Sunday, November 22, 2009

ONGOING COVERAGE: RIVER PARK SQUARE DEVELOPMENT

Mall garage price-fixing conspiracy suspected

Attorney wanted to accuse city leaders

Jim Camden and Jonathan Brunt
Staff writers
November 15, 2008

The attorney who originally handled the city's litigation over River Park Square wanted to accuse a former Spokane mayor and two City Council members of being part of a conspiracy to inflate the price of the mall's garage.

But those officials were never named in any lawsuit the city filed, and Seattle attorney O. Yale Lewis never could produce any proof to back up what he called "unavoidable conclusions" of that conspiracy in his correspondence with his replacement, Laurel Siddoway, and Mayor John Powers, who took office in 2001.

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Lewis' allegations in 2000 and 2001 against former Mayor Jack Geraghty, former council member Orville Barnes and then-council member Roberta Greene are contained in documents The Spokesman-Review obtained through a public records request.

Other documents reveal a dispute about how the city should handle the lawsuit that was filed by Lewis at the urging of a council headed by Powers' predecessor, John Talbott, but became the responsibility of Powers' new administration and a new City Council.

Documents also show city officials were raising repeated objections to Lewis' fees. He was eventually paid more than $106,000 for his work on many aspects of the River Park Square case.

With all investigations into the finances complete, it seems unlikely that the documents will cause new actions in court, but they do shine an interesting historical light on the city's legal strategy and infighting that was part of the dysfunction that came to symbolize city government in the early part of the decade.

Mayor Mary Verner, who flew to Seattle to meet with Lewis in May after he sent her the documents earlier this year, said she is confident former city officials did not act illegally.

"There isn't really anything when I reviewed (the records) that gave me any cause of action to do anything different as a result of the content of those documents."

She added that she remains supportive of the city's 2004 settlement with Cowles Co., which owns the mall and The Spokesman-Review.

"It's not a very satisfying outcome for me frankly that we still have a taxpayer burden to pay off," she said. "But does that rise to the level of criminal behavior? Apparently not, or those who investigated for criminal behavior would have found some."

Lewis' allegation of a conspiracy involves the $26 million price that was paid for the mall's parking garage. That price was the result of an investment value appraisal that tried to estimate the facility's value as a money-maker, as opposed to a market value appraisal to estimate how much it would cost in a transaction between someone who wanted to buy it and someone who wanted to sell it.

An investment value appraisal was unusual for Spokane, the city was told by local appraisers when it was seeking such an estimate. But it was legal and had been used for a similar mall garage in downtown Seattle.

In July 2000, as part of mushrooming litigation over the garage, the city sued the mall's owner and developer, the affiliates and subsidiaries of what is now Cowles Co., to avoid making a loan to cover unmet garage expenses. In that lawsuit, which Lewis authored, the developer was accused of conspiracy with "John Does and Jane Does" who might be city officials or city employees.

But the alleged conspirators were never named in any court documents.

Geraghty and Barnes both scoffed Friday at any suggestion of a conspiracy over the mall project. Greene, who was out of town, could not be reached for comment Friday.

"The theory was – and I think it was an accurate theory – that there was an investment value to (the garage)," Geraghty said. "It wasn't inflated; the investment value was a true value."

Neither Lewis nor any other city official ever contacted him to raise the questions about negotiations that led to the River Park Square partnership, although he did recall talking to Siddoway once to give her background on the genesis of the redevelopment project.

"There was never any conspiracy on anything," said Barnes, who left the council in 1999. "I think (the allegation) is stupid."

By 2001, voters had replaced Talbott with Powers, who had campaigned the previous fall on a promise to try settling the River Park Square controversy through mediation and negotiation. Powers named Siddoway as the city's chief counsel on River Park Square, and the documents make clear that the city was not going to pursue a claim for conspiracy as part of its legal strategy. Lewis suggested there was some political reason behind the decision.

"What political reason would I have had for deleting that claim?" Siddoway wrote on May 15, 2001. The city didn't need to claim conspiracy to get documents for the court case, the facts at the time didn't support such a claim and alleging conspiracy when the facts don't support it could expose the city to liability on a claim from investors who bought bonds to pay for the garage, she said.

Les Weatherhead, an attorney who handled much of the litigation for the River Park Square developers, said the price of the garage was developed over discussions with city officials. In the mid-1990s, then-City Manager Pete Fortin told city officials not to pay more than $18 million for the garage; developers said if that was the price, they wouldn't go ahead with the renovation. City officials later upped the price into the range of investment values reported by appraisers.

"That's not a conspiracy, that's a negotiation," Weatherhead said.

He recalled that Lewis' original lawsuit made a claim of a conspiracy with unnamed city officials.

"When Laurel Siddoway dropped it, I wasn't surprised," he said. "There was no negotiation that I can remember to drop it. I assumed it (was dropped) because it was a weak claim."

Siddoway said Friday that she believes the documents speak for themselves, and wouldn't comment further. Powers said he had hired Siddoway, because she could be more objective on the case than Lewis, and told her to do a thorough study of all the evidence.

"She saw nothing that would support any assertion of a criminal conspiracy against anyone," Powers said Friday. "I chose to follow Laurel's advice, and I think her advice was the right advice."

But Councilman Richard Rush said he questions the strategy taken by Powers' administration.

"I just wonder if we were served well by the legal strategy that was ultimately followed," Rush said.

Correspondence between Siddoway and Lewis reveal the two attorneys' tense relationship during a period when the mall deal dominated city governance.

"Yale, receiving your letters in the midst of trying to work constructively on the RPS case is like getting a call from my children asking me to referee a fight. There is nothing constructive that can come of it and most of what you say seems calculated more to create an inaccurate self-serving record than to advance the City's interests in a positive way," she wrote in a letter in May 2001.

Lewis responded a few days later: "I am sorry both that your children call on you at work to referee their fights and that your reaction to my letters is similar to your reaction to those calls. I, in turn, find your hostility and demeaning comments inexplicable."