The Local Area Watch

THE RIVER CITY KINGPINS

Last Friday we reported on the infighting at Amway/Quixtar.  For twenty years, with the cooperation of Amway headquarters, the top Amway distributors – i.e., the kingpins – have monopolized a sordid business known as the “tools and functions” trade.  That trade is the sale of motivational materials and seminars to lower level distributors recruited into the Amway multi-level marketing pyramid.

The hype trade is so lucrative that the kingpins make more money from that than from getting a cut of the sale of Amway kits to their downline (lower level) distributors.  In fact, the Amway kit – that package of goods a distributor buys from Amway ostensibly to resell – is something like a lossleader for the kingpins.  It’s the bait that brings in the new recruits to sell motivational materials to.  A group of mid-level distributors want to get into the “tools and functions” trade also and has sued Amway in U.S. district court to get a piece of the action.

You see, folks, Amway is like a Ponzi scheme.  It keeps going only so long as new suckers are brought into the bottom of the pyramid.  The “tools and functions” trade breathed new life into the rotten business by letting the kingpins shift income from Amway kits downline and then replacing it in spades by selling hype tapes, books, and seminars.  Amway headquarters also bought a little time by putting lipstick on the pig when they repackaged Amway as Quixtar a few years back.

But there are fewer and fewer marks getting sucked into the pyramid.  So to sustain their income the upline distributors need to sell more than just Amway kits to the same group of bottom-level distributors.  That’s why the mid-level distributors need to supplement their Amway kit income by selling motivational products downline like the kingpins do.  For obvious reasons, the kingpins want to keep their monopoly over the hype trade.  Amway headquarters bought peace with the kingpins over twenty years ago by letting them have that monopoly.  So there’s now a battle to bust the hype monopoly.  However it shakes out, the Amway pyramid is crumbling into dust, because the battle is a symptom of its collapse.  Like all Ponzi schemes, in the end there isn’t enough income to sustain it.

Now to begin answering the question we raised at the end of last week's article:  Why does this matter to the residents and taxpayers of Grand Rapids?  Well, Amway's founders, Rich DeVos and the late Jay Van Andel, understood the arthimetic of their racket and saw the writing on the wall.  So before the Amway pyramid rolled back far enough to expose them for the non-billionaires they were, they began erecting new pyramids, literally, right smack in the center of River City.  This time they would be their own kingpins, the marks would be the taxpayers, and the hype would be the glue that held everything together.

Next week we'll show you how the River City kingpins kept their scam going on your dime.  (Click here for the final installment, "The Illusion of Wealth".)

BLOWING OUR OWN HORN

The Local Area Watch was founded in September 2000, and so it’s our fifth anniversary.  To celebrate we thought we’d blow our own horn.  Some of our accomplishments …

[1] The developer of the DeVos Place Convention Center stiffened the controls over the removal of contaminated urban fill from the project site as a consequence of our complaint to the Michigan Department of Environmental Quality over the lack of such controls at the Boardwalk project site.

[2] Philanthropist Peter Wege decided against a $20 million gift to the Global Enterprise for Water Technologies project to redevelop the Monroe North water filtration plant as a museum and research center after we informed his office of the dumping of the Boardwalk project’s contaminated soil on the ground of the filtration plant and that the GEWT was a creature of the companies involved in the illegal dumping of that waste.  Instead Wege made a gift to the new art museum in downtown Grand Rapids.

[3] Similarly Michigan State University pulled its technical support from the GEWT project and the MDEQ ditched a $10 million grant for it after we prompted state legislators to inquire into the matter.  Because of their pressure, the MDEQ opened an investigation of the illegal offsite dumping of the Boardwalk’s contaminated soil.  Although the MDEQ did not prosecute the dumping as it should have, public bodies like MSU and the MDEQ did pull their support from GEWT which was nothing more than a front to cover up the dumping at the filtration plant.  That busted GEWT, which immediately folded its tent.

