Chapter Twenty-One: ‘Free Money’: The LCCCA pays its Consultants

(Twenty-first in the Convention Center series)

“Our goal is to be prudent towards taxpayers’ dollars.”

C. Ted Darcus, Chairman, Lancaster County Convention Center Authority board of Directors, 2006, explaining his board’s expenditures.

Lancaster County Ordinance number 44 of 1999 established a five percent room rental tax for every hotel and motel occupied in Lancaster County. Beginning on January 1, 2000, whether hotel and motel owners raised their prices by five percent, or took the levy out of existing rates, they were required by law to remit five percent of all room rental charges to the Lancaster county treasurer every single month of the year.

The treasurer would then send a check representing about sixty-two percent (62.4%) of the total room tax revenue to the Lancaster County Convention Center Authority. The rest of the tax revenue would go the Pennsylvania Dutch & Convention Visitors Bureau to market the center and promote the County as a tourist destination. The amount the treasurer sent to the Convention Center Authority came to about $3 million annually, depending on room occupancy. This money was spent solely at the discretion of the seven-member LCCCA board of directors.

James Pickard, the Authority’s initial Chairman and Executive Director, had enormous power in deciding how to apportion the funds. In 1999, after the LCCCA was established, Pickard was placed in his dual position by his close friend, Lancaster Mayor Charlie Smithgall.

Pickard served part-time, and took no pay for his work as Executive Director.

Prior to the project’s launch, it was Pickard as Smithgall’s special economic advisor who was tasked with finding a local buyer for the Watt & Shand building, eventually purchased by Penn Square Partners.

The City (read Mayor Smithgall) had also named the other LCCCA appointees, which made up the majority on the board, not that there was county opposition on the board in the early years. With Smithgall’s compliant, hand-picked appointees making up a majority on the board, that meant it was primarily the autocratic Pickard, the former Pennsylvania Secretary of Commerce during the Ridge administration, who decided on what to spend the tax money – and whom the board should hire.

The LCCCA had few fixed expenses. An Executive Director, when they found one, would be paid about $90,000 per year. The LCCCA office also employed a small, three-person administrative staff, which cost around $450,000, including insurance and benefits.

So, after these fixed costs, there was remaining approximately two and a half million dollars left to be spent by the Authority.

For the first three years of the LCCCA’s existence, its major non-fixed expenses went to legal fees.

The Authority had been challenged in court since early in 2000 by several local hoteliers. Millions of dollars were paid to Stevens & Lee and other law firms for legal defense. Stevens & Lee was also paid substantially for “negotiations” with Penn Square Partners, a potential conflict of interest, as the firm also represented High Industries, the General Partner of Penn Square Partners, as its registered lobbyist in Harrisburg. The LCCCA also hired legal counsel for the historic properties challenges it faced in 2001-2.

It is rare for a public authority charged with building $100-plus million projects not to have a paid professional executive director running the day-to-day operations from the start. But convention was something the Lancaster County Convention Center Authority was not following.

In the early years, from 1999 to 2002, the Authority effectively turned its planning, negotiations and decision-making over to the law firm of Stevens & Lee. In fact, for the first two years of the LCCCA’s existence, its offices were in the offices of Stevens & Lee, in the Fulton Bank building on Penn Square.

In the latter part of 2002 and the most of 2003, the LCCCA board was operating without a paid executive director. Pickard once again held the position de facto, without pay and on a part-time basis, after Michael Carper, a former president of a property management firm, resigned as Executive Director suddenly after six months in 2002.

It was on a rare Saturday LCCCA board meeting in March, 2003, when Chairman James Pickard recommended to the board that it hire two consultants.

One consultant, Daniel Logan, turned out to be something of a ‘mystery man’ in this story. Logan had already been tangentially involved in the project. Logan worked out of Philadelphia as the Lancaster Brunswick Hotel’s regional manager for the Philadephia-based owners, GF Management.  It was Logan, according to Mayor Smithgall, who failed to return Smithgall’s phone calls about putting the convention center project in Lancaster Square and incorporating the Brunswick. The brush-off from Logan irked the Mayor, Smithgall said, and he moved on to the Penn Square location for the project.

Whatever sour feelings existed between Smithgall and Logan didn’t override Pickard, who urged the LCCCA board hire Logan to analyze the “operating and marketing plan” for the project. The initial contract called for Logan to be paid $18,000 for a duration of three months.

After the three month contract with Logan expired in June, Logan continued to be paid $150 an hour. In the next year, Logan went on to be paid more than $200,000 without a LCCCA board-approved contract.

It wasn’t until June of 2004 that Logan submitted a “letter contract” to the LCCCA board. The contract finesses the lack of a previous agreement by saying Logan would be paid “the rate at which he has been paid prior to this date.” The contract with Logan was finalized on July 14, 2004. There was no time limit or cap on fees paid to the consultant.

