Edward Durell Stone contemporary high-rise, the World Trade Center building, New Orleans
The snowball effect of a deep tangle of lawsuits and civil conspiracy allegations continue to cloud and impact the Mississippi Riverfront World Trade Center (WTC) building redevelopment project that the City of New Orleans awarded a low-bidder Four Seasons group last March. That award comes at a potential loss of more than $2 billion to taxpayers. If you thought this wasn’t serious, think again. “The Two Canal Street Investors Inc. (TCSI) legal action against the city is about transparency and fairness in public procurement,” TCSI’s Lead Counsel Daniel Davilier said. The TCSI legal team, with includes two former Louisiana judges, took new aim at the Four Seasons, Carpenter & Co. and Woodward Interests group last week with anti-retaliatory (anti-SLAPP) legal paperwork to block their “retaliatory” strategic lawsuit against public participation (SLAPP) leveled at TCSI.
TCSI’s court filings make clear the rival billionaire Four Seasons-Carpenter-Woodward group used strong-arm bully tactics to “unlawfully intimidate” its detractors. TCSI law papers state the Four Seasons group seeks to “silence free speech on matters of significant public interest,” so the public at large might never know the shocking circumstances of how the group came to hold the valuable lease of the WTC property, to the financial detriment of New Orleans taxpayers. SLAPP lawsuits are used by corporations like Carpenter and Woodward to silence opposition to proposed projects and decisions that are unacceptable to the public interest. This kind of corporate bullying is a red herring designed to distract.
SLAPPs take the form of a variety of lawsuits. They commonly masquerade as defamation or business interference tort suits.
The Four Seasons group’s strategy of using a baseless SLAPP lawsuit to shut down TCSI’s lawsuit against the city has failed. Judge Tiffany Chase reaffirmed in November the case will go to trial, as court orders show and media organizations covering the case reported. Court watchers say, TCSI’s lawsuit against the Landrieu administration details how the city allegedly devised a “shell game” to handpick the Four Seasons influential developers.
This is not a plain brown-wrapper legal battle.
TCSI legal papers and lawyers call the city’s WTC lease to the Four Seasons group an “illegal public procurement that violated Louisiana Public Lease Law.” The anti-SLAPP filing against the Four Seasons group’s retaliation lawsuit (meant to stop plaintiff TCSI’s original complaint) states there is a “disturbing increase in lawsuits brought to chill the valid exercise of constitutional rights and matters of public interest and significance, through an abuse of the judicial process.” Watchdog groups, civil rights groups, press organizations, lawmakers, free speech advocates, jurists and legal luminaries concur.
Adding to many state laws already on the books, federal legislation may soon be enacted to stem the tide of rich and powerful companies and individuals who use retaliatory lawsuits as an (often successful) method to silence people who speak out.
TCSI attorneys have learned at least one local media outlet was afraid to publish public-record details of the TCSI case against the city and the Four Seasons group’s deal with the municipality, for fear of a SLAPP lawsuit.
Louisiana public bid laws for public procurement are for the purpose of protecting taxpaying citizens and the public treasury “against contracts of public officials entered into because of favoritism” involving unreasonable (below marketplace) price.
The WTC structure stands in the confluence of major downtown neighborhoods and streets, connected to the riverfront hub. Last fall, the city chose a city-appointed selection committee to review a buffet of real estate developers’ ideas for reviving the former WTC. The goal was/is to create a transformative project that helps attract visitors and locals to the river.
The problem is, TCSI alleges the city circumvented public bid laws and showed favoritism in awarding a lease agreement for the WTC building to the developers who plan to turn it into a Four Seasons hotel.
While the legal fight against the city looks ugly now, Davillier has announced that it’s just beginning. Prima facie evidence supports the filing of additional collusion claims against Mayor Mitch Landrieu’s senior level of government officials, city consultants, principals of master developer Carpenter and co-developer Woodward, and others, according to TCSI’s legal team.
Louisiana State law requires that the public lease procurement process be awarded to the highest bidder. For example, TCSI offered a $65 million upfront payment for the WTC lease while the Four Seasons group offered $5 million. A lowball offer on a public property affects whose pockets the bottom-line goes to, more profits to the developer versus the taxpayers.
More ammo is being added to the fray.
TCSI court papers describe the city’s procurement process as being a “rigged evaluation and scoring of the RFP lease proposal submissions, to the detriment of the public treasury. The net effect to the city is the loss of $60 million in one year and over $2 billion in lease revenues over the next 99 years.” The court motions go on to say, “The team with the longstanding political ties to the Landrieu administration were improperly favored to win the lease of the public property by way of the sham RFP procurement process. The 2-step lease procedure amounted to an illegal public procurement that violated Louisiana Public Lease Law.”
That about sums it up.
The Four Seasons group’s original development team members and equity investors include Richard L. Friedman, Carpenter & Co.; Paul Flower, Woodward Interests, [Woodward Design + Build is also cited]; Alan Levanthal, Beacon Capital Partners; and Sherry Marcus Levanthal. Bill Gates’ Cascade Company was named early on as a financier. Gates co-owns Canadian-based Four Seasons Hotels and Resorts with Saudi Prince Al-Waleed Bin Talal. Friedman is the director of the Four Seasons Hotels and Resorts.
As warring factions battle out a nasty snarl of lawsuits connected to the WTC lease and multiple sides continue to bombard the courts, with no trial scheduled until 2016 or later, there appears to be no end in sight to the litigation, court watchers say. TCSI’s preliminary witness and exhibit list has been filed into the court.
The Four Seasons group formed Two Canal Owner LLC entity in Delaware after the WTC contract award. The legal entity Two Canal Owner was not part of the city’s two-step RFQ/RFP bidding process and was never vetted. The Juffali Family of Saudi Arabia and others have recently been identified as project investors, one entity among others never even mentioned in the documents evaluated by the city.
