Individuals & amp;amp; institutions 12/13/01

by Ted S. McGregor, Jr.


Individuals -- Mike Adolfae Spokane's director of Community Development. Adolfae oversees the city's use of funding from the federal department of Housing and Urban Development and was part of the team that put together the plan that used a HUD-guaranteed loan to help the downtown redevelopment project with a lower interest rate than would have otherwise been available.





Orville Barnes A member of the Spokane City Council at the time the public-private partnership was adopted. Barnes' career was spent around retail as a commercial real estate agent and broker. Barnes' expertise was relied upon by other council members during their decision-making process, although the River Park Square deal was almost certainly more complex than anything he had ever seen before.





Gary Ceriani The Denver-based lawyer for the institutional bondholders (four of the nation's largest mutual funds). Ceriani has spent a career in this kind of law, sorting out who's to blame when multi-million-dollar deals go south. His message to the defendants (including the city, the developer, the underwriter, the consultants and others) is that they might as well settle now because it's only going to get more expensive.





Tim Connor and Larry Shook Journalists who have been covering the garage deal in some detail for a Web site of their own creation. At various times their venture has been funded by local businessmen Paul Sandifur and Bernard Daines, both critics of the garage, which has led some to call into question the fairness of their reporting. Currently they are continuing their project as a public service, and they have sued the city for cash damages for what they perceive as its failure to comply with public records requests.





Steve Corker Spokane City Councilman elected to the council in 1999, he helped to tip the balance of power on the council from pro-garage to an anti-deal approach. Corker endorsed the Yale Lewis lawsuit that alleged fraud and conspiracy, but at one point had brokered a deal with River Park Square Manager Bob Robideaux to create an at least temporary solution. His solution, however, was withdrawn after his colleagues on the council condemned it.





Betsy Cowles Leader of the effort to rebuild River Park Square and heir to her family's hefty fortune and 100-year-plus legacy in Spokane. Using consultants, lawyers and charm, Cowles oversaw and coordinated the development of probably the most stunningly complex legal and financial construct ever seen in Spokane. She has lived up to the family name in successfully preserving her family's downtown property values -- and saving downtown Spokane in the process. But she has also sparked a controversy that just won't go away and has tarnished her family's reputation.





Stacey Cowles Brother to Betsy and publisher of the Spokesman-Review. Some have been critical of the coverage his newspaper gave the family's business venture, and certainly some of the paper's public trust has eroded over the matter, fairly or not. It does appear now, with the benefit of hindsight, that the newspaper failed to apply the kind of critical coverage that would have been applied to any other major project of this kind. Certainly if the Sabey Corporation sought such a deal, coverage would have been different. At the turning point just before the city council was deciding whether to join the project, the S-R failed to cover in any significant way the various red flags being raised about the project.





John Dorsett Principal with Walker Parking Consultants, who visited Spokane as part of the consulting work his firm did for the city. The report his firm wrote was relied upon by the city, the developer and the bond buyers, and criticisms of its findings from as far back as 1996 did not shake people's faith in Walker's accuracy. Later, the report proved to be badly mistaken. Dorsett has not been speaking publicly since the litigation started, and his deposition is one of the most eagerly awaited by attorneys involved in the case.





Steve Eugster The garage deal's most persistent and vocal critic, Eugster first challenged the deal in 1997, when he argued that it unfairly enriched the developer. The state Supreme Court rejected that argument. Eugster was elected to the city council in 1999, and the city began to fund his legal excursions, including the hiring of his old colleague Yale Lewis. Currently Eugster is bringing a case in state court that challenges the deal on the grounds that it was entered into via illegally secretive meetings among city council members. When told by a judge that he could not be compensated by the city when representing himself in state court, he turned the case over to Chris Grimes. Grimes just happens to be his law partner, which calls into question whether Eugster has simply set up a puppet attorney to meet the requirement so he can still get paid by the city. Eugster is also threatening to file a federal anit-corruption suit (also known as a RICO suit), based upon a law written to help state attorneys general to defeat organized crime like the Mafia. Eugster says if he's unsuccessful in getting his RICO suit filed, he may run for Spokane County Prosecutor and pursue the case on the county's behalf. to date, Eugster's actions may have cost the developer as much as $2 million in legal fees and delays.





Pete Fortin The assistant city manager to Bill Pupo at the time the garage deal was contemplated and agreed to. Fortin also served on the city's finance committee, which ironed out many of the details in the deal.





