday, April 5, 2013

McGinty revives corruption investigation with state charges against Calabrese

A weekend surprise: Tim McGinty, who promised to crack down on public corruption when he ran for Cuyahoga County prosecutor, is picking up some leads from the federal government’s six-year-old county corruption investigation. Just when you thought everyone had pleaded guilty, it looks like there's more to come.

Late today, a grand jury indicted attorney Anthony Calabrese III (pictured) on two counts of bribery and one charge of theft by deception. All three charges seem closely related to federal charges to which Calabrese has already pled guilty.

“Cuyahoga County Grand Jury Issues First Indictment for Corruption Related Offenses,” reads McGinty’s press release, which went out at 5:36 pm. And yes, that word “first” implies what you think it implies.

“There will be more indictments,” McGinty’s spokesperson, Maria Russo, said this evening. She wouldn’t elaborate.

Calabrese is charged with bribing Jimmy Dimora and Frank Russo, indirectly, by directing J. Kevin Kelley to pay for their tickets to Las Vegas in 2008, in order to get Dimora and Russo to help restore funding to Alternatives Agency, a nonprofit Calabrese represented as a lawyer. In the theft by deception charge, Calabrese is accused of getting Alternatives Agency to pay Kelley and Anthony Sinagra as consultants, even though they did no work.

But Calabrese has already pled guilty to federal charges involving the trip to Vegas and the consulting payments to Kelley and Sinagra – bribery, bribery conspiracy and mail fraud conspiracy, to be exact.

So what’s going on?

Today’s charges could be part of a mop-up operation, where McGinty looks at whether leads from the FBI investigation point to violations of state law. He may be looking to file direct charges of bribery and theft where the feds could only make conspiracy, wire fraud or mail fraud charges.

McGinty may also be taking over late-breaking leads in the corruption probe. Federal law has a five-year statute of limitations on bribery and similar crimes, so the U.S. Attorney’s time to file new charges from the corruption probe is running out. (The FBI raided the county building, breaking up the corruption regime, on July 28, 2008.) But Ohio has a six-year statute of limitations, so McGinty has more time.

What might the new lead be?

I wonder if McGinty is probing Calabrese and Kelley’s relationship because he wants to know if they corrupted the county’s 2005 purchase of the Ameritrust complex. County executive Ed FitzGerald told me in January that he’s asked McGinty to probe Calabrese’s relationship to the Ameritrust deal.

At one point last year, federal prosecutors alleged that Calabrese promised to reward Kelley if he successfully lobbied Jimmy Dimora to vote to buy the Ameritrust property. Two months after the sale, the feds claimed, Kelley received $70,000 and a company with a tie to Calabrese received $99,000 from unidentified sources.

But the feds aren’t pursuing that lead anymore. They included it in a witness tampering charge against Calabrese, but dropped that charge in exchange for Calabrese’s guilty plea on 18 other counts.

Calabrese, unlike the other federal corruption defendants, didn’t agree to cooperate with investigators when he pled guilty. So the new charges could increase the pressure on Calabrese to make a deal with McGinty. (Calabrese also faces charges in an unrelated case: he's charged with trying to bribe rape victims to change their testimony at a sentencing.)

Calabrese is the last big lead in the corruption probe.  What more might he know?

Update, 4/14: The Plain Dealer runs a front-page followup today that's basically an 1,120-word question mark. It quotes a bunch of people puzzled over what the hell McGinty's doing. The story says McGinty "stunned federal officials" by charging Calabrese, but doesn't give details.

If McGinty really is just going to pile state charges on top of everyone's federal charges, that's really weird.  I still think McGinty may be trying to work his way up to probing the Ameritrust scandal. But Jim Jenkins, attorney for corruption defendant Daniel Gallagher, offers the PD another theory: McGinty may be trying to go after the corrupt officials' pensions.

Wednesday, January 30, 2013

FitzGerald: Calabrese holds key to 2005 Ameritrust inquiry

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)

Friday, January 18, 2013

4 questions about Ameritrust & county HQ deal

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.

(Photo from clevelandskyscrapers.com)