In a nutshell, the “favored” Four Season group initially touted a $360 million construction budget (often reported as $364 million). This gained favorable traction in the press because it was put forward as resulting in more tax dollars to the city in the future. Documents show the group then submitted a proposed lease mock-up agreement during the bidding process with a $160 million drop in the construction budget. Their revised budget offered a $200 million budget — lower than TCSI’s $228 million guarantee and other offers.
Despite signed documents showing Four Seasons would only commit to a $200 million budget financial guaranty, city consultants who evaluated the RFP proposals still gave Four Seasons credit for the pumped up construction budget of $360 million.
Shocking, a simple review of public documents reveals that the city later allowed the Four Seasons group to execute a final WTC lease with NO obligation for any minimum construction budget at all.
The group currently has no at-risk money up for the project, contrary to original RFP rules. Eight months after winning the award, they may cancel the lease any time through January and have their $1 million escrow deposit with the city and $4 million deposit with their local counsel retuned without penalty.
Four Seasons group’s bid proposal to the city line-itemed a $25 million developer’s fee. This figure is more than twice that proposed by TCSI and the other RFP bidder teams. Real estate and construction industry professionals confirm that it is typical for a developer to be paid a real estate development fee based on the total development cost of the project.
TCSI began oral and written protests after the city consultants and selection committee picked the Carpenter-Woodward development team in March to convert the long-vacant former WTC building at the foot of Canal Street into a Four Seasons Hotel and private residences. That plan, which offered the least money of all short-listed bidders, beat out proposals from four other teams, including TCSI. Five prequalified finalist bidder groups vying in the competition with a “best and final” offer to lease the city-owned building were narrowed from eleven original contenders.
Lawyers for TCSI filed the initial lawsuit against the city in April. Judge Tiffany Chase refused to dismiss the case against the city. When city attorneys cited loopholes the Landrieu administration argued allow them to sidestep certain Louisiana laws, the Advocate reported Judge Chase countered with, “I guess I question how, if in fact the city is doing all the appointments, is that possible.”
Louisiana newspaper the Advocate also reported last June that Chase wrote, “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.” After failing to get TCSI’s public-interest case dismissed, court records show, the Four Seasons-Carpenter-Woodward group then filed a retaliatory SLAPP lawsuit.
TCSI did not drop its suit against the city.
TCSI contends the “very flawed” public bid process of selecting a WTC lease award “winner” cuts deep to involve a plot to give preferential treatment to the Four Seasons group by complicit city consultants, the law firm of Stone Pigman and Jones Lange LaSalle (JLL), NYSE. JLL is a professional services and investment management company specializing in real estate
Court filings indicate that the city consultants made analyses and publically presented recommendations based on incorrect information and that the consultants, in a ploy to ensure the selection of the Four Seasons, used and interpreted a construction budget formula to estimate “property taxes” that favored the Four Seasons group that was not based on how Orleans Property Assessor Erroll Williams’ office actually calculates taxes for New Orleans hotel projects.
TCSI pre-trial discovery filed into the court shows Four Seasons-Carpenter-Woodward’s own team member knew JLL was using an unsound methodology based on construction/project costs in an improper tax analysis. “It is more likely that an income approach would be used for calculating RE tax,” a Carpenter & Co. associate said in a recovered email. The associate’s bio states he holds a Harvard Business School MBA.
The proposals were reportedly evaluated based on their overall quality, construction and management plans, financing plan and financial resources, terms of their proposed lease agreement, benefits to the city, and commitment to disadvantaged business participation.
Records reflect most of the obligatory decision-making and “interpretation” of the WTC proposals was outsourced to the consultants, who prepared a joint-report that gave a very inaccurate picture of how the proposals stacked up to insure selection of The Four Seasons.
“Two Canal Street Investors’ lawyer James Williams said his clients are asking (Judge) Chase to make two declarations: that the city was required to award the lease to the highest bidder, and that Two Canal Street Investors were in fact, the highest bidder,” the Times-Picayune reported of court hearing coverage.
The highly-contested and fought over X-shaped 404-foot tower located at 2 Canal Street was once the city’s premier office address designed by famed architect Edward Durrel Stone and opened in 1967. The building formerly housed consulates, international dignitaries and maritime offices.
In a not unexpected turn of events, a cannonade of dramatic new TCSI legal filings and additional bombshell developments in the initial lawsuit levied against the city (and Four Seasons-Carpenter-Woodward group) are expected to be unleashed shortly with the filing of an amended complaint, according to Davillier.
Lawyers for TCSI cite in their legal pleadings public interest concerns about the city’s premiere asset, the WTC: “despite the immense disparity in rent offered between TCSI’s substantially higher lease proposal and that of the Four Season group, the lease of the public property was erroneously and unlawfully made to the Four Seasons group, who offered the lowest rent proposal of all five bids from the finalist developer groups.”
Court filings repeatedly refer to undue bid manipulations and modification. Categories of review and “analysis” were “created” for the express purpose of attempting to justify the pre-planned section of the Four Season group. “Favoritism” and “cronyism” are alleged.
Litigation discovery documents in the court reveal evidence the Four Seasons-Carpenter-Woodward group participated in improper, prohibited communication with the Landrieu administration during the RFQ and RFP process. Email exhibits present the group “vetted” potential team members with the “mayor’s people” during the city’s procurement process. Electronic discovery obtained by TSCI also make evident city consultant JLL solicited help from Friedman in procuring work outside the U.S., at the same time JLL was evaluating Friedman’s Four Seasons-Carpenter-Woodward group as a WTC 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.”
At the heart of the controversy is the RFP process and Louisiana law, as it applies to a city-controlled competitive bid process for the lease of city-owned property.
The entire idea of a RFP process is designed with the intent of assuring an open and transparent process that is a merit-based arm’s-length relationship, in order to shield against favoritism and political shenanigans. Public Lease Law was enacted to curb political influence or any suspicion of political influence or control.
Who are the alleged Landrieu administration cronies? Unknown. The court case is expected to connect the dots.
