Wednesday, December 13, 2006

Lawrence Water Deal: Crime Pays

If you didn't think crime pays, you haven't taken a look at the proposed sale of Lawrence's water utility to Citizen's Coke & Gas. For those of you who need a little refresher course, former Lawrence Mayor Tom Schneider (R) decided it was in the best interest of Lawrence water users to privatize the water utility. He illegally awarded a privatization deal to a company founded by two of his former city employees and close political allies for a $1,000 investment. The deal required the city to funnel more than $4 million in cash and city-owned assets to the private company, which promised all kinds of savings to the taxpayers. Instead, their water bills skyrocketed.

When Deborah Cantwell took over as mayor after Schneider, she challenged the legality of the privatization contract. She was particularly upset that the city's long-time legal counsel, Ice Miller, had written the contract while representing Lawrence Utilities, LLC, the private entity which took over the water utility. State law requires privatization deals to be undertaken through a public, RFP process, which gives prospective bidders notice and an opportunity to bid on any proposed privatization deal. Lawrence, upon the advice of counsel, ignored that law and struck the deal with Schneider's buddies behind closed doors.

A Marion Superior Court struck down the privatization agreement because it had been entered into in violation of Indiana law, a case which is currently pending on appeal before the Indiana Court of Appeals (See Indiana Law Blog for more). During the litigation, Lawrence attorneys sought to remove Ice Miller from representing Lawrence Utilities because of their obvious conflict of interest. To the amazement of Indiana's legal community, Ice Miller attorneys defended their dual representation on the grounds that it had served as a mere scrivener in its role drafting the contract on behalf of the city. If something has a familiar ring here, there is a reason. Ice Miller has performed legal work for Center Township for many years. It also represents the investors of 300 East to whom Center Township Trustee Carl Drummer leased space in the Julia Carson Government Center without entering into a formal lease as required under Indiana law. Ice Miller partner, Lacy Johnson, is also an investor in 300 East.

Despite an Indianapolis Star expose' on the deal and a lengthy federal investigation, the Star reports today that the criminal investigation has concluded, paving the way for the proposed sale of the utility to Citizens Coke & Gas. For those of you connecting all the dots, our U.S. Attorney in Indianapolis is a former attorney for Ice Milller. The sale would net the City $51.3 million for the assets. Unbelievably, it would pay Lawrence Utilities, LLC $7.6 million. As the Star' Kevin Corcoran reports today:

A controversial water company deal that prompted a federal investigation and left Lawrence residents paying some of the highest rates in the metro area appeared to be nearing an end Tuesday.

As the FBI closed its investigation without charges, Lawrence and Citizens Gas & Coke Utility officials announced they want to form a public charitable trust that would own and operate Lawrence's water and sewer utilities.

The proposed agreement with Citizens Gas would lead to a reduction in the combined water and sewer rates that nearly 15,000 residential and commercial customers pay by an average of 20 percent, saving ratepayers $3 million a year.

The plan emerged from months of court-ordered mediation and would end a
lawsuit brought by Lawrence officials and ratepayers to regain control over the waterworks from a private company, Lawrence Utilities LLC.

City officials approached Citizens Gas officials this summer about buying the utilities should the city regain control of them. Under the agreement, Citizens Gas would form a nonprofit trust called Citizens Water of Lawrence to assume ownership of the utilities.

The nonprofit trust would restore Indiana Utility Regulatory Commission control over water rates, which would be set on a break-even basis.

Lawrence would get about $40 million in cash for the utilities' land, buildings and equipment. By placing the assets in an irrevocable trust, the waterworks would be removed from political control or the possibility of a private sale.

Then-Mayor Thomas D. Schneider, a Republican, handed control of the utilities to three of his political supporters in mid-2001 without taking bids. Company records show the men invested $1,000, and Schneider provided a $4.84 million infusion of cash, vehicles and assets to help launch their startup company.

Customers have criticized Schneider's pact, which could extend for 50 years, because it included three hefty water rate increases in less than two years, doubling Lawrence's rates.

