By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
Now see how you'd feel.
Imagine you are trying to sell a piece of business real estate. You've got a real estate broker representing you, and there is an interested buyer at your asking price--some kind of nonprofit agency you know nothing about.
Weeks pass, and then the broker tells you, well, they don't have the money, so you need to come way down on your price, and you need to tote the note for them; that is, you need to partially finance them yourself.
OK. Would you be at all upset to learn later from some guy who's a reporter for the Dallas Observer that your broker also happens to be the chairman of the nonprofit foundation that's been trying to buy your property?
And--just to cut to the chase here--understand that this deal involves $1.7 million in tax money. The nonprofit agency headed by the broker in question may end up controlling that money plus getting title to property valued by the city at $560,000 in exchange for what seems to be zero equity from this "foundation."
Do you get a good vibration from this? Or am I being persnickety?
Please be assured that the real estate broker in this situation says this isn't the real story, that I'm a liar, that he told everybody everything, and that it's all copacetic. We'll go there.
But first: The basic story is about an attempt by the city to use $1.7 million in federal funds to fix up the Texas Theater on West Jefferson Avenue, where generations of Oak Cliffites went to the picture show before it closed for the last time in 1998, and where Lee Harvey Oswald got caught in 1963. (Oswald would never have been apprehended there had he just bought a ticket before running in and taking a seat, perhaps establishing the Texas Theater "Curse of the Unclever.")
For the last two years, the city's department of economic development has been trying to craft a deal in which some entity would get $1.7 million in federal "Neighborhood Renaissance" money and use it to rebuild the theater. The goal is to turn it into an entertainment and tourism mecca on West Jefferson, hopefully giving the area some snap and sparkle. It's a great idea, and several organizations, including the Dallas Summer Musicals, have expressed interest.
But the Oak Cliff Foundation, which is sort of a lame adjunct to the Oak Cliff Chamber of Commerce, was never anywhere in the picture until the very last minute.
The owner of the Texas Theater is Don DuBois, an advertising art director who lives in Santa Monica, California. DuBois told me he first got the impression from his real estate agent, Monte Anderson of Options Real Estate, that this whole ball of wax meant DuBois was going to get his asking price of $800,000 for the theater and for an adjacent business that pays about $45,000 a year in rent.
Anderson, he says, informed him that something called the Oak Cliff Foundation was suddenly in the picture and that things looked good.
He says he never received anything on paper showing an $800,000 offer, but that he came away from a phone conversation with that impression. "Again, this was verbally," DuBois said. "We assumed the price was going to be $800,000."
Then Anderson calls him back. The Oak Cliff Foundation is having a cash-flow problem, he says. "Monte informs us that the price is actually $530,000."
But it's not $530,000 in money, Anderson tells him. The foundation doesn't really have any money.
"They offered very little, in fact, a very small amount or almost nothing down," DuBois told me. "Then I think it was interest for two years."
I asked DuBois whether Anderson had ever informed him that he, Monte Anderson, was chairman of the board of the Oak Cliff Foundation.
DuBois sounded shaken on the telephone.
"I would say I have no knowledge of that. He hasn't mentioned that to me. I'll be positive about that. We hadn't discussed that whatsoever."
The Oak Cliff Foundation was formed in 1973 under the Oak Cliff Chamber of Commerce to work with the police department in fighting crime. The most recent Internal Revenue Service declaration I was able to find on it showed that in 1997 it had assets of $10,672.
A recent story in The Dallas Morning News said that the foundation was going to "contribute $600,000 to the project." But I'm not sure "contribute" is the right term here.
I visited with Harry Swanson, the city official who has shotgunned the Texas Theater project, and Swanson told me candidly that most, if not all, of the money the Oak Cliff Foundation is bringing to the table is money the foundation intends to get Don DuBois to lend it.
Follow this? In order to paint this dried-up dormant old foundation as an equity partner in a big $1.7 million deal financed with your money, the folks at City Hall have to tell you the foundation will bring a wad of cash to the table. The city can't appear to be just giving away millions in public money and assets to some bunch of guys who have no skin in the game.
Hence the importance of persuading Don DuBois to tote the note. If he says, "OK, I'll lend it all to you," then the Oak Cliff Foundation can say it brought financing to the deal.
