Will we ever get answers on the Ameritrust Tower debacle?

Ten years ago today, Jimmy Dimora allegedly held one of his now-infamous power meetings in Independence, at the Holiday Inn on Rockside Road. The topic of the day was the Ameritrust Tower.

Dimora and his fellow Cuyahoga County commissioners were searching for a new county headquarters site. Two months earlier, in November 2004, the Staubach Co., the county’s real estate consultant, had delivered a report that scored the Ameritrust complex fourth among competing developers’ proposals.

But on Jan. 21, 2005 -- according to the lawsuit Ed FitzGerald’s administration filed in June -- Dimora met with someone from Staubach and the company’s attorney, Dimora crony Anthony Calabrese III.

Four days later, Staubach delivered its recommendation that the county should relocate to the Ameritrust complex, owned by the late developer Dick Jacobs -- even though it still ranked lower than other sites in Staubach's scoring.

Later in 2005, Dimora and his fellow county commissioners dumped the plan to lease the Ameritrust complex and bought it for $21.7 million. The county eventually lost about $28 million on its investment in the Ameritrust site. The costs included a $2.6 million payment to Staubach to get out of its contract.

Today, Cuyahoga County’s new government has a lawsuit pending against the firm and several other defendants. The suit is Cleveland’s last chance to get the elusive answers to long-asked questions:

Did Dimora corrupt the decision to buy the Ameritrust Tower? Did he nudge the 2005 county headquarters search toward his benefactor, Dick Jacobs, who had seeded his 1998 campaign with a $36,000 donation?

Did the pattern revealed in the 2008 federal corruption investigation -- people paying Dimora’s cronies to influence him – also lead to the Ameritrust Tower debacle?

A decade after the alleged deed, the question is in danger of receding into history. But it’s still alive, because there’s money at stake.

FitzGerald and his law director, Majeed Makhlouf, spent years building a case against Staubach and the politically connected consultants and attorney it hired, including Vince Russo (Frank Russo’s son) and Calabrese -- both of whom were sentenced to federal prison on other corruption charges.

The former Staubach, now Jones Lang LaSalle, says Russo, Calabrese, and company performed legitimate services for them. Its lawyers -- and other defendants’ -- have filed disdainful court briefs asking judge Jose Villanueva to dismiss the case.

The firm calls the county’s complaint “patently false,” says it “fails to meet even the barest pleading requirements,” and has “no facts to support its claims.” It argues that FitzGerald filed his case too late because of the statute of limitations.

The suit faces other hurdles besides the passage of time. Staubach wasn’t quite responsible for the decision to buy the Ameritrust complex – it recommended that the county lease the site and move in. It warned that totally new construction would not be "fiscally responsible." The decision to buy it instead (to tear it down) was heavily influenced by Tim Hagan, who joined the county commission in January 2005 and felt it was important for the government to own its headquarters, not be “subservient to a landlord.”

Now that FitzGerald is gone, how hard will the county keep fighting?

FitzGerald was practically obsessed with the 2005 Ameritrust Tower transaction during his four years as county executive. He knew that the purchase of the long-vacant skyscraper was one of the reasons voters threw out the old government, which made his election possible. The former FBI agent and ambitious reformer was energized by the prospect of baring ugly truths about the tower deal. He badly wanted to prove he could govern better than the Dimora-era regime.

Now the battle falls to Armond Budish, FitzGerald’s successor. Budish has already shown hints of distancing himself from his predecessor’s legal battles. He’s announced that he’ll hire a new law director to replace Makhlouf. Within days of taking office, he released FitzGerald’s keycard records, which FitzGerald had tried to withhold from the public.

In some ways, the Ameritrust suit is a remnant of Cuyahoga County’s dirty past. FitzGerald mopped up the Ameritrust debacle by selling the complex to a developer who agreed to build and lease a new headquarters for the county on the site. (In keeping with FitzGerald’s goal to reduce the size of county government, the new building is smaller than the behemoth Dimora and Hagan envisioned and abandoned.)

