Monday, March 10, 2014

ROC Investigating Committee Moves Forward With Subpoena, Corrupt Ballard Administration's Settlement Agreement Designed To Quash Any Taxpayer Remedy

UPDATE: See update below disclosing that lease agreement facilitated $9.6 million loan to ROC owner
Over the continuing objections of the Republican members of the ROC Investigating Committee, the newly-constituted majority Democratic members voted tonight to issue a subpoena to the City of Indianapolis' corporation counsel to obtain at least thirty documents that were requested four months ago but not produced pertaining to the one-sided lease agreement the City's Department of Public Safety entered into with the politically-connected owner of the former Eastgate Consumer Mall. Public Safety Director Troy Riggs ordered public safety employees to evacuate the building last September after he determined that continued occupancy of the building was unsafe for workers, but the City has continued paying about $57,000 a month in rent into escrow for the premises leased under the terms of a 25-year, $20 million lease as the site of the Regional Operations Center.

The good news at tonight's meeting was that the building's landlord, Alex Carroll, finally produced the documents at the end of last week that the council committee had threatened to obtain pursuant to a separate subpoena issued to him for documents the City claimed only the landlord possessed, either because it never obtained copies of them when the agreement with Carroll and his business associates was entered into, or the records were among those that former Public Safety Director Frank Straub had destroyed before he vacated his office and moved to his new job as Spokane, Washington's police chief. The bad news is that the reason Republican committee members have stonewalled production of the documents the past few months becomes crystal clear after viewing the unconscionable settlement agreement the city's corporation counsel entered into with the landlord late last year on December 10, 2013 after the ROC Investigating Committee had been formed and began its work in November.

Under the terms of that troubling settlement agreement, the City agreed to reimburse the various business entities owned by Carroll (401-Public Safety, LLC, Lifeline Data Centers, LLC and Lifeline Construction Services, LLC) approximately $120,000 for several items, including insurance on the building ($9,000), improvements to the leased premises ($40,000), reimbursement of maintenance expenses ($35,000) and data line use ($34,000). The City gave the landlord ninety days to complete a punch list of unfinished items (until May 2014 for some items) that should have been completed before the City's employees ever began occupying the premises prior to the Super Bowl in January 2012. The City assumed responsibility for obtaining permits for all work required to be done to complete the punch list of items and agreed not to unreasonably withhold approval of any work completed by contractors hired to perform the work. The agreement freed up the rent money being escrowed by the lender to be released to the landlord and made clear that the original lease would remain in full force and effect.

Adding further insult to injury, the City waived all legal and equitable remedies of any kind it might have had under the original one-sided lease agreement pursuant to the settlement agreement, including the damages it incurred from having to relocate the Regional Operations Center to another location while the problems within it were being remedied and the 24x7 fire watch expenses the Department incurred as a result of the premises not having an operating life safety system as required by law. Any attempt by the City to bring a legal or equitable action in the future based on a breach of the original lease agreement would constitute a breach of the settlement agreement and the City would be liable to the landlord for any attorney's fees it incurred defending against such a lawsuit. The agreement even included a non-disclosure clause applicable to the landlord concerning the settlement agreement unless the City chose to disclose its terms to the city council, pursuant to a public records request, a duly issued subpoena, the landlord's accountant or as necessary pursuant to a court action to enforce the terms of the settlement agreement. The settlement agreement even instructed the landlord how to respond to media inquiries regarding the lease agreement as follows: "The matter has been settled and the Lease Agreement remains in full effect."

Every standard provision that I thought was deemed mandatory in all government contracts is missing from this lease agreement. For example, the standard provision allowing the City to terminate the lease agreement for convenience is conveniently not included so that when the public finally found out what a white elephant this lease was the City would have no choice but to swallow the bitter pill and continue making exorbitant lease payments and paying to maintain the building over the next 25 years, or exercise its right to purchase the building. They've pretty much locked the agreement down so tightly to benefit the landlord that taxpayers will be socked with costly litigation that could allow the landlord to recover tens of millions of dollars, plus his attorney's fees, if the City tried walking away from it:

What it boils down to is that the politically-connected developer bought a white elephant of a property and looked to figure out a way of getting out from under it. He turned to taxpayers to not only bail him out of his current mortgage on the property but turn the property into a cash cow for the next 25 years. The City would have been better off buying the property from him for the amount of the mortgage and to simply demolish the building. Any normal buyer of this property would have bought it for the land and simply demolished the building so something new could be redeveloped on the site. When the ROC was closed last September, the employees were moved to a site out by the airport, which is where the Ballard administration is now trying to relocate the entire criminal justice system. Under that pending proposal, taxpayers would be stuck with another credit tenant lease agreement just like this boner that would put the taxpayers on the hook for decades for at least $2 billion to occupy a building that will be owned, operated and maintained by a private developer.

