September 6, 2008 in City

Garage probe uncovers no fraud

U.S. attorney’s office ends RPS investigation
By and The Spokesman-Review
 
Dan Pelle photo

Robert Westinghouse, of the U.S. attorney’s office in Western Wahington, speaks Friday at the federal courthouse in Spokane.
(Full-size photo)

More records to be released

City attorneys are preparing to release more information related to the River Park Square redevelopment deal.

The Spokesman-Review filed a records request in April for documents submitted to the city this year by attorney O. Yale Lewis, who once represented the city on the River Park Square matter.

In late May, the city released only a portion of the documents and the newspaper hired Tacoma attorney William Holt to pursue the matter.

The city attorney’s office said last month the city plans to release more documents but is working to redact information officials believe is exempt from state records law.

Mayor Mary Verner said the city is trying to find a balance that would allow more information to be released without violating attorney-client privilege.

A yearlong federal investigation into the River Park Square mall found no proof of fraud, but evidence surrounding the death of a Pullman woman whose car broke through a barrier and plunged over the side of the parking garage was given to Spokane County prosecutors for possible criminal charges.

The mall and parking garage are affiliates of Cowles Co., which also owns The Spokesman-Review.

Federal attorneys who investigated several controversies surrounding the downtown parking facility said Friday no federal charges apply in the April 2006 death of Jo Ellen Savage, but County Attorney Steve Tucker should decide whether state laws on negligent homicide apply.

“There are, of course, various degrees of manslaughter that may be of some concern,” said Robert Westinghouse, criminal chief for the U.S. attorney’s office in Western Washington. “We pass no judgment, again, because that it is outside our purview.”

But there’s no indication of fraud in the various aspects of the mall’s renovation and financing, Westinghouse said.

“After examining thousands of records from the civil case and using the tools available to the grand jury, we determined there was no case of criminal wrongdoing,” he said.

The investigation also cleared U.S. Attorney Jim McDevitt, of Spokane, of any suggestion that he failed to investigate possible fraud involving the mall project.

“There is no indication that Mr. McDevitt acted any way but prudently and appropriately,” Westinghouse said.

Les Weatherhead, an attorney for Cowles Co. who handled some civil litigation over the garage, called the federal investigation “a healthy thing” because it provided a review by an outside, credible agency.

“The community continues to be dogged by this idea that there must have been some skulduggery there,” Weatherhead said. “If this doesn’t put an end to all this nonsense, I don’t know what will.”

Spokane Mayor Mary Verner said she was not surprised by the decision not to pursue federal charges.

“With this thorough legal investigation by an independent third party, I think it does help just bring some closure that a completely disinterested U.S. attorney’s office has concluded that there was nothing criminal regarding the financing of River Park Square.”

But the decision to transfer information on Savage’s death from a federal grand jury to the Spokane County prosecutor’s office is an “extraordinary step,” according to David Savage, Jo Ellen Savage’s ex-husband and a former president of the Washington State Bar Association. Savage, who said he remained close to his former wife after their divorce, attended Friday’s news conference.

Weatherhead, however, said he saw “nothing untoward” about the referral of evidence to Tucker.

“That’s the appropriate thing for them to do. They’re in no position to make a determination on state law,” he said.

Savage died April 8, 2006, after her car hit a garage wall and fell from the structure’s fifth level onto the entry ramp below.

Savage said he believes there are “substantial grounds for a criminal prosecution for manslaughter” based on information he learned during a civil suit on the matter. Savage’s family received a settlement from Cowles Co.’s insurers “substantially” more than $1 million, he said.

In 1993, engineer Richard Atwood warned River Park Square officials of problems in the walls. He recommended the garage erect cables to prevent cars from hitting barriers or that the owners conduct more extensive tests. Neither action was taken, though mall officials have said they made other improvements and conducted other tests.

“For economic reasons the owners chose not to make the repairs or modifications, thus placing the economics of the garage ahead of public safety,” Savage said.

Weatherhead disagreed.

“I can certainly understand and sympathize with his state of mind; however, this was a tragic accident,” he said of Savage’s death.

