Sunday, November 22, 2009

ONGOING COVERAGE: RIVER PARK SQUARE DEVELOPMENT

Attorney's pick faces opposition

Letter to Obama cites Ormsby's role in RPS

Jim Camden
Staff writer
March 10, 2009

A former Spokane mayor and other critics of the River Park Square project are opposing the nomination of a local lawyer to be the next U.S. attorney for Eastern Washington because of his involvement in the mall renovation some 10 years ago.

Former Mayor John Talbott and three others sent a five-page letter to President Barack Obama and key members of Congress asking that Mike Ormsby not be named to the district's top federal law enforcement spot because of his role in helping to secure financing for the controversial project. They claim the project was rife with fraud, despite federal investigators' determination last September that no fraud occurred in the mall's financing.

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Ormsby called the letter an "effort to demonize me as a part of this project" and said some of its statements were false or misleading.

"The letter far overstates my importance to and involvement in the project," he said. "I very much look forward to defending my reputation, performance and ethics in the vetting process."

Ormsby must be investigated by the Federal Bureau of Investigation before Obama makes the formal nomination, which then is subject to a hearing by the Senate Judiciary Committee and a full vote of the Senate.

Ormsby served as the attorney for the Spokane Downtown Foundation, a nonprofit group set up in the mid-1990s by development arms of what was then known as Cowles Publishing Co. when company officials were discussing a public-private partnership with the city of Spokane to renovate the aging mall.

River Park Square is owned by Cowles Co., which also owns The Spokesman-Review.

The foundation eventually sold $31.5 million worth of bonds that were described as tax-exempt. The foundation used the proceeds in 1999 to buy the mall's expanded garage from the development companies for $26.5 million. Critics of the project said the garage's price was improperly inflated by an unusual appraisal method, and the Internal Revenue Service later challenged the tax-exempt status of the bonds because of the way the mall deal was structured.

Investors who bought the bonds eventually sued the city, the development companies, the foundation, Ormsby's firm and others connected with the project, claiming fraud. The suit was settled out of court, with the city buying up the outstanding bonds from investors and reaching agreements with most of the co-defendants. Ormsby's law firm eventually settled a complaint with the IRS that he and another attorney did not perform the "due diligence" necessary before bonds were sold to investors; it also paid some $1.4 million in fees and taxes assessed by the IRS as part of its settlement with the city.

Critics also have contended Ormsby should have advised the foundation to cancel the purchase, or demand a lower price, when AMC Theatres was threatening to pull out of the mall over a parking rate dispute, and should not have agreed that the board would not disclose details about a backup plan the Cowles development companies were offering if they lost AMC.

The letter from Talbott, former City Councilwoman Cherie Rodgers, former Pend Oreille County Sheriff Tony Bamonte, and Tim Connor, a journalist who has written extensively about the mall for an online magazine, contends Ormsby had "central involvement … in the fraudulent River Park Square garage transaction."

"At a time when it's vital that the Justice Department send a message that it will not tolerate private fraud and public corruption, Mr. Ormsby's appointment would send the opposite message," they wrote.

Washington's senior senator, Democrat Patty Murray, said through a spokeswoman she still fully supports Ormsby for the job.

"We forwarded Mike Ormsby's name because he is well-qualified for the post," Murray spokeswoman Alex Glass said.

Ormsby brought up River Park Square himself in discussions with Murray's staff and said he was "happy to talk to the White House about it," Glass said.