Now, the modern, glassy new county HQ is open. Next door, the once-scorned Ameritrust Tower has been resurrected as The 9: a luxury hotel, club stage for burlesque dancers, and high-rise home of Johnny Manziel. The gorgeous Cleveland Trust rotunda is about to reopen as, of all things, a downtown grocery store.

Both sides are awaiting Villanueva’s ruling on the motions to dismiss the case.  If the judge issues a mixed ruling -- allowing some counts to proceed but hinting at weaknesses in the case – then I could see Budish deciding to cut the legal bills and declare it’s time to move on.

Or, Budish could adopt FitzGerald’s zeal. He, too, could benefit politically if he recovers money possibly lost to the old regime’s corruption.

There’s also a simpler reason for Budish to keep fighting.

The suit seeks to resolve important unanswered questions. Did we truly plumb the depths of Cleveland’s corruption in 2008? Or did the corruption go even higher and deeper than we know?

Ten years later, Clevelanders still deserve an answer.

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.

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.)

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.

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

"How the county spent $3 million on Staubach’s Ameritrust contract," April 30, 2012

"How Hagan and Co. cut Staubach loose from Ameritrust deal," May 1, 2012

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.

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)

FitzGerald plan: sell Ameritrust Tower for $27 million, have new county HQ built next door

The Ameritrust Tower and rotunda, ghosts on downtown Cleveland's landscape since 1996, could be revived if Ed FitzGerald gets his way.

Cuyahoga County's executive wants to sell the Brutalist high-rise and the classic bank building for $27 million to Geis Co., which would build a new county headquarters next to the tower and lease it to the county for about $6.5 million a year.

The new, eight-story headquarters at East 9th Street and Prospect Avenue would share two parking garages and a new pedestrian bridge with the 29-story tower, which would be converted into apartments. The rotunda would house stores and possibly a public space.

If the county council approves the deal next month, construction would start right away and could be finished by July 2014, FitzGerald says.

The Geis Co. proposal could exorcise a controversial deal that has haunted the county since 2005. The previous government bought the Ameritrust complex that year for about $22 million as a site for a county HQ, then spent an equal amount ridding it of asbestos, paying its broker and buying a second parking garage.

With the sale, the county would recoup more than half of its $45 million investment. It would also move out of the 1950s-era administration building at Lakeside and Ontario and other offices around town.

"The building we're in now is outdated, inefficient, and duplicative," FitzGerald said during an interview today. His consultants project that the county could lower its annual occupancy costs by $6 million by moving. So the county would recoup its losses on the Ameritrust complex over time.

In a way, FitzGerald is bringing the county full circle, back to East 9th and the same headquarters site that Jimmy Dimora, Tim Hagan, and Peter Lawson Jones picked in 2005. But there are big differences between the old and new plans.

Dimora and Hagan wanted to tear down the tower and build a much larger headquarters than the 222,000-square-foot building FitzGerald and Geis envision. The old plan also had the county constructing and owning the headquarters. Geis' offer is a sell-build-lease deal with an option to buy after 26 years.

FitzGerald is confident the county will lower the cost of government by moving. But that could depend on a lot of things going right. That includes his hopes of selling the current administration building site, which is right next to the medical mart and convention center, to a hotel developer.

But FitzGerald doesn't have a buyer for the site yet. He didn't get an offer he liked in this round of bidding. He hopes to try again in the new year, perhaps after the convention center opens.

The county has for-sale signs on 13 properties, including the old juvenile justice center and the county archives building in Ohio City. Announcements about the sale of several more should come in January or February, FitzGerald said.

The public will have about 45 days to examine the Ameritrust and headquarters deal and the alternatives the county rejected. County council president C. Ellen Connally says the council will hold meetings on the proposal tonight and Jan. 2, 8, and 22.

