Told you so. Curtis Lockey and Craig MacKenzie, the downtown tower redevelopers who accused Dallas of practicing deliberate racial segregation, are back with a brand-new federal lawsuit against the city. These guys won't go away.
Last November the U.S. Department of Housing and Urban Development (HUD) pulled the rug from under them on a broad-based racial segregation complaint against the city of Dallas. Mayor Mike Rawlings made a big deal of the fact he had visited with brand-new HUD Secretary Julian Castro and charmed him into getting HUD to fold on a four-year investigation that had confirmed all of the developer's complaints.
HUD found that Dallas had been defrauding the federal government for a decade, pulling down $125 million or more a year in racial desegregation money, promising to use the money to achieve desegregation while in fact doing just the opposite. According to HUD, Dallas had been spending the federal de-seg money to develop deliberately segregated housing downtown while also conspiring to keep poor black and Hispanic people in concentrated areas in South Dallas.
But after Rawlings visited with Castro, HUD more or less said "just kidding," withdrew most of its complaint and agreed instead to a soft-sided promise from the city to do better.
The real money for Lockey and MacKenzie was never in their complaint to HUD anyway. They sued Dallas under a complicated law called the False Claims Act, dating from the Civil War. But they got beat up on their lawsuit as badly as they did on the HUD complaint. A federal judge in Dallas tossed them out of court in a decision upheld last year by the 5th U.S. Circuit Court of Appeals in New Orleans.
So how are these guys still around? One of the more striking features of the entire Lockey and MacKenzie saga is that everybody except the city of Dallas has agreed with them on the facts almost every step of the way: The trial judge in Dallas, the appeals panel in New Orleans and HUD's own four-year investigation all found that Dallas was doing pretty much what Lockey and LacKenzie said it was doing -- taking federal de-seg money and falsely claiming to spend it on de-seg while practicing deliberate racial segregation.
But it gets complicated. The False Claims Act provides that a citizen who blows the whistle on a fraud against the government can claim 25 to 30 percent of the amount of the fraud as his reward for whistle-blowing. But there are rules, naturally.
You can't say you think there might be a fraud. You have to prove there is one. You can't be the 10th guy to prove it. You have to be the first. It can't be something everybody already knew. You have to be the first and sole source, and then you have to be the only reason the government ever got onto it and got its money back.
Lockey and MacKenzie tried for years to redevelop the old LTV tower downtown and failed when the city pulled the plug on its share of the financing. MacKenzie is based here. Lockey is in California. They both have other deals. They are represented by local lawyers in some of their business in Dallas, but they are represented in the HUD matters by a law firm called Relman, Dane & Colfax in Washington.
Relman is one of the biggest, maybe the biggest name nationally in a very specialized kind of lawsuit dealing with false claims and fair housing. In their first bite of the apple here, Relman went broad, ferreting out patterns of racial segregation in Dallas that went far beyond the LTV tower deal. Relman's investigation spurred two things -- the larger, longer HUD investigation of the same charges and Lockey and MacKenzie's false claims lawsuit.
U.S. District Judge Reed O'Connor didn't toss the first Lockey and MacKenzie false claims lawsuit because he thought Dallas wasn't guilty. Quite the contrary. He said it had been common knowledge for years that Dallas was guilty of most of the discriminatory charges alleged in their suit, dating back to other suits against the city in the 1980s. He even cited an article of mine. Lockey and MacKenzie, he said, were just piling on so they could make a false claims claim.
This new lawsuit, filed some months ago but under seal until yesterday, is obviously designed to take all of the court's criticisms of the earlier suit to heart. In fact it says that's what it's doing.
The old suit accused the city of deliberately failing to carry out the broadest mandates of federal fair housing law. This new one stays narrowly focused on what the city did to Lockey and MacKenzie in their own deal. That way, they hope, they can argue they were the original and unique source of information about the federal de-seg fraud that torpedoed their own deal, because only they knew what was done to them.
The city, meanwhile, doesn't sound worried. City Attorney Warren Ernst emailed me yesterday: "The City has not been served with the new complaint. The new complaint appears to be identical to a proposed amended complaint they sought leave to file on 10-3-14 in front of Judge O'Conner. As far as we know, Judge O'Conner has not ruled on their motion. The City filed a thorough response to the proposed amended complaint back in October."
It's a lotta law, I know. But if they seem never to give up, if they keep coming back and the courts keep letting them back in, it's because everybody but the city seems to agree they've got the facts nailed.
Dallas has ducked this deal so far with some damned good lawyering by Ernst and some damn fine politicking by Mike Rawlings. But Lockey and MacKenzie are able to come back because of those damned underlying facts. Deliberate racial segregation. Like a thing ticking in the basement.
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