’60s-era New Orleans skyline. The International Trade Mart (former WTC building) as defining 20th century architecture. The iconic structure has been a vintage New Orleans postcard half a dozen times. It was built as a symbol of New Orleans’ role in international trade.
Inflated construction costs, secret iPads with content never disclosed in public records, financial analysis manipulation, and a paper trail showing favoritism and backdoor dealings between the winning bidders of a 99-year lease on the iconic New Orleans World Trade Center (WTC) property and City of New Orleans consultants highlight prima facie on-record evidence and allegations leveled at the city officials, employees and Four Seasons team in a groundbreaking court case set to determine the future of Louisiana’s Public Lease Law.
Two Canal Street Investors (TCSI), one of four “losing” bidders on the WTC project, filed suit against the city and Mayor Mitchell J. Landrieu’s specially-appointed selection committee in April following the decision to award the lease to the Four Seasons (brand) team.
TCSI’s lawsuit alleges the city illegally favored the Four Seasons team to win the lease of the landmark Mississippi Riverfront tower by way of the sham procurement process. Incredibly, the winning bid was actually the lowest bid.
Honorable Judge Tiffany Chase of the Orleans Parish Civil District Court presides over the litigation. Chase will hear key arguments in the case on Friday, November 6.
Chase denied the city’s initial motion to dismiss the case in June. “The merits of whether the process utilized was flawed will have to be properly fleshed out after discovery is completed and a trial on the merits is held,” Chase wrote, as reported by The Advocate.
The lawsuit concerns how the mayor and his administration conducted the Request for Qualification (RFQ) / Request for Proposal (RFP) and final deal to turn the famed modernist architect Edward Durell Stone’s 33-story high-rise into a mixed-use hotel and residences.
TCSI’s “whistleblower-type” legal action concerns transparency and fairness in public procurement and clear violations of the Public Lease Law by the city. The lawsuit spotlights the material workings of a flawed process. The violations result in substantially lower revenue for arguably one of New Orleans’ most visible and valuable properties within city limits.
As sure as there is a tiny plastic baby placed inside King cake, and the Mardi Gras colors are purple, green and gold, Louisiana is famous for — how shall we put it? — its colorful politics and court battles.
The facts are big and easy to grasp. Pre-qualified bidder TCSI offered $65 million upfront for the WTC lease, but the Four Seasons team snagged the desirable site for $5 million, $60 million less. TCSI offered $3.2 billion overall, Four Seasons $773 million, an excess of $2 billion lost to the public treasury.
Five rival real estate development teams contending to take over the WTC submitted “best and final” offers, yet the dubious cut-rate offer won. How come?
The city consultants’ report summarizing the financial offers made by each team was very flawed, highly irregular and illegal — to circumvent legally required procedures and standards, says TCSI New Orleans attorney Daniel Davillier. It had the effect of overinflating the value of the Four Seasons proposal.
“The consultants actively manipulated and distorted the proposals to such an egregious extent that [TCSI’s] submission was materially changed and materially undervalued,” Davillier points out to The Advocate. “This is precisely the kind of secretive, biased influence that the Public Lease Law is designed to eliminate.”
Faulty arithmetic is just the tip of the iceberg.
Few in the public sector grasp the important legal nuts and bolts of state laws that affect leasing Louisiana government-owned real estate, and the implications of a competitive-bid RFP, compared to private sector business dealings.
In the scheduling of court proceedings, Chase will hold another pivotal court hearing at the end of the week. A judicial ruling is expected shortly after she hears a fresh barrage of defendant motions filed by the city asking that portions of the TCSI case be dismissed even before TCSI conducts key discovery.
The outcome of this case will affect how others, locals and non-locals, do business in New Orleans, observers say, how city-issued RFPs are decided.
“Selection methods used were completely improper in a public procurement process,” Davillier explains to The Times-Picayune, regarding the TCSI case. “All this manipulation of the data has just allowed for a predetermined outcome to be justified on a post hoc basis.” This blatant effort to create ratings categories to portray one bidder in a favorable light — cost the citizens of New Orleans between $1 billion and $2.4 billion over the term of the lease.
