News for the Hospitality Executive
|By Michael Corkery, Providence Journal, R.I.
Knight Ridder/Tribune Business News
Mar. 14, 2004 - PROVIDENCE, R.I. -- For years, James S. Gordon, an established Massachusetts developer, had been intrigued by the opportunities in the Renaissance City.
Gordon had invested in property on Westminster Street and was looking for other downtown ventures.
In December 2000, he met with a local entrepreneur, Stanley Weiss, who owned property at the corner of Westminster and Mathewson Streets. Weiss had plans to build a boutique hotel there.
After another developer failed to secure financing for the hotel, Gordon stepped in. Gordon and his associates formed EMI Grace Park Hotel LLC to develop the hotel. In April 2001, they signed a lease agreement with Weiss.
Less than a year later, the Grace Park Hotel deal was dead.
Gordon and his group said they lost more than $300,000 in engineering, construction and architectural costs. Weiss has sued them for scuttling the deal.
In the lawsuit, Weiss argued that he was led to believe that Gordon was committing the resources of his main company, Energy Management Inc., which had developed power plants in Massachusetts and Rhode Island. He claimed EMI executives deceived him in not following through with funding the hotel project and honoring the lease.
Gordon's response was that Weiss was dealing only with a limited liability corporation, and that the agreement included no guaranty of funding.
Documents in the lawsuit in Superior Court also contain other claims by Gordon and his associates about why they left the project.
The claims, made by EMI executives in sworn depositions, are vague. But they paint a picture of out-of-town businessmen wading into the waters of Providence real estate and politics, and walking away frustrated, uncomfortable and even indignant at what they were allegedly being asked to do.
Gordon said the primary reason EMI Grace Park Hotel LLC abandoned the project was that it was not going to be financially viable. Part of the financial plan was a property-tax break from the city.
EMI's treasurer, Mitchell H. Jacobs, claimed that while the developers were trying to secure the tax break, it was suggested that they contribute to the campaigns of certain city officials and donate to a group representing minority contractors in South Providence.
None of these suggestions, according to EMI executives, came from the office of Mayor Vincent A. Cianci Jr., who at the time was under indictment for running a criminal enterprise at City Hall.
The allegations leveled by Jacobs involved two members of the City Council and the minority contractors group.
In a deposition, Jacobs claimed that Weiss recommended making payments to City Councilwoman Balbina Young, whose ward stretches from South Providence to parts of downtown.
"Mr. Weiss advised us that we would have to make payments, which I would call bribes, and confirmed that in writing to us," Jacobs testified in the deposition.
Jacobs alleged that Weiss advised giving money to both Young and Councilman Luis A. Aponte, who represents parts of South Providence and Washington Park. "Political or otherwise, Stan [Weiss] was not specific," Jacobs said in his deposition.
A graduate of Harvard University and Cornell Law School, who handles legal matters for EMI, Jacobs said in his deposition: "I told Mr. Weiss that that is not the way we conduct our business at Energy Management or Grace Park or any other entity."
Jacobs would not comment for this story, citing the continuing litigation.
In an interview, Weiss vehemently disputed the allegations in Jacobs' deposition.
"It's crazy. Do you think I would tell him to bribe them?" Weiss said.
"The council people have been good to me. They have been straight to me.
They are good people. They give of themselves. This is crazy. I would never tell him to do that."
Weiss had tried to develop a downtown hotel for several years. After EMI Grace Park Hotel LLC pulled out of the deal, Weiss went ahead with the project and said he has had no problem working with the council. His tax agreement is nearly finalized, he said.
Young said in an interview that she has never accepted campaign donations in return for her vote on the council. She said she had never heard of the allegations by the EMI officials until they were raised by a Journal reporter.
"What you have are two developers blaming each other, and what they want to do is put the council as the fall guy," Young said.
Likewise, Aponte said he has never taken a campaign contribution in exchange for a vote. He called Jacobs' statement offensive.
Weiss' lawyer suggested, through questioning in the deposition, that Jacobs has scant evidence of the alleged bribe. The lawyer, David Wollin of Adler Pollock & Sheehan of Providence, pointed out an e-mail, dated Sept. 6, 2001.
