Wednesday, February 25, 2009

Unraveling The Tangled Web Of Conflicts On The CIB Board

The American people scratch their heads and wonder how government regulators of banks and publicly-traded and regulated businesses could allow them to betray the public's trust. We wonder how there could be trillions of dollars in unaccounted expenditures by the Pentagon. And closer to home, we ask how an unelected board could shoulder the people of our community with a mountain of debt and and a $50 million operating deficit incurred primarily for the personal benefit of the state's wealthiest two families and be told the public must pay higher taxes to fix the problem. In each instance, you can track the root of the problem back to a pervasive pay-to-play environment and a never-ending revolving door between the entrusted regulators and the regulated.

To illustrate this problem with our own deeply-indebted Capital Improvement Board of Managers of Marion County, I requested from the City's Public Access Counselor the most recent statement of economic interest statement on file for the Board's nine appointed members. Despite Indianapolis' vague and incomplete disclosure requirements, more than enough information could be gleaned from the members' statements to shed light on why this obscure, unelected board is so non-responsive to the public interest and, at the same time, such a big cheerleader for those who benefit directly from the capital improvements over which it has been entrusted. Not surprisingly, I found reporting among the members inconsistent and, in some cases, incomplete. This is an important point for members of my own Republican Party to keep in mind, as they were quick to cast stones at the former Democratic President of the City-County Council, Councilor Monroe Gray, when he failed to disclose contracts a business he owned had with the government-related entities.

Let's start with the Board's President, Robert Grand. He answers affirmatively questions asking if he has a "direct or indirect pecuniary interest in any contract with the City of Indianapolis or Marion County" and has "received any compensation from any business entity" that is "doing or contemplates doing business with an agency of the City of Indianapolis" during his term on the Board. Grand also affirmatively acknowledges owning stocks, bonds or other investments" which have "a value in excess of $5,000 and which business entity" is "doing or contemplates doing business with an agency of the City of Indianapolis or Marion County." Grand's disclosure, however, becomes blurred on the part of the form where he is asked to provide an "additional explanation" if the answers he gave on the form "needs additional explanation."

Grand discloses that he is a partner with the law firm of Barnes & Thornburg. Grand's biographical listing on his firm's website also lists him as the firm's "Managing Partner", a fact not mentioned in his disclosure. The firm's bio for him states that he "concentrates his practice in the areas of public finance and governmental regulation." "In the public finance area, he counsels State officials, county officials, and mayors on various aspects of bond financing issues and also assists them with many aspects of economic development initiatives." Grand is also known in Republican circles for his ability to raise lots of campaign contributions for Republican candidates. His bio notes he has served as an advisor to many Indiana Republican candidates and chaired the Bush-Cheney Indiana finance committee. It should also be noted that Grand's law firm raised more money for Ballard's mayoral campaign in 2007 than any other city law firm.

Grand's disclosure states that his firm "has represented the City and County from time to time for several years based on the knowledge and expertise of the firm." He states that he anticipates his firm "will have other contracts." He adds, "The firm does not represent the Capital Improvement Board of Managers of Marion County. Noticeably missing from Grand's disclosure statement is his representation of the Simon Property Group and the Indiana Pacers. Much ado was made about this conflict of interest because of the CIB's lease with the Pacers on Conseco Fieldhouse and its financial relationship with Circle Centre Mall, which is operated by Simon Property Group. Grand assured the public he had taken steps up to wall himself off from participation in matters which presented a conflict of interest. Yet, reading his disclosure statement, you would have no idea such a conflict even existed. Instead, Grand vaguely discloses the fact that "several clients for whom I do legal work are doing business with the City of Indianapolis and Marion County. That list is quite lengthy, but his statement does not list who those businesses are. The fact that his firm represents AT&T, for example, should be disclosed but is not. Also, Grand on at least two separate occasions as Board President had to abstain on votes approving parking agreements between the CIB and Wellpoint and Dora Brothers, two adjoining property owners of the CIB. Those clients aren't listed on Grand's disclosure form.

Grand does list 557 shares of common stock he owns in Citigroup and another 184 shares of common stock in Microsoft, neither of which would seem to pose serious conflicts for Grand. I should also note that Grand's disclosure states that he, his spouse or minor children have not accepted any gift or honoraria in excess of $100 from a business entity which is "doing business with an agency of the City of Indianapolis or Marion County.