The Four Seasons-Carpenter-Woodward group’s co-developer Paul Flower has longtime political ties to Landrieu. He appears at Landrieu’s side often. Local business people, meeting minutes, organizational roosters and news coverage confirm the close connection. Flower has been selected to serve in (on) a number of advisory boards, committees and task force positions.
Flower’s development team won the city’s public-bid contract last year to build a half-a-billion-dollar new terminal at Louis Armstrong Airport. The RFP award was re-bid after the losing bidder protested improper scoring and evaluation by the review committee. Flower’s company Woodward dropped out of the re-bid process to capture the lucrative airport job mega-contract after racial discrimination/DBE controversies (CJ Peete Public Housing Project job in New Orleans) proved to be a distraction.
Orleans Parish School Board forced Woodward out of another public-bid $51 million construction job the company won when a subsequent DBE scandal erupted concerning “problematic” family ties. Flower sued but lost. Woodward is currently embroiled in a DBE misstep of work allegedly being steered to non-DBEs at the $600 million Iberville redevelopment project, a competitive bidding project. Flower has stoutly defended his company(ies), his bid scores, and stresses his deep civic commitment to New Orleans.
More twists and turns.
“High-powered, well-connected political consulting firm” [Norma Jane] Sabiston Consultants (a lobbying and PR firm) has worked with Flower’s company Woodward since 2010, the Advocate reported. This connection created a possible conflict of interest situation with respect to the airport RFP contract award when it was discovered an Aviation Board member owned a 30 percent stake in the Sabiston firm. As a political consultant, Sabiston is a close ally of Mayor Landrieu and his sister, Senator Mary Landrieu, and has done work for both of them. Sabiston and her firm have been paid more than $70,000 in campaign consulting services for the mayor, campaign finance records show. She previously served as chief of staff to Senator Landrieu and remains the treasurer of Jazz PAC, Mary Landrieu’s political action committee.
The Landrieu family name is prominent in Louisiana politics, considered a Southern Democrat political dynasty.
In September 2014, the city issued a RFQ seeking proposed development concepts and from experienced developers for the WTC site.
In October 2014, Landrieu appointed Flower to head up a task force (Firefighter Pension Reform Working Group) to settle firefighter judgments of totaling hundreds of millions of dollars levied against the city over pensions and back pay. Landrieu also named First Deputy Mayor and Chief Administrative Officer Andy Kopplin to the firefighter task force. A business organization Flower chairs was named to pay for outside consultants and “technical assistance” to help end the long-running firefighter litigation.
In November 2014, the Four Seasons-Carpenter-Woodward (Flower) team submitted a response to the WTC RFQ. The bid was one of eleven proposals.
On December 11, 2014, the Advocate released the names of the redevelopment of 2 Canal Street selection committee Landrieu picked to select to judge the RFP proposers. Kopplin was named to the committee to evaluate the RFP.
“I have always said the people of New Orleans will rebuild New Orleans, and this project is no exception,” Landrieu said.
Private businessman Flower and municipal leader Kopplin both headed task force mediation for firefighter concessions which had the city on one side and the firefighters union on the other side, at the same time Flower was an active bidder for city-controlled WTC lease and Andy Kopplin was on the opposite side of the table judging the bidders.
This entwined relationship could be construed as a conflict of interest.
Outside professional consultant observers say that any monies derived from a potential WTC lease award for city-owned property may have impacted the firefighters and the city’s bargaining ability, or lack thereof, in the standoff feud between the city and the firefighters.
In March 2014, Flower’s Four Season-Carpenter-Woodward team then won the city’s WTC lease award with the lowest-price bid of $5 million upfront.
What is wrong with this picture?
Explosive new TCSI videotaped deposition testimony alleges the Four Seasons-Carpenter-Woodward team gained private knowledge on how to structure a WTC lease-bid with low numbers upfront, sources say, based on information that the Landrieu administration would not favor bids with large payments upfront. The city allegedly feared the firefighters union would attempt to attach the funds in partial satisfaction of the firefighers’ final judgment. This is the same firefighters union that Landrieu appointed Flower (of the Four Seasons-Carpenter-Woodward team) to negotiate with during the WTC RFP selection process.
In August 2014, “Even under the best case scenario, the cost to rescue the [firefighter pension] fund will fall overwhelmingly on taxpayers,” Flower told the council. Flower spoke at a time when Landrieu was engaged in a behind-closed doors poker game with the city’s firefighters. “Is it fair for the citizens of New Orleans who are going to pay this [firefighter] freight,” Flower added. Flower made these remarks, as the Landrieu-appointed chair of a task force, five months after securing the city-controlled competitive-bid WTC lease award that cost local taxpayers significant lost revenue.
To put it in perspective, four out of five of the finalist bidders offered more upfront money to the city for the WTC building then Flower’s winning-bid team.
In September 2014, the presiding judge overseeing one of the firefighter judgment court cases against the city held Landrieu in contempt of court and threatened house arrest. Landrieu sought leverage to dig his heels in and overhaul the firefighter pension system with steep cuts. Landrieu fended off house arrest with a last minute intervention by the Louisiana Supreme Court.
Landrieu issued an ultimatum for firefighters to agree to his plan or he would pull the plug on talks. A deal was struck. The city will pay firefighters $75 million over 13 years, to put to rest judgments against the city that administration officials say could total about $400 million. The firefighters conceded on many points, and the city will pursue raising taxes. The plan is contingent on the approval a property tax increase by voters in a March 2016 election. The local referendum tax proposal will be for an additional 3 mills (Orleans Parish millage rate) over 12 years.
This may be a wake up call for New Orleans taxpayers.
“My question is whether or not everything complied with the methodology that was set forth in the [WTC] 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 in June. “Was the process clearly transparent? Was it followed without any kind of favoritism?” These questions will now be considered and settled at trial.