FitzGerald era vs. Dimora era: 9 ways the new county HQ hunt is different

Ed FitzGerald's administration is ready to deal. Cuyahoga County put 13 properties up for sale today and asked landlords to offer proposals for a new county headquarters.

FitzGerald wants to get out of the current administration building and unload the Ameritrust complex, the white elephant we ended up with when Jimmy Dimora and Co. bumbled their way through their own headquarters hunt almost nine years ago.

To the layman (me), the new RFPs read like they were written by pros -- smart guys experienced in commercial downtown real estate. (That'd be CBRE, the county's consultants.) They left me feeling nostalgic for the era when our county ran a little more fast and loose.

So I dug up the RFP from the wildly improvised 2003-2005 headquarters search, and I'm posting it for download here, in case you'd like to compare the old and new ways of doing business in Cuyahoga County. Here are some of the big differences I noticed.

1. Old way: Be transparent at the start and secretive at the end. New way: Vice-versa. The 2003 search started out promising, with all the developers' proposals released to the public right away. The mistakes came at the end, in summer 2005, when Tim Hagan and Jimmy Dimora rejected a lease deal and directly negotiated an as-is purchase of the Ameritrust complex from Dick Jacobs, asbestos and all.

Today, when a once-burned public is paying more attention, we won't have much info to go on at first. "Your proposal will be kept confidential during the negotiating process," the RFP promises, but "ultimately this information will become public when a transaction is submitted by the Cuyahoga County Executive Branch to Cuyahoga County Council for its approval."

This is an improvement over what we heard last week, that the public wouldn't get to see the proposals until a contract was signed.  But it means we'll only have a short window of opportunity to see the details of the administration's plans and debate the other options before the county commits.

2. Old search: For 600,000 to 700,000 square feet.  New search: for about 225,000.  FitzGerald wants a much smaller county headquarters than Dimora and company did.  One reason is that Dimora liked building big, while FitzGerald is cultivating a reputation for shrinking government. He's laid off plenty of people.

But that's not the main reason for the smaller HQ.  The county is seeking to relocate fewer offices this time.  Many agencies, such as the Board of Elections, will stay put.  The idea is to get out of the current county building fast, in hopes a developer will buy the site and add a hotel to the convention center.

3. Lease old, not build new.  The old government looked at leases in existing downtown buildings, then switched gears at Tim Hagan's urging and bought the Ameritrust complex. Hagan wanted the government to own and control its own home.  He and Dimora wanted to tear the Ameritrust Tower down and build something new themselves.

FitzGerald's RFP allows for the options of buying a building or having a developer build a new office for the county.  But leasing an existing building is clearly the favored option.  Building owners are repeatedly required to explain what they'd do as landlords.  Under "New Building Option," the county insists that developers would need to line up lenders in advance and have the building built by March 2014.  Not easy.


4. Old way: Just keep it under $7 million a year.  New way: Break down the costs and cut us some breaks.  The 2003 request asked developers to "detail all and total costs," which "should be similar to current County occupancy costs" of $7 million a year. But the commissioners -- especially Dimora, who wasn't very good at math -- took their eye off the details when they bought the Ameritrust Tower as is, not realizing the move would no longer pay for itself.

FitzGerald's RFP gets into detail: it leaves a space on the form for a rent discount, asks about utility costs, insists the landlord offer janitors and maintenance, and even asks the landlord to pick up the county's costs of moving, "including packing cartons."

5. Broker's fee set in advance.  The county is still smarting from the $3 million paid to its real estate broker, the former Staubach Co., after the Ameritrust purchase.  This time the developer is asked to "outline the standard procuring broker fee offered by Landlord."

6. Package deals encouraged.  FitzGerald clearly doesn't want developers to pick over the 13 county buildings up for sale, bid on some and leave us stuck with the rest.  He'd rather the county's future landlord also take our surplus buildings off our hands.