Patrick Early is the Board's Vice President, its former President and its longest-serving member. His disclosure statement is very brief. He lists as his employer, Somerset CPA. Although his firm's website bio lists him as one of "25 principals" and identifies him as the company's "President", his disclosure statement omits those two items. He answered negatively to every question pertaining to potential conflicts. He acknowledges receiving one gift valued at $225 from the Indianapolis Colts identified as a "Super Bowl Souvenir". I'm surprised that his firm, unlike many of the other major CPA/consulting firms in town, has not done business with the City of Indianapolis or Marion County. I'm also surprised Early had no free tickets to disclose.

Ann Lathrop is a recent addition to the Board and serves as its treasurer. Lathrop formerly served as City Controller during the administration of Mayor Steve Goldsmith. She also formerly worked for ACS, a client of Bob Grand's Barnes & Thornburg. ACS recently won the contract to privatize Indiana's welfare delivery system. She discloses as her employer, Crowe Chizek, and offers this additional explanation: "From time to time, Crowe provides services to the City of Indianapolis and Marion County." Although Crowe's website identifies her as a "partner" of the firm, her disclosure statement does not state that fact or the type of work she performs for Crowe. She adds, "My spouse, Michael Gargano, is employed by KPMG." "KPMG provides services to the City of Indianapolis and Marion County." She had no gifts or honoraria in excess of $100 to report.

On the one hand, Lathrop's experience as the City's former controller makes her a potentially valuable asset for the Board. At the same time, both she and her husband work for companies which rely on contracts with the City of Indianapolis and Marion County. Because of Lathrop's and her husband's jobs, their employers are vulnerable to financial retaliation if she doesn't conform her actions on the Board to persons who have influence within the Ballard administration. Grand and another Barnes & Thornburg attorney, Joe Loftus, exercise enormous power in the Ballard administration. The two ran Ballard's transition team and, according to the Indianapolis Star, they sit in on weekly senior staff meetings with Mayor Ballard. Lathrop's desire for her company to win favor with key people to ensure a steady stream of contracts for her employer could severely cloud her independent judgment as a CIB board member.

Dorothy Henry serves as the Board's secretary. She states that her employer is the Indiana Healthcare Association. The Association is a trade organization for nursing homes in the State of Indiana, and Henry is a registered lobbyist for the organization, neither of which are mentioned on her disclosure statement. Henry formerly worked for the City of Indianapolis in the Goldsmith administration with Joe Loftus and Ann Lathrop. Her husband, Bruce Henry, was promoted to head up human services at IMPD in the Ballard administration after his unsuccessful bid for a City-County Council seat as a Republican in 2007. Her husband's employment is not disclosed; however, the wording of the disclosure statement purports to exclude a "contract of employment" from the disclosure requirement. Henry indicates that neither she nor her spouse or minor children have accepted gifts or honoraria exceeding $100, and she answers in the negative on every question pertaining to potential conflicts of interest. Coincidentally, Barnes & Thornburg represents some of the IHCA's clients and has lobbied the Indiana legislature in the past for its nursing home clients. It doesn't take a rocket scientist to figure out that Henry would be wise not to risk offending certain persons in her service on the Board and face potential retaliation.

Craig Huse is one of the newly-appointed members of the Board by Mayor Greg Ballard. Huse discloses that St. Elmo Inc. and Harry & Izzy's Inc. are his employers. His disclosure statement does not indicate that he is a co-owner of these neighboring, downtown restaurants. Huse's statement indicates that he has no direct or indirect pecuniary interest in any contract with the City of Indianapolis or Marion County. Harry & Izzy's operates a restaurant at Indianapolis' new International Airport, which is not mentioned on Huse's statement. His St. Elmo's and Harry & Izzy's restaurants are located just a block from the Indiana Convention Center, two blocks from Conseco Fieldhouse and within walking distance of Lucas Oil Stadium and Victory Field. It goes without saying that his businesses receives a direct economic benefit from the CIB's facilities that most businesses in Marion County never see.