New Orleans politics have a long and colorful history of fouling business deals. “Any time you have a project that involves the city through a quasi-public agency like the [New Orleans Business Corporation] NOBC and the interests…no matter how the deal is or has been structured, politics is going to play a role,” said Ivan Miestchovich, the late director of the University of New Orleans Institute of Economic Development and Real Estate Research, to a New Orleans Gambit Weekly newspaper reporter. “You’re just dealing with entities that never figured out how to play together in the same sandbox.”
Today’s economic climate which redevelopment plans best benefits the city, may or may not draw upon patterns from the past.
Government watchdog groups and real estate industry officials say, if not for the TCSI lawsuit, the public might never know the details of how the city conducted its WTC public procurement process.
“The consultants actively manipulated and distorted the proposals to such an egregious extent that (TCSI’s) submission was materially changed and materially undervalued,” the lawsuit says. “This is precisely the kind of secretive, biased influence that the Public Lease Law is designed to eliminate.”
TCSI legal pleadings make the case that it is critical for public procurement bidders engaged in a competitive bid process, and the public in general, to understand and believe in the transparency and fairness of how RFP data is processed and used, free of favoritism and cronyism. The Louisiana courts will be in charge of how justice is meted out in the WTC case of TCSI filing suit against the city.
One losing bidder in another city-issued RFP was reported as saying to New Orleans investigative journalism online publication the Lens “[they] had issues with the entire procurement process.” Not every company or individual has the wherewithal (or lack of fear of reprisal) to take grievances to court.
According to TCSI’s attorneys, explosive new civil-conspiracy developments in TCSI’s case against the city may give even more insight to the bombshell evidence already introduced in support of “sweetheart deal” allegations that the city controlled the Request for Proposal (RFP) process to select a “winner” and hand the Four Seasons group the lease contract for the iconic WTC riverfront property at a below marketplace uncompetitive price.
Legal experts watching the case say that city has previously tried to whitewash the WTC lease by hiding behind its alter-ego New Orleans Building Corporation (NOBC) as a smoke-screen cover, arguing the NOBC as official landlord of the city-owned WTC building has flexibility to skirt the law and not accept the highest bid offer.
“Pubic record disclosures and discovery confirm the city completely and unilaterally controlled the entire process,” TCSI court filings recite, “with no involvement with NOBC until after the lease selection was made on March 24, 2015.” Discovery shows NOBC members being completely uninformed during the city-spearheaded RFP selection process.
The Lens’ in-depth news and investigative journalist team recently reported revelatory information about city RFPs. Fresh disclosures have surfaced in a separate Ethics Review Board investigation of city officials: a 30-year city employee who raised her voice for what she saw as a “contract-steering scheme” that awarded a multimillion-dollar city contract to a “preferred bidder” faces retaliatory firing and seeks “whistleblower” status.
Legal experts say that repeated allegations of “favoritism” and “manipulation” in the city’s RFP process may indicate a troubling pattern of behavior in how the city’s handles its public procurement bids.
“They [city employees] were basically dictating and directing the selection committee,” Zepporiah Edmonds says of the case currently before the Review Board. She speaks of a working-place climate where city employees actively collaborated to “pick” the winner of a competitive-bid process. Edmonds also cites key data being suppressed and a manipulation of how competing bidders were ranked. She also objects to the practice of “best and final offer” as being an “unethical process” that violates the mayor’s own rules for RFPs. Due to protests from the losing bidders and on advice of the then city attorney, the city cancelled the particular RFP Edmonds refers to. But that did not end the problems.
What will the TCSI lawsuits mean for the future of the WTC? What impact will the outcome have on companies who seek to bid on the city’s RFPs? Too soon to tell.
There are, it turns out, plenty of theories.
Charline Gipson, one of the lawyers representing TCSI, said at least one “fatal flaw” in the city’s consultants’ calculations occurred when they estimated potential property tax revenues based on Four Seasons’ original higher construction budget, rather than net operating income. The Four Seasons-Carpenter-Woodward proposal came out on top in that measure because its original construction budget was nearly $100 million greater than that of its nearest competitor. But, again, the Four Seasons group’s proposed construction budget of $360 million was then lowered to a $200 million guarantee. The city then executed the highly irregular final lease with the group with NO minimum-guarantee.
In the WTC case at hand, the shortlisted bidders were experienced “dream team” developers with billions of dollars in construction projects and land transactions under their belts when presenting offers to lease the mid-century building. The city’s consultants’ analysis report summarizing each team’s financial offer was “very flawed” and had the effect of “overinflating the value” of the Four Seasons proposal, Davillier says. “All this manipulation of the data has just allowed for a predetermined outcome to be justified on a post hoc basis,” he adds, as reported by the Times-Picayune.
All of this comes at time when the cash-strapped city is garnering international press for its crime rate. The number of police is down and murder is up, reports the Washington Post. A recent playground shooting spree and the point blank gut-shot of a Good Samaritan Tulane medical student who came to the aid of a woman being dragged down the street continue to make world news. The Big Easy is hurting from a lack of police and a thin-stretched city budget. Money is short in the city coffers.
Each of the two distinct RFP cases that now spotlight the city in an unfavorable political light and scandal center on questionable city-controlled contracts awarded to bidders with “longstanding political ties” or a “close business/personal ties” to Landrieu and his administration.
TCSI’s landmark case proceeding against the city is set to determine the future of how public contracts are decided and awarded; litigation will also affect the fate of the vacant 33-story WTC.
“In my long tenure as a DPW employee and with all my previous experience as Parking Administrator, I have never found one instance where a vendor, once submitted pricing, has been allowed to go back and resubmit a different amount,” Edmonds wrote, as reported by the Lens in their pursuit of hard news, government and politics, and stories that are in the public’s interest.
How did Four Seasons-Carpenter-Woodward win the WTC RFP?
This is the question the court trial will “limelight” under the microscope. The community at large and news outlets may ask, how can four of the five selected RFP bidders for the redevelopment of the existing historical WTC building be so close in their financial offers – yet lose to the lowest bidder – and by almost 90 percent less paid to the city?