In the e-mail, which is contained in the court file, Weiss proposed that Jacobs hire a lobbyist to smooth relations with the black community and prevent the city from imposing unexpected demands on the hotel project.
The e-mail also raises the possibility of giving campaign funds to key council members, including Young.
Weiss said he wanted to prevent what had happened to another Providence developer: at the last minute the city had imposed a "low-moderate housing requirement" on the project.
In the email, Weiss suggested hiring a lobbyist. The e-mail says: "He is a friend of mine, and this might be able to be arranged so there are no surprises. Time is of the essence, so if you want to proceed, please advise. (Cost: I don't know, could be $5,000-$10,000 and certain key council people, like Balbina Young, would need money in their campaign fund??)" Jacobs wrote back to Weiss a few hours later: "Thanks for the suggestion.
We'll keep working on our own for now."
When pressed during the deposition, by Weiss' lawyer, Wollin, whether the statement in the Weiss e-mail was what Jacobs referred to as a bribe, Jacobs testified: "I was referring to his statements and what he knows there. I know what he meant, too . . ."
When pressed further about whether the bribery allegation stemmed from the e-mail, Jacobs replied: "That is correct."
In the interview, Weiss confirmed that he suggested the EMI executives hire some kind of "consultant."
Weiss said he did not recall raising the idea of giving campaign money to certain City Council members, as indicated by the e-mail.
Weiss has owned property in Providence for years, including several East Side and downtown buildings. He studied urban sociology as a graduate student at Brown University and later became a banker. He's been hailed as a visionary in the effort to revitalize downtown.
Weiss said he has attended political fundraisers for city officials, but they were unrelated to his business.
Asked why Jacobs would make these allegations in a sworn deposition, Weiss said: "He's a very angry man and he's throwing whatever mud he can throw around," Weiss said.
EMI is no stranger to the mix of business and politics. The company has developed power plants in Massachusetts and Rhode Island. Its executives, through limited liability corporations, have developed condominiums in Boston and proposed to build a controversial "wind farm," which would generate wind power off Cape Cod.
Gordon said in a deposition that he had been watching for opportunities in Rhode Island's capital city.
"We wanted to do things in Providence, Rhode Island," recalled Gordon in a deposition. "And help, you know, spark the renaissance of the city and Downcity district."
Providence uses tax breaks, or "tax stabilization" treaties, as part of its strategy to attract developers.
The city offers treaties for buildings in the "Downcity" area and for certain mill buildings. Under a typical treaty, the city forgives about half of the property tax over 10 years, said Acting Tax Assessor John Gelati.
In exchange, developers have agreed to demands from the city, including buying supplies from local businesses, building affordable housing and hiring minority workers.
The City Council negotiates many of the terms of the tax treaty. Since the mid-1980s, Providence has issued 42 stabilization deals, said Gelati.
Currently, there are four or five treaties pending before the council, he said.
According to EMI executives, the hotel tax treaty was stalled in the Providence City Council in the fall of 2001.
Jacobs testified that he was told that two Providence City Council members -- Young and Aponte -- were holding up the tax deal.
One reason, Jacobs said, was that the hotel developers had failed to reach an agreement with a group representing the interests of minority contractors.
In his deposition, Jacobs said he could not recall the exact name of the group, but said EMI Grace Park Hotel met with "Stan Cameron."
Stan Cameron is chairman of the Center to Advance Minority Participation in the Building Trades and a member of the Black Contractors Association.
He has an office on Broad Street in South Providence.
Cameron would not comment for this story.
Cameron insisted, according to Jacobs' testimony, that if EMI Grace Park Hotel did not reach an agreement with the minority contractors, the City Council would not pass the tax break. Jacobs claimed Young and Aponte later confirmed that assertion.
Jacobs argued that the minority contractors group had unreasonable demands. It wanted a high number of minorities on the job, Jacobs said.
According to Jacobs' deposition, the minority contractors group, "was demanding that 40 percent of the work force on the project be a minority work force."
In his deposition, Jacobs said EMI Grace Park was advised by Dimeo Construction of Providence that a high percentage of minority contractors was not feasible. Furthermore, he said, there were not enough qualified minority contractors to work on the hotel.
