Civic Accountability -- Honesty in Local Government I

[Mark Kindt]

Many others so effectively pulled the laboring oars and plowed these fields so fruitfully (to launch a truly splendid mixed metaphor) in covering the legal issues. The Save Lakewood Hospital folks had/have a very strong legal team, very effectively at work. Mr. Essi is a true legal hound of the best and rarest breed. Other doctors, lawyers, accountants and citizens are at work on these issues that I do not know. I applaud them!

Frankly, I was stunned when I read Exhibit A (discussed above) and understood that it was completely contradicted by the terms of the Master Agreement. This hits at the integrity not just of Lakewood, but of the larger legal system. As a lawyer, I have a duty to what is known as the Rule of Law. I found this filing to be highly provoking. It seems unimaginable that any lawyer would file that exhibit and then argue its facts to support the motion. Both the motion and the exhibit are deeply defective and suspect.

More importantly, this is open meetings litigation designed to protect our basic representative rights regarding our elected council members, that is, open and public deliberations. It was a double insult to the citizenry.

The lawyer that filed it has an absolute professional duty to advise the Court of its erroneous nature and seek to refile a corrected exhibit and a new motion that accords with the corrected exhibit.

I was concerned that this was a very recent act in a long and tainted history related to the transaction, particularly given the fact that the Ohio Ethics Commission had already issued written adverse opinions to the City of Lakewood. I had a sense that the city administration was now actually out-of-control with whatever agenda it was pursuing.

Our citizens deserve a full analysis of the legal warts that I and other lawyers have discovered in the past two years. Our public officials deserve the analysis so that they can address the legal issues set forth here.

A tipping point has occurred with the closure of the hospital; the process by which that closure occurred could very well tip the City into legal situations that would be better to avoid (for all of us.)

My goal is an informed analysis of a very questionable process that now results in the current demolition near Belle Ave.

Tomorrow, my posts will discuss the extent to which public officials violated conflict-of-interest rules and/or breached their fiduciary duties to the City.

[Stan Austin]

Explanation read and understood

[Mark Kindt]

Let us resume our review of Disclosure Problem No. 4.

Exhibit A (attached) was filed less than two weeks before the vote on Issue 64. I have also attached the full motion that contains all of the filed exhibits. The Master Agreement is on the City website. You can review each document and verify my analysis (or dispute it).

If the city administration fails to timely correct the motion and the exhibit, each document remains evidence in a potential future lawsuit to obstruct the distribution of funds to the new foundation. This is an especially difficult problem for the City, since once the document is filed in a court case, other parties can legally prevent the City from disputing it. (A technical legal doctrine known as "non-mutual collateral estoppel". Believe me on this one. I had it happen to me in a case not too long ago.)

I will repeat that counsel has an immediate and absolute professional ethical duty to correct the exhibit and the motion in order to stop misleading the appellate court hearing this matter.

This paragraph is my own speculation and I therefore flag it as such. Did legal counsel for the defendant council members or the city law department purposefully draft Exhibit A to avoid disclosing how little the City was actually to be paid in the hospital deal? Was it drafted to conceal how much was to be paid to the private third-party foundation that was still formative. Did it fail to disclosure continued control rights to the funds that were held by another party?

We have the following legal problems:

1.) A material false statement filed in court;

2.) An affirmative misrepresentation on how and what amounts are to be paid to the City;

3.) A deceptive omission as to the party actually receiving the funds, and, perhaps even worse;

4.) A false statement offered to defend violations of the Ohio open meeting statute.

Let me expand here on point 4. Under this point, I am noting that the false statement is being used to defend city council from allegations that certain of its deliberations were illegally concealed from public access and/or participation. From my perspective, this is adding insult to injury.

Let us hope that this was all an entirely benign error and that a corrected filing is made quickly. We can all watch the court docket to see whether this happens or not. The docket is online and public.

[Mark Kindt]

The following discussion focuses on the extent to which the negotiations with LHA were tainted by the improper behavior of local public officials. These problems would be in addition to the open meeting violations alleged in Skindell v. Madigan.

Disclosure Problem No. 5: Failure to Disclose Actual Conflicts-of-Interest

The public officials involved in the negotiations that led to the Letter of Intent with LHA related to Lakewood Hospital and other related financial matters failed to disclose to the public (or other officials) that actual conflicts-of-interest existed throughout the entire time-period of the negotiations. These conflicts-of-interests were later fully documented by the Ohio Ethics Commission in written opinions that are adverse to the City.