Most Crescent City residents want the city-owned and long-abandoned building returned to commerce and full glory, but presumably not with a blind eye to improper RFP interference. According to legal briefs filed in the court, TCSI alleges city consultants juggled facts, suppressed pertinent financial information and modified clear numerical values. This “illegally subjective process scoring” in a competitive bid process caused a loss to the public fisc (treasury), according to TCSI claims.
Tellingly, the Four Seasons team lowered their minimum construction budget from $360 million to $200 million, but city consultants continued to use an improper formula of calculation on the $360 million number, at a cost to city coffers.
The final lease the Four Season team signed with the city requires no minimum construction budget, a study of the signed lease reveals.
Unlike private business transactions, Louisiana Public Lease Law legally mandates the award of a public property lease go to the highest bidder to avoid preferential treatment and cronyism. TCSI’s rent/bid was the most lucrative rent proposal for the leased property in ALL categories of the rent listed in the RFP.
Under Louisiana Law, the lease of a city-controlled property must create maximum revenues for the municipal body serving the people. In the RFP process currently under the microscope, the four prequalified offers ranged from two to four times higher than the winning proposal.
Something doesn’t add up, and neither does the math.
“This maneuver was done to allow Mayor Mitch Landrieu’s administration to influence the outcome,” Davillier adds.
TCSI litigation has yet to conduct full discovery from Four Seasons (Carpenter-Woodward) team members, the mayor’s office, selection committee members and outside consultant(s) including Jones Lang LaSalle. JLL is an investment management and professional services company specializing in real estate. The impartiality of JLL has been called into question.
Early document retrieval uncovered compelling and convincing evidence that city consultants manipulated and modified bidder presentation facts and figures in the “project analysis,” improperly awarding the WTC building lease to the least competitive bidder.
The Advocate reported that Chase confirmed in open court during a preliminary hearing, “The reason the [State] Legislature enacted the Public Bid Law is to ensure that the playing field is level.”
The city’s two-step RFP process for public real estate began September 2014. Eleven original contenders replied to the RFQ. The field of RFP proposers was then vetted and cut to five finalists. The competition ended last March when the shortlisted development teams submitted their “best and final” offer. Each team proposed to redevelop the iconic jet-age building into a branded hotel with private residences and other destination-point public attractions. Hotel flags represented in the RFP process included Valencia, Conrad, Starwood and Godfrey.
The public was not privy to the entire process.
“My question is whether or not everything complied with the methodology that was set forth in the RFP and in the RFQ and whether or not that methodology was actually adhered to throughout and applied evenly across the board,” Judge Chase said. “Was the process clearly transparent? Was it followed without any kind of favoritism? That’s really what I’m here to determine.”
The Four Seasons original team members include Richard L. Friedman, Carpenter and Company; Paul Flower, Woodward Interests; Alan Levanthal, Beacon Capital Partners; and Sherry Marcus Levanthal. The Juffali Family of Saudi Arabia and other investor names have recently been released. Bill Gates co-owns Four Seasons Hotels and Resorts with Saudi Prince Al-Waleed Bin Talal.
A judiciary body of triers of fact will determine if the Landrieu administration was in fact required to follow Public Lease Law. Chase’s trial court, the Louisiana Court of Appeal, Fourth Circuit and the Louisiana Supreme Court will each weigh in on the case centered on a signature skyline building, one of the Crescent City’s most famous structures.
The court has already heard that, in addition to the materially false work product, influential but skewered, emails correspondence obtained via a Public Records Request reflects that city consultants use partial and disparate treatment among bidders. The city later struck a deal to convert the city-owned and long-abandoned former WTC building into a Four Seasons Hotel property at a cut-rate lease price.
Four Seasons was permitted to violate RFP rules via undisclosed iPad submissions with their RFP bid, as disclosed to the court in public pleadings. Seven iPads sent to the selection committee were not part of the public record. The content was unavailable to public-eye scrutiny and not put online on the city’s website with other RFP materials.
