Sunday, November 23, 2003

Officials: Mayor pushed project


Luken aide pressed for money for Empire Theater

By Gregory Korte
The Cincinnati Enquirer

The mayor's office put pressure on Cincinnati community development officials to pay $184,172 to the developer of the now-failed Empire Theater project, development officials said in statements turned over to a federal grand jury this month.

When checks weren't issued, now-fugitive developer LaShawn R. Pettus-Brown went to the city manager or the mayor's office, according to an Oct. 8 statement Community Development Director Peg Moertl gave internal auditors.

Moertl said regular calls from James A. Franklin, Mayor Charlie Luken's Vine Street coordinator, commanded a low-level development employee: "Give the boy his money, girl!"

TIMELINE
Jan. 10, 2002: Mayor Charlie Luken proclaimed Vine Street, the epicenter of the 2001 riots, "the most important street in the city" during an annual address to City Council.
Feb. 20, 2002: LaShawn R. Pettus-Brown, a former Taft High School basketball star then playing professionally in Japan, gave a presentation to City Council's Small Business Development committee on his plans for the Empire Theater.
April 15, 2002: Vice Mayor Alicia Reece introduced an amendment to the arts capital budget to divert $200,000 from the Taft Museum of Art to the Empire Theater.
June 3, 2002: Luken and Reece introduced a motion asking the city to approve the funding.
June 5, 2002: City Council voted 6-2 - along party lines - to fund the project. Charterite Jim Tarbell was absent.
June 9, 2002: Pettus-Brown asks general contractor RLE Construction to advance him money to pay for the renovation, so he could use the city's money to put on a Ja Rule concert in Australia. The concert never happened.
June 14, 2002: Pettus-Brown bought the theater and adjoining properties for $76,000.
July 12, 2002: Pettus-Brown submitted his first voucher for payment.
Oct. 25, 2002: Asked to provide evidence of private financing, Pettus-Brown gave city officials a letter - purportedly from PNC Bank - to approve him for credit.
Nov. 25, 2002: A PNC Bank vice president told the city that Pettus-Brown's loan letter was a fake.
Jan. 8, 2003: Pettus-Brown was scheduled to meet with city employees to go over financing. He never showed.
Jan. 14, 2003: City officials sent a notice of default to Pettus-Brown, and City Manager Valerie Lemmie reported to city council that the project had collapsed.
Feb. 11, 2003: The FBI raided Pettus-Brown's offices on Vine Street in search of evidence of wire fraud.
June 13, 2003: The FBI issued a warrant for Pettus-Brown's arrest. He remains at large.
July 18, 2003: The roof of the theater collapsed in a rainstorm. The building was later condemned and demolished.
Sept. 5, 2003: Department of Community Development and Planning Director Peg Moertl announced her resignation, writing, "I wish we all had not suspended disbelief in the face of a young basketball player's plan for a theater relic on Vine Street."
Oct. 24, 2003: The city's Internal Audit Division finds the loan application and business plan was "fraught with error, misstatements and outright fraudulent claims." Among the items that should have raised flags: Pettus-Brown had submitted bank accounts in yen.
Nov. 5, 2003: The city turned over thousands of pages of documents related to the project to a federal grand jury. Those documents were released publicly last week.
Pettus-Brown, a concert promoter and former Japanese league basketball player, told city officials he planned to convert the 89-year-old Vine Street theater into a nightclub. He has been missing since January and is now wanted by the FBI.

Luken and Vice Mayor Alicia Reece co-sponsored the resolution to approve the project.

But Luken said no one in his office told city officials to cut corners. He said he would have stopped the project if he had any indication of the scope of the problems.

"It is certainly true that I cut red tape on dozens of projects for people. That is part of my function," Luken said. "I have never told anyone to pay an invoice here or anywhere else."

Internal auditors investigating the project questioned development officials involved in the deal. Summaries of those statements were included in thousands of pages of documents turned over to the grand jury Nov. 5 and released publicly last week.

Many of those statements were missing from the audit report, which placed the blame on low-level development officials who failed to review Pettus-Brown's business plan.

Drafts of that audit were edited 10 times by Finance Director William E. Moller. Earlier drafts noted that the development official with primary responsibility for the project, Maria Collins, had told Moertl she wouldn't lend Pettus-Brown "one red cent." Collins has since resigned.

City Council never heard from Collins or any other administration official. Instead, it was Franklin who answered questions to the Finance Committee in June 2002.

When questioned about Pettus-Brown's assets and financing, Franklin said, "Those numbers are firm."

Pettus-Brown later provided a letter of credit, purportedly from PNC Bank. The bank says the letter is a fake. Pettus-Brown also provided bank statements showing assets of 1.6 million - but the assets were listed in yen, not dollars. At today's rates, 1.6 million yen is worth $14,700.

"If they would have told me, 'We don't know the difference between a yen and a dollar,' I would have said, 'Everyone out of the pool,' " Luken said last week.

City Council voted 6-2 along party lines - with Democrats in the majority - to approve up to $220,000 in grants and loans.

A handwritten note by development officer Ron Regula the next week said Moertl instructed him to "process this through the manager's office without going back again through Council" - against the advice of an assistant city solicitor.

Councilman Pat DeWine, a Republican who voted against the project, said the mayor should take responsibility.

"You can't have it both ways," he said. "You can't say, 'Give him the money, girl,' and then say the responsibility rests solely with Community Development."

DeWine also questioned the truthfulness of a Jan. 17 memo from the city manager to City Council that concluded, "No pressure was applied from an outside source to shortcut any procedures."

Democratic Councilman David Pepper, who voted for the project, said he supports a more thorough investigation.

"I don't think something like this gets through seven or eight safeguards accidentally," he said. "What you are seeing is a city government that is as dysfunctional as something can be."

E-mail gkorte@enquirer.com




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