As I’m sure you’ll be reading in tomorrow’s newspaper, the two Assistant U.S. Attorneys who’ve supervised a criminal investigation into the River Park Square fiasco held a press conference this morning in Spokane to announce that nothing much was amiss.
I would have posted this in our news section but it would have felt odd to do so given that I was one of the two people, a year ago, responsible for the criminal referral. The other was my long-time friend Cherie Rodgers, who served on the Spokane City Council from 1997 thru 2005. So, suffice to say I’ve got a bias and a point of view. It just seemed more appropriate to post this over here, away from the news column, where I take more liberty to offer my own opinions. And my main opinion is that I’m deeply unimpressed by the DOJ investigation. Not surprised, but deeply unimpressed.
But first, the news. After a year of looking into criminal charges the U.S. Department of Justice has concluded that it found no evidence to support criminal prosecution for racketeering, bank fraud, securities fraud, or other federal crimes. They did note, however, that the investigation was complicated by the fact that “memories of events had dimmed, and records of some key events had not been retained.” They did not say what those key events were. Here’s the full press release.
Moreover, “with a five year statute of limitations limiting the prosecution of most federal offenses, many of the most obvious potential criminal charges were unavailable ten or more years later.”
While I still am confused about this third result, the U.S. attorneys did announce they are forwarding evidence and “limited grand jury materials” regarding the tragic death of Jo Ellen Savage (who died when he car plunged from the garage in April 2006) to Spokane County Prosecutor Steve Tucker for his review.
A fourth finding is a bit clearer. Although it wasn’t disclosed in his press release, or in his prepared remarks, Assistant U.S. Attorney Robert Westinghouse did reveal that the DOJ inquiry found that the appraisal associated with the collateral for the City’s $22.65 million loan to River Park Square did not comply with the federal law governing appraisal standards for projects involving federal money. This was an issue that Mrs. Rodgers and I specifically had asked them to address. The reason we sought review of the appraisals is that Mrs. Rodgers and I still believe that the heart of the corruption in the RPS transactions involved fraudulent appraisals that were appraisals in name only. So, it kind of looks like we got that one right.
Still, this is the disappointment I’ve been expecting for months since I learned from the Assistant U.S. Attorneys themselves how stymied they felt they were by the statute of limitations problems. As I told a couple reporters on the way out of the courthouse this morning, I think this unprosecuted case, such as it is, will always be clouded in the legitimate suspicions and doubts created by the fact the sitting U.S. Attorney for Eastern Washington at the time the most vivid RPS evidence came to light was James A. McDevitt. Before being appointed a U.S. Attorney, Mr. McDevitt put in many hours on the real estate transaction (the sale of the River Park Square garage for a preposterous $26 million) that led to a successful securities fraud lawsuit by RPS garage bondholders, and a damning IRS investigation. The inquiry by the IRS’s tax exempt bond unit culminated in a thorough finding in June 2004 that the bond transaction violated federal tax rules.
I’m not the first to note that the statute of limitations problems faced by investigators could have been avoided if Mr. McDevitt had recused himself in 2001, rather than waiting until 2007. Again, I would call attention to the fact reported in the Department of Justice press release that the statute of limitations on the most obvious possible crimes, is five years.
As I was getting ready to go out tonight with my wife and friends to see The Exonerated (gee, how’s that for irony) Inlander news editor Jacob Fries sent me what I thought was a good set of questions. So, let me share his questions and my answers here as it will save me from repeating myself. If I’ve missed a typo or two, please bear with me. It’s been a long couple of days.
On Sep 5, 2008, at 3:13 PM, Jacob Fries wrote:
Tim,
I wanted to get your thoughts on Westinghouse’s announcement today (for use in an article).
