March 9, 2009 in City

Garage critics oppose Ormsby nomination

By The Spokesman-Review
 

A former mayor of Spokane and other critics of the River Park Square project are opposing the nomination of a local lawyer to be the next U.S. attorney for Eastern Washington.

Former Mayor John Talbott and three others have sent a five-page letter to President Obama and key members of Congress, asking that local attorney Mike Ormsby not be named to the top federal law enforcement spot because of his role in helping to finance the controversial project. They continue to claim the project was rife with fraud, despite federal investigators’ determination last year that no fraud occurred in the mall’s financing.

Washington’s senior senator, Democrat Patty Murray, said through a spokeswoman she still supports Ormsby for the job.

“We forwarded Mike Ormsby’s name because he is well-qualified for the post,” Murray spokeswoman Alex Glass said.

Ormsby must be vetted by the Federal Bureau of Investigation before Obama makes the formal nomination, which is subject to a hearing by the Senate Judiciary Committee and a full vote of the Senate. Ormsby brought up River Park Square himself in discussions with Murray’s staff and said he was “happy to talk to the White House about it,” Glass said.

River Park Square is owned by Cowles Co., which also owns The Spokesman-Review.

Ormsby served as the attorney for the Spokane Downtown Foundation, a non-profit organization set up in the mid 1990s by development arms of Cowles Co. when company officials were discussing a public-private partnership with the City of Spokane to renovate the aging mall.

The foundation eventually sold $31.5 million worth of bonds that were described in their prospectus as tax-exempt, and used by the foundation in 1999 to buy the mall’s expanded garage from the development companies for $26.5 million. Critics of the project said the price of the garage was improperly inflated by an unusual appraisal method, and the IRS later challenged the tax-exempt status of the bonds because of the way the mall deal was structured.

Investors who bought the bonds eventually sued the city, the development companies, the foundation, Ormsby’s firm and others connected with the project for fraud. The suit was settled out of court, with the city buying up the outstanding bonds from investors and reaching settlements with most of its other co-defendants. Ormsby’s law firm eventually settled a complaint with the IRS that he and another attorney did not perform the “due diligence” necessary on the project before bonds were sold to investors.

Critics also say Ormsby should have advised the foundation to cancel the purchase, or demand a lower price, when AMC Theaters, a key tenant, was threatening to pull out of the mall over a parking dispute, and should not have agreed to sign a non-disclosure agreement about a backup plan the Cowles development companies were offering if they lost AMC.

The letter from Talbott, former City Councilwoman Cherie Rodgers, former Pend Oreille County Sheriff Tony Bamonte and Tim Connor, a journalist who has written extensively about the mall for an online magazine, contends Ormsby had “central involvement…in the fraudulent River Park Square garage transaction.”

“At a time when it’s vital that the Justice Department send a message that it will not tolerate private fraud and public corruption, Mr. Ormsby’s appointment would send the opposite message,” they wrote.

In 2007, Rodgers and Connor asked for a federal investigation into the involvement of the current U.S. attorney, Jim McDevitt, in the mall project. McDevitt was a partner at the same firm as Ormsby when the mall deal was being structured. He recused himself, and federal attorneys from Western Washington, some of whom specialize in white collar crime, spent about a year looking at documents Rodgers and Connor provided, as well as other evidence.

But the federal investigators concluded there was no fraudulent activity in the various aspects of the mall’s renovation and financing.

“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,” Robert Westinghouse, criminal chief deputy for the U.S. attorney’s office in Western Washington said.

They did forward to the Spokane County prosecutor information about a fatal accident of a woman whose car went through a garage wall and crashed onto the ramp below. Prosecutor Steve Tucker has yet to decide whether any criminal charges will be filed in that death.


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