"Any aggressive offers by Landlord to acquire property shall be a consideration of the [headquarters] transaction, and taken into account during the evaluation," it says. (The 2003 RFP included a line about proposed reuse or purchase of county buildings too, but it wasn't as forceful.)

7. Changing downtown.  Dimora, Hagan, and Peter Lawson Jones justified buying the Ameritrust complex by saying a county headquarters there would revitalize the East 9th and Euclid area.  This time the county will consider the effects on downtown of selling its properties.  Potential buyers have to tell the county what they'll do with the property, how much they plan to invest in it, and whether any renovations will be eco-friendly. (How they'll be held to that once they buy it isn't clear.)

8. Be good!  "Please confirm Landlord and its management company have completed Cuyahoga County ethics training and registered as such with the Cuyahoga County Agency of Inspector General," the new RFP reads.

9. Old way: Insist the deal pay for itself, then forget to do the math.  New way: Just make the best deal.  The 2003 RFP included the goal, "Complete this project with the use of existing resources only, with no additional financial burden on the taxpayers of Cuyahoga County."  Instead, the commissioners pulled the plug after sinking $45 million into the Ameritrust complex, when they realized their plan would permanently add to the cost of government.

The new RFP doesn't make any promises about the budget.  FitzGerald has said that consolidating into new offices will save the county money in the short and long terms.  But it'll be up to him, and us, to do the math before the deals are inked.

(photo from clevelandskyscrapers.com)

Can FitzGerald keep county HQ proposals secret? Should he?

I saw the first signs a few months ago, but I never thought it'd be this bad.  Ed FitzGerald is asserting the right to lease a new Cuyahoga County headquarters, sell 13 public buildings, and maybe string together a mega-deal to do it all with one developer, without letting the public see the proposals until the contracts are signed.*

In other words, the county executive is launching a new headquarters search that's less transparent than the infamous Ameritrust deal.  And a four-year-old state law may allow him to do it.

I could barely believe this front-page Plain Dealer story today, "Details on county proposals won't be released to public."  But an email to me from county law director Majeed Makhlouf confirms it's true. Makhlouf quoted from a 2008 law that allows counties to use competitive sealed proposals instead of competitive sealed bidding to award contracts. The law says (bolds mine):

In order to ensure fair and impartial evaluation, proposals and any documents or other records related to a subsequent negotiation for a final contract that would otherwise be available for public inspection and copying under section 149.43 of the Revised Code shall not be available until after the award of the contract.

That law ought to anger anyone who cares about open government.

I knew secrecy was building around the county's big move earlier this year, when I asked for the appendix to a report about the county's real estate holdings and got a call from FitzGerald, who politely explained why he wasn't giving it to me.

His argument, that the report's details were a "trade secret," was fishy. He also said the appendix would give away property appraisals and hurt the county's bargaining position, a practical argument that made more sense. (See my earlier post here.)

But now, he and Makhlouf are asserting the right to tell us nothing about the bargaining positions of developers competing for a public contract -- "so officials could negotiate the best deal for selling property," as the PD paraphrases. In other words, to preserve the county's ability to play developers against each other by keeping them in the dark and bluffing!

I thought the whole point of creating a new government was to create more accountability and openness.

Think about the last search for a new county headquarters.  It was botched so badly, it cost the public tens of millions of dollars and helped bring down the old form of government.

My story about the Ameritrust affair ("Tower Play," June 2008) showed that the county commissioners bought the Ameritrust complex thinking their plan would save money, but it would actually have permanently added to the cost of government. That became clear if you dug deeply enough into the county's assumptions about the costs of leasing vs. building, the costs of financing, and the costs of maintaining, renovating, and operating offices. But if you just trusted the commissioners' assertions, you had no way of knowing they were wrong.