At a minimum, the SEC could review these facts in the context of other material misrepresentations or omissions (previously identified) should it choose to review the hospital transaction in light of its Harrisburg Release or the anti-fraud statutes that it enforces. So too would any class action or private securities litigant.

The facts related to these conflicts also provide compelling predicate for a future taxpayer lawsuit that might focus on the improper transfer of funds to a private-third party foundation; funds that might otherwise have reverted to the City under existing contractual arrangements.

This would be under the theory that a process tainted with conflict-of-interest as well as false representations and deceptive omissions was for an improper purpose, such as the diversion to a private third-party of certain financial benefits held by the City from reversionary rights it held under existing contracts.

To say this informally, this is the idea that the deal was improperly structured to return real property to the City, while moving what might otherwise be public funds to a private third-party (the New Foundation). This appears quite problematic when the control rights with respect to such funds are viewed through the lens of the Master Agreement.

Clearly, the uncontroverted OEC evidence associated with this problem would strongly buttress any future cases brought against the City. The evidence associated with Disclosure Problem No. 5 will be very difficult for the city administration to dispute.

The key documents from the Ohio Ethics Commission are attached.

[Mark Kindt]

To continue our interactive civic learning experience:

Let's answer the question "Do municipalities actually face legal risks from SEC enforcement related to misrepresentations by municipal public officials?"

Please start with a Google search of this phrase "securities fraud litigation against municipalities" -- then select any document you find and skim it.

I've even attached cheat sheets for you!

I think you will easily conclude that the SEC has seriously stepped-up its enforcement efforts in recent years on this issue.

That's our project for the balance of the afternoon!

[Bridget Conant]

Here's a link to the second one in case someone wants to just read online and not download a PDF.

http://www.fb-firm.com/Firm-Articles/The-SEC-Crackdown-on-Municipal-Bond-Fraud-and-The-Increased-Risk-for-Municipal-Officials.pdf

[Mark Kindt]

One final comment on Exhibit A.

To the extent that Exhibit A remains uncorrected in the court records, it will create a multi-year audit problem for the City.

Because the total of the sums in paragraphs 9, 11 and 12 are not actually being paid to the City, these amounts will not show up in the City's 2016 annual report next year, or the year after, etc. Yet, here is an affidavit from the City saying that it will be paid these sums. It is an easy problem to fix.

I do again want to make it clear that I am only describing the legal risks that the City has already incurred or that might possibly occur in the future given the conduct that I believe has been or can be documented. My interpretations are purely my own. Though I write from the perspective of an attorney who knows how to bring a case, I do so only to illustrate the possible consequences when government processes lack openness, transparency, honesty and accountability.

Tomorrow, I hope to review three topics:

1. Impairment of access to public records,
2. Spoliation damages, and
3. Potential breaches of fiduciary duties.

--Mark

[Mark Kindt]

Yes, about a minute ago, I received an anonymous call asking if I was posting on the deck and whether or not I was a real person. Yikes! As I asked his name, he hung up on me. How strange!

I hope that you will not doubt that I am a real person. Though I might write like the artificial intelligence named Watson, I suffer from all of the foibles of humanity.

What should I expect next? A subpoena?

Most bewildered,

Mark

[james fitzgibbons]

Mark, that is strange and unsettling is it possible to have the call traced? It would be nice to know who is harassing you. We appreciate your posting it helps us understand our situation regarding Lakewood Hospital. Maybe it is a backlash from one of the Pro Close the Hospital sites.

[m buckley]

Yes, about a minute ago, I received an anonymous call asking if I was posting on the deck and whether or not I was a real person. Yikes! As I asked his name, he hung up on me. How strange!

I hope that you will not doubt that I am a real person. Though I might write like the artificial intelligence named Watson, I suffer from all of the foibles of humanity.

What should I expect next? A subpoena?

Most bewildered,

Mark

Mr. Kindt, First let me thank you for your posts. They are informative, thought provoking and much appreciated.
As for what you can expect next....Well there are all sorts of possibilities lining up to greet you.
You might get a knock on your front door from the Lakewood police following up on a bogus claim that your words are threatening.
If you're a member of the Lakewood Democrats Club you can almost certainly look forward to being purged.
And if neither of those eventualities come to pass there's always the very real possibility of a lawsuit aimed at shutting you up.
These are exciting times in Lakewood with lots of choices and lots of consequences.

[Mark Kindt]

Thank you, Mr. Fitzgibbons for the suggestion.

In real life, I have spent the past 11 years litigating against Exxon Mobil. I can handle the difficult. Be sure of that.