Huse's disclosures offer just one additional explanation for one of his investments. He states that he is an investor in Centaur, Inc. Centaur is a large gaming/entertainment-related company with a controversial past. Centaur owns Hoosier Park horse race track in Anderson, which operates an off-track betting parlor in Claypool Court, which is owned by Simon Property Group and connects to Circle Centre Mall. Its race track recently won the right from the Indiana legislature to operate a racino at its horse race track. It also helped establish the Argosy riverboat casino in Lawrenceburg, Indiana. Centaur's lobbying activities became the subject of scrutiny last year in Pennsylvania, where the company's attempt to win a gaming license to operate slots at a horse race track was turned down. The company was criticized for making hundreds of thousands of dollars in contributions to key politicians prior to the passage of a state law banning gaming-related contributions. It was also criticized for its ties to former Conseco CEO Steve Hilbert.

There have been recent discussions about the possibility of establishing a downtown casino to bail out the CIB, an idea originally proposed by former Mayor Bart Peterson as a way of funding the construction of Lucas Oil Stadium. Centaur would no doubt be in the driver's seat to win a downtown casino license because of its OTB's presence in Claypool Court tied to its racino in Anderson. Centaur's business relationship with the Simons, who own the Pacers, could be an added boost for the company.

Doug Brown is another attorney member of the CIB. He identifies Stewart & Irwin, P.C. as his employer, in which he discloses that he is an "Equity Shareholder." Brown adds, "One or more of Stewart & Irwin's clients may from time to time to business with the City of Indianapolis." Brown, unlike Grand, specifically identifies one such client posing a conflict for his role on the board. "The firm has performed legal services for Lucas Oil Co., the new naming sponsor of the Indiana stadium." He adds, "I abstained from voting on the approval of the Lucas Oil Co. Agreement and will abstain from voting on any Agreements in the future involving my Firm or its clients." Brown also acknowledges that he has received gifts or honoraria in excess of $100, but he does not itemizes them.

While it's noble that Brown disclosed his firm's relationship with Lucas Oil, it raises a serious concern that a member of the Board was involved in representing a company that was competing with other companies to purchase the naming rights to the new stadium from Colts' owner Jim Irsay. Brown's disclosure does not specify the legal services his firm performed for Lucas Oil so it is unclear whether it had anything to do with the naming rights. Lucas Oil obviously had a vested interest in seeing the new stadium built and a new lease entered into between the CIB and the Colts. There is the potential for the appearance that Brown's knowledge of the Board's negotiations with the Colts could have aided Lucas Oil in winning the naming rights it purchased for a whopping $120 million. Under the lease deal with the Colts and the CIB, Irsay gets to keep the revenues from the stadium naming rights, as well as all other advertising opportunities at the new stadium. The Colts have refused to disclose the amount it is earning from those other revenue opportunities.

Brown also lobbies for Indianapolis Downs, the Shelbyville horse race track that won a state gaming license for a racino last year. Like Huse's Centaur, Indianapolis Downs would have a considerable interest in a potential downtown casino to bail out the CIB. A casino that didn't involve Indianapolis Downs could prove financially devastating to the company.

City-County Council President Bob Cockrum is the Council's representative on the CIB. Cockrum's disclosure statement lists him as being retired. He discloses that one of his sons is an executive with White Lodging, the company to which the City of Indianapolis awarded the right to develop a new J.W. Marriott convention hotel adjacent to the Indiana Convention Center to be connected by an elevated connector. The City pumped approximately $65 million in public funds into the project. Cockrum is the only Board member who itemized a number of gifts, totalling almost $1,000. Cockrum identified $150 worth of free Colts tickets he received from the CIB and another $150 worth of free tickets he received from the Colts. He also listed several free dinners he received courtesy of United Water, IUPUI, Marion County Soil & Water, IPL and the Indianapolis Parks Foundation. I found it very odd that Cockrum was the only CIB board member who disclosed receiving free Colts tickets.

Jay Potesta identifies his employer as the Sheet Metal Workers Union No. 20. He notes that he serves on the Mayor's Labor Advisory Board in addition to the CIB. Potesta says that he has received no gifts or honoraria exceeding $100 and answered in the negative on all other questions about potential conflicts. Potesta's union contributed tens of thousands of dollars to the campaign of former Mayor Bart Peterson. Last year, the union made similar contributions to Ballard's political campaign after he took office. Thousands of the union's members have won work in recent years on various projects undertaken by the CIB, including Lucas Oil Stadium and the expansion of the Indiana Convention Center. It goes without saying that the more the CIB taxes us for public works projects, the more members of Potesta's union will win work on those projects.

