‘Red flag’ on S. Side hous­ing project

De­vel­op­ers sought $20K from tax­pay­ers to cover do­na­tions to al­der­man

Chicago Tribune (Sunday) - - FRONT PAGE - By Gre­gory Pratt and Joe Mahr

As de­vel­op­ers sought tax­payer help to over­haul a prom­i­nent South Side apart­ment build­ing, an un­usual email ar­rived at the Chicago Hous­ing Au­thor­ity that raised a red flag for its top ethics watch­dog and drew in­ter­est from the FBI.

In the 2013 email, the de­vel­op­ers sought tax­payer re­im­burse­ment for var­i­ous ex­penses tied to the re­de­vel­op­ment of the historic Rosen­wald Courts hous­ing com­plex in Bronzevill­e. In the more than two dozen stan­dard en­tries was one eye-catch­ing line: “Do­na­tion-Al­der­man $20,000.”

By then, state records show, the de­vel­op­ers and an as­so­ciate had made a com­bined $20,000 in po­lit­i­cal con­tri­bu­tions to Ald. Pat Dowell, the 3rd Ward al­der­man who held sway over the project thanks to a long-stand­ing tradition known as al­der­manic pre­rog­a­tive. Two of the project’s top de­vel­op­ers also served as co-chairs for her an­nual fundraiser while the

project was un­der con­sid­er­a­tion by the city in 2011 and 2012, ac­cord­ing to copies of the in­vi­ta­tions.

The de­vel­op­ers later dropped the un­usual re­im­burse­ment re­quest filed with the CHA, and cut an ad­di­tional $607,000 in other re­im­burse­ment re­quests. No criminal charges have been filed, though one of the de­vel­op­ers ac­knowl­edged to the Tribune that the FBI asked ques­tions about the $20,000 re­im­burse­ment re­quest.

Amid in­creas­ing po­lit­i­cal and le­gal scru­tiny of Chicago al­der­men, the Tribune has un­cov­ered records that de­tail how a de­vel­oper chron­i­cled its costs of doing business in Chicago — and listed po­lit­i­cal con­tri­bu­tions to an elected gov­ern­ment official among them. The news comes as re­form­ers, in­clud­ing Mayor Lori Light­foot, rail against Chicago’s po­lit­i­cal cul­ture, in­clud­ing the of­ten-un­spo­ken ex­pec­ta­tion that de­vel­op­ers must do­nate in or­der to get their projects ap­proved.

Those in­volved say there’s an in­no­cent ex­pla­na­tion: A sec­re­tary made a mis­take that eventually was cor­rected, and tax­pay­ers didn’t re­im­burse for the do­na­tions, which were le­gal.

Dowell de­clined an interview re­quest for this story, but in re­sponse to written ques­tions she said the po­lit­i­cal dol­lars and sup­port she re­ceived from the de­vel­op­ers did not have an ef­fect on their project’s ap­proval. The al­der­man also said she did not ask the de­vel­op­ers for $20,000.

“Business lead­ers are a vital part of any com­mu­nity. They are wel­come to par­tic­i­pate in the po­lit­i­cal process,” Dowell said. “All large scale de­vel­op­ments in the 3rd Ward are con­tin­gent on a ro­bust and in­tense com­mu­nity en­gage­ment process. The Rosen­wald was treated no dif­fer­ently.”

Nev­er­the­less, the CHA’s in­ter­nal watch­dog acted on the email. CHA Inspector Gen­eral Elissa Rhee-Lee for­warded the mat­ter to Faisal Khan, the for­mer leg­isla­tive inspector gen­eral who at the time was tasked with City Council over­sight.

Rhee-Lee told the Tribune she sent it to Khan be­cause she didn’t have au­thor­ity over al­der­men or cam­paign fi­nance mat­ters. She ques­tioned why the con­tri­bu­tions would be listed as a project cost. “Ob­vi­ously, that’s a red flag.”

Gov­ern­ment watch­dogs con­tacted by the Tribune said the doc­u­ments and po­lit­i­cal fundrais­ing his­tory with the al­der­man raise the ap­pear­ance of im­pro­pri­ety, even though they’re le­gal.

