For those who are not bored to tears over the Riverside Park Square bond fraud, Attorney O. Yale Lewis is the best hope for holding those accountable who violated the publics’ trust and also stem the flow of $1.5M per year from the general fund to repay the bonds that were issued to pay off the first bond investors.

In short whether you agree with the objectives of the RPS project or not, the public financing was a sham. First and foremost was the failure to disclose that the AMC Theater was reneging on paying parking fees that were 50% of the proposed revenue stream to service these bonds. Attorney Jim McDevitt (Now the US Attorney for the Eastern District of WA) and Attorney Michael Ormsby of Preston & Gates did not disclose this material fact to the institutional bond investors while these bonds were in escrow. They allowed the bond escrow to close and the bonds subsquently tanked. The bondholders sued the City and the developers for a SEC civil fraud. They had an excellent case and the City bought their claim and was proceeding to sue the developers. The public foundation formed on behalf of which these bonds were issued was found to be a false front for the developers according to the IRS in DENYING the tax exempt status of these bonds. The IRS collected it back taxes through Preston & Gates in a secret deal.

O. Yale Lewis was brought in by Mayor Talbott to unravel this fraud. Lewis was later fired by Mayor Powers when he was elected. Mayor Powers brought in Attorney Laurel Siddoway to represent the City in its civil fraud case. It should be noted that Michael Ormsby was the campaign treasurer for Powers and Siddoway and her husband were large contributors to Power’s campaign. In my read of the Camas Magazine documents, Laurel Siddoway “gutted” the City’s legal case. It should be noted that Michael Ormsby loaned Mayor Hession’s campaign $10K at the least minute that he lost to Mayor Verner. Hession’s refusal to distance himself from Ormsby was probably a factor in his loss to Verner.

In essence this deal was a “gift of public funds” to the developers. Even though there have been subsequent “agreements” the smart money is betting that if Lewis is brought back and allowed to complete his work these deals can be unwound as fraudulent all the way back to the point the bond escrow was allowed to close. Yes, the developers LLC could be rendered bankrupt. But so what, if this deal could be shown to be a fraud, the LLC can be pierced and all of the assets of the developer would then be on the table to make the citizens of Spokane whole again.

Here’s a related analysis by award winning investigator report Tim Connor on two documents that were withheld by the City Attorney’s Office from O. Yale Lewis. These documents were given to Mayor Verner by Mayor Talbott and Dick Adams at their recent meeting.

Ron the Cop

Dick–

Thanks for copying me on your response from the Mayor’s office, inviting you to meet with her. It’s your meeting, so have at it, but I just wanted to flag an item for you. It’s at the top of my list of issues that the really harmed the City, and that the City (e.g. Mary Verner) have a moral responsibility to investigate because it involves their records, their officials, and the thwarting of a previous effort by special counsel O. Yale Lewis to identify those culpable for getting the city involved in a fraud.

The item is pretty simple. It’s a pair of letters [here and here] that were sent in late 1996 to City Attorney Jim Sloane from Mike Ormsby and Preston
Gates. The letters notified the City (specifically, Sloane) that Preston had a conflict of interest in the RPS transaction because in August of 1996 it had done work for River Park Square, advising RPS on the public financing options for the RPS garage. You’ll notice when you read the second letter (the 11/20/96 letter that was exhibit #572 in Duane Swinton’s deposition) that it actually references a third letter, reportedly sent in August of 1996 from Preston to Sloane.

Here is what is significant about these letters which I’ve attached as PDF files.

1) There’s no indication that Sloane ever shared the letters, or the specific information about Ormsby’s conflict, with his client, the Spokane City Council. Cherie Rodgers says, flatly, she didn’t know. You can check with John Talbott, but I think it’s safe to say if John knew he would have gone public with it. Moreover, all three board members of the Spokane Downtown Foundation asserted in a federal court filing that Preston/Ormsby failed to disclose to the SDF board that Ormsby had previous worked on the garage project for RPS. This is important because, as you’ll recall, the garage transaction was on “on behalf of” financing, meaning that the SDF was supposed to be acting in the City’s interests.

2) None of these letters (the two we have, the third that is referenced in the 11/20/96 letter) were ever identified to me when I filed broad pubic records requests for city documents in early 2000. In fact, the city never identified the letters to anybody. They only came to light when they were produced by other parties in the RPS litigation. This was a clear violation of state rules requiring the preservation of such documents and, if it were proven that the documents were destroyed to prevent disclosure, it would be an obvious violation of the public records law. More importantly, it’s a clear sign, to me, of obstruction of justice, in that I believe somebody consciously destroyed these letters or the whole file they were in because of the sensitivity of what’s in the letters. Jim Sloane said (in a deposition in our public records case) that he gave all his RPS files to Stan Schwartz. Schwartz, when asked about this in his deposition, got very upset and denied any knowledge that Sloane was relying upon him to keep his RPS records. To me the motive was clear. If either Rodgers or Talbott knew about Ormsby’s conflict, it would have given them the information they needed to scuttle the bond offering. You’ll remember that the bondholders later argued that Ormsby’s conflict was among the material facts that were withheld from them.

3) The letters and the substantive information about Ormsby’s conflict was withheld from O. Yale Lewis. Think about this. Lewis is brought into investigate the city’s involvement in the RPS fiasco and Sloane & Co. neither provide him these letters nor even mention that they know about Ormsby’s previous work for RPS. The first Yale learned about it was in reading Camas Magazine when we published our story “The Many Hats of Mike Ormsby” in July of 2002. Lewis was stunned and outraged.

Obviously, the whole RPS fiasco is mind-numbingly complicated. The City’s best hope for holding itself accountable was through Mr. Lewis’s efforts. The fact that his investigation was impeded by city officials who did not disclose these records or the substance of them is, to me, direct evidence that his work was being undermined by the City Attorney’s office. It’s as good a reason I can think of for why Verner should invite Mr. Lewis back and let him conclude his investigation with the FULL cooperation of city officials. [Emphasis added]

warm regards, Tim Connor