And you thought crime didn't pay. Let the word go out, if you want to engage in public corruption, move to Indianapolis. We are officially worse than Arkansas now. And Tom Schneider and his buddies did get the last laugh.

CORRECTION: Okay, Mayor Cantwell and Sen. Maria Cantwell (D-WA) are not sisters as reported earlier--stupid mistake on my part. Maria is, however, a native of Indianapolis and the daughter of the late Rep. Paul Cantwell (D-Indianapolis), who was an uncle of the Mahern brothers, Ed and Louis.

Also, here's an archived Star story and lots of other information on the original privatization deal.


Anonymous said...

What a completely unfair and unwarranted slap at Mayor Cantwell, AI.

She inherited all of this deal. Political goons like Kyle Walker and Paul Ricketts have dogged her every move for three years. She has sometimes stumbled, but never out of greed: her mission has always been for the citizens who elected her.

She decided to cut the losses, and move on, and undo the entire wicked deal. Doing otherwise, with the power of Ice Miller and some high-priced Chicago attorneys working on the case, would've meant two to five more years of protracted legal expense and lost opportunity.

Cantwell prevailed in the trial court, and that fight, plain and simple as it appeared, took over three years.

The real lesson here: beware Ice Miller. They'll do anything, ANYthing, to protect their image, including harrass plaintiffs through multiple-front assaults.

And your Center Township/Drummer reference is appropriate. Drummer is chairman of the Fort Harrison Reuse Authority, an appointment he sought out and pushed others aside to get. Ice Miller's fingerprints are all over their files and multiple lousy real estate deals. Drummer sits in their RCA Dome suite often. Interesting, huh?

Cantwell may not have the midas touch, but her political instincts, and her sense of right and wrong, were absolutely correct in this deal. She's throwing in the towel to more legal challenges, and the Lawrence tax/ratepayers win. Plus, the purchasing entity, Citizens Gas & Coke, has a long history of operation right under our nose. So their track record is good.

I also sense, in a small way, that she realizes her re-election next year is in question, although it shouldn't be, and she wants to finish this on her watch. That is poignantly admirable.

It looks to me like Schneider, Lawson, et al, ably assisted by the Ice Miller stooges, crafted this deal just tightly enough to escape federla charges.

By the by, now that the FBI is done, does that mean our county prosecutor can get involved? Ample state laws are alleged to have been broken.

I can tell you this: multiple persons' jobs anmd livelihoods have been threatened over this situation.

Just asking.

Gary R. Welsh said...

I applaud everything Cantwell had done with respect to this shady deal since taking office; however, in one fell swoop, she's erasing all the progress she's made in my opinion. She will win the case on appeal; nobody should doubt that. This is a huge windfall to the Schneider cronies. Cantwell is making that possible. That's a fact which is hard to ignore.

Anonymous said...

Cantwell (D-Lawrence) and Cantwell (D-Washington) are NOT sisters. In fact, I do not believe they are related.

Anonymous said...

This is so boring, can't you talk/write about the success of the war in Iraq and other Bush foreign policy successes?

Anonymous said...

I didn't think they were related. I believe the Senator is the daughter of the former local City Councilman, Paul Cantwell, but I could be wrong.

You may be right, AI, but I am pretty sure Mayor Cantwell is worn down by this fight. And the legal bills are mounting precipitously. My legal beagle friends tell me it'll take 2 years minimum, maybe more, and untold money.

Of course she stood a good chance to win on appeal.

I bet she decided to take a bird in the hand, rather than risk it. Can't say as I blame her. Her every move, whether it's a dumb move or brilliant, is dogged by critics. Schneider had lined his pockets and installed his relatives in more jobs than you can imagine. How'd you like to start every day knowing you'll be harranged by fools? It's gotta get old. Like CHinese water torture. This way, if she settles and the City Council there agrees, it's over.

By the way, why is Lawrence even a separate city? Talk about duplication of services.

(I know. Can of worms. Thinking out loud here)

Anonymous said...