Ben Silver, a lawyer with the Elmhurst-based Cit­i­zen Ad­vo­cacy Cen­ter, said of­fi­cials like Dowell should avoid doing any­thing that even looks like it could be im­proper. “With­out more in­for­ma­tion, we can’t know if it’s an ex­am­ple of the Chicago Way. But if you had an ex­am­ple of a project that you knew was done in the Chicago Way, it would look just like this,” Silver said.

David Mel­ton, a se­nior ad­viser with the gov­ern­ment watch­dog group Re­form Illi­nois, said he’s never seen a project doc­u­ment be­fore that lists po­lit­i­cal do­na­tions as a cost.

But, he said, “I would not be sur­prised to learn that real es­tate de­vel­op­ers typ­i­cally in­ter­nally list that as one of their ex­penses of doing business.”

The Rosen­wald

The re­im­burse­ment re­quest stems from the $132 mil­lion re­de­vel­op­ment of Rosen­wald Courts apart­ment com­plex, a block-long De­pres­sion-era com­pound in Bronzevill­e where heavy­weight cham­pion Joe Louis, jazz icon Nat King Cole and poet lau­re­ate Gwen­dolyn Brooks once lived.

Rosen­wald Courts, at 47th Street and Michi­gan Av­enue, fell into dis­re­pair dur­ing the 1960s and shut down dur­ing the 1990s un­til de­vel­op­ers and the city sought to re­vive the prop­erty.

Dowell was in­stru­men­tal in push­ing for re­de­vel­op­ment of the Rosen­wald, which she once called “a huge, hulk­ing build­ing that is a blight on the com­mu­nity.”

Court and prop­erty records show the de­vel­op­ers signed a deal in Fe­bru­ary 2010 to buy the Rosen­wald from a real es­tate firm if the de­vel­op­ers could line up the fi­nanc­ing, in­clud­ing any gov­ern­ment help.

Later that month, Dowell cospon­sored a two-day con­fer­ence with a non­profit land use group on what to do with the di­lap­i­dated com­plex. The con­fer­ence’s re­port does not men­tion the de­vel­op­ers’ deal but broadly rec­om­mended that gov­ern­ment dol­lars help with re­de­vel­op­ment.

In Oc­to­ber 2011, Dowell wrote a let­ter to then-Ald. Daniel Solis, who was the Zon­ing Com­mit­tee chair­man, supporting a zon­ing change sought by the de­vel­op­ers.

In July 2012, the Chicago Com­mu­nity De­vel­op­ment Com­mis­sion ap­proved a re­de­vel­op­ment deal with the de­vel­op­ers, send­ing the mat­ter to the City Council.

In Oc­to­ber 2013, the City Council passed $25 mil­lion in tax in­cre­ment fi­nanc­ing sub­si­dies and backed $58.6 mil­lion in loans for the project, which Dowell voted for.

Those joined other public sub­si­dies for the project, in­clud­ing a $17.4 mil­lion CHA loan, an $8.5 mil­lion loan from the Neigh­bor­hood Sta­bi­liza­tion Pro­gram and $155,000 worth of city-owned parcels of land sold to de­vel­op­ers for $1 each.

The de­vel­op­ers on the project were a mix of lo­cals and out-of­s­tate fig­ures, city records show. Land­white De­vel­op­ers was a main en­tity, led by In­di­ana-based David Roos and New York-based Jay Lan­des­man, city records show. Lan­des­man has since died.

Iowan Jim Bergman also part­nered with them, ac­cord­ing to city records.

The de­vel­op­ers also turned to Chicago-based Light­en­gale Group for help co­or­di­nat­ing fi­nanc­ing, records show.

It was Light­en­gale Pres­i­dent Vir­ginia Pace who emailed the CHA in July 2013 with the list of project ex­penses that gen­er­ated scru­tiny. The doc­u­ment, ti­tled “Rosen­wald costs spent to date, 4/10/13,” listed nearly $2.6 mil­lion in de­vel­op­ment ex­penses.

The ac­count­ing Pace sub­mit­ted in­cluded stan­dard project items in­clud­ing ac­count­ing, ap­praisal, ar­chi­tec­ture, en­gi­neer­ing, le­gal, pre­de­vel­op­ment in­ter­est and fees paid, and $127,500 to a TIF consultant. Records show Ernest Sawyer, whose brother was a for­mer mayor and whose nephew is South Side Ald. Rod­er­ick Sawyer, also consulted on the project.

And the doc­u­ment in­cluded the line not­ing the $20,000 that was do­nated to Dowell.