[4] The Federal Reserve Bank of Cleveland investigated and penalized Fifth Third Bancorp for improprieties in its acquisition of Old Kent Financial Corporation in response to our declaration of bank fraud filed with the U.S. Justice Department.  Also the bandit David Wagner, former chief of Old Kent, then lost his sinecures with both Fifth Third and the Federal Reserve – a good result we were indirectly responsible for.

[5] Kent County Circuit Court Judge H. David Soet resigned his seat on the local bench with two years left in his term after we filed a complaint against him in U.S. District Court for improperly pressuring a defense attorney to call River Rat Robert Wardrop as a witness in a trial to affirm false testimony he had given earlier the proceedings which were related to the illegal dumping of hazardous waste from the Boardwalk project site.  Soet had relied upon Wardrop’s false testimony to keep open for the Boardwalk’s developers an access road they needed for the rapid removal of contaminated soil from the project site.

There’s more to our credit, but I think posting five achievements for a fifth anniversary will do the trick.

CANDIDATES OF THE COMPASSION MONGERS AND THE PYRAMID BUILDERS

There two contested Grand Rapids City Commission seats in this year’s municipal elections.  Incumbent James Jendrasiak and challenger David Shaffer are vying for the First Ward seat.  Competing in the Second Ward for the seat Lynn Rabaut is vacating are Rosalynn Bliss and Shaula Johnston.

Both races offer genuine choices for the voters.  The bleeding heart liberals are Jendrasiak and Bliss.  They are backed by the usual lefty crowd.  Jendrasiak, an unemployed electrician and self-styled (and largely AWOL) tribune of the workingman, has received contributions from the local UAW and from the D.C.-based International Brotherhood of Electrical Workers.  Bliss is well-known as a political protégé of Mayor George Heartwell, whose so-called progressiveness is as sanctimonious as it is soft-headed.  In addition to his endorsement, his wife Susan, former City Commissioners Linda Samuelson and Mary Alice Williams, philanthropist Peter Wege, some local unions, and the Progressive Women’s Alliance have given Bliss the thumb’s up.

Shaffer and Johnston are the stone-hearted conservatives opposing Jendrasiak and Bliss.  A host of Amway pyramid-builders and their allies are backing Shaffer, including Rich DeVos, Helen DeVos, Doug DeVos, Daniel DeVos, Pamela DeVos, David VanAndel, Stephen VanAndel, and Peter Cook.  Shaffer also got some attention during the primary by winning the support of the quasi-Republican Mavericks.  Johnston is getting some of the same backing from the DeVoses and the Van Andels plus the campaign contributions from Peter Cook and Peter Secchia.

So, I as said, dear readers, you have a real choice this year.  You have the candidates of the compassion mongers who would have us follow the same feel-good “social justice” path that put cities like Detroit in the toilet.  And you have the candidates of the pyramid builders who would expect to have their big projects greased with taxpayer funds in corrupt public-private partnerships that put cities like Detroit in the toilet.  Hmm, maybe there’s not such a difference.  Of course, no candidate is necessarily defined by his or her supporters, which is why Jendrasiak, Shaffer, Bliss, and Johnston need to make clear to the voters whether or not they endorse the agendas of those who endorse them.

NAME GAME GREENLIGHTED

While twiddling its thumbs over the huge loss of five percent of the student body in the space of one year, the Grand Rapids Public School board of education approved the hackneyed renaming two elementary schools after union-organizer Cesar Chavez and civil rights leader Martin Luther King.  Come Fall 2006 Sibley School will get the Chavez moniker and Henry School will be MLK.  If board members were sincere in this name game, they could have found local icons to honor.  They do exist and speak well of the city’s progressiveness regarding race.  But that’s not the reason for the renaming.

Using the names of Chavez and King, two men who have had nothing to do with River City, the school board is playing to the P.C. mindset that bows to the racial grievance industry in town.  By throwing these bones, somehow the board members must’ve thought it would make up for the GRPS’s spectacular failure to deliver a decent education to inner city residents of Grand Rapids.  This pointless exercise in the politics of the craven will do NOTHING to help the students stuck in the city’s underperforming public schools.  And, as this year’s plunge in enrollment shows, it will do even less to attract new students to the GRPS.