Jack Geraghty Mayor of Spokane when the garage deal came before the city council. A year later, Geraghty, an unabashed supporter of using River Park Square to save downtown, lost his position to garage critic John Talbott.





Roberta Greene City councilwoman who served during the time the garage was debated and adopted by the city. Greene voted for the deal, but before the city joined the project, she did ask the council to consider a new study to confirm previous findings of various consultants. The council did hire Coopers and Lybrand to conduct that report, but the fact that the report raised significant questions about the project didn't deter the council from joining the project.





Phyllis Holmes City councilwoman who voted for the project in 1997. At that meeting, she pointed out that if the deal was bad, as some were saying, a firewall would emerge somewhere down the line. Both HUD and the bond underwriters had their chances to be that firewall, but both found the deal to be sound when they examined it.





Jim King The pro bono attorney for the Parking Development Authority, which was empowered to make decisions for and to operate the garage. King is the only attorney not getting paid in the deal's legal quagmire.





Roy Koegen The city of Spokane's bond counsel for many years, Koegen was the architect of the financing mechanism that was ultimately used. In late 1996, Koegen recommended the city step back from the deal a bit, and he proposed the use of the Spokane Downtown Foundation as the purchaser of the bonds, with the city guaranteeing the deal if income fell short of expenses for the garage. His deal was adopted and was given a rating a BBB- by the bond markets -- the lowest available above "junk" status. Later, Koegen was involved in the working group that wrote the official statement that bond buyers used to make their investment decision on the deal. When Eugster and the city council ran the litigation, Koegen was not named in the lawsuit; since Mayor John Powers took over, he has been named by the city in a third-party claim. The city's current position is that Koegen did not do the job he was paid to do and did not give an accurate-enough accounting of the risks involved -- an accounting that was reflected in the official statement. His defenders say that Koegen did his job by getting more protections for the city put into the deal.





Yale Lewis The Seattle attorney hired by the city council in the summer of 1999 who filed a lawsuit against the developer, alleging fraud and civil conspiracy. After nearly $1 million in legal fees (a figure that was reduced after the city challenged it), his suit was dropped with no effect when Powers took office. Lewis continues to be involved in the suit, however, which may constitute a conflict of interest. Although he once represented the city in this case, he has now taken up Cherie Rodgers' defense in a suit in which she was named by the developer. He has also filed counterclaims on her behalf. Some city officials see this as a conflict of interest, but these issues may now be moot as just this week Judge James Murphy dropped Cherie Rodgers' counterclaims in state court.





Rick Miller Talk radio host whose daily anti-River Park Square rants were a feature of the local media scene when the controversy was at its height. After a failed stint in the Seattle market, Miller is expected to be back on the Spokane airwaves in January, providing the likes of Eugster and Connor with an outlet for their perspectives.





Terry Novak Former Spokane City Manager who agreed to become the volunteer chairman of the PDA, which was to run the garage. Novak pointed out the facility's financial futility early and often, and he was involved in trying to create a solution before the mess ever wound up in court. Novak pleaded with the city to loan money to the garage to keep hope alive for a negotiated settlement and to prevent the city's bond rating from dropping again. After Powers vetoed the council's decision to make the loan this summer, Novak resigned.





Mike Ormsby Bond counsel for the Spokane Downtown Foundation. What was supposed to be a quick and easy piece of work has wound up embroiling Ormsby's firm, Preston, Gates and Ellis, in this litigation. Ormsby is proof to some that Powers is a secret pawn of the Cowles family, since Powers is willing to file a claim against Koegen but not Ormsby -- and Ormsby works for the Foundation, a creation of the developer. Also, Ormsby was Powers' campaign treasurer. The only hitch in the theory is that Powers rejected a settlement offer from the developer earlier this summer that would have let Ormsby (and others) off the hook. Ormsby and his firm are currently appealing the Internal Revenue Service's preliminary decision that the bonds used to buy the garage were not tax-free, as his firm had determined for the purpose of the official statement that went out with the bond offering.





Laurent Poole Vice president of the Sabey Corporation and leader of his company's efforts to convince Spokane officials that they were making a big mistake in joining the River Park Square project. Since Sabey owned NorthTown Mall, many wrote off his criticisms as based in anger that NorthTown received no such public assistance. But many of Poole's criticisms proved accurate. With his background in major retail projects, Poole claimed that garages don't cost what the developer was proposing. He also criticized the Walker Report for using faulty numbers, like the three-hour average length of stay. Sabey later sold NorthTown to JP Realty (owners of Silver Lake Mall and the Spokane Valley Mall), but Poole's arguments remain in the public record. In fact, in his recent rejection of motions to dismiss the bondholders' lawsuit, U.S. District Court Judge Edward Shea pointed to the Sabey presentations before the city council as potential proof that the city and others were aware of problems with the deal.