A Tribune re­view of cam­paign fi­nance records shows Dowell re­ceived a se­ries of do­na­tions in the more than three years be­tween when she spon­sored the sum­mit that rec­om­mended de­vel­op­ers get gov­ern­ment sub­si­dies and when the City Council ap­proved the TIF deal.

Rosen­wald Courts LP gave two do­na­tions adding up to $5,000 to Dowell’s cam­paign com­mit­tee on Nov. 30, 2010. On Dec. 2, 2011, the com­pany gave an­other $5,000. Rosen­wald Courts LP gave an­other $1,500 on Dec. 21, 2012 — the same day that five other in­di­vid­u­als or en­ti­ties with the de­vel­op­ers gave Dowell a com­bined $7,000, records show.

Roos do­nated an­other $1,500 to Dowell’s cam­paign fund on Jan. 11, 2013, records show.

Those 10 con­tri­bu­tions from six sep­a­rate donors to­tal $20,000, down to the penny.

In an email, Dowell ac­knowl­edged re­ceiv­ing the $20,000 in con­tri­bu­tions “over the four year pe­riod be­tween 2010-2013.”

She also re­leased in­vi­ta­tions to her an­nual “Glitter Gala” fundrais­ers that show Roos and Lan­des­man served as co-chairs on Dec. 6, 2011, and Dec. 6, 2012. Roos also co-chaired the gala on Dec. 5, 2013, though his last name was mis­spelled, Dowell said.

Roos said in an email that he do­nated to Dowell “be­cause of the pos­i­tive work she had done in her ward, as well as knowing that she will con­tinue to do a won­der­ful job in her ward.”

The retraction

Nearly three months af­ter her ini­tial re­im­burse­ment email, Pace sent a fol­low-up to the CHA seek­ing to re­tract the $20,000 re­im­burse­ment re­quest.

“This work­sheet was pre­pared by a prior part­ner’s sec­re­tary,” Pace wrote in the email to the CHA. “I for­warded it with­out re­view­ing it, which of course, I should have. As you know from all bud­gets and in­for­ma­tion on draw back-up sent to you, any do­na­tions are not a project bud­get item.”

Ex­plain­ing fur­ther, Pace told the Tribune she for­warded the ini­tial doc­u­ment re­quest­ing re­im­burse­ment and “went on va­ca­tion the next day.”

Records show a CHA em­ployee emailed Pace a re­quest to im­me­di­ately file a new ver­sion of the doc­u­ment with­out the do­na­tions, and Pace re­sponded with an email that also with­drew more than $607,000 in other claimed ex­penses.

The CHA worker replied in an email, “I’m sorry, but I’m a bit confused. I thought you would only elim­i­nate the $20,000 item, so the to­tal amount would only be re­duced by $20,000. This seems sub­stan­tially dif­fer­ent.”

In her re­sponse, Pace said the orig­i­nal doc­u­ment in­cluded other non­re­im­bursable items in ad­di­tion to the po­lit­i­cal do­na­tions.

“This list was cre­ated by a sec­re­tary not in­volved with the deal and in­cluded sev­eral items which we knew would not be re­im­bursable items,” Pace wrote back. “We have elim­i­nated those items which we be­lieve may not be re­im­bursable to the project.”

That in­cluded more than $400 in bank charges, $62,500 for a “con­struc­tion man­ager fee,” the al­der­manic do­na­tions, about $2,900 for a con­struc­tion hall rental and more than $150,000 in travel. The re­vi­sion also cut “pre­de­vel­op­ment in­ter­est and fees” from $815,594 in the orig­i­nal doc­u­ment to $444,500.

It’s not clear what prompted Pace to re­tract the months-old doc­u­ment. She said she couldn’t re­mem­ber how it was brought to her at­ten­tion.

Roos in an email told the Tribune the doc­u­ment was cre­ated by an as­sis­tant for the now-de­ceased Lan­des­man.

Bergman, the Iowa de­vel­oper, told the Tribune there were in­ter­nal dif­fer­ences on the project and he wanted Lan­des­man off the job. He said he bought out Lan­des­man and told him that he could sub­mit le­git­i­mate ex­penses to the CHA for re­im­burse­ment.

Bergman’s rec­ol­lec­tion is that the CHA said it wouldn’t re­im­burse for the do­na­tions, which he said was an “id­i­otic” re­quest.

