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The 'K' Factor 06/06/02 

by Ted S. McGregor Jr.


There's one character in the saga of River Park Square and its troubled parking garage whose public persona stays well below the level most other players have experienced. Everybody knows (more than they probably would like) about Betsy Cowles and Steve Eugster, John Powers and even the Walker parking consulting firm. But you could argue that Spokane attorney Roy Koegen equals them all for his role in the deal five years ago -- and still today. But he rarely gets mentioned in press reports, and he has managed to stay out of the heaviest litigation that has exploded over the past two years.


The city's bond counsel since 1978, Koegen is well thought of throughout the community. But in the aftermath of the bondholders' decision to sue the city and the developer, Koegen and his firm -- Perkins Coie -- have been named in a cross-claim by his former client, the city. The bondholders, however, have not named him. Although no longer the city's lawyer, Koegen has continued to work behind the scenes to create a solution to the problem -- perhaps out of civic duty; perhaps to forestall legal action; perhaps both. Many of the efforts reported in the press about possible settlements have been Koegen's handiwork.


The Roy Koegen fan club is large and diverse -- in some surprising ways. While Eugster, for example, was among the first to characterize the financing deal as fraudulent and the result of a conspiracy, he doesn't count Koegen -- perhaps the deal's chief architect -- among the guilty. Koegen did earn the largest fee of all the bond lawyers engaged in the matter.


When Eugster made a strategy presentation earlier this year at a special Saturday city council session on the city's litigation, Koegen was behind a good deal of it. Eugster's plan was to refinance the bonds, pay the bondholders so their lawsuit would go away and then sue the Cowles for damages. Koegen drew up the refinancing plan Eugster presented that day.


Koegen says his efforts are intended to help the city overcome a situation that is "affecting everything. This is a great community, and all of us need to do what we can to move forward.


Former City Manager Terry Novak worked with Koegen for 13 years, and he says Koegen's clever lawyering saved the city hundreds of thousands of dollars over the years.


"Like a lot of people who meant well, Roy got caught up in all this," says Novak.


"Roy's a significant part of what happened and what's going on today," says Eugster. "He's a significant motivator in getting a mediation going, and he has enough sense to know this can be solved. But he's got his own self-interest, too"


But there's no doubt that Koegen is working on his own behalf, too, in part to restore his standing with what was his biggest client.


Koegen's approach has been to find a way to pay the bondholders in order to maintain the city's good credit. He also wants to remove the parking meter pledge from the deal, as it has been politically radioactive. Koegen thinks by refinancing the deal over 30 years, the garage could pay its own way without any contributions from other parties. But he concedes that political considerations dictate that all parties contribute financially to a solution. The city's special counsel Laurel Siddoway says the firm representing Koegen -- Seattle's Danielson, Harrigan & amp; Tollefson -- is willing to join in negotiations on a settlement.


In defending itself, the city is claiming it isn't liable at all. In the event a jury finds it is liable in the bondholders' claims, the city would then seek damages from the Perkins Coie firm. The city's position on Koegen then would be, says Siddoway, that he failed to do what he was hired for, and that nobody at the city is a bond expert, so they retained him to sniff out problems with deals like this one. As for his continued participation in the resolution, Koegen's approach on refinancing will likely play a role later in the process, but Siddoway cautions that it would have to be part of a global solution that doesn't just ask the city to assume all future risk. She adds that the mayor's office is already working with the city's new bond counsel, Doug Goe of Portland, on refinancing options.





The city didn't issue the bonds in question -- the Spokane Downtown Foundation did, at Koegen's advice. So Koegen wasn't the bond counsel on the issuance. He was, however, in the loop on the writing of the official statement that articulated the risk inherent in the deal. The way that risk was characterized is at the heart of the bondholders' claims.


Some attorneys involved in the case, however, think Koegen's problems run deeper. If, as he has told the press over the past two years, he warned the city council in private not to pay more than $18 million for the garage, an SEC rule may be interpreted to have bound him to drop out of the deal after the council rejected his advice. At issue is whether his advice to pay $18 million was based on what he thought the financing could support or simply what he thought was a fair price. (Either way, it would have been good advice for his client to follow.)


Koegen now says all the numbers they had in 1996 showed that the garage could support a $26 million purchase price. If, however, the city's bond counsel had made such a statement in public back in 1996, the critics would have had even more evidence to bolster their claims. Not only did Koegen and others keep this opinion to themselves, but they actively supported the deal with the higher purchase price.


Koegen's private advice to the city council might also bolster the bondholders' assertion that the city understood the risk involved in the deal very well and joined the project with its eyes wide open. The city's current defense claims that all the details of the financing were not clearly understood when the city joined the project.


So far, the bondholders have not named Koegen and his firm in their lawsuits, but they have until July 1 to amend their complaint. Koegen says his work has been supported in state court up until now, and he believes it will withstand future challenges.


Meanwhile, his firm is working to secure its position. Siddoway says Perkins Coie has been getting players in the case to sign affidavits supporting Koegen's version of events. So far, then-City Manager Bill Pupo and then-Assistant City Manager Pete Fortin have signed them. Siddoway admits they signed the documents freely, but she wonders if they really understood that they were committing to statements that might not be in the best interests of the city -- and to statements that she believes don't jive with the facts of the case. Former Assistant City Attorney Stan Schwartz signed one, too, but only after significant rewrites, Siddoway says. (Schwartz now works for Witherspoon Kelley, the developer's counsel.) Schwartz's boss at the city, Jim Sloane, was an easy one -- he works just down the hall from Koegen, having taken a job at Perkins Coie after leaving the city.

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