Some say the Four Seasons group was dubbed “the halo group” due to the Four Seasons brand of luxury resort properties. However, the winning group’s offer may have contained elements of attention grabbing bait-and switch “gimmick”—a $360 million construction budget that was not guaranteed.
Four Seasons team member and noted real estate investor and billionaire Leventhal said on record, “Four Seasons New Orleans will provide the greatest payments to the city over the life of the lease.” The boldface claim did not refer to actual checkbook payments; the team’s proffer was $60 million less than that of TCSI in year one, billions shy long-term. The Four Seasons teams offered the lowest WTC lease payment of five proposals.
Leventhal also told the selection committee that his team would achieve the “highest residential prices in the city, highest room rate in the city,” Katherine Sayre of the Times-Picayune/NOLA.com live reported at the public hearing, with minute-by-minute updates. “The result of all this, is that the city will receive higher real estate tax payments over the life of the lease,” Leventhal said, “higher hotel tax payments over the life of the lease.”
Leventhal’s “highest price” narrative was, of course, speculative and subjective.
Valencia hotels (TCSI’s proposed hotel flag) out-perform Four Seasons urban hotels in cities where the two go head-to-head. Even though there is a Four Seasons hotel in Houston, the Hotel Sorella CityCenre, Valencia Hotel, was rated the best hotel in Houston.
Condé Nast Traveler readers have named all four of Valencia Group’s urban hotels to the magazine’s 2015 Readers’ Choice Awards list. Each one was rated the best hotel in their respective cities.
Errors occur. Mistakes are made. Some are fatal flaws in design and/or financial analyses.
With respect to the once glamorous now shuttered WTC building, the Four Season group’s architects initially proposed (RFQ) interior parking inside the 60s building. They planned to utilize an electric lift to ferry vehicles from lobby level to floors 4-9. The architects obviously did not have a solid understanding and interpretation of the building’s unique structure. Interior columns are too close to make the space work for parking. The building was never conceived, planned or engineered for interior parking, according to Peter Capone, the last surviving architectural partner of the building’s original designer Edward Durell Stone. TCSI’s professional team concurred. The Four Seasons group dropped their seemingly ill-conceived, unworkable parking plan from the second-step RFP proposal.
Similarly, the Four Seasons group has never fully publically addressed the elevator capacity: how the historic high-rise’s set number of internal (center shaft) elevators will ferry daily visitors to a proposed roof top tourist attraction — while sufficiently servicing luxury hotel guests and private residential units.
TCSI legal briefs detail in no uncertain terms the Four Seasons group’s “artificially inflated construction budget” of $360 million, later reduced to zero minimum budget guarantee, coupled with the “wrong method to calculate taxes” of city consultants using construction budget figures, an “erroneously methodology.” All of this created a “favorable scoring” for the Four Seasons group, over its competitors, who were vying for a lease award based on real numbers.
The New Orleans Tax Assessor does not use construction costs to calculate property taxes for hotel projects. Further compounding the city consultant’s “very skewered” analysis is the use of estimated property taxes to begin with, in itself a highly speculative move.
TCSI refutes the validity of a WTC lease award based on many egregious errors including projected financial numbers that presented increased payments to the city based on projected real estate property taxes.
There appears to be no shortage of extensive tabbed materials, legal and financial documents to fuel the fight.
Regardless of the authenticity (or lack of) of the property-tax calculation numbers laid out in this unrecognized “category,” it is a red flag and revenue cost to the city’s citizens. The WTC building may very well continue to have a tax-exempt status because it is owned by the city, and so may retain its character as a “public property.”
Any leaseholder of the WTC lease may challenge paying real estate taxes, and would currently have the legal authority to do so. Why? A similar legal challenge by the Board of Commissioners for the Port of New Orleans vs. the city and the tax assessor concerning taxes/the abeyance of taxes on city-owned property is currently on appeal at the Court of Appeals, 4th Circuit and working its way through the Louisiana courts.
The Orleans Parish Civil District Court ruled a city-owned property is exempt from real estate property taxes regardless of any commercial use by the lessee for the property.
If the lower court ruling is upheld, millions of dollars are going to the bottom line of the developer on an annual basis. A potential continuation of the building’s existing tax-exempt status equally impacts the feasibility of condo-sale property taxes; future condo owners could presumably challenge a tax assessor bill.
According to the consultants’ evaluation, but contrary to the apparent facts, the Four Seasons proposal claims to produce the largest amount of taxes for the city. After the Four Seasons group won the selection, the Times-Picayune wrote that TCSI and at least one other bidder had advised the consultants during selection process that they were using bogus real estate property tax benefits with totally misleading numbers.
The Four Seasons group say they plan condos but yet also intend to pursue tax credits, according to public statements. Something may not add up. Real estate industry experts agree that tax-credit regulations require any would-be WTC developer to retain the units as apartments for five years after they are constructed if they use the benefit of historical federal and state tax benefits. The analysis is straightforward. All other redevelopment bidders for the WTC lease contract proposed rental apartments.
“We found a lot of divergent, erroneous information about our proposal,” TCSI attorney Gipson said, speaking of how city consultants for the selection process appeared to wrongly downgrade TCSI’s proposal, which boosted Four Seasons’ grading, to push through their lease award.
The TCSI proposal, which offered the most money, placed last in the selection committee’s ranking, while the Four Season’s bottom offer received the lease. The WTC revenue stream to the city was minimized at time when the city looks to raise taxes to pay more than $100 million in longstanding firefighter judgments against the city, and to fund a New Orleans Police Department federal consent decree. Landrieu is also seeking a $100 million bond boost to fix the city’s water and street repair issues.
But now with Chase’s ruling, all WTC selection lease details will have public disclosure. The shine of an open courtroom spotlight will explore how the city consultants and the selection committee subjectively chose a lease proposal for public property that offered the lowest rent among all submissions, experts say, at a cost of dollars syphoned from a city unable to pay its judgments, a city seeking new sources of revenue.
