D.C. Suing Don Peebles
Updated, 6 p.m.
Still Mayor Adrian Fenty may be coasting to the finish line, but his attorney general sure isn’t. Today’s big news is that AG Peter Nickles has filed a lawsuit against super-developer and super Fenty-basher Don Peebles. Nickles is alleging that Peebles’ MLK Associates was trying to get the city to pay for $1.25 million worth of “improper charges,” including a fundraiser and political contributions.
According to the complaint, the city and MLK Associates began a 20-year lease in 1989 to rent about 60,000 square feet of office space at 2100 Martin Luther King Ave SE. The lease said the city would pay for a proportionate share of operating costs, and paid about $30k a month from 2000 to 2009.
The lease calls for MLK associates to tally up the actual operating costs at the end of each year and compare it to what they city has paid. If the city had paid too little, MLK Associates was due extra cash. If the city paid too much, then Peebles' firm is supposed to refund the city.
MLK Associates never said either way from 2000 to 2009 if the actual operating costs squared with what the city had paid, the complaint says.
Then in February of this year, MLK Associates presented the District with a balance sheet from 1992 to 2009, saying the city owed an extra $3 million in operating costs on top of what had already been paid. In March, an independent auditing company began pouring over MLK Associates’ books. Looking at 2007 through 2009, the auditors found $1.25 million in expenses that were “not supported.”
Here’s a list of some of those “not supported” expenses billed to the city, according to the complaint:
- $500 for a fundraiser held at the Peebles-owned Bath Club in Miami on March 11, 2007. The complaint says some of the costs for the event included $1,050 for champagne and $1,060 in tips.
- $5,000 donation to the Anacostia Economic Development Corporation.
- $3,700 in political contributions, including $1,500 to Councilmember Michael A. Brown, $500 to Marion Barry, and $500 to Ward 2 Councilmember Jack Evans. (According to campaign finance records, MLK Associates has also given to Ward 1 Councilmember Jim Graham and Ward 5 Councilmember Harry Thomas Jr. outside of the years the auditors looked at.)
- Nearly $500,000 in excessive management fees.
- $146,000 in business taxes that had “no connection" to any operation costs the city had agreed to pay.
- $11,000 in accounting fees to prepare federal and state tax returns.
- $2,700 in legal fees.
- $84,000 in loan modification fees, loan commitment fees, mortgage renewal fees and appraisal fees.
- $493,000 in cleaning and janitorial costs, which the complaint claims the lease says were all on MLK Associates to pay.
- $10,000 in other fees, which include office supplies and mail service.
The complaint says MLK Associates knew damn well it was submitting improper costs to the District, and should be forced to pay back what it owes the city ($600,000), multiplied by three, plus fines and attorney fees.
A spokesman for Peebles promised a rebuttal statement a few hours ago. LL hasn’t gotten it yet, but it’s a safe bet that it’ll accuse Nickles of using his last few weeks in office to settle scores with Fenty's critics.
Peebles, you’ll recall, toyed with challenging Fenty and is clearly not a big fan of the still-mayor. During a speech in January of this year, when talking about Fenty’s attempt to boot Cora Masters Barry out of a city-funded tennis center, Peebles said this of Fenty: “Does he think he's gonna be mayor forever? One day his wife will be the former first lady. Then I realized he probably doesn't have much respect for her."
Yeah, that’s not a very nice thing to say.
Councilmember Thomas, another loud critic of Fenty, has also accused Nickles of playing politics. Nickles is currently investigating a Thomas nonprofit that’s been accused of being a city-funded slush fund.
But Nickles tells LL that Thomas and Peebles better come up with something stronger than the “weak” argument that he's out for political payback. His advice to Peebles: “If you can justify the kind of expenses we outline here, then fine, do it in court.”
Nickles went on to say that whenever he sues powerful interests, like slum lords, pay day lenders or banks, he’s always faces the same accusations.
“It seems that everything I do is political,” Nickles says. “Bullshit—the reason I sued them is they deserved to be sued.”
Plus, he added, Fenty didn't even know about the Peebles lawsuit.
Read the complaint here:
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The plot thickens. Peebles sent out a response late this afternoon that, as predicted, casts the lawsuit as a “political vendetta” on Nickles’ part.
“The Fenty administration will end on the same note of pettiness and retribution which has defined it throughout,” Peebles says in a statement. Zing!
