Tuesday, May 1, 2012

How Hagan & Co. cut Staubach loose from Ameritrust deal

Yesterday, I blogged about how Cuyahoga County’s former government committed to a big consulting contract with The Staubach Co. worth more than $4 million as part of its ill-fated search for a new county headquarters. Today, the story continues with the contract’s undignified end: the county rejecting parts of Staubach’s advice and cutting it loose for $3 million.

One more person on the county’s side, besides Neil Dick and Jay Ross, objected to the Staubach contract’s cost: Tim Hagan, who replaced Tim McCormack on the county commission in January 2005.

“I would not have consummated that contract,” Hagan told me in a 2008 interview about the Ameritrust affair. “I thought [the price] was too much. I didn’t like the terms of it.” He began looking for a way to sever the contract.

In January 2005, Staubach recommended that the county lease the Ameritrust complex from the Jacobs Group. That March, after negotiations, Staubach told the commissioners that Jacobs had improved its offer: it had agreed to include a large parking garage and build a second tower alongside the Ameritrust Tower.  (See the design sketch above.)

Staubach has been criticized for recommending the Ameritrust site. It’s not a sought-after location for offices because the tower is so thin. Rob Roe, former managing partner of Staubach, says the second tower was meant to address that.

“We understood that the floor plan of the tower was too small to accommodate their use,” Roe says. “The tower was always built to have a mate.”

The above design sketch shows the new tower that never came to be: about half the height of the Ameritrust Tower and touching it on one end, suggesting that the two towers’ floors could’ve been linked together.

Hagan, like Staubach, liked the Ameritrust complex’s location and its historic bank rotunda. But he thought the Ameritrust Tower was a blight on downtown’s skyline. He also felt a government shouldn’t lease its main offices.

“You can’t be entangled with a private enterprise if the future of a building might be in question,” Hagan told me in 2008. “The public [should] not have to ask anybody for permission to do whatever they wanted within their public building.”

Also, Hagan told me, he didn’t trust Staubach’s advice.

“I didn’t take their advice because that advice might have been in their own best interest, to be quite candid about it!” Hagan said. He didn’t elaborate. “I wanted to sever the relationship with Staubach and we did.”

(Roe doesn’t know what to make of Hagan’s comment. He says Staubach, now merged with Jones Lang Lasalle, has negotiated other deals with the Jacobs Group, but has never been hired by it. His company represents real estate users, not developers.)

Hagan and Dimora decided to buy the complex from Jacobs and tear down the Ameritrust Tower -- ignoring Staubach’s advice that “totally new construction” would not be “fiscally responsible.” (For more on this, see my 2008 story, “Tower Play.”)

The county cut Staubach out of the loop and negotiated directly with The Jacobs Group.

“We didn’t really need [Staubach] to do that negotiation,” says Dave Lambert of the prosecutor’s office. “Therefore, the commissioners asked me to get us out of the contract.

“They brought their lawyer in. The decision was made to cut our losses, cut Staubach out of the process and move on.”

In September 2005, the county bought the Ameritrust complex as is for $21.7 million. The purchase agreement specifically required the county, not Jacobs, to pay Staubach’s broker’s fee.

“The county wanted to negotiate our final fee down from what was in the contract,” Roe says. “They felt it was easier to control the payment of that fee.”

Staubach’s contract had promised a fee of $6.85 per square foot for its role in choosing the 641,000-square-foot Ameritrust complex. That would’ve added up to $4.4 million.

Instead, Lambert and Staubach attorney Anthony O. Calabrese III negotiated a $2.6 million final payment to Staubach. Add in its initial fee, and Staubach got an even $3 million.

Calabrese’s role brings up one last unanswered question about the Ameritrust affair. Calabrese faces trial in September on charges stemming from the county corruption probe. Federal prosecutors claim that by 2004 and 2005, Calabrese was engaged in a racketeering conspiracy with former county employee and Dimora crony J. Kevin Kelley to “give things of value to public officials and their designees” in return for favors to Calabrese, his law firm and their clients. (The specific charges dating back that far involve the nonprofit Alternatives Agency.)

Calabrese appears only once in public records about the Staubach contract, in a mid-negotiation email in 2004 about how to define “rentable area,” the measure by which Staubach insisted on being paid. Lambert says Calabrese never mentioned any relationships with county employees during settlement negotiations, and never did anything that gives him pause in retrospect.

The county’s inspector general and law department surely want to know if Calabrese’s role in the Staubach contract was clean. But they may not be able to answer the question without subpoena power. That may be one reason why the inspector general is, I’ve been told, cooperating with the FBI.

Update, 6/7: Calabrese asked Kelley to lobby Dimora to buy the Ameritrust Tower, according to a new indictment of Calabrese. The FBI and IRS examined five-figure payments that Kelley and a company linked to Calabrese received in fall 2005, after the building was purchased and Staubach got paid, the indictment says. Hagan makes a flattering cameo appearance in the filing as the public official who questioned the Staubach contract. See my new post here

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