This is only the beginning of this drama, whereas the city/Four Seasons group and TCSI will advance to the knockout round at trial, and one side will be eliminated, based on the evidence and facts at hand not a popularity contest or beauty pageant.
The legal war being played out in the Louisiana courts could escalate dramatically.
Business insiders say that whispers of concern circulating in and around New Orleans offices and boardrooms are already getting louder about how these lawsuits impact local business and the real estate development climate in New Orleans. It’s another black eye in the financial world for the city, economic analysts say. For now, most business experts and legal scholars agree, TCSI has a solid case and most likely holds the winning hand, but most locals also hope this rocket-fire litigation goes away, soon.
On February 27, the rival developer groups competing against one another made pitches to a selection committee to get the long-term lease at the city-owned WTC building on the riverfront.
“The money for this project ‘is at this table here and now’ with no third party financing, Four Seasons Lead Developer Friedman said,” the Times-Picayune reported when following the developers’ presentations live from City Council chambers. “[We have] great capital to pull it off,” he said.
After winning the award, Friedman later told city dignitaries in attendance at a September public show of a gala on-site lease-signing event, “The real purpose of this [the ceremony] is to demonstrate to the people that we have a financial commitment from the wealthiest people in the world.” Amid a tented backdrop surrounded by violin music and hors d’oeuvres, he added, “We have the money. The papers are signed, and we’re ready to go.”
“We have the money to proceed with this project — lined up, committed, invested in the deal,” Friedman repeated in September.
The winning Four Seasons team debuted their Facebook page March 30 (days after securing the lease award), then rolled out their Two Canal Owner, LLC website in June. The website highlights Friedman’s Carpenter and Company recent work with Citi Private Bank to successfully raise $800 million for a Boston-based project. They will “bring this same enthusiasm and commitment to the New Orleans community” Friedman states.
“Strategic demolition” in the project was reported to begin at the tower at the foot of Canal Street in the summer of 2015, the Four Seasons team said in June. Eight months after the lease award, construction has been pushed back. The developers now hope to close financing in May 2016 and launch construction.
Four Seasons team member and Boston billionaire Friedman, who gave an interview to Business Jet Traveler and mentioned his Lear jet, says he has long been involved in politics. Observers say his office is lined with personal photos of the Kennedys, Clintons and Obamas. The hotelier and Democratic contributor was the recipient of President Bill Clinton, President Barack Obama and John Kerry appointments. The media often cover the Clintons stays at Friedman’s secluded Martha’s Vineyard 20-acre compound. The couple spent eight summers there during the Clinton presidency as the “Summer White House” vacation haven, according to press reports.
Four Seasons team member Friedman, a Clinton Foundation donor, previously lobbied the then-Secretary of State Hilary Clinton in 2011 for government-guaranteed loans (later approved) from the Overseas Private Investment Corporation (OPIC) to build Haiti hotels, State Department emails reveal. This created a controversy. The United States “independent” government entity OPIC provides U.S. companies long-term loans to help finance “environmentally-sustainable” hotel construction in “emerging markets” in the Middle East, Africa, Latin America and the Caribbean. Reports indicate OPIC’s own data shows that it benefits large, well-connected and even multi-billion dollar companies. Such programs have been called “crony capitalism” and “corporate welfare” by another name.
The Four Seasons hotel chain, of which Friedman is a director, has come under fire for the hosting a press conference in Doha, Qatar, by Hamas top official Khaled Mashal who called for extreme violence against Israel. The United States classifies Hamas as Foreign Terrorist Organization (FTO). New reports raised questions about whether the prominent hotel chain could be in violation of U.S. laws barring material support to terrorist groups, according to the letter of American law.
Friedman, Gates and Prince Prince Al-Waleed Bin Talal’s Four Seasons evaded questions about hosting the Hamas terror leader, reports say, sparking terrorism experts to question the hotel’s relationship with this group. The Four Seasons at first took to Twitter to deny the reports as “fabricated” then under mounting pressure backtracked and admitted the event. Multiple media reports indicate Mashal may reside at a Qatar Four Seasons penthouse, possibly since 2012.
Fellow Four Seasons team member and Bostonian real estate scion Leventhal, a mogul with a cool knack profitable business decisions, also has a company-registered business jet; he is a noted Democratic Party top donor and fundraiser with deep ties to the Clinton administration and its Department and Housing and Urban Development (HUD) projects. Leventhal was on the Clinton year’s White House sleepover guest list and attended coffees (informal “coffee klatch” meetings) with the then president, according to the New York Times, Wall Street Journal, the Washington Post and other publications.
Senator Landrieu, now a Washington lobbyist, is campaigning for Secretary of State Hilary Clinton’s presidential bid.
There is no injunctive restraining order in place to prevent the Four Seasons group from moving forward with the WTC project while TCSI’s lawsuit heads to trial, yet the city has argued unsuccessfully in court filings to have the case against it be dismissed for the reasons: they were at “true risk” of harm because a court-ordered delay “could jeopardize financing and tax credits for the project, stall construction and result in a delayed opening, reducing the city’s tax revenues.”
The Times-Picayune reported, after Judge Chase ruled the case will go to trial, now the Carpenter-Woodward team has warned that the litigation might delay the WTC project. This may seem contrary to Friedman’s March public statements that the heavyweight team of developers and investors required no third party funding to bring the proposed project to fruition.
Landrieu previously lobbied hard to raze the historic WTC building in 2010-13. “If it was up to me, I would tear it down,” Landrieu said at the time.
Although Landrieu and others cooked up a big demolition for the WTC building, public outcry to save mid-century skyscraper from the wrecking ball became great. National and international community voices like Docomomo US joined the local grassroots movement to save the building. Preservationists said destruction of the WTC would go down in history as “Landrieu’s folly.”