Until Friday, none of the parties involved in the settlement with the Savage family had released details on the amount of the settlement. Savage said Friday that the family earlier declined to give a figure because it would have distracted from the family’s demands to make the garage safer.

River Park Square completed safety improvements to the walls by the end of 2006.

Savage said the mediator involved in negotiating the settlement told him Cowles Co. had requested a confidentiality agreement in the settlement, but the Savage family had refused. Weatherhead said he did not believe there was a confidentiality clause, but the Cowles Co. wouldn’t comment on the settlement.

Some evidence gathered as part of the civil dispute was turned over to federal prosecutors.

“I was contacted by the federal authorities and I provided them with information they requested,” Savage said.

Tucker said Friday he will review the four boxes of evidence with Chief Criminal Deputy Prosecutor Jack Driscoll before making a decision on the next step. He envisioned three possibilities:

•They could conclude that there is enough evidence to file criminal charges, based on the federal investigation that has already occurred;

•They could conclude that there is enough evidence to determine no criminal charges should be filed, based on that investigation;

•They could ask local law enforcement to investigate further, to make a decision on whether to file charges.

If they need further investigation, Tucker will meet with Spokane Police Chief Anne Kirkpatrick, Sheriff Ozzie Knezovich and representatives of the State Patrol to discuss who would take the lead on that investigation. His inclination at this point would be to ask the State Patrol to take the lead, he added.

He will make an announcement on which of the three he will choose “fairly quickly,” Tucker said. “As soon as I can get through the boxes.”

The complicated financing of River Park Square has been controversial since the mid-1990s, when a public-private partnership was set up between the city of Spokane and the mall’s owners, the development arm of Cowles Co.

Part of that financing involved the sale of bonds by a private foundation that would purchase the garage and oversee its operation for 20 years until the bonds were paid off and the garage became property of the city.

The bonds were to be paid off by garage revenues, with a pledge of loans from the city’s parking meter fund if the garage didn’t make enough money.

Consultants projected the garage would make more than enough money to pay off the bonds, but critics questioned those projections and the $26.5 million price tag placed on the structure by an unusual appraisal that estimated its “investment” value.

After the garage opened, revenues were so far below projections that it couldn’t make bond payments. City officials 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, including a federal securities fraud claim by bondholders, who sued the city, the mall developers and almost everyone else connected with the renovation project.

The city eventually bought back the bonds and settled with the other defendants, but critics have continued to question whether city leaders and officials of the Cowles Co. withheld vital information about the mall project from the public.

A year ago, former Spokane City Councilwoman Cherie Rodgers and Tim Connor of Camas Magazine, an online publication, brought boxes of documents to McDevitt in an attempt to prompt a federal grand jury investigation into River Park Square. But they also questioned McDevitt’s ability to make that determination because he is a former member of one of the law firms that worked on the garage bonds.

McDevitt recused himself, and the Department of Justice assigned the case to prosecutors in Western Washington, including some who specialize in white-collar crime.

Their conclusion after studying thousands of pages of documents from the civil cases and other sources: mistakes were made and revenue estimates were “ambitious,” but no crimes were committed.

“There was no evidence that came to our attention that suggests that any particular individual or group acted with the intent to deceive,” Westinghouse said.

When the Internal Revenue Service said the bonds were incorrectly granted tax-exempt status, its investigator used the term fraud in describing parts of the deal.

But Westinghouse said that was a reference to civil fraud, and the IRS made no referral for criminal prosecution. Civil fraud allegations “can’t transfer word-for-word into a criminal finding,” he said. The bond prospectus had warnings about the risky nature of the project, and the bonds were graded accordingly.

The investment appraisal was wrong, but appraisals are estimates, he said, and it was up to experts to decide the proper method of appraisal to use. But if he were considering whether to invest his money in something based on that type of appraisal, “I would probably seek other investments.”

McDevitt had a duty to disclose his association with the firm that was involved in the garage financing when he was considered for the job of U.S. attorney, and he did that, Westinghouse said. Before last year, no agency had ever come to his office with allegations of criminal misconduct surrounding the mall, and when they did, he did the proper thing by recusing himself.

“He was entirely forthcoming in our efforts to sort out what had occurred,” Westinghouse added.

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