A recovered email from the city’s selection committee chairperson sent to other members states: “I respectfully request you take a moment…to review the information stored on the iPad submitted by the Four Seasons. After reviewing, please return the iPad to Nat Celestine who will return them (as requested) to the Four Seasons team.”
Like others, TCSI has taken the city to task to advocate for the analysis necessary for accountable and just governance for the residents of New Orleans. City lawyers have stated that the city “has broad discretion regarding the method and criteria used to select a lessee in order to maximize the benefits to the public.”
The city sidestepped TCSI’s immediate $65 million infusion of revenue (versus the city-inked deal for a paltry $5 million). These missing multi-millions of dollars could be used to pay critical firefighter $142 million judgments, and to pay for additional police protection, provide other essential city services, without increasing fees or citizen taxation.
Before, during and after the RFP process to lease one of the city’s chief assets for creating revenue, the city has battled its New Orleans Fire Department. Many of the dedicated life-on-the-line firefighters were Hurricane Katrina first responders.
As chief executive of the city, Landrieu has long riled against paying the city’s hardworking firefighters their outstanding judgments against the city. The judgments concern back pay and pension issues.
City Hall previously indicated firefighters could not be paid, and the city would continue to shirk a legal judgment, because the city was constrained by a tight budget.
In September, Civil District Judge Kern Reese held Landrieu in contempt of court and threatened house arrest for disobeying court orders pertaining to the firemen case. Landrieu initially said he would stay under weekend house arrest rather than agree to a deal he considers devastating to the cash-strapped city. Yet Landrieu and his administration left $60 million, ultimately billions, on the table with regard to a WTC revenue stream.
The firefighters created a t-shirt showing them being backstabbed by New Orleans.
Landrieu recently issued a steamroller ultimatum to firefighters as he unveiled his 2016 budget: agree to a settlement with a pair of lawsuits worth hundreds of millions of dollars by day’s end or lose the chance to negotiate. The city and firefighters reached an agreement contingent upon the passage of a property tax increase, somewhere around 3 mills, used to pay down the judgments.
Higher property tax is one of the main drivers of gentrification. Homeowners are squeezed enough.
Landrieu also wants a $100 million bond boost to fix the city’s water and street repair issues in 2016; voters will have to approve a new debt next year.
Likewise, New Orleans is under Federal consent decrees that mandate costly reforms to its prison and its police department. It struggles to find monies to hire more New Orleans Police Department officers and make street repairs while boosting cash reserves to improve its credit rating and fund the park system.
By the same token, “winning” Four Seasons team member Paul Flower has longstanding political ties to Landrieu. He is the recipient of numerous mayoral-appointments to influential boards and committees, which is public knowledge. Flower is a frequent spokesperson and chairman of the group sponsoring mediation to negotiate a firefighter settlement with the city, the Business Council of New Orleans and the River Region.
Flower’s team’s proposal “won” the RFP to lease the city-owned WTC site with a lowball pledge of $5 million upfront to the city — (in stark contrast to TCSI’s $65 million offer) — while Flower simultaneously spearheaded the taskforce brokering firemen pension concessions on their judgments against the city. Flower’s dual role may appear as a conflict of interest.
Flower’s company has previously faced complaints and legal challenges about a workplace culture where minorities feel harassment and racial discrimination, as reported by New Orleans media outlets on multiple occasions. Flower eventually stepped back from a city-awarded contract to build a half-billion-dollar new terminal at Louis Armstrong International Airport. That city contract also ended up in a formal protest, with two bidders at odds over the fairness of the selection process and scoring.
Again, the purpose of the Louisiana Public Lease Law is to prevent favoritism and cronyism between boards and authorities, a manipulation and modification of “best and final” offer, improper influence at the expense of the residents.
TCSI’s lawsuit of record specifies in no-uncertain terms how the city’s flawed manipulation of a public procurement bid process violates Louisiana Public Lease Law, through creatively devising a scheme to circumvent key aspects of the Lease Law to subjectively select a “favorite” contender.
The city touts a commitment to ensuring governmental transparency. Procurement is promised to be within the guidelines of the Louisiana Public Bid Law and applicable Executive Orders from the Mayor of the City of New Orleans. The process is designed to be one of equitable treatment, to instill public confidence in an “open, honest, fair, transparent, just, and inclusive” manner.