John Powers Elected to the newly created strong mayor position on a platform that included a pledge to seek a negotiated settlement to the River Park Square garage mess. Since he has been in office, however, solutions have eluded him and the controversy has only become more complex, with more lawyers and new lawsuits.





Bill Pupo City manager when the city council joined the public-private partnership. Pupo was a strong advocate of the deal, but he later left the city.





Bob Robideaux Manager of the River Park Square mall and key negotiator for the developer in the project. The relationship between Robideaux and Walker Parking Consultants is of interest, as some believe that Walker, while working for the city, was simply plugging in numbers provided by Robideaux. Walker has denied this. If true, however, it would have the appearance of the developer putting a thumb on the scale in order to boost the value of the garage by inflating its projected revenues.





Cherie Rodgers City councilwoman who joined the council in early 1997, one week after the city adopted the plan to own the parking garage eventually. Since then she has been a consistent critic of the deal, on the moral grounds that using public money for projects benefiting wealthy individuals and companies is wrong. After filling Chris Anderson's vacant seat, she has won two terms to the council in races centering on River Park Square. According to our recent Inlander/KXLY poll, Rodgers is the city's most popular council member.





Mark Schwartz A former bond attorney who has turned into a public advocate in exposing public bond frauds, Schwartz has popped in and out of the controversy from his home in Pennsylvania. Most significant, he started the inquiry at the IRS that led to the preliminary ruling that the bonds are not tax-free. In a bizarre incident at one council meeting, Schwartz claimed he was being harassed by a person in the audience and then got into a minor scuffle as the meeting adjourned.





Stan Schwartz An assistant city attorney who worked very closely on the negotiations between the developer and the city. Not long after the deal was consummated, Schwartz left the city to take a job at the law firm of Witherspoon Kelley -- the firm that represents the Cowles family and employs Duane Swinton and Les Weatherhead. Now Schwartz does not work on any River Park Square-related cases.





Laurel Siddoway A Spokane attorney hired by Powers to lead his legal strategy on the garage. A specialist in litigation, Siddoway worked with the Friends of the Falls to defeat the proposed Lincoln Street Bridge. Siddoway developed the legal theory that the city has no responsibility for the bond payments and removed charges of fraud and conspiracy that had been leveled at the developer by Lewis, who ran the litigation for the city council in 1999.





James Sloane Spokane's City Attorney since Expo '74, he and Koegen were the city's chief decision-makers on the deal when it came to questions of law. Critics say he was too eager to see the deal go through and was blind to warnings. Sloane resigned from his post when the strong mayor system took over, and he has since taken a job at the firm of Perkins Coie, the same office where Roy Koegen works.





Duane Swinton The Cowles' family attorney, who handled many of the legal issues surrounding the deal in the early stages. One of the best lawyers in the state at getting documents opened for his other client, the Spokesman-Review, he was kept busy writing confidentiality agreements that had to be signed by those privy to information the developer deemed sensitive. Since the deal has entered its litigious stage, Swinton has moved aside as Les Weatherhead has taken the lead in defending the developer.





John Talbott A former council critic who swept into office -- albeit narrowly -- on an anti-garage deal platform. Like Geraghty before him, the garage proved his undoing, as Powers defeated him in 2000 with a more moderate message that involved finding a way for the city and the developer to share the pain.





Les Weatherhead The Witherspoon Kelley attorney picked to handle the litigation over the garage deal. With 21 years of experience in the courtroom, Weatherhead's first legal salvos were somewhat restrained, and only focused on getting the city to fork over the money the developer believed was owed to them. Later the gloves came off, and the developer began naming individual council members who had criticized the project -- a tack that suffered a setback earlier this week in state court. Ironically, Weatherhead and his wife lost their business, Annako Toys, when River Park Square was shuttered somewhat unexpectedly prior to the redevelopment project.








Institutions -- City of Spokane The public half of the public-private partnership. Spokane joined the project out of a desire to save downtown -- a goal made all the more pressing by the lobbying of the developer and citizens concerned about the fate of the city's heart and soul. Although public officials in 1997 appear to have understood the risks, today the city is claiming it was misled, and that the risks were cloaked in bad advice from the likes of Walker and its own bond counsel.