But, Bergman said, he doesn’t be­lieve it was an ex­am­ple of the so-called “Chicago Way.” He said he doesn’t be­lieve the $20,000 was any­thing other than a le­gal cam­paign con­tri­bu­tion and that the to­tal isn’t “big enough to move the nee­dle.”

“If it was $2 mil­lion or $200,000 I would tend to say yeah, that looks bad,” Bergman said. “Twenty-thou­sand dol­lars or what­ever it was? That just looks like, to me, you like what she’s doing and how she’s doing it. I have noth­ing but great things to say about the al­der­man.”

Dowell said she had never seen the re­im­burse­ment re­quest un­til the Tribune sent it to her for com­ment. How­ever, she said, Roos had for­warded Pace’s retraction email to Dowell in 2013 with an “FYI.”

Emails re­leased by the CHA show Roos was in­cluded on the July 2013 email with the re­im­burse­ment re­quest as well as the later retraction.

In an email, Pace told the Tribune she was con­tacted by the FBI about the in­ci­dent in 2013 and told them “the same I told you — the list was sent to me from (a) Land­white sec­re­tary and that I for­warded it on with­out re­view­ing it and later re­tracted it with­out the do­na­tion shown.”

“I do not re­mem­ber when/who de­ter­mined that the list was sent in er­ror with the do­na­tion,” Pace wrote. “There was no in­tent to ob­tain re­im­burse­ment for these funds.”

She said she has not heard from the FBI since 2013. Khan, whose of­fice the City Council has since elim­i­nated, de­clined to com­ment. Dowell said she never was con­tacted by the FBI or in­spec­tors gen­eral. The FBI de­clined to com­ment on the mat­ter.

Records show Dowell kept the cam­paign money, a small part in an al­der­manic fundrais­ing ma­chine that took in more than $480,000 from 2010 through 2013, ac­cord­ing to a Tribune anal­y­sis of state cam­paign fi­nance dis­clo­sure data. Over­all, she col­lected cash, loans and in-kind con­tri­bu­tions of more than $1.9 mil­lion from 2007 through 2015, the two elec­tion cy­cles be­tween the start of the Rosen­wald do­na­tions and the end, with her big­gest listed donors rang­ing from unions to de­vel­op­ers and builders.

Ear­lier this year, Light­foot picked Dowell to head the City Council’s bud­get com­mit­tee.

Rosen­wald Courts re­opened in Septem­ber 2016. Stand­ing next to then-Mayor Rahm Emanuel, Dowell smiled for the cam­eras. Emanuel held one gi­ant scis­sors to cut the rib­bon. She shared the other with Bergman.

That De­cem­ber, state records show Bergman do­nated $1,500 to Dowell’s cam­paign fund. He said he doesn’t re­mem­ber giv­ing the money but said it isn’t un­usual for him. “If I see peo­ple that are doing a good job help­ing their com­mu­nity, I do that,” Bergman said. “I think she’s as good as any­one I’ve ever worked with in terms of trying to help her com­mu­nity and her ward. She’s all about: ‘How do I lift the lives of the peo­ple in my com­mu­nity?’”

“I would not be sur­prised to learn that real es­tate de­vel­op­ers typ­i­cally in­ter­nally list that as one of their ex­penses of doing business.” — David Mel­ton, a se­nior ad­viser with the gov­ern­ment watch­dog group Re­form Illi­nois, on list­ing po­lit­i­cal do­na­tions as a cost

JOSE M. OSORIO/CHICAGO TRIBUNE 2017

Rosen­wald Courts apart­ment com­plex on Chicago’s South Side was built in 1929, shut down in the 1990s and re­opened in 2016 af­ter restora­tion.

BRIAN CASSELLA/TRIBUNE 2016

Ald. Pat Dowell, 3rd, has said that po­lit­i­cal dol­lars and sup­port from de­vel­op­ers did not affect the project’s ap­proval.

CHICAGO HOUS­ING AU­THOR­ITY DOC­U­MENT

De­vel­op­ers sub­mit­ted project costs to the Chicago Hous­ing Au­thor­ity and re­quested re­im­burse­ment for $20,000 in “Do­na­tion-Al­der­man.” The de­vel­op­ers later re­tracted the re­quest, say­ing it was a mis­take.

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