This time, we'll know even less about the county's plans to move. Because the administration chose to request "proposals" instead of "bids," it looks like almost all the important information will be kept secret, in closed executive sessions of the county council and in documents locked up until the contract ink is dry.*

"So I guess we're just supposed to trust the process?" Laura Johnston, the PD's county government reporter, tweeted in frustration yesterday. 

Today I talked to David Marburger, a top media lawyer in town and co-author of Access With Attitude: An Advocate's Guide to Freedom of Information in Ohio. He said the sealed proposals law may not be as black-and-white as Makhlouf says. He read the law and pointed to another section of it:

A county contracting authority shall not use competitive sealed proposals for contracts for construction, design, demolition, alteration, repair, or reconstruction of a building... 

What if the county chooses a developer's proposal to construct a brand-new headquarters building? Could it still keep the proposals secret? Or, say the county chooses to lease an existing downtown office building (as most people think it will). What if the lease calls for the landlord to alter, repair, or reconstruct the building before the county moves in? Can the proposals still be withheld?

Either way, Marburger calls the law bad policy.

"Officials are allowed to commit to a contract before the public can see what the options were and influence the outcome," he says. "That can't be in the public's interest. ... By then, it's too late to even raise questions."

*Update, 7/23: FitzGerald says the proposals will be released to the public one step before the contracts are signed, when the negotiated deals go to the county council for approval.  The county request for proposals says so too.

This is an improvement, though it leaves the public with a short window of opportunity to see and debate the options before the contracts are signed.  See item #1 in my new blog post.

FBI, IRS investigated Dimora, Kelley, payment to Staubach Co. over Ameritrust Tower purchase

The FBI and IRS investigated whether Cuyahoga County officials received bribes for their decisions on the ill-fated Ameritrust Tower project, a prosecutors' filing revealed today.

Among the details alleged in the filing: Anthony O. Calabrese III -- an attorney for The Staubach Co., the county's real estate consultant -- asked county employee J. Kevin Kelley to lobby Jimmy Dimora to buy the Ameritrust complex.  Calabrese, who represented Staubach in contract negotiations with the county, promised to reward Kelley if the county purchased the complex.

And in October 2005, soon after the county bought the Ameritrust Tower and paid Staubach $2.6 million for its consulting work, Kelley and a company with a tie to Calabrese both received five-figure payments as part of an unidentified series of financial transactions.  The FBI and IRS investigated whether any money from Staubach was "funneled through others for the ultimate benefit of public officials," the prosecutor's filing said.

The new information is part of a superceding indictment of Calabrese, who's scheduled for a September trial on corruption charges.

However, the filing is also significant for what it does not say.  It doesn't assert that Kelley actually lobbied Dimora, or that Dimora received anything of value for his Ameritrust decisions, or that any of the Staubach money actually went indirectly to public officials, or that the Staubach Co. was aware of what Calabrese was allegedly doing.

Staubach isn't named in the Calabrese indictment, but the company is easily identifiable from details. (Only one "global real estate advisory firm" got paid $2.6 million "related to the Ameritrust project" in fall 2005.) The company had recommended that the county lease, not buy, the Ameritrust Tower as a headquarters site. Its contract called for it to be paid more than $4 million if a deal on a property it recommended was completed.  That $4 million-plus was later negotiated down to a $2.6 million.

Rob Roe, who was managing partner of Staubach (now part of Jones Lang LaSalle), told me in April 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.

Calabrese faces only one charge related to the Ameritrust Tower investigation: tampering with a witness or informant.

The indictment alleges that, a week or two after the July 2008 FBI corruption investigation raids, Calabrese met Kelley in downtown Cleveland. They went from a hotel lobby to the 21st floor of the Justice Center, the filing charges, where they talked in a place overseen by someone they could trust: then-judge Bridget McCafferty's jury deliberation room.  The charge alleges that Calabrese talked about the county corruption investigation and a Business 57, which had given Kelley $70,000 three years earlier.  Calabrese made false statements to Kelley, the charge says.