John Short, the ninth and last board member, discloses that he works for Indiana University. He doesn't state the specific job he holds, and he indicates he answers in the negative on every question relating to potential conflicts. He also indicates that he has accepted no gifts or honoraria exceeding $100. Short may not have any relationship with the City of Indianapolis or Marion County, but you can bet his IUPUI employer does. Shouldn't those be identified if they exist?

There you have it in a nutshell. In the case of virtually every member on the Board, potential conflicts of interest or prevailing influences exist that would inhibit them from exercising independent judgment and acting on behalf of the public's interest and not on behalf of their employer's or one of their employer's clients interests. I'm reminded of President Dwight D. Eisenhower's farewell address in 1961 in which he warned us against the growing influence of the vast military industrial complex:

We must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved. So is the very structure of our society. In the counsels of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals so that security and liberty may prosper together.
Now, Eisenhower's message was directed at the influence of the military and the defense industries which support it, but the same influences have emerged at all levels of government and in all facets of government relating to the interaction of government regulators and the various overseers and the persons who seek to influence them. Our failure to heed Eisenhower's warning has been met with disastrous consequences for our country. Indeed, our individual liberties and democratic processes have suffered greatly because of the improper meshing of these conflicted and self-serving actors.

I consider it my civic duty to make the citizenry of this city and state as knowledgeable as possible to help guard the public interest. It comes at a personal cost, though, for those of us who are willing to stand up and fight for this cause. Paid bloggers who won't disclose who is paying them launch personal and defamatory attacks against us, calling us "batshit crazy bloggers" and seeking to discredit our volunteer work for the public good. Anonymous bloggers employed by our city government and the Marion County Republican Party have launched a blog devoted entirely to discrediting citizen activist and fellow blogger Paul Ogden, often taking swipes at me and others as well along the way. Sadly, the Citizen Kane mayoral candidate many of us fought so hard to elect when others in our party wouldn't give him the time of day, and who promised us on his election night victory to end "country club politics" in Indianapolis as we know it, will not even give us an ear to hear our concerns. He won't even speak to me or acknowledge my presence when he sees me. Even U.S. Rep. Andre Carson, a politician who has been on the receiving end of many barbs from this blogger, always greets me with a friendly handshake and a smile. No sooner had our new mayor taken office than the same government contractors who populated his predecessor's campaign finance reports began writing similar checks to his campaign committee. True to form, publicly-funded contracts were rolled out to satisfy many of those same contributors.

What these people can't understand is that there are some people who still want to participate in the political process who aren't looking for a job or a government contract. We're driven by civic virtue and the public good. Unfortunately, we've created a political system at all levels of government in this country where the free and unfettered are not welcome. If you cannot be controlled, then just go away. Well, we're not going away and these people will just have to learn to live with that fact.


Paul K. Ogden said...

Terrific reporting, Gary. I'm going to spend some time digesting this.

Is Grand saying he never received Pacers or Colts tickets in excess of $100? I guarantee you he did.

I think Dora had an option on the Pan Am property. I remember running across that. I don't know if he was paid to release it or what the story was. Grand's involvement might help explain why the Mayor's Office is desperately trying to get the case dismissed before discovery. They don't want us digging.

Unigov said...

Jeez, this is unbelievable. We are screwed.

Great reporting, if the Star would get off it and do some work they wouldn't be such a joke.

As for the situation with the CIB and Conseco and Lucas and Circle Centre finances - not to beat a dead horse, but we're screwed. It's just like AIG and Citibank, the bigwigs spent all the money and the taxpayers have to bail them out.

Paul K. Ogden said...


I missed the comment about me and the "batshit crazy bloggers."

Personally I LOVE the fact they started an anti-Ogden blog to try to discredit me. That shows I'm making a difference and people are worried.

As far as the "batshit crazy blogger" albeit I'm not sure what "batshit crazy" means, I too find that is more proof that they're worried.

What I find utterly remarkable though is that the "batshit crazy" comment comes from a paid Democrat blogger who refuses to condemn corporate welfare. Unbelievable. Supposedly the Democrats are the party of working men and women yet they refuse to stand up against taxpayers being asked to give more of their hard earned money to billionaire sports owners. How much more of a hypocrite can Democrats be if they can't oppose corporate welfare?

It tells you something that it is Republicans like us, and not Democrats, who are opposing and exposing these corporate welfare schemes. Democrats are all talk when they say they are for the the lower and middle class.