Only when we can get past race-mongering to discuss honestly the failure of our public schools, especially urban systems like the GRPS, will we find the will to make genuine reforms.  Stunts like the GRPS’s trivialization of race with its name game does nothing good and sets us back.

RICH SUBURBANITES GET CITY FIRE PROTECTION

While the Grand Rapids City Commission was falling all over itself to help alleged billionaire Rich DeVos move forward with his latest taxpayer-subsidized project (see article below), it also approved a trial run of City Manager Kurt Kimball’s plan to have the Grand Rapids Fire Department respond to calls in Grand Rapids Township.  During the 90-day trial, the GRFD station at the Leonard Street firehouse is decamping to the G.R. Township firehouse on the East Beltline.  Don’t worry, folks, city residents are getting something out of the deal.  The wealthy homeowners of G.R. Township agreed to pay us $7,728 for the experiment that puts one of our remaining fire stations on the outskirts of town.  Another note:  The Grand Rapids City Commission voted 5-2 in favor of this trial after approving the 2006 city Budget that cuts twelve slots from the GRFD.  I’m sure the idea of fewer firemen answering more calls over a 25% increase in territory somehow computes with the rocket scientists on the City Commission –- once public safety is no longer a factor.

PLANTING A PYRAMID

Amway founder Rich DeVos’s Michigan Street Development Company L.L.C. has got the supine Grand Rapids City Commission to agree to commission a $300,000 study to investigate the need for a six-lane overpass where Michigan Street currently spans Division Avenue with four lanes.  As you may recall DeVos is planning a $120-$150 million multi-tower medical arts complex on Michigan Street across from Spectrum hospital.  It is anticipated that the extra lanes will be needed to service DeVos’s bid to bleed ever more cash out of Spectrum through leases for his new towers.

One has to raise an eyebrow at a study for routine re-engineering of a thousand-foot stretch of concrete costing three hundred grand.  But the City Commission tells us not to worry, because DeVos’s development company will reimburse the City for the study’s cost.  Perhaps, and no doubt out of the $18 million in taxpayer subsidies DeVos has already gotten approved for his new project.  But who’s going to pay for the new bridge?  Especially one that benefits DeVos’s medical towers project on one end and the DeVos Place Convention Center and any new hotel DeVos builds on the Olds Manor site on the other end?

WMU CFO PREDICTS PUBLIC UNIVERSITIES WILL GO PRIVATE

Robert Beam, vice president of finance for Western Michigan University, predicted in a recent interview with the Business Review that Michigan’s public universities will eventually become private schools.  The driving factor behind Beam’s prediction is that “defunding” of the state’s public universities is not a recent phenomenon.  He notes that in 1965 taxpayers funded 75% of the collective public university budget.  Today that figure is half that, with schools like the University of Michigan being public in name only.  Taxpayers fund less than fifteen percent of U-M’s annual budget (with parents being suckered into picking up much of the rest with inflated tuition bills).

Beam thinks voters will support continued de facto privatization of our public universities for two reasons.  One, they put a higher priority on public spending for elementary and secondary schools, Medicaid, and other social programs.  Two, they put a higher priority on those things because the perception of higher education has changed from generally benefiting society to a tool for individual advancement.  Beam says he supports this development, which goes to show not everyone on the public dime views the taxpayers as a meal ticket.

THE PYRAMID IS CRUMBLING

The Grand Rapids Press sorta reported this on Wednesday, but here’s the real story …

A few years back the Fixer helped Rich and Jay re-brand the Amway multi-level marketing scam as Quixtar.  Sure, call it a corporate reorganization if want, but it’s the same ol’ pyramid, the same ol’ hucksters, and the same ol’ suckers buying Amway kits and loads of motivational materials from the hucksters.  But now the hucksters are feuding.  The big bucks in the Amway/Quixtar pyramid come from flogging motivational books, tapes, CD’s, and seminars to newbie Amway distributors.  It seems that not all the hucksters are getting their chance to fleece the flock with tapes and seminars.  Only the hucksters highest on the pyramid, the “kingpins”, get to do that.  So a group of non-kingpin hucksters filed suit against Amway in the U.S. district court in the western district of Missouri.

