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)

Sun papers endorse McCormack

This summer, I asked Tim McCormack, the former county commissioner who’s running for county executive, what he’d say to voters wary of electing someone who served in the old government.

“I think they’d get best of both worlds,” he replied: “Somebody who knows the government and somebody who has a good reputation.”

That argument won over the editors of the Sun papers. The suburban newspaper chain endorsed McCormack this week.

“At a time when honesty and experience are paramount in this election, Tim McCormack more than fills the bill,” they write.

The editorial dismisses Ed FitzGerald for accepting campaign contributions “tied to the old county regime” (without mentioning he’s gotten rid of most of them) and Matt Dolan for running “divisive” campaign ads. The Sun News admits McCormack isn’t well-funded, but says he “has something worth more than gold: his good name.”

When I interviewed McCormack, I thought he stood out in two ways. He’s the candidate most likely to pursue the ultimate step in regionalism: an actual merger of the city, suburbs, and county. “We can build a region if we unite,” he said at the City Club debate this week. “Pittsburgh has done so. It’s growing.” (Pittsburgh and Allegheny County haven’t merged, but they’re talking about it.)

He’s also the candidate who defends human services most passionately. With a budget briefing in hand, he complained hotly to me about cuts to county child-health programs. He did the same when a City Club questioner asked how to fight human-services cuts if budget-slashing Republican John Kasich is elected governor.

“I served with John Kasich,” McCormack replied. “I know him well. Should he succeed, what I would emphasize [is] -- people die. They will die without funding for these programs. The Help Me Grow program, visiting young women who are pregnant. The Early Childhood [program], the only chance most kids in Cleveland have. … Kids that drop out of school -- we need to heavily invest in those children or they won’t make it.”

This summer, I talked to people who saw McCormack as a short-tempered lone crusader when he was county commissioner. The Sun editors have heard that too. “If elected, we urge McCormack to temper his reported testy demeanor,” he says. McCormack agrees – he told me he’d have to set a “positive tone” as executive.

Reading the Sun editorial, though, and thinking about McCormack’s chances in the unusual six-way race, I wondered about a different scenario. What if McCormack doesn’t win, but pulls just enough liberal voters away from FitzGerald to help Dolan edge him out?

McCormack seems to dislike FitzGerald. He praised Dolan’s temperament during the City Club debate. So maybe that ending wouldn’t bother him too much.

Dolan-FitzGerald, Lanci-Scipione feuds heat up at City Club debate

Matt Dolan and Ed FitzGerald fought the main bout while Ken Lanci and Don Scipione faced off on the undercard at the county executive candidates’ debate this week at the City Club.

FitzGerald, who's endured two weeks of brutal attack-ad beatings from Dolan, led with a classic political jujitsu move.

“Five out of the six candidates have run positive, issue-based, substantive campaigns,” he said. “Mr. Dolan is the quite clear exception to that. He ran an exceedingly negative primary campaign, and he’s run an exceedingly negative general election campaign. And you can’t change this county if you don’t ennoble this process by trying to be positive and tell people what it is you’re going to do differently.”

Dolan said voters need to know FitzGerald was among the “Democratic entrenched interests” who opposed Issue 6 and supported the “sham reform” Issue 5. Anticipating FitzGerald’s next move, Dolan disclosed that his relatives – including his father, Indians owner Larry Dolan -- are contributing more than $1 million to his campaign.

“Before I got into this race, I talked to Democrats and Republicans,” Dolan said. “I said, ‘What’s it going to take to win? What’s it going to take to beat the entrenched interests?’ They said, ‘It’s going to take about $2 million.’" He repeated his plans to recuse himself from Indians matters and create a bipartisan committee to advise him on appointments. {Update, 10/20: Here's my new post on how Dolan would handle this.}

FitzGerald said Dolan’s friends should have told him to run a positive campaign instead of “commercials that are showing me Photoshopped as a Russian monarch.” The ad's image -- accompanied by balalaikas, no less! -- refers to FitzGerald’s Oct. 2009 complaint that the county executive would be “a czar” who “will control just about everything in Cuyahoga County government.”

“I apologize for being out of uniform this afternoon,” FitzGerald joked.

“Issue 6 is a concentration of political power,” he continued, “but what aggravates that is if you have a concentration of economic power.” A wealthy family "spending money like it’s water" to "capture the most powerful local political office" is "the worst way possible to actually to reform this government. It can’t work.”

