Saturday, October 23, 2004
In Revere, Massachusetts, where I grew up, the Mafia was the group you had to worry about. In Portsmouth it’s the Chamber-of-Commerce and Southern-Ohio-Growth-Partnership types, the over-privileged people, a number of whom live on the Hill. Yes, there was more crime and corruption in my hometown than in Portsmouth, but Portsmouth has more of one thing than any town I’ve lived in – what could be called legal, or country-club, corruption. In Portsmouth, the over-privileged don’t have to bilk the public; they simply have to bill them, and some foundation or “non-profit” organization, will tap in into local, state, or/and federal sources to find the money to pay the bill. One local “non-profit” corporation that has apparently tapped into public funds for real-estate payoffs is Portsmouth Murals, Inc.
In addition to attracting a steady trickle of tourists and funneling a few scarce dollars into Portsmouth’s depressed downtown neighborhood, Portsmouth Murals, Inc. also provided an influential member of Portsmouth’s ruling clique, George Clayton, with the opportunity of unloading five parcels of property in the same depressed downtown neighborhood, including the empty store of his failed Kenrick’s business. Just as Mayor Bauer and the Portsmouth city council used public funds to bail out the Marting’s Foundation by buying the empty Marting’s department store for $2,000,000, Portsmouth Murals, Inc. bailed out Clayton by buying the Kenrick building and adjoining properties for $350,000. These properties have very little commercial value, and the empty store was likely to stand idle for years, so public funds had to somehow be tapped into to take these distressed properties off his hands. Historic structures like the Norfolk & Western terminal and a number of elegant older homes near the university have been demolished, while buildings like Marting’s and Kenrick’s, which have even less historic and architectural worth than they do commercial value, are re-cycled with public monies to bail out the over-privileged who own them. Was it just a coincidence that George Clayton was bailed out by a publicly funded, not-for-profit corporation, Portsmouth Murals, Inc., that he himself was one of the founders of? Wasn’t George Clayton involved in a similar conflict of interest similar to that of his relative Clayton Johnson in connection with the Marting’s purchase?
In an article I published in 2002, “House Shenanigans,” I wrote about several sweetheart real-estate deals for and by the over-privileged people on the Hill, and of a particular deal that George Clayton was directly responsible for when he was chairman of the board of trustees of Shawnee State. A doctor who lived just a golf putt away from Clayton’s home on the Hill was leaving town and reportedly having trouble selling his house. Sounds like a situation in which the doctor might have to sell at a loss, right? Wrong. Just as the city came to the rescue of the Marting’s Foundation, just as Portsmouth Murals, Inc. came to the rescue of George Clayton, Shawnee State University with George Clayton in the negotiating seat came to the rescue of the doctor on the Hill, paying him $412,000, for his house on Camelot Drive, a house that had been appraised for $365,140 in 2001, and he would have been lucky to find a buyer at the figure. Isn’t there a pattern here in which the over-privileged of Portsmouth, in danger of taking a loss on real estate, are bailed out by publicly funded institutions and organizations?
According to the Portsmouth Daily Times, Representative Rob Portman recently deposited a check for $300,000 in federal money into the account of Portsmouth Murals, Inc., bringing to a total of $1.2 million the public money that has been allocated for the renovation of the former Clayton property. It is ironic that businesses that go bust in downown Portsmouth manage to unload upon the public property that no other business would want. If you are a member of Portsmouth’s over-privileged and have a white elephant house or vacant store, be patient. The city, state, or federal government will bail you out. It remains to be seen how much Portsmouth Murals, Inc. is going to cost the public in the years ahead, and it will probably all be legal.
Posted by Robert Forrey at 1:46 PM
Friday, October 15, 2004
"The Midnight Ride of Paul Revere," by Grant Wood
Like a ball through space, the past does not move through time without spin. Throughout history, individuals and groups, tribes and races, religions and political parties, nations and, yes, even cities, put their spin on the past, re-spin their history, in order to improve their image. The saying that you can’t change the past is wrong. The past is constantly being changed. The past is not what it used to be, and it never will be.
I grew up in Revere, Massachusetts, a city whose past was steeped first in poverty and sin, and then, in the twentieth century, in crime and corruption. Like the nation of which it became a part, the history of my hometown was in sore need of re-spinning. The easiest thing to change about anything is its name. In 1871, the town, then called North Chelsea, renamed itself after the legendary hero of the American Revolution, Paul Revere, even though he had no connection with the town. Not only was there no connection, the real Paul Revere was no hero. That was just a legend. The real Paul Revere had fled cowardly in the only Revolutionary war battle he was ever in. No matter. Longfellow re-spun who Revere was in his famous 1861 poem “The Ride of Paul Revere,” and the rest is history, or rather myth, which is enchantingly rendered in the painting by Grant Wood.
