Friday, July 13, 2007

D.C. heavy hitter hired in Ketchum legal flap

Negotiations may begin to help city buy Bavarian Village condos

Express Staff Writer

Photo by The Associated Press Washington, D.C., lobbyist George Nethercutt Jr. makes a public appearance with President George W. Bush. Nethercutt has been hired by the city of Ketchum to lobby on behalf of affordable housing interests in West Ketchum.

A former congressman with a network of lobbying ties to the Bush-Cheney administration has been retained by the city of Ketchum to disarm combatants in a legal shoot-out with the federal government over a failed attempt at acquiring affordable housing.

George Nethercutt Jr., who served three terms as a congressman from Washington state, has a contract to provide "strategic advice" on issues associated with the Bavarian Village affordable housing project, the Ketchum City Council said during its June 26 meeting.

A motion approving the contract was passed by the council in late May and "memorialized" on June 26, said City Attorney Ben Worst. It pays Nethercutt $25,000 plus expenses that include unlimited air travel outside of Washington, D.C., at business class or better. That travel must be approved in advance by the city administrator, Worst said.

Nethercutt is drafting a letter for the Idaho congressional delegation to sign that would urge a settlement with the U.S. Department of Justice so the city could buy the Bavarian Village property, agreed Worst and a spokeswoman for Sen. Mike Crapo, R-Idaho. That letter would also go to Sen. Larry Craig, R-Idaho, and Congressman Mike Simpson, R-Idaho.

The Bavarian Village condos, in West Ketchum, have been controversial since they were part of $4 million worth of assets seized by the federal government after their owners, both local residents, went to prison in 2004 following convictions on money laundering and drug smuggling charges.

In plea agreements, the smugglers admitted being part of an international drug ring. Starting in the 1970s, they used foreign and domestic banks to launder money from the sale of tons of Thai marijuana brought in from Southeast Asia by yacht. An investigation that started in 1997 in Idaho led to the convictions of one man from Ketchum and another from Hailey. The Bavarian units were part of assets forfeited by those men.

The 14 units in question are located in three buildings at 106 and 110 Rember St. and 154 Bird Drive and include a mix of studio and one- and two-bedroom units. The federal government owns those three buildings of the seven in the complex. The IRS intended to auction the three 30-year-old properties together in one sale. It is common for the government to sell properties gained through illicit activities and share the profits with law enforcement. Both Ketchum police and the Blaine County Sheriff's Office received monies from the sale of other forfeited properties from other convictions in the case.

Feds threaten legal action

In September 2005, Rebekah Helzel, founder and director of Advocates for Real Community Housing (ARCH), approached Ketchum for help in acquiring Bavarian Village for workforce affordable housing. The city agreed it was a good opportunity and agreed to kick in some money so Helzel could go to the auction and bid, said City Administrator Ron LeBlanc.

The October 2005 auction was nullified after the IRS rejected the sole bid of $2.3 million by Helzel. After the auction, the IRS revealed there was a previously undisclosed minimum acceptable bid of $3.5 million, an April 10 letter from the U.S. attorney said.

The U.S. attorney's office in Boise then contended the city interfered with an IRS auction and a flurry of letters went back and forth between the city and the U.S. attorney.

In an April letter to Mayor Randy Hall and the Ketchum City Council, the U.S. attorney accuses the city of manipulating the auction during a meeting the day before the event in which then City Councilman Hall and Sun Valley Mayor Jon Thorson "made it very clear to the other prospective bidders that any developer who attempted to outbid ARCH would have a very difficult time getting a development plan through the city's planning process." The letter added, "It is illegal to interfere with a federal auction."

In a Sept. 29, 2005, letter, Sun Valley City Attorney Rand Peebles asked the IRS to cancel the auction so that Sun Valley and Ketchum could negotiate directly to buy the property, an April 10, 2007, letter from the U.S. attorney to Mayor Hall said. But the law does not allow the government to "bypass public commercial sale requirements."

In that April 10 letter, the U.S. attorney stated it would take legal action to force the city to show why the property should not be "marketed immediately" and "sold under the zoning and other city codes, which were in place in October 2005, when the property was auctioned."

More letters ensued between Hall and Assistant U.S. Attorney Anthony Hall with the mayor asking for more time, and the U.S. government saying it would not go beyond the end of May before taking action.

Appearance of pressure on U.S. attorney

Now it appears both sides are attempting to negotiate rather than litigate.

"The consultant (Nethercutt) is getting the Idaho (congressional) delegation to ask the DOJ (Department of Justice) to negotiate with us to purchase the property," City Attorney Worst said this week.

Worst said he could not yet release the letter because it was still in draft form.

Nethercutt was tapped by the city for his connections and because it's hoped he can secure some grant money to buy the Bavarian Village, Mayor Hall said this week.

"Also through his political connections maybe (he can) help us negotiate a deal to purchase that property," Hall said. With Nethercutt's congressional experience, it is hoped he "knows what doors to knock on."

Nethercutt could possibly "use a little bit of leverage," Hall added.

The hope is that the delegation will plead the city's case with Attorney General Alberto Gonzales, according to Hall.

But both U.S. Attorney Thomas Moss and Assistant U.S. Attorney Anthony Hall work for Gonzales, who is embroiled in controversy over accusations that his firing of seven U.S. attorneys was politicized. The matter could end up in the Supreme Court because President Bush this week is refusing to comply with congressional subpoenas seeking more information on the firings, claiming executive privilege.

