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Tuesday, January 27, 2004

More oversight of developers


Editorial

The arrest of LaShawn Pettus-Brown, impresario of the Empire Theater fiasco, should spur City Hall to lock in standards to keep such rip-offs from recurring.

For the past year, the former Taft High and University of Dayton basketball star has gone missing after blowing $184,000 of city money, supposedly to restore Vine Street's Empire Theater as a nightclub. Since his arrest Saturday in New York, he has been labeled in news accounts as a "fugitive developer," but that misnomer goes to the heart of this scandal. Pettus-Brown, 27, never developed anything. And that's been the pattern with City Hall development scandals: Invest in "developers" with no track record and end up with nothing to show for it. The Empire Theater has since collapsed and been bulldozed.

Cincinnati has yet to find the right balance between cutting red tape for "developers" and verifying if city money is well-spent. The city especially needs to do "due diligence" on any "developer" without a track record. Some verifications should never be waived, no matter how high up political pressure goes. The city's internal auditor already reported that development officials repeatedly failed to follow the city's own rules before paying Pettus-Brown.

The Oct. 24, 2003, audit is one of the most damning to come out of City Hall, even after Finance Director William Moller edited it 10 times to remove mention of council and mayor's office pressure. On June 5, 2002, council voted 6-2 to fund the Empire Theater project. Only Republicans Pat DeWine and Chris Monzel opposed the deal. Mayor Charlie Luken and Vice Mayor Alicia Reece championed it. Pettus-Brown seemed a godsend after the rioting and boycott: Here was this 6-foot-5 home-grown African-American basketball star fresh from Japan's pro circuit promising to invest his own money and a bank's in the heart of Over-the-Rhine.

Except that he wildly overstated his assets and fraudulently forged a letter from PNC Bank. The only money in the deal was the city's. Even a glance at his business plan, a credit check or a phone call to his alleged corporate officers should have alerted city watchdogs. His assets were stated in yen (totaling less than $17,000). He claimed his company had $100 million cash equity. He admitted in his application part of the loan would go toward "Record Division Start-Up." The mayor's Vine Street coordinator James Franklin told the Finance Committee that Pettus-Brown's financing numbers were "firm" and later commanded a development officer to give Brown the city money.

Even after a PNC Bank vice president in November 2002 told the city a loan letter was a fake, the city didn't send notice of default until January 2003, and the FBI didn't raid Pettus-Brown's office until February.

The city auditor urged in-depth reviews of loan applicants, strict oversight of contracts and no payments until a developer complies. The internal auditor and other oversight arms of the city need to be insulated from political pressure as much as possible under the city charter.




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