Don DuBois' financing.
So, in effect, the Oak Cliff Foundation could wind up getting the building with little or no down payment and then use the federal money both to fix it up and to make payments on the note. And if the Foundation goes belly-up? Even if the city sues it, it would have only $10,672 to lose--its original net worth.
Does anybody else hear the chatter of squirrels?
Of course I talked to Monte Anderson. He was very angry. When I asked him whether he had placed himself in an obvious conflict of interest, he said, "That's a lie. I have nothing else to say to you."
But we talked. He confirmed that he is chairman of the board of the Oak Cliff Foundation. "That has all been disclosed to all of the parties, to the Oak Cliff Chamber of Commerce, to city staff, and to the sellers."
I told him I had just gotten off the phone from an hour-plus chat with Don DuBois in Santa Monica, who had told me emphatically that he had no idea Anderson was himself a principal in the deal.
"You called Don DuBois?"
I said yes. I refrained from mentioning that they pay me to do this stuff. From that point forward in our brief chat, Anderson never reasserted his claim that DuBois knew all about his double role.
This isn't an inconsequential matter. I checked out the law. The Texas code for real estate agents specifically lists as a violation "acting in the dual capacity of broker and undisclosed principal in a transaction."
The fact that I found my way to some language in the code that I think pertains to this situation doesn't mean it pertains to the situation. There is always lots more to every situation than what meets the eye, especially my eye. That's why, when you go to court, you find a judge there and not me.
But I do think I'm competent to say that none of this smells very sweet, especially since it involves so much public money and the action of city officials.
Harry Swanson told me Anderson had agreed to forgo his commission on the sale of the theater as a way of cleansing himself of any conflict. Bob Garza, chairman of the Oak Cliff Chamber of Commerce, was quick to tell me the same thing. And so did Anderson himself when we spoke.
But under this construction, Anderson's organization still winds up basically owning the property with no equity of its own in the deal. And it's not just the property: It's $1.7 million in federal funds, of which $1.2 million is a "forgivable loan."
You know: forgivable loan. That's like what you loan your brother-in-law.
When I first talked to DuBois, before I told him his broker, Anderson, was chairman of the Oak Cliff Foundation, he was telling me how bad he felt that Anderson wasn't going to collect his commission. DuBois thought there was some obscure city regulation that was screwing Anderson out of his due. He told me he felt obliged to find "some other way to get him some money." After I gave him the news, he felt less sorry for Anderson.
But later I asked Anderson whether he had communicated to DuBois somehow that he was unhappy with the no-commission deal.
"Sure," Anderson said. "Nobody likes working on something for a year for free."
There is an important subtext for all of this ethical-shmethical business. The organization favored by the business community on West Jefferson to run the Texas Theater project was one put together by a man named Will Boroski. Boroski runs an actors agency in Dallas and has a long, impressive résumé in theater and film in Los Angeles and New York. He was director of the restored Savoy Theater in Los Angeles in the 1980s.
Boroski told me he had brought both investors and developers to the deal, unlike the Oak Cliff Foundation, which has no money and has yet even to file a proposal. Swanson confirmed Boroski's claims to me and showed me his financial declarations to the city.
Boroski says he was led to believe that the deal was almost his. But at a meeting two months ago with Swanson and other city officials, Boroski says, Swanson told him to use a certain architect and a certain lawyer, both of whom Swanson named.
"I told him I already had a lawyer and I already had an architect," Boroski says. "I said that wasn't going to happen. But Harry Swanson repeated it three times, that I really needed to use these people."
Swanson told me he did recommend the architect but that he didn't "remember" naming a lawyer.
The fact is that, after the meeting in which Boroski says he refused to follow these two strong suggestions from Swanson, Boroski was out of the deal and the whole thing was going to the Oak Cliff Foundation instead.
Don't ask me what this all means. The city council is scheduled to vote June 14 on approval of the loan to the Oak Cliff Foundation. I just know that the money part of this deal smells to high heaven, and putting the Oak Cliff Chamber of Commerce at the throttle sounds like a prescription for a train wreck.
If it were my money in the deal, I would be extremely angry and upset about the way it has been handled.
Wait a minute. Hold the phone. This is my money!