John Freemuth, a professor of public policy at Boise State University, said he did not understand why the city did not go directly to the Idaho delegation.

"The concern is why are they going to that sort of high-powered character for something that is a local issue," Freemuth said. "This gives the impression that this consulting firm (Nethercutt) can get to the White House to get the U.S. attorney to back off." Given George W. Bush's problems on the attorney firings, "it gives the appearance of putting some pressure on this guy (the U.S. attorney)."

In a voicemail message left for the Idaho Mountain Express last week, U.S. Attorney spokeswoman Jean McNeil said her office would have no further comment. "He does not want to negotiate in the media," McNeil quoted Anthony Hall as saying.

Also in an interview last week, Mayor Thorson denied hearing any such threats at the October 2005 pre-auction meeting or at any other. The meeting was held in his city because the participants needed somewhere to meet, he said.

"All the other stuff is baloney," Thorson said.

On auction day, a man who Thorson believes was Anthony Hall was present and "appeared agitated."

It is purely a guess but, "things did not go the way he (presumably Hall) wanted," Thorson believes. "He got angry" after the lone bid, Thorson said.

Hall was present at the auction, confirmed spokeswoman McNeil.

Mayor Hall also denied that any fix was in for ARCH to be the only bidder.

"It's simply not true, period," he said.

On April 12, 2006, the government alleged that after the U.S. attorney was told by the city and ARCH that they could not obtain the full $3.5 million to buy the three Bavarian Village units, that Ketchum then passed a building moratorium in that area (the Tourist zone) to delay or block the sale, said the April 10, 2007, letter from the U.S. Attorney.

There is no connection between the moratorium and attempts to buy the Bavarian Village units, Mayor Hall said this week. Although the mayor recalled that the moratorium preceded the Oct. 5, 2005, auction, city records indicate the emergency moratorium was passed April 12, 2006.

That April 12 letter also says new condos in the same area sell for between $800,000 and $1 million each. That math would mean 14 units could be worth up to $14 million. Mayor Hall said he didn't know where the government's $3.5 minimum sale price came from and called it "unrealistic" for the dilapidated property.

ARCH response

ARCH founding director Rebekah Helzel wrote in a July 22 op-ed piece in the Idaho Mountain Express that no threats were made and there were only two meetings held with any potential bidders. In addition to the meeting the day before the auction, there was another meeting one week before with the same players, as well as Dennis and Pat Hanggi, owners of some of the other Bavarian Village buildings, Helzel said this week.

That meeting was to see if the Hanggis wished to join ARCH in a bid, but the Hanggis later said they didn't believe ARCH had enough money for the deal, Helzel said.

ARCH was founded one year before the auction, and it was the group's first attempt to buy affordable housing, Helzel said. The city would have committed about $800,000 to acquiring the property through the then Blaine-Ketchum Housing Authority (now Blaine County Housing Authority), Helzel and Mayor Hall said. The balance of the $2.3 million ARCH bid was to have come from a loan from a nonprofit organization, Helzel said.

"It is unfortunate that the Department of Justice has taken an adversarial role with the city, and it is appalling that they have done so on 'hearsay' rather than facts," she wrote in her opinion piece.

Old friend and lobbyist tabbed for workforce housing help

Enter Nethercutt, 62, who found his way to Ketchum because he was recommended to the City Council by recently appointed Ketchum Planning and Zoning Commissioner Sam Williams, who said he has known Nethercutt since 1972 when Williams was working in Washington, D.C., as a lobbyist.

Nethercutt was brought into the mix, "to see if they (Ketchum) as a government entity can pick up a government-owned property for pennies on the dollar," Williams said. The government is not required to sell a property at appraised value, he said.

Workforce affordable housing is important to the city, Williams said, adding that he was doubtful about the government accusations.

"I don't think they even have the facts to back that up at all," he said.

Williams said the allegation that the city is tying up the Bavarian Village properties with a moratorium on development in the Tourist zone, where the properties are located, doesn't matter. The city can do what it wants with moratoriums, he said.

The City Council continued consideration of an ordinance lifting the moratorium at its July 2 meeting.

Nethercutt might be able to secure federal grant monies for the Bavarian Village properties, Williams said. "He is fairly well connected with the Idaho delegation."

Councilman Baird Gourlay agreed that Nethercutt might be able to secure federal funding to buy the properties.

Lobbyist's former partner jailed in Abramoff scandal

On June 26, the same day the council passed a resolution cementing the contract with Nethercutt, his former partner in a lobbying firm whose title contained their names, was sentenced to prison. Steven Griles and Nethercutt were partners in the Washington firm Lundquist, Nethercutt and Griles, LLC (see stories pages A22 and A23).

When informed that Griles had been sentenced to prison, Williams responded, "I didn't know that."

Williams said, however, he did not believe that should have any implications on the city's contract with Nethercutt.

"It shouldn't because they (the city) are dealing directly with George."

Attempts to reach Nethercutt for comment at his D.C.-based BlueWater Strategies LLC firm were unsuccessful.

Councilman Ron Parsons said the Bavarian Village effort was simply the city trying to do something positive to get more affordable housing in the Ketchum-Sun Valley area.

"I don't know anything about it," he responded when told of Griles' sentencing. "I haven't peeled the onion back that far."

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