What the Republican council members have been trying to do is run out the clock to allow the landlord these additional months to remedy all of the problems with the leased premises until it is suitable for occupancy and use again by city employees, at which time they will then argue that the point of the investigation is meaningless because all is well now. They've been offering specious reasoning that instead of getting all of the relevant documents pertaining to the lease agreement first would have the committee devote its time hearing Carroll's attorney, David Brooks (husband of U.S. Rep. Susan Brooks), spout off talking points in an effort to hoodwink the public into believing that the criminal lease isn't really as bad of a deal for taxpayers as it so obviously is. The hell with the fact that the Ballard administration entered into a settlement agreement that was even more criminal than the original one-sided lease agreement. If there was a provision in the law for the impeachment of the city's mayor, this would be grounds for doing so.

I would again call on U.S. Attorney Joe Hogsett to move off his butt and do something about the rampant public corruption going on in this city. We're sick and tired of sitting by and watching our tax dollars being pilfered by corrupt politicians in pursuit of their sole aim of rewarding their campaign contributors without a concern in the world about whether there is any public benefit resulting from their actions. Yeah, this sort of crap happens in Chicago all the time, but at least when it's disclosed to the public, there has been a federal prosecutor to bring those responsible for the corruption to account for their actions. That never seems to happen here. If Hogsett's inaction wasn't bad enough, the media's coverage of this issue has been equally as unsettling. News reports portray the ROC Investigating Committees strictly in terms of it being partisan bickering to date, obviously unconcerned that public documents the media normally clamors for release on demand haven't been produced even to the council, let alone members of the public.

UPDATE: WTHR's Sandra Chapman, who has pretty much been the lone person in the mainstream media pursuing the ROC story, got some information out of Carroll and his attorney, David Brooks. She surmises that what he's been trying to keep a secret all along is the fact that he used the city's credit to obtain a $9.6 million loan from Wells Fargo Bank:
The issue first surfaced last September during a sit down interview with 13 Investigates.
"You get paid your fee up front, so we've been paid," said Carroll. "We were paid a nominal fee up front to allow them to lease the place to what amounted to $9 a square foot."
13 Investigates Reporter Sandra Chapman pressed Carroll for more information.
"Can you tell us what..." she started to ask about the payment.
"No, ma'am, I'm not able to tell that. It was signed up in confidential agreements, as well," Carroll said.
Now, Carroll and his attorneys are revealing what they previously wanted secret: a $9.6 million loan Carroll obtained using the city's low bond rating.
Off the top, $1.4 million was used to pay 401 Public Safety's existing mortgage on the ROC property. Another $5.6 million was put into a construction escrow account for labor and materials and $1.5 million went to cover financing costs and surveys. What was left was pocketed by 401 Public Safety as a base lease price payment of $1.1 million.
"He got that money, (it did) not come from the city, it was part of the loan proceeds and he ended up paying almost all of it out in tenant improvements," Brooks said . . .  
Records show 401 Public Safety is making a profit. The company is due to get $800 a month from each lease payment over the next 10 years. That figure jumps to $7,000 a month during the final 15 years of the loan.
As you can see, Carroll is doing business like Ersal Ozdemir. He formed a construction company that's making money off the supposed $5.6 million in tenant improvements. His original mortgage on the entire property of $1.4 million, which presumably included property not covered by the lease, got paid off and presumably replaced with a much lower-interest rate loan since city revenues are pledged towards repayment of the loan. He got $1.1 million of the lease payments up front with graduated lease payments made available to him by the bank starting at $800 a month and increasing to $7,000 a month by the 15th year of the lease. City taxpayers picked up Carroll's entire tab for obtaining his personal financing. I'm assuming that $1.5 million cost of obtaining financing included the huge legal bill David Brooks got paid out of the deal as well. Perhaps he and Susan can purchase another $1 million home in Washington, D.C. to complement their $1 million Carmel home courtesy of Indianapolis taxpayers. These amounts don't count the maintenance fees Carroll is getting from the City, which are quite substantial. The City's monthly lease payments from day one were to be made to the bank directly and not Carroll so the idea that any lease payments were ever escrowed was a bunch of bull. Basically, the City is fronting all the upfront costs of making the entire building suitable for tenant occupancy, including parts of the building not leased by the City. The long and short of it is that we're paying at least double the amount of rent we should be paying on this pile of crap building that Carroll owns and we're still no closer to having a building that can be occupied than we were the day the Ballard administration signed the settlement agreement in December. According to Chapman's report, that's still months away.
The video clip from last night's meeting puts on display what stonewalling looks like, scripted questions and all.
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Anonymous said...