Ken Lanci, taking advantage of the latest Bill Mason controversies, tried to make the prosecutor a political bogeyman.

"Who's connected to what?" he asked. "You have Mr. Mason, who is a friend of Mr. Scipione’s, who worked on the charter with him. You have Mr. Mason, who is a friend of Mr. Fitzgerald. You have Mr. Mason, who is a friend of Martin Zanotti’s, who’s now a friend of Mr. Dolan’s. It’s anybody but Lanci! … Lanci is the only guy none of them can control!”

That roused Don Scipione, normally a quirky-scientist figure, the opposite of Lanci’s brawny CEO persona.

“This Mason stuff! Give me a break!” Scipione exclaimed. "The first time I met Bill Mason was a year and a half ago. … The only advice he gave me was not to run!

“Ken, give me a break! You did the pay-to-play with Zack Reed at Luke Easter Park to try to keep me from getting [petition] signatures! You filed a [complaint] at the Board Of Elections saying I was a Democrat, not an independent, and they voted 4-0 against you!

“We’re not going to split the Italian vote! I’m Italian in the vein of Marconi and Michelangelo and Galileo and Enrico Fermi! That’s my Italian heritage!

“What was I going to say before that? I forgot!” The audience cracked up.

A questioner tried to force decorum by asking the candidates which opponent they’d choose as a chief of staff. Dolan chose Scipione, David Ellison named Tim McCormack, and McCormack cited Dolan.

“I’d be tempted to choose some people just so I could fire them,” FitzGerald cracked before picking Scipione.

“I was going to say Mr. Scipione,” said Lanci, “but I can’t get past $200 million in savings without a plan.” (Scipione claims that he could reap vast savings by modernizing the county’s technology and systems. A county transition committee also claims the county could save huge sums that way. {Update, 10/21: See the Comments for more on this.)

Scipione deflected Lanci with more humor. “I would look at Ken, because at $1 a year—” The audience, who’d heard Lanci promise to work for a $1 salary, drowned him out with more laughter.

County exec candidates talk corruption on Dimora’s day of reckoning

At the very moment Jimmy Dimora was pleading not guilty to 26 corruption charges on Wednesday, the six candidates for Cuyahoga County executive were sharing a stage at a forum in Lyndhurst. Moderator Steve Gleydura, Cleveland Magazine’s editor, asked them how they’d drive corruption out of the county government.

Lakewood Mayor Ed FitzGerald stressed his credentials as a former FBI agent investigating crooked Chicago-area politicians. He described feeling “déjà vu” while watching Dimora’s arrest on TV.

“Greed – that is the fundamental motivation behind these crimes,” the Democrat said. “You have people in leadership positions that either went into public service for the wrong reasons, or they forgot why they went into it in the first place. What happens when you set that example at the top is, it gives tacit permission for all kinds of misconduct below those levels.”

The FBI can’t clean up a dirty government by itself, he warned. “They pick out specific instances of federal violations, and that’s it. They don’t look at whether an employee is maybe cutting time on clock, or misusing a county computer, or just isn’t motivated or is going through the motions. Those things have to be done by management.”

FitzGerald said he’d set up a “completely transparent” hiring process the day after the election and fill the new county administration with people chosen for their knowledge, not connection. “If we set high ethical standards and bring the right team in, we can turn this situation around.”

The forum, held at Executive Caterers at Landerhaven, took place at lunchtime Wednesday. Most of the audience knew Dimora had been arrested early that morning, though news outlets were still sifting through the details of the 138-page indictment. Tim McCormack, on the other hand, sounded like he’d already read the indictment and noticed FitzGerald's cameo appearance as Public Official 14, taking a brief 2008 call from Dimora about the lease of Lakewood's Winterhurst ice rink.

“Bad people knew where there’s a weak spot,” McCormack said. “They do not approach and they don’t do business with bad administrations. You set that standard every single day in the way you use your voice, your telephone calls, your practices. It happens every hour of the day. That’s how you root [corruption] out and avoid it in the future.”

McCormack, who once served with Dimora on the county commission, made the startling suggestion that “hundreds of additional people” may have “paid bribes to secure county positions.” It was hard to tell whether to take the comment literally, since McCormack based his comment on “information” from a source he didn’t name. (He recently said the FBI asked him around 2000 about rumors of a jobs-for-bribes scheme in former auditor Frank Russo’s office.)