The new charge, Count 20 in today's indictment, explains a lot of the buzz around the Ameritrust Tower lately.  It reveals some of what the FBI was investigating in 2007 and 2008 (previous clues appeared in Judge Sara Lioi's late December opinion).

It also shows that county executive Ed FitzGerald's decision to investigate the Ameritrust Tower purchase, the Staubach contract, and Calabrese's relationship to it isn't just based on idle suspicion.  Judging by what he and top aides told me earlier this year, the U.S. Attorney has been communicating with him and county inspector general Nailah Byrd about the Ameritrust Tower's place in the corruption investigation.

The Calabrese indictment also contains a cameo appearance by Tim Hagan, aka Public Official 10, but it's one Hagan might find flattering: "PO10 [Hagan] questioned the County contracting with Business 55 [Staubach]. Despite PO10's concerns, the County awarded Business 55 an approximately $3 million contract related to the Ameritrust purchase and transition." (Mostly true, except the contract was signed before Hagan took office.)

Here are some links to my previous reporting about the Staubach contract and FitzGerald's Ameritrust investigations:

"How the county spent $3 million on Staubach’s Ameritrust contract," April 30

"How Hagan and Co. cut Staubach loose from Ameritrust deal," May 1

"Two county investigations of Ameritrust Tower underway since December; feds cooperating," March 16

"Can FitzGerald sue Staubach over Ameritrust Tower?" March 23

"FBI investigated failed Ameritrust Tower sale, asbestos contract," Dec. 29


(photo from clevelandskyscrapers.com)

A new county HQ: Will FitzGerald and council do better than the old regime?

Ed FitzGerald is itching to move out of the county administration building, the drab ’50s offices at Lakeside and Ontario. He’s about to start hunting for a new county headquarters site. The county council wants in on the decision.

That means the executive and council will have to succeed where their predecessors -- Jimmy Dimora, Tim Hagan, and Peter Lawson Jones -- failed. They’ll have to choose a new headquarters location wisely, negotiate a good deal, and save money while doing it.

They’ll have to be tough, shrewd negotiators, even when they sit across the table from downtown real estate interests, some of whom like to fund politicians’ campaigns. And without giving away their negotiating positions, they’ll have to be open enough about their decisions to show the taxpayers that the move makes sense.

That’s all going to be a lot harder than investigating their predecessors’ failures, as FitzGerald is doing. It’s easy to find fault with the last administration, harder to do better next time.

FitzGerald and his real estate consultant say the government could save $56 million over 10 years by moving out of the administration building and some of its other offices around town. He wants to choose a new headquarters location this year and move by 2014.

The administration building “isn’t a modern work space,” FitzGerald told me earlier this year. He thinks the site could become a hotel or parking structure for the Medical Mart and convention center.

The county basically faces three choices if it moves: Lease space in an existing building, buy a building and move in, or buy land and build a new headquarters. FitzGerald sounds like he’s leaning toward a lease.

“Under the previous administration, there were elected officials philosophically opposed to leasing,” FitzGerald told me. (He means Hagan, who told me in my 2008 Ameritrust Tower story that he didn’t want the county to be “subservient” to a landlord.)

“I don’t have that point of view,” FitzGerald said. “I’m totally open to leasing.”

The county is looking for 300,000 square feet of office space — which narrows its options.

The leading contender for a new county HQ seems to be the former Huntington Building at East 9th and Euclid.  Built in the 1920s for the Union Commerce Bank, the place almost looks like a government headquarters already, with Roman columns on the façade and a soaring lobby with beautiful murals. Other contenders are the old May Co. building and Eaton Center, once Eaton moves to Beachwood.

But FitzGerald and the county council need to answer a lot of questions before they commit to a new headquarters. After all, the old government failed at precisely the same task, spending $45 million on the Ameritrust Tower, the albatross skyscraper and superhero-battle stage that the new government is getting ready to sell at a loss.