I am now convinced more than ever of the importance of continuing my presentation on these issues. This kind of nonsense is motivational in my world.

When I complete this series, my next series will focus on the extent to which Free Speech Rights are being impaired in Lakewood and will explore who has been harassed, how they have been harassed, at what cost, and for what purpose. I have already opened up a dialogue with the ACLU on this topic.

Signing-off for the evening. More tomorrow.

--Mark

PS. Feel free to "Google" -- "Mark D. Kindt" That's me! I'm real....at least for a few more years yet.

[Bridget Conant]

Watch for postcards in the mail.

There's a lot of really disturbed people in Lakewood - many in public office, too.

[Mark Kindt]

A little on our fundamental rights to freedom of speech:

Make no mistake about this. Each citizen of Lakewood has the right to criticize and petition its public officials with respect to the performance of their duties. My criticism is on this basis and within this scope. This is a fundamental civil right guaranteed by both the Ohio and the United States constitutions. On-line speech such as that which occurs on the Deck is fully-protected; as is anonymous speech in the online environment.

I have fully verified who I am; my anonymous caller has not. I am happy to meet with anyone to discuss these issues (and offer both my passport and Ohio driver's license as proof of identity). My photograph can be found at http://www.kindt.com.

Now, let's carry on without further distraction.

Disclosure Problem No. 6 -- Access to Public Records

This disclosure problem is based on the failure of the city administration to timely or completely respond to properly submitted requests for public records. Ohio law provides a clear right for both citizens and, of course, journalists to review certain broad classes of public records.

The transaction leading to the closure of Lakewood Hospital was complex and there are numerous public records relating to that transaction. For several years now, attempts have been made to obtain records from the city administration with mixed success. And, by mixed success, I mean that those seeking public records have had to file a law suit to secure the release of the public records (with only partial success to date).

Other area lawyers have complained to me of this practice in other matters unrelated to the hospital.

The is a perfect example of a lack of transparency in our local government. Major policy decisions are made that deeply affect the citizens and the economic well-being of the city, then interested citizens are obstructed from exercising their statutorily-guaranteed rights to review relevant documents. --Citizens who, for the most part, lack the dollar resources to sue the city. This is a powerful strategy to keep the public process closed from citizen or media oversight.

Yes, to be clear, there are some exceptions to disclosure, but these exceptions should not be so broadly construed as to defeat the intended purpose of the statute as I believe they are here.

In the context that I have described previously of misrepresentations, material omissions, and closed deliberative processes, the obstruction of access to public records by the city administration has to be viewed in a negative and aggravating light in any future case brought against it.

This is another problem that is easily addressed with just simple compliance with Ohio law by the city administration.

[Mark Kindt]

LHA used a third-party consultant, Subsidium, to conduct what now clearly appears to have been a questionable solicitation process that went to a minimal list of health care providers, most of whom never replied.

If you do a Google search, you'll see that Subsidium has now merged with another business. The city administration denies that it had any relationship with Subsidium. Why did Subsidium represent that it was acting on the city's behalf?

Disclosure Problem No. 7: The Subsidium Solicitation Offering

The Subsidium solicitation offering expressly states that it was being conducted on behalf of a municipality. This was a fundamental misrepresentation to the parties receiving the offering information from Subsidium. The City denies that it had a contractual relationship with Subsidium; nor does the City have documents establishing the relationship represented in the report.

So, here we have a private-circulation offering document with a fundamental misrepresentation problem that public employees and/or public officials did not repudiate and used to justify the legislative actions before the public. (For clarity, this was not a bond offering document.)

This offering document related to City-owned rights (lease income, assets) circulated to sophisticated health-care market participants that may have had an effect on the City's finances. Given that future lease payments (approximately $16,000,000) and future income tax revenues would be impacted by proposed transactions, the Subsidium solicitation process was likely material.

To the extent that public officials adopted and used the Subsidium Report to justify the contemplated transactions to other elected officials and to the public, they have ratified a material misrepresentation made by a third-party; a third-party not retained by the City.

I will try and post this document when I have a chance.

[Lori Allen _]

Perhaps the proof of a contractual relationship between the City of Lakewood and Subsidium are part of the documents that Kevin Butler, Lakewood's part time Law Director is refusing to release,even though they are public records.

Remember when Summers had the records retention ordinances changed? Don't most records get purged at two years? Could this be one of the reasons that Cuyahoga County Courts appear to be dragging their heels on any cases pertaining to Lakewood Hospital?