The Preservation Resource Center of New Orleans named the WTC the city’s most endangered historic features; in direct opposition to Landrieu’s initial plan of destruction.
After millions in state-funded financing needed to topple the building and build a replacement art sculpture fell through, the city took demolition of the structure off the table.
Local, state and national politicians are consistently accused of the insincerity of putting short-term political gain before the long-term interest of the citizens, whether that accusation is true or false. On the other hand, some say that some people, some cities, are not governable, except by strong-arm tactics.
The WTC building has since been added to the National Register of Historic Places. Although listing on the register does not put a stop to demolition or place any restrictions on a property’s owners (the city), it means any income generated by the historic building is eligible for certain tax incentives. An estimated $75 million in state and federal tax credits to any private developer of the building because of its historic significance, if certain criteria are met.
The WTC project is poised to be a moneymaking engine to create and sustain jobs, local leaders and economic forecasters say. “This iconic building is prime for redevelopment and should receive fair market value for rent,” the Landrieu administration said in a 2015 statement.
What’s the WTC building worth? TCSI obviously set the bar.
The building overlooking the river at the foot of Canal and Poydras streets has often been called “the city’s most valuable piece of real estate.” Efforts to revive the WTC appear stalled, by outward appearances.
Meanwhile, the famed bookend building at the foot of Canal Street awaits to be a high-rise hotel and private residence project and economic driver to anchor a re-enlivened and reimagined Mississippi Riverfront.
Watchdog group the Bureau of Governmental Research (BGR) in the fall of 2014 recommend the city sell the city-owned WTC site to the highest bidder. “It is a more transparent process,” says Janet Howard, president and chief executive officer of BGR. “The price is divided by objective factors rather than subjective factors.” The Times-Picayune reports that the group goes on the say, “The city should set a minimum price that approximates fair market value and sell to the highest bidder willing to accept a redevelopment timeline with penalties, including a recapture provision for non-performance.”
The 2010 BGR report about the WTC stated, “Although past efforts have suffered from a variety of economic, financial, and political problems … the long delays raise questions about the city’s underlying approach to redevelopment.” The group also blasted the city’s efforts to overhaul the building in 2003-2009.
In the WTC developmental tug-of-war, “Deal or no deal!” is a former cartoon caption tagline the Gambit associated with the city’s former attempts to redevelop the mothballed architectural gem of a building that dominates the skyline.
The clock continues to click toward the city’s tricenntenial celebration, a birthday party three hundred years in the making.
Bringing this case to resolution so that the aging WTC tower may soon live up to its full promise? It’s a tall order.
Adding more twists to the already tangled awarding of the WTC-RFP contract worth millions and billions of dollars is the apparent rubberstamping of the Four Seasons group lease award.
Court documents indicate city consultants Stone Pigman attorney Scott Whittaker and Managing Director of JLL’s Hotels & Hospitality Group Greg Hartmann and JLL Associate Judd Stensrud formulated the faulty “construction budget” math that resulted in a “recommendation” that the Four Seasons group receive the lease. The consultants jointly advised and guided the selection committee. These “financial analysts” consultants were charged with the public-benefit responsibility of making a decision that has a significant financial impact on New Orleans taxpayers for the next 99 years.
Director of the Office of Supplier Diversity for the City of New Orleans Arkebia Matthews also gave the selection committee a DBE report on bidders. Matthews previously drew ire over alleged DBE failures in the city’s own contracts and the enforcement of other DBE compliance. Paul Flower of the Four Seasons group has a negative DBE history on his Woodward projects and the allegations of bundled DBE work funneled to non-DBEs.
Legal documents verify the city’s WTC RFP consultant JLL inflated the computation of Four Seasons-Carpenter-Woodward DBE numbers by $80 million more than the Four Seasons group’s own estimate.
TCSI discovery has shown apparent status update briefings involvement in the selection process by Landrieu’s executive counsel Rebecca Dietz, esq. (now city attorney) and Executive Director of Sewerage and Water Board of New Orleans and NOBC executive director Cedric Grant (Landrieu’s longtime infrastructure czar and deputy mayor of facilities, infrastructure and community development).
“The mayor was directly involved, and met routinely with members of the selection committee and the city consultants,” one affidavit filed into the court states.
This and other maneuvers were “done to allow Mayor Mitch Landrieu’s administration to influence the outcome,” Davillier said, according to the Advocate.
A review of the transcript for the March 25, 2015 selection committee public hearing where the Four Seasons was awarded the WTC lease shows committee member Kopplin thanked committee chairman Cindy Connick and Dietz for “helping in the guidance” of the selection process. He also thanked Deputy Mayor Grant “who was part of our decision to enter the negotiation with [the Four Seasons group]” and “that was a real important and gutsy decision he helped advise us on.”
Grant is currently under Ethics Review Board investigation, the Lens reports.
“Show me the money,” Grant once said of the WTC project.
The Landrieu administration previously said the mayor has completely removed himself from the selection of professional services contractors, instead relying upon an appointed committee to score proposals and select firms in open (transparent) hearings. Ex-Mayor C. Ray Nagin fought the city council to keep that selection process secret and under his full control. Nagin is now serving 10 years in prison for 20 counts of public corruption.
TCSI’s court filings allege, “Email and calendar entries confirm the Mayor’s direct involvement and control of the procurement process.” Attorneys for TCSI say discovery exhibits document that city consultants and selection committee members met with and briefed the mayor though the entire procurement process, including the content of proposals and the identity of team members.
This is not the first time Landrieu has been accused of political interference and meddling. A 2014 New Orleans investigative article about the city’s Civil Service Commission discloses information about emails obtained from public records requests. The Lens reviewed the context of hundreds of emails the then-CSC chairman exchanged with Kopplin and other top members of Landrieu’s administration.
“The emails from [Civil Service Commission chairman] Wildes’ tenure show his relationship with the Landrieu administration to be cozy, deferential and even reliant,” the Lens reports. “This relationship perverted the intent of the commission in some cases, turning it into a panel that at times did the mayor’s bidding.”