Q. What do you make of his findings of no criminal wrongdoing?
Well, it’s hard for me to unpack given the unrefuted evidence that strongly indicates criminal wrongdoing. There is a reason I pressed him at the press conference today on the IRS report. When Cherie Rodgers and I met with Westinghouse, Hermanns, agent Betz, and IRS criminal investigator Dale Guess last March, we discussed the IRS report (by which I mean the June 2004 final report). They could not have been more effusive in praising the work of the IRS investigators. We also discussed my reporting for Camas. I told them there had been only one serious attempt to question the facts of my reporting on IRS, and that came in a guest column in the Inlander by Cowles attorney Ladd Leavens. Leavens just flat misquoted a piece I’d written for Washington Law & Politics. Anyway, Westinghouse cut me off. He said they’d read all the reporting and that there were no errors. I’m not a prosecutor. But I’ll go to my grave believing that there was a conspiracy to divert public funds for private use, that it was well-organized (though poorly executed) and that it was done in violation of the Washington constitutional prohibition on gifting public funds, and in violation of federal tax rules, and (as Westinghouse significantly disclosed today) in violation of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) which requires market value appraisals in ALL transactions involving federal funds. I do think crimes were committed here.
I’ll also say this: during our lengthy meeting in March the conversation was DOMINATED not by discussions of the evidence, but of the problems they faced, at every turn, with statute of limitations issues. The clock had already run out on fraud, money laundering, conspiracy in terms of the statute of limitations. That’s what we were told. So, I take with a grain of salt this assertion that, yes, time had passed, but the evidence was also cold. That’s not what they told us in March. Westinghouse, in particular, just seemed completely discouraged by the statute of limitations issues.
And that’s what really clouds this issue because, as is obvious, the U.S. Attorney with jurisdiction while the clock was running down and out was Jim McDevitt, the man who worked alongside Mike Ormsby and Duane Swinton in trying to solve the AMC crisis in 1999. You can read for yourself what IRS thought of that misadventure, and the successful efforts (including Swinton’s enforced confidentiality agreement on the Spokane Downtown Foundation and the Spokane Parking Public Development Authority) to cover it up. So, in conclusion, I’m deeply unimpressed.
Q. What effect do you think this will have on our understanding of the RPS scandal?
Obviously it depends in large part on how the Spokane media digests the story. I think there will be an obvious effort (as there has been already) to try to discredit me and Larry Shook. By this I’m referring to Steve Smith’s “apology” to me and Larry last June when he admitted that “Insulting them, marginalizing them, ridiculing them, well yes, that is often my intention with Connor/Shook.” Cherie’s a bit harder to bring down because of her electoral popularity and reputation. Plus, I just think the fiasco is mind-numbingly complicated, even to the lawyers that I’ve worked with over the years. It’s just hard to explain things like the bizarre investment value appraisal, and the mirage-like “Cowles Publishing Company Guaranty” that had the exact opposite effect of using public money as a shield to protect the assets of Cowles Publishing Co.
Q. Will this put to rest suspicions and conspiracy theories surrounding RPS?
No.
Q. What do you think of Westinghouse refusing to talk in specifics about his process, who was interviewed, etc?
Well, it’s certainly not the transparency I expected given McDevitt’s comments to the S-R a year ago about how all these questions would be completely answered. Obviously they weren’t. Westinghouse today repeatedly referred to the Walker report as the “appraisal” and that was disconcerting. The Walker report was not an appraisal, and it wasn’t even a feasibility report. It was a contrived parking revenue projection that the city’s contract appraisals were instructed to use (in violation of appraisal ethical canons, I would note) to concoct the garage’s “investment value.” So, that kind of misunderstanding doesn’t help his credibility. The other telling detail, I thought, was that they did not come prepared to report that the appraisal for the HUD loan collateral did not comply with FIRREA standards. He only admitted that when I was questioning him closely. Now, think about that? This was an agency error that badly hurt the City of Spokane because, frankly, it enabled a $22.65 million loan with collateral that was flimsy at best. The result is that when the loan went into default, city block grant funds had to be tapped. So, it’s a big deal. Why didn’t they just come out with it today? Why did I have to reach into Bob’s mouth and extract it like an inflamed molar?
End of Interview
Regrettably, Cherie Rodgers wasn’t able to be at the Federal Courthouse in Spokane today because she was driving her parents to Montana. But she did call me later in the day, and I had the unpleasant task of reading the DOJ press release to her. Cherie’s a patriotic person, the widow of an Army veteran, and she really did have faith that the Assistant U.S. Attorneys in charge of this investigation would do a an honorable and thorough job. But she gasped when I read from their conclusions and I could tell she was shaken not just by their findings, but by the way they explained them.
It would have been better had she been there, for them to have to have looked her in the eye.
–Tim Connor
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