They accuse Amway a.k.a. Quixtar of helping the kingpins monopolize what is known in their parlance as the “tools and functions” trade – i.e., motivational materials and seminars.  About twenty years ago Amway and the kingpins, the independent distributors at the top of the pyramid, were in a Mexican stand-off.  The kingpins were making most of their money pushing “tools and functions” instead of Amway kits, which displeased Amway.  However, Amway needed the kingpins to recruit new distributors into the bottom of the pyramid to buy Amway kits and keep the Ponzi scheme rolling forward.  Likewise, the kingpins needed a product like the Amway kit as a pretext to hook new distributors and then browbeat them into attending their seminars and buy piles of their motivational materials.

In the early ‘80s the kingpins showed Amway that they had the clout to reduce the sales of Amway’s kits – you know, that bundle of soap and vitamins that a new distributor buys thinking he’s going to get rich reselling the stuff to others (just as those motivational tapes he bought from his kingpin tell him) but almost always ends up using the overpriced products for himself.  So Amway dropped its opposition to the “tools and functions” trade and instead decided to regulate it.  Primarily that meant enforcing rules that let the kingpins monopolize the trade.

It’s a business that is rotten to its core.  Amway’s real customer is the sucker who buys the distributor’s kit.  Getting rich off reselling the goods in the kit is a pipe dream fueled by the kingpins and their get-rich-quick wares.  So the kingpins are parasites feeding off of Amway’s already parasitical business, yet Amway is completely dependent upon them.  They bring in Amway’s new customers/distributors.  You already know Rich DeVos and Jay Van Andel, the founders of Amway.  Now know their kingpins, Ron Puryear, Dexter Yager, and Bill Britt, who are in the filthy business of conning ordinary people into buying Amway kits through their motivational materials promising them riches if they do.  Also know that the mid-level distributors who are suing Amway are no champions of free enterprise.  What they want is a piece of the kingpins’ “tools and functions” trade.  It’s one band of thieves suing another.

The pyramid is crumbling.  Well, you were never foolish enough to get suckered by Amway, so what does it matter to you as a taxpayer or a resident of Grand Rapids?  An excellent question, which I will answer next week.

ANOTHER EXODUS FROM CITY SCHOOLS

According to the Press, the Grand Rapids public school district has lost 1,100 students this fall.  That is a huge drop of five percent from last year and continues the long-standing trend of shrinking enrollment in the GRPS.  The district now has slightly more than twenty thousand students.  Superintendent Bert Bleke and school board members are at a loss to explain this dismal outcome.  Of course, what they do know is that the GRPS will lose $2 million in state funding because of the drop in enrollment.

Board members are now arguing over the best way to divvy up the shrinking tax pie.  Some want to close schools.  Others want to keep neighborhood schools open, even if underutilized, by consolidating programs.  Still others want all GRPS facilities to be subject to the ax.  As always in a budget crisis, everyone wants to spend money on a study to tell them what to do.  (See the story below regarding the Grand Rapids City Commission.)

What neither the superintendent nor the board members seem to be talking about is what will it take to revive the GRPS.  There are plenty of students within the Grand Rapids city limits.  Why are so many of them enrolled in suburban, charter, and parochial schools?  One reason is the bullying and violence endemic even in the elementary schools.  For too many students, a Grand Rapids public school is not a sanctuary for learning but a daily trial of fear and intimidation.  You hear nothing about that from the officialdom, but the parents know about it.  Those with the means or the opportunity get their kids out of the GRPS.

Nothing but a revolution in the Grand Rapids public school district will change that.