"Our message has been consistent over the last year, but bears repeating today: It doesn't matter to me what your politics are or what position you hold in your community," Hogsett said. "If you violate the public trust, our Public Integrity Working Group will find you, will investigate you and the U.S. Attorney's Office will then prosecute you to the fullest extent of the law."

Anonymous said...

Hogsett should also go full bore after FSSA, IURC, and DWD! We must continue to pressure the US Attorney's Office in Indianapolis, the Justice Department's Public Integrity Division in Washington, D.C., the United States Department of Labor's Office of Inspector Genera to look into DWD. Health and Human Services to look into FSSA. Contact every reporter, state and congressional lawmaker and demand they fix this crap or vote out all incumbents in Indiana! Don't just call these people call them every 15 minutes! Leave them endless messages! This people are supposed to work for us! Lets make them!

Anonymous said...

Carl on the Wishard Referendum tried that...Talking to locals and staff...Look what happened to him...Don't call crooks..Call DOJ and Integrity Division. Our report card grades speaks volumes on corruption in Indiana...

Anonymous said...

Carl who? And what happened to him?

Had Enough Indy? said...

Have you heard when the City first provided funds to Carroll? Before or after the lease was approved by the City Council?

And, how binding is a secrecy clause in a public document?????

Gary R. Welsh said...

Pat, the non-disclosure clause was carefully crafted so that it kept the landlord from disclosing its terms unless the landlord brought a lawsuit against the city alleging breach of its terms. The City had no legal authority to keep its terms from being disclosed to the public so it contained the exceptions that allowed it to disclose.

As near as I can tell, Pat, the lease payments have always been made. Under the terms of the deal, the City makes its lease payments to the bank that financed Carroll's $9.6 million loan. We're told these payments were being escrowed, but I think that's just a load of crap. I don't believe any payments were due until January 1, 2013; however, Carroll received the $1.1 million up front base lease payment when the deal was originally inked. The actual bank loan documents that Carroll provided to the committee hadn't been put online when I last checked so I'm basing that off Chapman's news report.

Anonymous said...

What are Councilors Aaron Freeman, Janice McHenry and Jack Sandlin hiding?

Unlike the other members of the Regional Operations Center (ROC) Investigating Committee, they refused to sign the DOC Disclosure Form. This would require them to disclose gifts, campaign contributions and business relationships with Alex Carroll and/or his company. These three steadfast stood in the way of disclosure. Maybe the DOJ should focus on these three to see if they benefited from the deal cooked up by Alex Carroll and his lawyer Brooks. Isn’t one of these three already being investigated?
Find the disclosure document and who signed it here:
The Alex Carroll/ROC documents should be posted on the internet and available to all citizens.

Anonymous said...

Hunter did not submit the disclosure form either. The website is misleading. His mumbo jumbo letter is smoke and mirros.

L Truth said...

Ben Hunter should be investigated for corruption. The ROC is in his district, he accepted campaign contributions from Carroll, and he was sitting on the investigative committee (conflict of interest). Will a public corruption investigation by the FBI take place?

Gary R. Welsh said...

The financial disclosure forms are useless. Our elected officials lie on them all the time because they know there is no consequence for falsifying their content.

Anonymous said...

I have no faith that Joe Hogsett would properly handle this. He has already proven he can't.

This needs to go over his head to the Public Integrity Section of DOJ. The Public Integrity Section (PIN) oversees the federal effort to combat corruption through the prosecution of elected and appointed public officials at all levels of government. Section attorneys prosecute selected cases against federal, state, and local officials.

U.S. Department of Justice
Public Integrity Section
Criminal Division
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001

Flogger said...

WOW< The Republicans must have stopped off before the meeting and ate 1/4 pound a Pout Sandwich. After several months of milling around, they still want to obstruct.