The striking thing about the Logan hire is not the amount of money he was paid, a tab that eventually added up to nearly one million dollars in four years, but that there is almost no evidence of any work product performed by the man.

From an investigation conducted by journalist James Sneddon for NewsLanc.com, it is seen that Logan was very much a mysterious figure.

A former employee of the LCCCA described Logan as the “Invisible Man.” Almost no mention is made of Logan at LCCCA board meeting minutes.

However, according to another LCCCA insider, who spoke on condition of anonymity, Logan was Hixson’s “right hand man,” the ex-staffer said, “He was always with Dave.”

What he was doing “with Dave” is not clear from the invoices submitted by Logan to the LCCCA. The NewsLanc investigation, after examining the invoices, showed that Logan billed for hours he could not have worked. Logan sometimes billed for meetings with other consultants when those other consultants were not there.

Logan typically invoiced the Authority once a month, and billed in daily 8-hour, workday blocks. $1200 a day, $4800 per week, usually about $20,000 monthly.

Logan, from 2003 to 2007, was said to be involved in “pre-sales and marketing.” According to Hixson: “He [Logan] serves as community liaison to the Convention and Visitors Bureau which is obviously a very important working partnership with us in moving forward.”

But in 2005, when the Visitors Bureau held a “Meet us in Lancaster” event, a free weekend for booking agencies in the Baltimore metropolitan area, only Hixson attended. The sales and marketing consultant, Logan, was not present.

At a board meeting in 2006, county-appointed LCCCA board member, Laura Douglas, questioned Hixson about Logan’s one person, Medford, New Jersey-based firm, Growth Business Development:

“There are a number of these extremely high bills without itemization or some sort of results or some sort of actual work to show for it,” Douglas said.

“Sure, fair questions,” Hixson told Douglas and the rest of the board. “We have in our office itemization. Each month we receive the bills from various vendors and advisers that serve us. That is reviewed by me, as well as Willie Borden who is our Treasurer. We also run it by the Chairman [Darcus].”

“So what we do,” continued Hixson, “is review it in our roles as Executive Director, Treasurer, and as Chair, and then we submit the summary out to Board members, but certainly we have the itemization that is closely reviewed by the Treasurer and Executive Director.”

But when Sneddon, for NewsLanc, submitted multiple ‘right-to-know’ document requests to the Authority for the itemized invoices, he was stonewalled.

“Please be advised,” read a letter to Sneddon from the LCCCA, “that the LCCCA has provided you with full and complete invoices on file for the requested documents. Therefore, the LCCCA …. does not have additional information.”

Sneddon wrote: “Either Hixson lied about the detailed invoices, or they have been destroyed.”

The other consultant hired on that Saturday in March, 2003, was Robert C. Hazard, III.

Again, it was at Pickard’s urging that Hazard was hired by the Convention Center Authority.

Pickard told the Authority board why the project needed the Pittsburgh-based Metro Vision Company headed by Hazard.

“The need for Metro Vision relates back to the litigation and the pall it has put on the project. Because of the litigation, the Authority has been unable to attract qualified Executive Director candidates. … For 20 years Hazard has been actively involved in asset development business, specifically publicly owned or sponsored convention centers that headquarter hotel facilities,” enthused Pickard.

Hazard also had a connection to the project, having worked for Interstate Hotels, Inc., the company that was to manage both Lancaster Marriott Hotel and Convention Center facilities. In 2001, on behalf of Interstate, Hazard worked with the Authority on negotiations between the Authority and Interstate.

As with Daniel Logan, Hazard was rarely mentioned at board meetings minutes, and rarely seen at the meetings. And he, too, had examples of mysterious billings.

The NewsLanc investigation found that on two separate dates in September, 2003, Hazard lists “Presentation to LCCCA board and local stakeholders.” Yet no executive sessions or public meetings are listed for those dates.

Later, that same September, Hazard bills the Authority for 8.0 hours for a “Presentation to Government and High.” But records show Hazard didn’t get off the Pennsylvania turnpike in Harrisburg until 5:15 p.m. that day, then checked into his hotel. It is not reasonable that Hazard would be giving a “Presentation” to the “Government” and High well after normal business hours.

Hazard was paid more than $407,000 for twenty-six months of employment for the Authority. There is no trace of work product to show for that outlay.

Yet another costly consultant contract was given by the Authority in June of 2003. This one was one awarded to Philadelphia-based Fairmont Capital Advisors, “an independent financial advisory firm.”

Fairmont’s senior vice president was Thomas Beckett, who became the Authority’s principal financial advisor. Beckett was said to have 15 years municipal market experience, and was hired to provide expertise in the bond markets for the Authority.

Like Logan and Hazard, Beckett’s bills were simple statements that lacked detail. In just under three years, Fairmont billed $409,039 to the Authority, almost all from Beckett’s work.