AD..You are right on this one. She has strong opposition in democrat Dean Jessup. She is in grave danger of losing the slating. MCDCC will leave hands off, not endorsing any candidate in this race. Good for Mr Jessup, bad news for Cantwell.

This deal seals the deal, as far as I'm concern, for Mr. Jessup He is a long time City of Lawrence resident having raised his family here. We don't know for sure where Cantwell lives for god sakes.

Also her "boyfriend" Steve Laudig and the paid Lawrence City Attorney will share in the money grab. Despotism? I think so.

But the Lawrence Comnmon Council must first approve this sham. I will be calling them all expressing my oppsition. I hope many others will do the same.

Anonymous said...

9:59 Sure, water now police and fire next. That's excatly what this represents. If mayor Cantwell can't stand the heat, she needs to get out of the kitchen. A responsible Democrat is waiting in the wings.

Anonymous said...

Maria Cantwell (a cus to Louie and Eddie Mahern) Nooooo Deborah's in this family. I know personaly they do not want to have anything to do with her. I know cause I'm a cus too.

Anonymous said...

Jessup will NOT win in slating. He has not contacted ward chairs yet to ask for their help/support and I don't believe he can raise the slating fee... MCDP knows they have to work hard to hold onto this office, and will. It would be off to a better start if everyone would play ball together!

Anonymous said...

11:05...Dean will meet the slating fee and enter and win the slating convention. In politics you need to learn how to count. Sorry guy you got a F.

Anonymous said...

A responsible Democrat

If that isn't a contradiction of terms ...

Anonymous said...

Mayor Cantwell hasn't always demonstrated the best judgment, but I never once doubted her heart was in the right place.

The death by a thousand cuts, which she has endured, makes her a wounded target.

Dean Jesusp would be better? Are you serious? If you're a liquor store owner, maybe.

Why the Democrats would not unite behind their first mayor in Lawrence, is strange.

Evidently they just love to fuss in Lawrence.

I have no idea whether Dean Jessup can raise the slating fee or not. Don't really care. That will probably be the object of sniping back and forth until the deadline date.

But to ditch a mayor who's endured so much, is not smart. She'd win in the fall. Republicans in Lawrence are disorganized, on the ropes. Ricketts is gone (yeah!) and I know many, many Republican women who backed Cantwell in 2003 and will do so again.

If there's a slating fight, I wonder who Julia will back?

What say you, Wilson?

And as for the "cuz" noted above, I know some of those cousins, too, and none speaks ill of Mayor Cantwell.

Nice try, though.

Anonymous said...

Mr. Arnold - Counting is important. Parts of one ward is what I have for Dean... A letter to precinct committee people is a start, but he needs more that that to win their vote and affection...

As for this deal, is it ideal? No. Do I wish the Corp. Counsel and Laudig weren't each getting a cool, quarter mil each? Yes. Would I rather have the IURC with some oversight of the utility and have it in the hands of the a not-for-profit, absolutely.

Everyone wanted to know what the city was going to do without the $3M in annual payments from LWU, LLC... Well, now we have 13 years to figure it out, if the council doesn't spend the money like drunken sailors.

We got a bum deal under Schneider, and if you or I wanted to EVER see the end to this litigation (and I'm a young person), this was as good a deal as we could hope for...

Dean is a nice guy. I'm just not sure this was the best move for the party or the city of Lawrence. Democrats in Lawrence are starting to look like the Republicans in Lawrence. And that's no compliment.

Anonymous said...

go to ebay number is 250058452785

Anonymous said...

What the hell does a corrupt politician in this town have to do to go to jail? This city is becoming so third-world like.

Anonymous said...

go to ebay number is [I AM A EBAY SPAMMER]


Anonymous said...

2:09...Its not a try babe, only fact.

Anonymous said...

anon 2:10...I agree this thing should have a hearing and believe it will get one . The Common Council members, I'm sure, will do just that. I have to think there must be a better way. We will see.

Sweet Baby Avery said...

"Political Goons Kyle Walker and Paul Ricketts?" Please! Whoever made that comment has no idea just how community minded those two are.....