I am now living in another American town with a shady past and a tarnished present. Like Revere, Massachusetts, Portsmouth, Ohio, has re-spun its history. It did not change its name: it changed its past. Portsmouth’s town fathers have tried to make the past of their river city look respectable through one of the oldest forms of propaganda: murals. I will say more about that in “Tale of Two Cities: II.”
Posted by Robert Forrey at 9:39 AM
Friday, October 08, 2004
In the last couple of years, several shady real estate deals have taken place in Portsmouth, such as the sale of the Marting’s building to the city and the sale of Kenrick’s store to Portmouth Murals, Inc. Elsewhere, when a business fails it goes out of business: in Portsmouth, when a business fails it unloads its liabilities and otherwise depreciated assets off on the public in the guise of philanthropy and foundations while getting tax breaks in the process. The Marting’s and Kenrick’s deals were too big to escape public notice, but how many smaller shady deals are hardly noticed? What follows is the history of one of these failed but not completely forgotten smaller businesses, Travel World.
In 1993, Frank Waller, of Waller Bros. Stone Co., and Michael Warsaw, of Lewis Furniture, joined with dentist Gregory Gillen to establish Travel World. Starting a business in the chronically depressed economy of Portsmouth in any year takes nerve; starting a travel agency in Portsmouth in 1993 took more than nerve, because Portsmouth already had a major travel agency, Triple AAA, which had been serving the community for seventy years, and several smaller travel agencies as well. The Travel World partners apparently had no previous experience in the travel business. Waller’s business was rocks, Warsaw’s furniture, and Gillen’s teeth. But they had something more valuable than experience, namely connections. The most important of these was Waller’s connection to Shawnee State University, where he was a member of the Board of Trustees, which he also chaired. It did not hurt Travel World’s prospects that Warsaw was the husband of SSU Director of Development Susan Warsaw, because among the potential customers Travel World aimed at were state-funded travelers at SSU, including the Board of Trustees themselves. While Waller was sitting on the SSU Board of Trustees, Travel World became the preferred travel agency for the university. A former Travel World employee told me Waller was sometimes kidded about his apparent conflict of interest, but he could shrug it off, as Clayton Johnson was able to shrug off his apparent conflict of interest in the Marting’s deal. In the country club atmosphere that prevails among the small circle of Portsmouth elite, what may appear to be conflicts of interest to outsiders is to them just Chamber of Commerce camaraderie. By 1996, Travel World’s net total sales had reached $853,083. By December 31, 2000, net total sales had increased to $1,052,582.
But 2001 turned out to be a disastrous year for Travel World. For one thing, on-line internet travel sites began cutting deeply into its business. In fiscal year 2000-2001, according to university financial records, SSU was directly billed for only about $15,000 by Travel World for official travel, but that was a third more business with SSU than Triple AAA did. But the fatal blow to Travel World came on 9/11/ 01 when the travel industry nationally was paralyzed following the attack on the twin towers. After 9/11, Travel World was close to being grounded permanently. Its assets were negligible. It did not even own the land and building in which it was doing business; that building was rented, and has since been razed. But help was on the way. Travel World retained attorney Clayton Johnson and hired Portsmouth CPA Michael L. Gampp, whose business connection at the time was with Reynolds & Co., a CPA firm that had been founded by the late Thomas B. Reynolds. Mr. Reynolds was a member of the SSU Board of Trustees and his widow Kay Reynolds continues with Reynolds & Co. She also served on the Board of Trustees.
Travel World supplied accountant Gampp with unaudited figures on which to make an estimate of what Travel World was worth, which he calculated to be $100,942. That may not sound like much for a company that had been doing an annual million dollar business a few years earlier, but it was more than the business would be worth in bankruptcy. Perhaps with the fate of auditors such as Arthur Andersen in mind, Gampp disclaimed any responsibility for the unaudited figures he used to make his estimate. He stated twice in official documents, “I take no responsibility for the underlying data presented in this report.” Gampp also denied his fee was influenced by the figure he came up with in his valuation.
