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Council approves third settlement in RPS case

Wed., Dec. 1, 2004

The Spokane City Council has approved a settlement with the former manager of the River Park Square mall in connection with a lawsuit over financing of the mall’s parking garage.

It is the third agreement reached in the city’s effort to settle a securities fraud lawsuit over $31.5 million in garage financing. The council approved the agreement Monday in a 5-2 vote with Cherie Rodgers and Bob Apple voting no.

Under the agreement, RWR Management Inc. will execute a promissory note to the city for $1 million and assign to the city its claim against two business insurance policies that had covered RWR for business-related errors.

In addition, corporate head Bob Robideaux has agreed to waive, in part, his attorney-client privilege involving private communications among himself, the owners of River Park Square and attorneys for the mall project.

The waiver could offer the city a new avenue for obtaining evidence in its case against the mall owner and any remaining defendants in the case, which is scheduled for trial in federal court in January, city officials said.

The lawsuit stems from the 1998 sale of $31.5 million in tax-free municipal bonds by a private foundation, which used the money to purchase the garage from the mall owner. The money went for redevelopment and expansion of the garage and mall. A city-sponsored parking authority then leased the garage and agreed to make lease payments to satisfy the bond debt as well as rent on the land beneath the garage, which is still owned by the mall developer.

Bondholders alleged securities fraud in their 2001 lawsuit against the city, the developer and seven other parties involved in the deal. The city in June paid off the bondholders and took over their claims against the other defendants. It is part of Mayor Jim West’s strategy to end the legal stalemate.

A parking consultant and attorneys for the bond underwriter previously agreed to settlements totaling $2.8 million.

RWR has insurance coverage up to $500,000, but the two insurers have denied coverage of the claim. The city would seek to enforce the policy if the federal trial judge approves the settlement, said Laurel Siddoway, the city’s special counsel for RPS litigation.

The City Council earlier this month approved a settlement offer to the Spokane Downtown Foundation, the private nonprofit entity that sold bonds and purchased the garage. The deal would be worth $900,000 to the city if the foundation agrees to it.

The city has nearly completed negotiations with Preston, Gates and Ellis, the law firm for the foundation, which would bring another $1.3 million to the settlement, city officials said Monday.

Settlement negotiations have been going on between the city and the mall owner, a group of corporations affiliated with Cowles Publishing Co., which also owns The Spokesman-Review.

Prudential Securities Inc., the bond underwriter, has not settled. The city is also seeking money from another defendant, Perkins Coie, the city’s bond counsel.

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