Dallas Pushing HUD to Withdraw Letter Accusing City of Misusing Housing Funds

Yesterday I said I would eat crow if Dallas Morning News editorial writer Rudy Bush turns out to be right and I turn out to be wrong about the outcome of the HUD racial discrimination complaint against the city of Dallas. Today after much more snooping around, I would offer this as my opening position in negotiations with Bush:

I will eat one crow wing, if you, Mr. Bush, will agree to eat a foot. Or it could be me foot, you wing. But I'm not eating crow alone.

See also: When HUD Releases Its Segregation Settlement With Dallas, Someone Is Going to Get Smoked

Here's the real deal. Reliable sources tell me Dallas wants the U.S. Department of Housing and Urban Development to engage in a massive cover-up of its own evidence in order to help Dallas. If and when that happens, I will eat the whole crow, shortly before moving to damn Canada.

One question, the "public interest" question, is whether Dallas will agree to major changes in its housing policies and laws in order to hang on to hundreds of millions of dollars in federal subsidies after HUD concluded Dallas colluded to increase racial segregation in the city between years 2000 and 2010.

The smaller-bore question -- more what Bush and I have been arguing -- is whether HUD will also force Dallas to pay some $40 million to Curtis Lockey, the real estate developer who told HUD what Dallas was doing four years ago and built a lot of their case for them with the evidence he brought forward.

Bush wrote an editorial for the paper last Tuesday in which he said two things: one, generally, that the HUD public interest case against Dallas is turning out to be bogus, and two, specifically, that HUD has already agreed not to press for money for Lockey.

I said in my piece yesterday that I didn't believe any of that and that I would eat crow if it turned out to be true. So why now, barely 24 hours later, and am I willing to negotiate on crow parts?

Yesterday in response to my question, Sam Merten, spokesman for the mayor, told me in writing that the mayor believes HUD gave up on compensation for Lockey a long time ago: "Mayor Rawlings is confident that the financial compensation requested by HUD contained in the original draft will not be included in the final version that is agreed upon because it is his understanding that HUD removed that component early in the negotiations."

I have now heard the same thing from other City Hall sources who would know. I have also satisfied myself that HUD has no legal obligation to get Lockey paid, even though HUD would not have had a case had Lockey not brought it to them. HUD can settle the public interest side of the case -- the things Dallas has to do to make up for years of racial segregation -- and not press the city to pay back Lockey for the tens of millions he claims the city cost him by pulling the rug from under his downtown tower re-do deal in 2009.

Lockey says the city yanked funding that had already been agreed upon for his deal when it found out he intended to develop a racially integrated building. HUD investigated Lockey's claims for four years and came out with a report last year saying he was absolutely right and the city was lying about it. That's where all of this came from.

Wait. Why don't I have to eat the whole crow? Well, merely getting HUD to step away from Lockey, persuading HUD not to use its own muscle to get Lockey paid, is not what the city is seeking. The city knows if that's all they get HUD to do, Lockey may be in for an even bigger payday later.

If HUD tells Lockey to go after his money on his own -- "We got our deal done, now you go get yours" -- Lockey will sue the city directly for compensation, something he hasn't done yet, and he will have all of HUD's evidence from the four-year investigation as ammunition.

In fact Lockey already has a "fair housing" lawsuit loaded up and ready to be filed, in which he will argue that Dallas torpedoed his deal and put it into bankruptcy because he was trying to obey the law on segregation and Dallas wanted him to break it. His lawyers can show the HUD letter of findings to a judge or jury along with reams of supporting evidence and say, "HUD said Lockey was right."

Sources in the Dallas legal community familiar with these negotiations have told me that Dallas wants HUD to do much more than merely step away from Lockey. The city wants HUD to withdraw its letter of findings and take other actions that would suppress evidence and actively cripple Lockey's ability to sue the city.

If HUD entered into some political deal to conceal evidence in order to help out a city it just found guilty of racial segregation, that would make some lost emails over at the IRS look like pretty small potatoes. I have a column in next week's paper detailing what HUD found Dallas had done, and it's very damning, both on the larger segregation issue and specifically what they did to Lockey. To walk on that or try to cover it up would be an enormity.

But it gets worse. The same sources are telling me Dallas City Attorney Warren Ernst has told the City Council that he still wants HUD to fold on most of the public interest side of its complaint by agreeing that Dallas's new "Housing Plus" program is plenty good enough, and Dallas won't have to do anything else that might look like eating crow.

That's much harder for me to believe than the part about ditching Lockey. HUD can walk away from Lockey, and it's cheap for them, not a big story. Lockey is some rich real estate dude. Maybe he did or did not get shafted, in the public mind. He has been pursuing another totally separate lawsuit in the courts, a so-called qui tam whistle-blower suit, and the courts have poured him out twice.

Bush says that means he's not even a real whistle-blower. I say the HUD complaint makes him a whistle-blower because it says he brought all of this to their attention. So two newspaper guys disagree. It's a gray area. Lockey not getting paid right away is not a national story.

But if HUD takes a dive on the public interest side of its complaint -- basically folds its tent and walks away from its own letter of findings -- then that's a major national story about the new HUD Secretary Julian Castro.

If HUD also throws its arm around Dallas' shoulders, agrees to put a knife in Lockey's back and do it by covering up evidence, that's my dream story and everybody else's dream story, too.

Merten told me yesterday that there is no larger deal with HUD yet. He added a curious addendum: "Mayor Rawlings has not shared that information with the council because Mr. Ernst is leading the negotiations and no final agreement has been reached at this point."

Yeah. That's what I thought. If the mayor or Ernst had anything like a deal in hand, they would have been crowing to the high heavens and The Dallas Morning News would have a picture of them on the front page in Roman robes with golden trumpets and little angels fluttering by their heads and multitudes bowing down before.

There is no deal yet. Dallas is still asking for the moon. The deal Dallas wants is crazy.The fact that the whole deal is still so up in the air means that Lockey hasn't been poured of anything yet because there is nothing from which to be poured.

HUD may have agreed early onto consider walking on Lockey if Dallas agreed to a mea culpa on the segregation issues. But if Dallas won't do that and in fact insists on a HUD cover-up, then there is no deal to pour out Lockey or anything else.

If I had to bet? I would bet that HUD will insist on its public interest issues being satisfied, and if the price for getting that done is to walk away from Lockey, they will. But they won't agree to collude with Dallas to bury their own evidence. Lockey will sue. He will be able to use the HUD evidence to get even more money tomorrow than he could get today.

I eat one wing. Bush eats one foot. Fair?

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Jim Schutze has been the city columnist for the Dallas Observer since 1998. He has been a recipient of the Association of Alternative Newsweeklies’ national award for best commentary and Lincoln University’s national Unity Award for writing on civil rights and racial issues. In 2011 he was admitted to the Texas Institute of Letters.
Contact: Jim Schutze