So far, the FitzGerald Administration hasn’t even proven that the county needs to move.  It’s only asserted it.

Allegro Realty Advisors, FitzGerald’s consultant, says the county should sell 22 buildings, including the administration building and the Ameritrust Tower, and upgrade 15 buildings, including the Justice Center. Allegro estimates its strategy would save the county $56 million over 10 years and $84 million over 20 years.

But Allegro’s assumptions about the cost of leases, maintenance and renovations aren’t available to the public. The county has only given out an 18-page PowerPoint presentation and an eight-page list of county properties, with very little financial information.

I asked for the Allegro report’s two appendices and got a phone call from FitzGerald instead. He asserts that the appendices aren’t a public record.

“It’s trade secret information,” he claimed. Releasing the property evaluation would be “giving away our negotiating position with the private sector when negotiating prices,” he argued.

This is a very fishy interpretation of Ohio’s public records law. But it’s true that as taxpayers, we don’t want our government negotiating with all its cards on the table.

“Before we engage in the actual property transaction, we’ll have a very public conversation about why it makes economic sense,” FitzGerald told me.

We’ll need to see a lot more detail. The Ameritrust Tower debacle proved that rosy financial assumptions and a lack of attention to mundane occupancy costs like repairs, maintenance, and utilities can make a bad real-estate deal look good.

Thankfully, the county council has formed a special committee to look at the real estate transactions. Council president C. Ellen Connally says it’ll look at the short-term and long-term benefits of moving.  That’s key, because the question isn’t just whether the county can make some one-time money in a sale.  It’s also, will it be cheaper to operate the government after the move?

FitzGerald says yes, but he isn’t showing us the numbers to prove it.  Allegro’s estimated savings don’t distinguish between one-time cash and long-term savings.

The press and the public will need to make sure the new government doesn’t blunder into some awful sequel to the Ameritrust affair. Three pages in a PowerPoint isn’t enough proof.

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. 

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.

==

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)

What about campaign finance reform?

Ed FitzGerald and the county council want to make 10 changes in Cuyahoga County's charter, and they want to do it soon.

They want to write the inspector general into the charter (good idea), give the law department more power (a revival of their turf war with prosecutor Bill Mason), put the fiscal officer in charge of the treasurer's office (OK), and make some minor shifts in who does what. They aim to put all their ideas on the ballot this fall. 

But one big issue is missing from their to-do list.  What about campaign finance reform?

Political donors face limits on how much money they can give to federal candidates, state candidates, and candidates for Cleveland mayor and city council.  But there are no limits for giving to candidates for county-wide office.

That's why the late Dick Jacobs was able to donate $36,000 to Jimmy Dimora's first campaign for county commissioner in 1998, and give Peter Lawson Jones $25,000 when he ran for commission in 2002.  Dimora, Jones, and Tim Hagan then bought the Ameritrust complex from Jacobs in 2005 for $21.7 million. It was the unwise purchase of the decade.

Maybe gratitude for that early seed money played no part in the Ameritrust decision.  But isn't it at least a cautionary tale about how no one person should play such a dominant role in a politician's campaign fund?

The big money got even bigger in 2010. Matt Dolan, Republican candidate for county executive, got contributions of $400,000 and $300,000 from his uncle, Charles Dolan of Cablevision, and his father, Indians owner Larry Dolan. 

The charter's framers should have created campaign finance limits up front, rather than leave it to politicians who rely on contributions to run for re-election.  They didn't.

How about contribution limits of $750 per election cycle to county council candidates and $1,000 to candidates for executive and prosecutor? That's what an advisory group working on the charter transition proposed. The idea went nowhere.

Instead, county councilman David Greenspan proposed an ordinance in July that would set the contribution limit really high -- at $12,000.  And even that extremely mild reform has been languishing in the rules committee, which Greenspan chairs, ever since.