In estimating what Travel World was worth, Gampp took as his base period the five-years from January 1, 1996, to December 31, 2000, which was the most prosperous period of Travel World’s history. He excluded the catastrophic year, 2001, in his calculations. To use an analogy, imagine a doctor evaluating the health of a patient for a life insurance policy. The doctor reviews the patient’s health beginning six years earlier but excludes in his evaluation the most recent year, when the patient suffered a stroke that left him paralyzed . I know nothing to suggest Mr. Gampp is an ethically challenged CPA. But it is curious that his valuation included the following stipulation: “This report is not to be copied or made available to any persons without the express written consent of Michael L. Gampp, CPA.” Perhaps that is a boilerplate CPA stipulation, but it certainly sounds suspicious in light of the accounting scandals of a few years past. In any case, I obtained his valuation from Ohio University, Ironton, under Ohio’s open public records law, which overrides his preference for secrecy.
Waller and his partners donated the sinking travel agency and its assets, such as they were, to Ohio University, Ironton, to be used for instructional purposes in its travel program. That move may have been philanthropic or it may have been a way to get Ohio taxpayers to defray their losses, for the donation had tax advantages: Waller and his partners, based on Gampp’s valuation, became eligible for a $100,942 tax credit. I do not claim to know whether legal boundaries were crossed in Travel World’s relationship with SSU, but those boundaries were obviously blurred by possible conflicts-of-interest. Not all the people who serve on boards of trustees and boards of directors do so for altruistic reasons. The country club corruption of our river city makes it possible for people with connections to unload their white elephant houses, failed businesses, and empty department stores off on the public, all in the name of philanthropy and public service.
Posted by Robert Forrey at 2:29 PM
Saturday, October 02, 2004
Portsmouth City Council c. 2000
From left to right rear are Solicitor Kuhn, Mayor Bauer and City Clerk Aeh.
“O, what a tangled web we weave when first we get involved in real estate deals.”
A hearing on the now notorious purchase by the city of Portsmouth of the Marting’s department store building was held last Thursday, September 30th, 2004, in the Court of Common Pleas on the third floor of the Scioto County Courthouse. The hearing was held in connection with a suit brought by Robert Mollette against the Portsmouth City Council. The chief witness was City Clerk Jo Ann Aeh, who was questioned by City Solicitor David Kuhn and cross-examined by the attorney for Mollette. Ms. Aeh’s testimony in the dimly lit, acoustically challenged, drafty chamber of the Common Pleas court will be little noted nor long remembered, but it is a classic example of the denial, deception, and double-talk that those who defend the Marting purchase have to engage in.
At the outset, Ms. Aeh appeared to be a self-assured, even haughty witness. She prided herself on her efficiency and accuracy as City Clerk, and she was obviously impatient with the whole procedure; at times she could not hide her contempt for the line of questioning that Mollette’s attorney was following, especially when he made a few missteps. Her general position was that nothing improper had occurred in city government prior to the purchase of the Marting’s building. She was absolutely confident of her record keeping in regard to the number of meetings that had been held to discuss the purchase of the building. When her testimony regarding the number of meetings related to Marting’s was shown by Mollette’s attorney to be at variance with the testimony of five city council members who had been deposed in the previous week – depositions Ms. Aeh had not seen – she said the council members’ memories were obviously faulty. It was then the turn of Mollette’s attorney to be contemptuous.
Ms. Aeh may be as well-organized and efficient as she implies she is, but she is caught in a web of deceit woven by more clever and less scrupulous hands than her own. The more accurate, reliable, and upright she tried to be, the more hopelessly she got ensnared in the tangled web, and the more morally compromised she became. At one point, while she was quibbling about the meetings, the judge said to her (I had trouble believing what I was hearing) that the reason council members were meeting with attorney Clayton Johnson in groups of threes was obviously an attempt by those involved to get around provisions of Ohio’s Sunshine laws, since the presence of four council members would have made it an official meeting and open to the public. Why did those meeting in the offices of Johnson and Oliver not want the public to know what they were doing? Could it be because they were about to rip off the public?
On Portsmouth's John Street there’s a lot of trafficking in sex and drugs by those without the education and connections that would allow them to make a killing in the professions or in real estate. Every real estate deal in Portsmouth is an opportunity for someone – often more than one party – to make a dishonest dollar – dishonest though not necessarily illegal. From the shenanigans at Shawnee State in connection with the purchase of a home for the university president, I learned how these shady real estate deals are pulled off, how these webs get woven and tangled. The Marting’s deal is different only quantitatively; it was just too big and crooked a deal, too wide a web, however clever the weaver, not to entangle and compromise others. It remains to be seen whether anybody besides Mayor Bauer, who was recalled by the voters, will be made to pay for the Marting’s purchase.
Posted by Robert Forrey at 1:23 PM