The article mentions “improper interference by the city and a lack of independence on the part of the commission,” conflicts with Landrieu’s law department, the political patronage system and maneuvers used to violate the state sunshine laws—the supposed transparency of Open Meetings Law being circumvented.
The city-employed selection committee for the WTC RFP consented to the city consultants’ good word. This is what the TCSI legal team says transcripts and discovery in the court case indicate. The NOBC then gave the stamp of approval to the selection committee’s pick (as advocated by the city consultants) the Four Seasons group. New Orleans City Council then voted through what the NOBC authorized, what the city consultants’ suggested, as approved by the selection committee.
TCSI salvo fired at the city and Four Seasons-Carpenter-Woodward group appear to indicate a relentless determination to bring to light a “fast shuffle” of false financial data pedaled to the public in an alleged civil conspiracy to unlawfully select the Four Seasons group’s lowball offer for the WTC lease.
The Lens, the online publication that is a focus on the government and “keeping the powerful accountable,” ran a mayoral feature story on Landrieu headlined “‘Enemy for Life’: Mayor Mitch Landrieu accused of steamrolling those who disagree with him. The article goes on to say, if you’re not on Mitch Landrieu’s team, people say, he’ll fight back by pulling city contracts, withholding funding, removing you from boards and committees, and dressing you down.
The 30 New Orleans residents interviewed for the Lens article (former elected officials, business people, a wide range of civic activists, attorney) share a common consensus, common stories. Landrieu enjoys those who curry his favor and punishes those who challenge his dictatorial style of governing. Don’t cross him. Don’t disagree with his opinion. The Lens reports that Landrieu “retaliates against those who question that one voice — his.”
“People are afraid of him,” said one-time supporter and champion of the mayor Babs Johnson, speaking on the record. Many of Landrieu’s critics are more cautious about being quoted, or going public with concerns, fearing retribution by the mayor. He is vindictive, they say. “You have to be in lockstep with him or he’ll go after you,” Johnson added. “He went after me.”
This implies Landrieu may prefer to govern with a “coalition of the willing.”
The mayor says there’s no evidence of such retaliation, and that he’s tangled with entrenched political interests. Landrieu chalked up stepping on toes and exchanging sharp words with those who disagree with him to “passion.”
With the WTC lease at stake to transform the empty skyscraper into a world-class hotel and apartments/condos, many of those involved in the approval and negotiation of the 99-year lease may not have been apprised of the true and accurate financial and business facts, lawyers for TCSI say.
Landrieu has made “turbocharging the riverfront” a central part of efforts to improve the city before its tricentennial celebration in 2018. Redeveloping the city’s signature skyline structure — built in the 60s as the pivotal International Trade Mart then renamed the World Trade Center — is expected to help commemorate and usher in the city’s yearlong party.
Today, the WTC building sits vacant and dilapidated state. Many call it an “eyesore” and a “danger.” With it’s strategic Mississippi Riverfront location at the base of Canal Street, the mid-century modern aesthetic building is impossible to ignore.
Location, location, location.
“It’s in the best interests of the city to make a deal as clean and clear-cut as possible,” the late economic researcher Miestchovich said of the WTC building (during a separate now failed 2013 bidding process for the site). “The building has lain fallow for a long time. It’s time to put that baby to work. Let the developer do what he does best.”
Experts say a WTC-site mixed-used hotel and residential complex of international prominence has the potential to be a market leader and urban catalyst.
Southeastern Louisiana has weathered many storms. New Orleans is a 300-year-old city steeped in its distinctive richness of heritage, culture and traditions, but new investors to the city want to believe the old New Orleans way of business has shifted. Ten years after the devastation of Hurricane Katrina, progress and revitalization continues. New Orleans is heralded for more positive change, growth and innovation in many phases of life, business and tolerance of the citizens of New Orleans displacing the old business as usual attitude.
Most everything about understanding New Orleans from history to present day, from its people to its politics to its architecture, required unwrapping complex deep-dive layers of penetrative storytelling. It’s a one-of-a-kind city.
Economic development, education, opportunity, safety, housing, infrastructure, fairness and equality-versus-discrimination, international tourism, labor force training, preparing in this city the next generation of leaders and closing the gaps between the advantaged and the disadvantaged remain at the forefront of the city’s blueprint for tomorrow — say business, civic and religious leaders.
The Crescent City is a town that has long known woes, but is also knows how to mitigate the damages and carry on.
The four wings (aligned with the four cardinal points) of the riverfront WTC building were originally designed to symbolize the embodiment of the fabled port city of New Orleans’ historical and modern-day international importance, research of the building’s history shows. Today, the building remains an enormous compass and anchor.
Some say the fate of the WTC building may be a harbinger for the future of New Orleans. Even keel — everything old is new again.
“We believe you set the bar for offering the highest payments in every category,” Kopplin told the TCSI at the selection committee public hearing in March.
The Times-Picayune reported that Chase said in court about the TCSI litigation against the city, she has the authority to tell the city to scrap its lease with the Four Seasons development team and start a new selection process. Any question of whether the selection process was flawed will have to be settled at trial. Should she conclude TCSI claim is meritorious, plans to redevelop the long-vacant riverfront office tower could once again be scuttled.
TCSI, who filed notice in Orleans Parish Land Records Division against the WTC property, also expects a far-reaching civil-conspiracy lawsuit with potential damages of $500 million to be established at trial.
Davillier said he is seeking to compel a turnover of over 6,000 city emails the Landrieu administration has yet to release, with the city claiming privilege.
The ending to this long slog of a complex story remains unclear. Resolution is a long way off, the New Orleans media has reported.
Four Seasons group member Friedman once jauntily remarked in a media interview, “God is in the details.”
Experts could not agree more.
DOWNLOAD LEGAL DOCUMENT: TCSI’s Reply Brief
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SOURCE: Two Canal Street Investors, Inc.
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