You would think that FitzGerald would push for campaign contribution limits, if only to protect himself from a financial assault similar to Dolan's in 2014.  Not so.

If FitzGerald and the council don't take action, citizens will have to.  Campaign finance reform should be the first thing the charter review commission tackles when it convenes in September.

Can FitzGerald sue Staubach over Ameritrust Tower?

Ed FitzGerald is mad. He wants to unload the Ameritrust Tower, Cuyahoga County’s $45 million albatross and skyline ghost. He knows he’ll have to sell the empty high-rise for less than the county put into it. Taxpayers are likely to lose more than $20 million.

So the county executive wants to sue The Staubach Co., the real estate consultant that recommended the Ameritrust complex as the best site for a new county headquarters in 2005 and got paid $3 million.

Is FitzGerald grandstanding, like Mayor Frank Jackson did with his lawsuit against subprime lenders? Or does he have a case?

FitzGerald told me he wants to know whether “a contract violation or fraud” occurred. When his law director finishes his investigation, we may know more about whether anything improper happened when lawyer Anthony O. Calabrese III — now a defendant in the county corruption investigation — negotiated the county contract on Staubach’s behalf. We may also find out why the county paid Staubach (now owned by Jones Lang LaSalle) so much money for the job.

But if FitzGerald tries to argue that Staubach’s advice was so bad, it shares responsibility for the Ameritrust debacle, I think he’ll have a hard time. That’s because the county didn’t make the deal Staubach recommended.

I unearthed Staubach’s final recommendation to the county while working on “Tower Play,” my 2008 story on the Ameritrust Tower affair. Staubach recommended the Ameritrust complex, but it didn’t advise the county to buy the site. It negotiated a lease deal that would’ve obligated the owner, The Jacobs Group, to build a new, second tower next door.

“We believe the Jacobs proposal … is the best overall offer,” Staubach wrote to the county commissioners on March 31, 2005. “The existing tower’s high-rise identity and historic rotunda are unmatched by the other submittals.”

Staubach recommended that the county lease the Ameritrust Tower, the Cleveland Trust rotunda, an attached parking garage and a second tower Jacobs had agreed to build for about $120 million to $125 million. The report says Staubach’s negotiations with Jacobs had gotten the company to add the garage and the new tower to the deal, “neither of which were previously offered.”

The second tower seems to have been an echo of Marcel Breuer’s original plan to build two Ameritrust towers. “The overall structure will effectively accommodate all targeted County functions,” Staubach wrote -- perhaps implying that the existing tower, standing alone, would not.

But Jimmy Dimora, Tim Hagan, and Peter Lawson Jones accepted part of Staubach’s advice and disregarded the rest. They bought the Ameritrust Tower directly from The Jacobs Group for $21.6 million in September 2005, without Staubach as a negotiator.

And Dimora and Hagan didn’t buy the tower to move into it. They bought it to tear it down — a path Staubach had warned against.

“We do not believe a totally new construction alternative would be fiscally responsible at this point in time,” its report added.

Two years later, that line in Staubach’s report was proven right. The commissioners halted the project in fall 2007 after realizing they couldn’t afford it. (You can read my full account of the project in my “Tower Play” story.)

FitzGerald’s administration could still argue that Staubach never should’ve recommended the Ameritrust site at all. In a previous phase of the search, Staubach had named its top four sites, including the Ameritrust complex, but noted drawbacks to each. The Ameritrust Tower’s flaws included its small floor plate — one of the reasons the tower isn't desirable office space today.

But if FitzGerald sues, the former Staubach could argue the county’s real losses came when Dimora, Hagan and Jones bought the tower instead of taking the lease deal. In the end, Staubach could deploy an argument most everyone in town accepts -- that Dimora, Hagan, and Jones are ultimately responsible for the taxpayers’ loss on the Ameritrust Tower.

(photo from clevelandskyscrapers.com)