The lawsuit against the city directly challenges all the above.
The benefit of selection panels and external oversight as advisories on a city-controlled RFP is meant to be impartial, not used as a potential straw man cover for mayoral powers-to-be to run roughshod over.
In this instance, the city has conceded that the Selection Committee was “comprised of persons who are also employed by the city.” Chase wrote in an opinion, “At first glance, such appointments may appear questionable.” But not prohibited. The case has yet to be fleshed out.
RFPs awarded during the now-disgraced ex-Mayor C. Ray Nagin administration were under the sole authority of the mayor’s office. Nagin’s autocratic approach to RFPs stirred controversy and ruffled feathers long before he came under the gaze of federal prosecutors. Nagin most likely missed his own red flags.
New Orleans has long been a tale of two cities, or more.
TCSI’s lead attorney Davillier, a native son of the 7th Ward of New Orleans, is the driving force behind his boutique law firm the Davillier Law Group. Yale University graduate and distinguished former Orleans Parish Civil District Court Judge Michael Bagneris is also part of Davillier’s legal team. The National Bar Association recently recognized Bagneris’ civil rights work with the Thurgood Marshall Award.
Davillier is joined in representing TCSI by nationally recognized litigator James M. Williams. The “Super Lawyer” is among the top one percent of trial lawyers nationwide. Williams has also served on the bench as Orleans Parish Civil District Court judge and Louisiana Supreme Court judge.
All TCSI attorneys are active in civic causes, mentoring youth, civil rights and social justice.
New Orleans black pastors and community leaders have recently called on Landrieu and his top officials to move forward from “racially divisive politics,” separating New Orleans along racial and economic lines. Prominent black voices have urged him to focus on the real issues of crime prevention, spiraling police response time, shrinking police force, unemployment and not enough of the city’s budget being spread among black nonprofits.
The Pastors for a Better New Orleans ask the Landrieu administration for transparency and inclusiveness, to listen to those who do not agree with him, to stop political attacks upon black leaders and to coalesce around criminal justice leaders, first responders and others who are the lifeblood and heartbeat of the community.
Residents are concerned about the city securing the necessary funding for police protection, city services, public safety, taxes and affordable housing. Education, job training and opportunity for younger people in the city remain a priority.
The populist governor Earl Long once said that his constituents “don’t want good government, they want good entertainment.”
Landrieu succeeded Nagin as mayor in 2010. Nagin later stood trial for public corruption and was convicted of 20 counts of bribery and fraud and exchanging public contracts. Nagin is now serving ten years in federal prison. Several Nagin cronies also received prison sentences. Since Hurricane Katrina, three city council Members have also gone to jail. From governors Huey Long to Richard Leche and a host of other colorful characters, Louisiana has been long known for its toleration of scandal and corruption in government, broader and deeper than most other places.
Some say the storied state of Louisiana’s deeply entrenched kleptocrat political culture may be passing away, with the passage of some of the strongest ethics laws in the nation. Many believe Louisiana has turned her back on the arithmetic of the past.
The courts will decide if the City of New Orleans is required to follow Public Lease Law, or whether the city is permitted to inventively concoct a scheme to dodge key aspects of such law and subjectively choose a lease proposal for Public Property that offers the lowest rent among five submissions, all at a cost of over $2 billion to the citizens of New Orleans. At a time when the city has taken the position that it could not pay its obligation to the firefighters, and now wants to further raise taxes on residents to settle its firefighter debts, the city’s behavior is even more egregious and troubling.
TCSI’s well-plead lawsuit against the City of New Orleans will be winding its way through the court system for next several years, undaunted by retaliatory actions and intimidation against those who speak out on behalf of transparency, fairness and the public interest of the citizens of New Orleans. TCSI and its legal team are committed to pursuing every legal remedy available, and to the long-term fight.
Mark Twain said in the 1800s, “America has only three great cities: New York, San Francisco, and New Orleans. Everywhere else is Cleveland.” Some things never change.
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SOURCE: Two Canal Street Investors, Inc.
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