More interesting is Peebles’ assertion that MLK Associates had reached a settlement with Department of Real Estate Services Director Robin Eve-Jasper on Monday, which Nickles invalidated before filing suit. Peebles also says that Nickles is attempting "to derail the Peebles Corporation's bid for the Stevens School.” The Fenty administration just yanked plans to turn the historic West End school into an apartment building.
Here's Peebles' full statement for your reading pleasure:
Today, I was disappointed to learn that the District of Columbia, directed by Peter Nickles, filed suit against 2100 Avenue Martin Luther King Associates, a partnership of which I am a part. This lawsuit is without merit and the allegations made in it are false. Sadly, this action represents another example of a continued pattern of abuse of power under this Attorney General. It is no secret that I have been highly critical of this administration and for good reason. This retaliation does not surprise me; it has become the modus operandi of the Fenty administration over the past 4 years. I know that this is a consequence of my criticism. It is a price I am willing to pay in order to do my part in standing up to an administration that has repeatedly practiced intimidation.
Under normal circumstances, people sit down to work out this kind of disagreement. For example, the District has owed 2100 Avenue Martin Luther King Associates between $216,000 and $326,000 since 2009 and we never demanded payment or even considered filing suit. Going against the recommendation of the Department of Real Estate Services, Peter Nickles has taken the most confrontational path possible by retroactively invalidating a settled agreement the partnership made with Director Robin Eve-Jasper this past Monday and going straight to court. Furthermore, he has issued an inflammatory press release in an attempt to further damage the reputation of our partnership and it’s owners. This lease is a triple net lease and provides for the District to pay 100% of all operating expenses associated with the building operations, including reimbursement of the Lessor for expenses including attorney's fees for the costs of collection of rent under the lease.
The building ownership has and will continue to make charitable contributions and political contributions to worthwhile candidates as is it sees fit. None of these contributions have ever been charged to or paid by the District. To suggest that we would knowingly attempt to charge the District for $3,700 in political contributions and $500 for a contribution for event expenses and risking a $30 million building is simply ridiculous. The lawsuit is based on our unofficial internal documents that were requested by the city and handed over immediately, they were not reviewed by attorneys and our outside accountants and were never represented as an official bill. Nothing was withheld from the District and there was no intent to deceive. Most importantly, no demand for payment was made by the partnership. At best, this is a dishonest application of a false claims suit. At worst, it is a setup.
As a point of clarity and indication of Peter Nickles motivations; here is a short timeline:
- 1987: the District signs letter of commitment regarding the lease of the building at triple net.
- 1988: the District signs off on lease including Addendum H which indicates that the District will pay for waste removal and char/cleaning services.
- 1997: the District audits the building and gives a clean bill of health.
- May 17, 2010: we get a letter from DRES auditor saying overcharges to the District based on attached audit not done in accordance with GAAP. DRES gives us until June 7 to respond.
- May 28, 2010: we respond and ask for a meeting.
- We do not get a meeting for 5 months until Oct 25 despite repeated attempts. At this meeting our accountant is advised that the District is bringing suit and no need to talk.
- On November 8, 2010, a follow up meeting takes place with the director, staff and city attorneys, we are told that we have only until the close of business to settle. We reach agreement.
- November 8, 2010: Peter Nickles voids the settlement agreement.
- November 9, 2010: Peter Nickles files a lawsuit.
- November 10, 2010: Peter Nickles issues an inflammatory press statement.
This is not only an unjustified escalation, but is also a waste of District resources. Based on these facts, Peter Nickles has demonstrated that he is using his government position to pursue a political vendetta. This lawsuit is an attempt to derail the Peebles Corporation's bid for the Stevens School, projects in the region and to embarrass me personally. It is not an accident that Peter Nickles waited for nearly six months before allowing the Department of Real Estate Services to meet with us and file this frivolous law suit. He waited because he knew when it went to court and it was time to prove these allegations, he would be long gone. Nickles has brought this suit within days of his departure from his job and the end of the Fenty Administration with the false sense of security that he will no longer be in office when it is time to prove these baseless allegations and suffer the consequences of his actions. He will be held accountable.
It is sad that in the twilight of the Fenty administration, Peter Nickles is pursuing such a classic case of abuse of power and wasting tax dollars to settle a political vendetta. The Fenty administration will end on the same note of pettiness and retribution which has defined it throughout. Peter Nickles conduct in this matter will remind us of the legacy of Adrian Fenty when this suit fails in court. His legacy will be abuse of power, retribution, and political vendettas. A sad chapter is ending for the District of Columbia.
Photo by Darrow Montgomery