Coopers and Lybrand Now Price Waterhouse Coopers, this consulting firm was hired in late 1996 to double-check the work of several consultants hired to create the deal that would bring the city into the redevelopment of River Park Square. They did good work, as the concerns they listed have proven to be right on point. Still, their report did confirm the controversial purchase price, and its warnings were not enough to stop the council from adopting the plan in early 1997.





Cowles Publishing The branch of the Cowles empire that runs the newspaper. Critics say the real estate developing branch and the publishing branch were too cozy, and that more critical reporting by the city's only daily newspaper could have pressured the city into holding the line and negotiating a better deal.





Foster, Pepper and Shefelman A Seattle law firm hired by Prudential Securities to help with the technical aspects of writing the official statement that would go to bond buyers considering purchasing the bonds used to fund the purchase of the garage. The firm now finds itself named in the lawsuit from those who did buy the bonds. They claim that Foster Pepper should have included more warnings of risk based on the documents they knew to exist, such as the Coopers and Lybrand Report.





Internal Revenue Service Everybody's favorite federal agency come April 15, the IRS decides whether bonds are tax-free or not. After reviewing an earlier opinion that these bonds qualify tax-free, they disagreed, apparently thinking the deal look a little too private. Their preliminary ruling is under appeal.





Parking Development Authority The quasi-public agency charged with running the garage. It turned out to be a thankless task, and its volunteer director, Terry Novak, ultimately quit.





Perkins Coie One of the state's largest law firms, its relatively small Spokane office is home to Roy Koegen, who was the city's bond counsel for many years. The firm is now named in a third-party claim by the city, arguing that that the firm shares in the blame for the failing garage and its troubled bonds.





Preston, Gates and Ellis The Spokane law firm that did the bond work for the Spokane Downtown Foundation, which ultimately issued the bonds and bought the garage.





Prudential Securities Underwriters of the bonds, the firm is now named by the bondholders for not putting stronger disclaimers into the official statement it had prepared to go with the bond issue.





River Park Square Doing business as Citizens Realty and Lincoln Investments, the mall itself is the private side of the public-private partnership. First built in the mid-1970s, the mall's list of tenants dwindled along with downtown as a whole until the need for an update became obvious in the early-1990s. River Park Square is owned by the Cowles family, which also owns the city's only daily newspaper, a TV station and much more. The new incarnation of the mall succeeded in securing Nordstrom in Spokane, and it brought in a handful of shops that had never been in the Inland Northwest before. The AMC Theaters, in particular, have become major people-magnets, and downtown's restaurants and other businesses have come to depend on the vitality the 20 screens generate.





R.W. Robideaux and Company The property management firm that manages the mall. Since the PDA has never had the wherewithal to do so, Robideaux has also continued to operate the garage at the developer's expense. The company's relationship with Walker Parking Consultants has been called into question.





Spokane Downtown Foundation A creation of the developer, the foundation was viewed by city officials as a good vehicle to use as the purchaser of the garage. After the foundation paid off the garage in 20 years, the garage would belong to the city. The foundation is essentially a conduit for funds, as it has no assets or income (although it now owns the garage and is liable for the bonds). Its three-member board of directors consists of former Chamber of Commerce President Chris Schnug, attorney Dave Broom (a former partner of John Powers) and Empire Health Services CEO Tom White. The City of Spokane pledged the use of parking meter money to help the Foundation pay the garage's bills under some circumstances (just what those circumstances are remains an open legal question).





U.S. Bank Called the indenture trustee in the bond transaction, U.S. Bank is playing a kind of financial housekeeper. It collects money and makes payments. In August, after the mayor vetoed a loan to the garage, U.S. Bank decided not to tap the reserve fund to make that bond payment, which meant that a payment was missed.





Walker Parking Consultants This Indianapolis-based firm has been called the nation's top parking consultant. First employed by the developer, Walker was hired by the city to calculate how much money the garage could generate. Their figures -- figures that later proved to be way off -- wound up being relied upon for the purchase price, which arguably was inflated as a result. The city still wonders if the work Walker did was truly an independent feasibility study, as advertised. As a result, Walker has been named by the city in a cross-claim for professional malpractice.





Witherspoon, Kelley The Cowles family's law firm for nearly 100 years, Witherspoon, Kelley, Davenport and Toole is now defending the developer in the federal case brought by the bondholders. It's also bringing its own cases against individual council members and the council as a whole, in an effort to get the city to live up to what the developer sees as the bargain that was struck back in 1997.