Republican candidate Matt Dolan also swiped at FitzGerald. Better ethics, he said, starts with not electing a county executive candidate who “stood shoulder to shoulder with the current establishment and did not support Issue 6 county reform.” Dolan described his proposal to establish a bipartisan committee to screen appointees for all county boards and commissions. The committee would set qualifications, sift resumes, and examine whether to abolish any boards or commissions entirely.

“We’re going to do something brand new, unfortunately, in this county: we’re going to require job descriptions for everyone,” Dolan added. “If you are not qualified to do the important work, you will be removed.” He also hinted at Russo’s recent reassignments of workers caught in the Board of Revision scandal. “We are not going to shift people around,” he said. “If you breach the public trust, you’re not qualified, you’re fired! No longer are we going to be moving them to back rooms.” Dolan also said he’d institute an ethics policy by executive order on his first day in office.

Independent Ken Lanci cited his proposals for employee ethics training and an office to regulate and register vendors, lobbyists and consultants doing business with the county. Stressing his experience as a business turnaround expert and his many recent conversations with county department heads, he also said the new executive would have to inspire the county’s ethical employees.

“Everybody thinks they’re corrupt,” he says. “I can tell you, there are a lot of extremely qualified, very good employees, in this county. So don’t be confused by what you saw this morning. There’s 8,000 people there, you probably have 7,500 people that are pretty honest. It’ll be up to the CEO to turn their attitude around, make them proud of the job that they have.”

Don Scipione, also an independent candidate and businessman, said he endorsed the recommendations of the county transition work groups on ethics and campaign finance reform: limits on campaign contributions to county candidates (none exist now), ethics training for county workers, and “online transparency of the relationship between vendors and campaign contributions.” (Scipione served on the campaign finance transition group before resigning to run for county executive.)

Green Party candidate David Ellison, the last to respond, changed the subject to encouraging collaborations among “all the people who have the answers.” He warned that the county faces a $19 million deficit, which could worsen if the state’s $8 billion budget shortfall causes it to cut funds to counties. “We may have to get rid of people we don’t want to get rid of,” he said. “We might be good, thorough house cleaners of the ethical problems and still have to get rid of more people.”

Who was right about Russo? Who enabled him?

One of the saddest things about the Frank Russo bribery scandal is that it didn’t have to happen. Twelve years ago, our political system came very close to taking Russo down -- but his offenses earned him a wrist-slap.

Everyone was forewarned about Russo’s true character. But in the past 12 years, he still got away with pages and pages of misdeeds, and an alleged $1.2 million in cash, because not enough people heeded the warnings. And some of our biggest political names – Jimmy Dimora and the late Stephanie Tubbs Jones -- covered for him.

Here’s the story. Russo was appointed county auditor in January 1997 by the county Democratic Party after 13 years as county recorder. Later that year, new recorder Pat O’Malley -- of all people -- blew the whistle on Russo, calling for a special audit of “bookkeeping irregularities” in the recorder’s office. State auditor Jim Petro’s staff spent a year investigating.

“Mr. O’Malley spoke of employees paying ‘kick backs’ to the former Recorder, Frank Russo, in order to receive pay raises,” Petro wrote in his report.

The audit, released in July 1998, reported that dozens of Russo employees were allowed and encouraged to do political campaigning on county time. Attendance sheets were marked “polls” and “election day.” Employees said they passed out “combs, nail files, literature, gum and signs” at the polls. They said payroll officers told them to sign in as having worked in the office that day, and they were later allowed to take unofficial days off in exchange.

One of those payroll officers was Cindy Calabrese -- now Cindy Bialowas, sister of Russo’s housemate, Michael Calabrese. Russo appointed her to co-supervise the troubled Board of Revisions last month. Back then, Bialowas, subpoenaed by Petro’s investigators, denied granting time off for campaigning.

Three workers also told investigators they felt pressured to donate to Russo’s political campaign. Two said they were pressed to sell or buy tickets to his fund-raisers. One said she was told that employees usually donated 2 percent of their salary to Russo’s campaign. Petro’s office forwarded the statements to the county prosecutor, Stephanie Tubbs Jones, for review.

The state audit came out while Russo was running for a full term as county auditor.

That September, Jim Trakas, then county Republican chairman, brought up Russo in his debate with Jimmy Dimora at the City Club.

“The Russo name used to stand for integrity and decency in government,” Trakas said. “Today, it stands for all that is wrong in county government.” Trakas called on Tubbs Jones to appoint a special prosecutor to investigate Russo, noting that one of Tubbs Jones’ deputies had taken a leave of absence to manage Russo’s campaign.

