August 21, 2007 in City

RPS files to get review

U.S. attorney accepts documents on mall deal, then recuses himself
By The Spokesman-Review
 

An outside attorney from the U.S. Justice Department will be asked to investigate whether anyone involved in the River Park Square development project broke federal corruption laws.

James McDevitt, U.S. attorney for Eastern Washington, said he would turn over files of documents he received Monday from former Spokane City Councilwoman Cherie Rodgers and independent journalist Tim Connor to someone who will be designated by the attorney general’s office in Washington, D.C.

McDevitt said he was separating himself and his office from the investigation because he was once a partner in Preston Gates Ellis, a law firm that represented the Spokane Downtown Foundation, which issued some $31.5 million in bonds to purchase the garage. Although he was not the foundation’s primary attorney for the bonds, he did work on some issues in 1998 and 1999.

“I had a very limited role with respect to one or two very specific real estate issues,” McDevitt said.

That connection was enough to convince him to send a recusal memorandum for himself and ask for an outside attorney. “I’m not going to decide anything. I’ll be completely out of the loop,” he said.

Rodgers and Connor laid out their claims in an eight-page cover letter that challenged McDevitt to honor a statement he made recently on “The Mark Fuhrman Show” on Spokane-based KGA radio, in which he invited anyone with evidence of public corruption in the River Park Square project to bring it to his office. Public corruption is a high priority for the federal prosecutor’s office, he said.

“The first message we’d like to express � is how damaging it is to public confidence in federal law enforcement that these steps (your recusal and a referral to another U.S. attorney) have not already occurred,” Rodgers and Connor wrote. “The tendrils of public corruption in the River Park Square transaction run in all directions and Preston is implicated in much of it.”

The River Park Square mall redevelopment was a complicated public-private partnership that involved the city of Spokane and the mall’s owners, the development companies owned by what is now Cowles Co.

Cowles, through its subsidiaries and affiliates, also owns The Spokesman-Review, KHQ-TV and the Journal of Business, as well as other property and businesses in the region.

As part of the partnership, the city applied for a federally backed, low-interest loan of $22.65 million, which was secured with Community Development Block Grants and reloaned to the mall developer. Cowles development companies set up a nonprofit foundation to sell $31.5 million in bonds that would purchase the mall’s expanded garage, and when the bonds were paid off, the city was to take possession of the garage.

The bonds and other garage expenses were to be repaid by parking revenues, with the city’s guarantee to loan money from its parking meter funds if garage revenues fell short. The federally backed loan was to be repaid from several sources, including rent that the foundation was supposed to pay to Cowles development companies out from parking revenues.

Projections in the bond prospectus that the garage would make more than enough money to cover its expenses proved wrong; soon after it opened in 1999, the garage faced significant losses. The City Council refused to loan money from the parking meter fund, saying there was no guarantee the money would ever be repaid. A series of lawsuits followed, and eventually investors who bought the garage bonds sued the city, Cowles development companies and everyone else involved with the project for securities fraud.

Rodgers was a longtime critic of the city’s involvement in the project. Connor worked with independent journalist Larry Shook in publishing a series of investigations of the project for their online magazine, Camas; some of those reports were later published in book form.

The civil suits filed in U.S. District Court, however, never went to a jury. The city bought out the bondholders, and eventually settled with all the other parties.

The litigation and other investigations generated rooms of documents. Rodgers and Connor included about 60 documents in the paperwork they left with McDevitt, along with a long explanation of why they believe the sale of bonds, the federally backed loan and other aspects of the project were illegal. They also provided an explanation of why they think his former firm violated federal law in its representation of the foundation that sold the bonds.

Because so much is available from documents compiled for the civil cases, Rodgers said Monday that a federal investigator should have no trouble finding evidence that the law was broken.

McDevitt said he believes that various aspects of River Park Square have been investigated by the Internal Revenue Service, the Securities and Exchange Commission, the FBI and the state attorney general’s office, and that no recommendation had come to his office to prosecute a federal crime. To him that means someone with “an intergalactic grip” is controlling all those agencies, or that they’ve found no evidence of criminal wrongdoing.

Although the U.S. attorney’s office is a prosecuting agency, not an investigating agency, he said on the radio show that anyone concerned about River Park Square should “put together your best shot,” and he would refer it to the attorney general’s office. He has recused his office from a few other cases, most notably the investigation into any violation of federal public corruption laws involving former Spokane Mayor Jim West.

He expected to hear within a few weeks who would be assigned to the case, and would make that public. If the investigating attorney wants to take anything before a grand jury, there’s usually one in session in Spokane, he said.

Any charges would be public. If the designated attorney concludes there was nothing to be prosecuted or the grand jury declines to indict anyone, McDevitt will recommend that he and the attorney hold a news conference to answer questions, much the way they did after the West investigation.

“That’s good news,” Rodgers said when told Monday afternoon of McDevitt’s decision to refer the case to another attorney and discuss results “no matter what happens.”

McDevitt said he hoped the investigation would provide some closure to the long-running controversy, no matter what the designated attorney concludes.

Rodgers said it would be “really hard for me to believe” that a federal prosecutor wouldn’t conclude a crime was committed. But if there was no recommendation to prosecute, she didn’t know whether that would be the end of the controversy: “We’ll have to see.”


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email