Aponte said in an interview that minority participation has always been an important issue when he reviews tax stablization treaties. In fact, many stablizations have included goals that a developer must work toward in hiring minorities and women.
"Here are opportunities for underrepresented communities who have been isolated for a long time. You will see a goal [for minority participation] in almost every tax stablization we've done," Aponte said.
"I've never suggested to anyone that there is a quid pro quo," Aponte said.
Young said she remembers meeting EMI executives briefly at City Hall.
"They acted like they didn't need a tax stabilization," Young said. "I remember them being cavalier about it."
Young added, "I always advocate for minorities and women. I won't apologize for that."
In another deposition, Diana McInerney, who was doing legal work for EMI, recalled attending an event at The Center to Advance Minority Participation in the Building Trades on Broad Street.
At the Center's Christmas party, McInerney said, she made a point of meeting Aponte, the city councilor.
"I told him about our project," McInerney said in her deposition. "He seemed to already know about it, and he said something along the lines of, gee, why haven't you gotten the approval yet?
"I said, I don't know, it seems to have gotten tabled and we can't get it back on the docket; and he smirked at me and winked his eye and said, 'I know.' " McInerney added: "I came away with the impression that he had been intentionally holding up the treaty until he knew that we were cooperating with the Center."
Aponte said in the interview that he recalled meeting McInerney at the party. Aponte said he might have confirmed to McInerney that he was aware of their tax treaty request, but he meant "no ill will," in his statement.
"I have no control over how she interpreted what was said now that she's being sued," Aponte said.
He added that the Center to Advance Minority Participation in the Building Trades has no authority to determine the amount of minority participation in a project. He said the Center primarily serves as an office where minority contractors prepare their bids, and a clearinghouse where developers can locate qualified minority contractors. It's not an "omnibus group" that can negotiate deals, Aponte said.
EMI executives had a different impression. The minority contractors group, according to the deposition testimony of three EMI officials involved in the deal, also wanted money for itself.
Gordon, the company president, said in the depostion that the group wanted a "donation" from EMI Grace Park Hotel LLC. "They wanted us to make a payment or a donation of $50,000, which was purportedly going to go to helping them fund a new building."
McInerney also claimed in her deposition that the Center asked for money.
"At one point, they asked for quite a lot of money, and there was some discussions about that, about how it could be used to help them with their efforts, and I recall that we communicated back to them that we would be happy to help them in some way, but an up-front, lump-sum payment, we did not feel was appropriate at that time."
Young and Aponte said they were not aware of any suggested donation to the Center.
By February 2002, EMI Grace Park Hotel LLC stopped paying rent to Weiss, and its investors decided not to commit any more money to the hotel -- effectively ending the project.
Weiss sued Jacobs, Gordon, EMI and EMI Grace Park Hotel LLC in Superior Court.
Weiss, meanwhile, has gone ahead with plans to develop the hotel. In August, Weiss announced that he was teaming up with the owners of L'Epicureo restaurant on Federal Hill -- restaurateurs Rozzan and Tom Buckner -- to create elegant lodging and fine dining at the downtown location. The Buckners plan to move their restaurant to leased space in the hotel, called The Hotel Providence.
Weiss said in a recent interview that he could not recall the percentage of minority contractors slated to work on the project, but he supports hiring large numbers of minorities.
He said he was never asked to donate to the black contractors association or the Center to Advance Minority Participation in the Building Trades.
He praised the City Council for recognizing the value of the hotel and approving the tax break. Weiss' treaty was recently ammended with updated figures and is awaiting final approval.
"I came to them and showed them I was trying to pick up a project out of the ashes. We needed the stabilization to make it work. We explained to them how it was essential to make it happen. They were civic-minded enough to approve it."
Weiss suggested the EMI executives had created their own problems with the Providence City Council.
"They came on very strong, and for some reason they were not relating to City Council people. I can understand why, because of their nature. They are very high-powered."
"They are very wealthy individuals," Weiss added about the EMI executives, "and they may have turned some of these people off."
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(c) 2004, Providence Journal, R.I. Distributed by Knight Ridder/Tribune Business News.