Beckett’s rate started at $150 per hour, but spiked to $275 within one year. Until April, 2005, Beckett simply submitted hours worked for “consulting.” There was no more detail in the invoices. He was paid $280,000 for that unsubstantiated work. An example is an August, 29, 2004, invoice for “consulting” for 107.02 hours. Cost to the Authority:  $24,079.50.

In early 2006, when it came time to secure an underwriter for the issuance and re-marketing of 2003 and 2006 bonds, Beckett recommended as financial advisor, the George K. Baum & Company of Denver, Colorado. Baum had local offices in West Conshohocken, Pennsylvania. Baum was paid $130,000 out of bond issuing proceeds for its work.

Apart from the fees from the bond settlement, there was a separate bill from Baum for $25,937.50 for 103.5 hours of work at $250 per hour. The work was done by Baum’s new vice president – Tom Beckett.

Fairmont’s final bill was submitted to the Authority in February, 2006. Baum billed the Authority for work done March 7 to March 19, 2003.

Beckett’s dubious timing in recommending Baum, then joining Baum in time to bill more than $25,000 for Authority-related work, was not questioned by the LCCCA board, nor by reporters with any of the Lancaster Newspapers.

In September of 2003, ten months after Carper’s resignation, and after Logan, Hazard, and Beckett were hired, the LCCCA hired, again at the recommendation of James Pickard, David M. Hixson as its Executive Director.

Along with Hixson, who had worked in the press office of former Gov. Ridge, now Executive Director of the LCCCA, there was still another six-figure consultant who found a paycheck with the Lancaster County Convention Center Authority.

In March, 2005, at the request of the LCCCA board and at $350 per hour, a business consultant named Herman Bulls traveled to Lancaster from McClean, Virginia. According to documents investigated by Jim Sneddon for NewsLanc, based on expense records submitted by Bulls, he was in Lancaster from 11:30 am to 4:00 p.m. That 4.5 hours cost Authority $1575. Bulls also billed 5.5 hours in travel, for an additional $1925. Bulls billed a cool $3500 for the nine-hour day.

Bulls, a West Point graduate with a Harvard MBA, was representing his own firm, the Bulls Advisory Group, “a full-service Minority and Veteran owned real-estate firm, providing strategic advisory and implementation services to corporations, higher education, as well as state, local and federal government entities worldwide.”

During that visit, the LCCCA and Bulls agreed that Bulls’ firm would be engaged by the Authority. In June, 2005, the Authority hired Bulls’ managing partner, Maurice Walker, at $300 per hour.

Walker, with an MBA from the University of Virginia, had expertise in the commercial real estate and finance industries. Over an 18-year period Walker worked in the areas of development, technology, operations, investment asset management, compliance, business development/retention. He was a highly qualified consultant.

It was Walker who effectively ran the Authority, along with John Espenshade. He was indeed Hixson’s right-hand man.’

But like the other high priced consultants, Walker was either sloppy or deceptive with his invoices.

Sneddon’s investigation discovered that Walker billed the Authority twice on September 21, 2005, costing the Authority and extra $4200.

On December 31, 2005, Walker claimed in an invoice to have worked for 17.75 hours. This is on New Year’s Eve. That would mean Walker would have had to work from 6:15 to the stroke of midnight, with no breaks for breakfast, lunch, dinner, or a walk with the dog.

Maurice Walker was also paid his hourly rate as he traveled from his home in Bowie, Maryland to Lancaster. Each trip cost approximately $1200, plus mileage.

By the time Walker’s contract was terminated in 2007, after just over two years, the consultant had been paid $1,124,642.61.

The lack of spending oversight on the LCCCA board caught the attention of the Pennsylvania office of Common Cause, a leading non-partisan ‘good government’ organization. In May, 2006, Barry Kauffman, Executive Director of Common Cause/PA, wrote a letter to then-Pennsylvania Governor Edward G. Rendell, urging the Governor to direct the Auditor General to investigate the LCCCA.

Kauffman’s letter merited only a single sentence in a Lancaster Newspapers article, buried in the fifteenth paragraph.

Still, the Common Cause letter to Rendell was a stinging public indictment on the Authority’s operations. Kauffman writes:

“The apparent lack of transparency and accountability regarding this Project have prompted Common Cause/PA to express these concerns to you, and we ask that you instruct the Secretary of Community and Economic Development to 1) conduct a complete review audit of state funding pertaining to this project; 2) ensure that this Project is in full compliance with all state laws regarding grants, contracting public input and oversight; and 3) ensure that all public records about this Project be made available in full compliance with state law.”

There were other consultants who were well-rewarded by the Authority. A Lancaster public relations firm, Kelly Michener, was paid hundreds of thousands of dollars, again with little apparent work product. A company called E4 Exchange, was able to bill the Authority tens of thousands of dollars for apparently phantom work.

But the consultants did help the sponsors in one aspect; they captured the attention of project critics. And that was a very useful role, indeed.

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Chapter Twenty-Two: ‘An alternate use for the site’: The PKF Feasibility Study