Dimora, riffing on Bill Clinton’s legal troubles, joked it off.

“Please, no more special prosecutors,” the then-Democratic chairman sighed. He added, “If she feels there is enough evidence, whether it's civil or criminally, I'm sure [Tubbs Jones will] do the right thing.”

That year, Dimora loaned Russo’s campaign $15,000.

Mike Wise, Russo’s Republican opponent, used the audit against Russo in two hard-hitting campaign commercials. He called on Tubbs Jones (who died in 2008) to act on the allegations before the election. She didn’t. Voters re-elected Russo with 61 percent of the vote.

Russo could’ve faced a theft in office charge, a felony that would’ve barred him from holding office if convicted. Instead, three days before Christmas and 12 days before she left the prosecutor’s office for Congress, Tubbs Jones let Russo plead guilty to a misdemeanor count of dereliction of duty. He was sentenced to 120 days probation and agreed to pay a $750 fine and $26,000 in restitution.

At first, that earned Russo some scrutiny from his peers. The next year, county commissioner Tim McCormack, who’d preceded Russo as auditor, publicly questioned why Russo’s budget was growing. The commissioners held up approval of Russo’s leases for satellite offices until he got his budget under control. Russo tried to blame McCormack for leaving problems to clean up. But it was Russo who had increased the auditor’s staff from 237 employees to 280.

McCormack, a candidate for county executive, now says FBI agents interviewed him about jobs-for-cash allegations involving Russo a year after that, around 2000.

Russo got his revenge. He took the mike at a Democratic party meeting in late 2003 and tried to convince party members not to endorse McCormack’s re-election. Russo threw his support behind Tim Hagan, who also won strong support from business leaders and knocked off McCormack in the 2004 primary.

After that, did the commissioners ever seriously question Russo’s budget again? Not that I know of (and I’d be happy to be corrected on this). When the Plain Dealer ran its patronage exposé in 2008, Russo’s staff was still at 283.

Russo’s 14 bribery counts include a cash-for-jobs-and-raises conspiracy involving six employees -- and those are just the ones the FBI knows about. Anyone in power who says they had no idea Russo was corrupt has to contend with one tough question: After what the town learned about Russo in 1998, why weren’t you watching more closely?

FitzGerald streaks toward victory over Brown

Ed FitzGerald jumped into the county executive race last December, when the rest of town was still arguing about the last election. While bigger names dithered and stepped back from the leap, he ran all out. He got a four-month head start on his Democratic opponent and never looked back.

Now FitzGerald looks like he’s heading to victory in the Democratic primary. He leads Terri Hamilton Brown, 50% to 30%, in the vote-by-mail results – which will probably be two-thirds of all the ballots cast in today’s election. It’s likely an insurmountable lead. Likewise for Republican Matt Dolan, who leads Victor Voinovich 70% to 18% so far.

FitzGerald’s quick move into the race, just eight weeks after Issue 6 passed, didn’t impress too many people. The Issue 6 crowd tried to call a foul, saying no one who campaigned against their reform should lead the new government. But by Christmas, FitzGerald had already perfected his answer: He thought the county executive too powerful, so if elected, he’d check his own power.

I remember one or two people scoffing. Being first didn’t matter, they said. But in this election, when bigger names shivered and stepped back from the diving board, FitzGerald’s early leap made a big difference. He had six months to line up endorsements. He churned out one position paper after another. Hearing him talk, I got a sense of restless motion. It’s a good vibe to give off in a reform election.

Tenacity stands out in a field of unknowns and little-knowns. So does poise. FitzGerald’s a better communicator than Brown and might be the best in the general election field.

Political instincts stand out too. FitzGerald sensed he was in the lead at the City Club debate. He ignored Brown’s jabs and called out the Republican candidates for jabbing each other. He took the high road because he knew he could afford to.

Now, Matt Dolan awaits, warmed up by some shadow-boxing with George Voinovich's brother. Also ready to fight FitzGerald is Ken Lanci, his name recognition swelled by ubiquitous bus ads. Both are wealthy men who'll outspend the Lakewood mayor. Tim McCormack, the old-school liberal, may hit FitzGerald hardest of all -- did you see his "deceit" quote last week?

It'll be a dramatic general election. But FitzGerald's got a running start. And he's probably already planned his next few moves.

Check out my coverage of the county executive race, "A Fresh Start," in the September issue of Cleveland Magazine or online here.