CITY SEZ NO TO RESTROOMS

Last week we reported on a problem discovered by Robert Harrison, the coach of Creston’s girls tennis team.  His team practices and hosts matches at Aberdeen Park, where due to budget cuts the City of Grand Rapids closed the restrooms.  This week, led by Mayor George Heartwell, the Grand Rapids City Commission refused to spend the $200 a month it would cost to keep the restrooms at Aberdeen Park open.  However, they did approve a $50,000 payment to a private consulting firm to advise our solons on “lean administration”.

That fifty thousand bucks could keep restrooms open at twenty city parks throughout the entire year, but we see where the budget priorities lie for our city commissioners.  Heartwell and the gang are happy to go step by step towards making the quality of life in River City’s neighborhoods as miserable as possible, but they’ll blow the equivalent of a working stiff’s annual wages on a pointless study for themselves.  These are the perverse priorities of the people elected to run our city.  Keep that in mind when you check inside that port-a-john over at Aberdeen Park.

HOW TO STEAL $2.4 MILLION FROM YOUR LOCAL HOSPITAL (AND NOT PAY THE IRS)

A perceptive reader had an interesting observation to make about last week's article on the looting of Butterworth Hospital's reserves to fund a flip of the Autodie Fitness Center.  He noted that by having a closely-held corporate entity, like Joe Rathbun's Rathbun Engineering Inc., receive the proceeds of the sale of the fitness center and then dissolving it immediately afterwards, the transaction is effectively hidden from the I.R.S.  That's because the corporation no longer exists to file a return, and the lack of return from a defunct corporation is not something that shows up on the I.R.S.'s radar screen.

We don't know if either Rathbun or REI filed a return with the I.R.S. declaring the gain from the fitness center sale (the I.R.S. refuses to say), but we do know there was a big gain.  That's because REI was paid $3.6 million for the Autodie Fitness Center by Charlevoix Club III Inc. (Butterworth's shill), but REI had no basis in the property -- i.e., money invested in its purchase or improvement.  According to county records, Rathbun quitclaimed his interest in the fitness center to his company REI in exchange for nominal consideration.  So that means the entire $3.6 million was a net gain to REI.  Worse yet, because REI flipped the property to CCIII within a few days of Rathbun's quitclaim, the $3.6 million profit had to be taxed at the higher rate for ordinary income instead of the lower rate for a capital gain.

Even if Rathbun had in some manner transferred his basis in the fitness to REI, that doesn't help much.  All Rathbun had in that property was his original $50,000 for purchasing one of the buildings that later became the Autodie fitness center and the additional $300,000 he ponied up to provide a kitty for Autodie's creditors to persuade them to release the property from Autodie's bankruptcy estate.  Crediting those sums as REI's basis in the fitness center property means that the company still received a taxable gain in excess of $3.2 million.

Regardless of whether or not the defunct REI ever reported this huge taxable gain to the I.R.S., there still remains the question of how REI -- in actuality, Rathbun -- received the benefit of the millions that Autodie invested into the redevelopment of an old garage and boiler room into a modern fitness center.  It doesn't add up.  Autodie's creditors took it in the shorts, while Joe Rathbun, an old friend and business associate of Autodie's nearly bankrupt owner, acquired for a few pennies on the dollar a valuable Autodie property which he then flipped for almost four million bucks.  How is it Rathbun received that gain and Autodie's workers, suppliers, and shareholders got nothing?  And is it even credible that Rathbun kept the gain, or is it more likely he acted as a shill like CCIII did?

Just another reason why the fitness center sale stinks as we reported last week.  It goes to show how much you can get away with in River City when you have the pull to get your crime "lawyered" -- that is, get one of the bigshot attorneys in town to vet your shady transaction and the authorities will look away.  Better yet, get that attorney to help plan the crime so that the authorities don't even look in the first place.  It is incredible how many dirty deals certain lawyers in this town, like Charlie McCallum, Robert Wardrop, Dick Wendt, Gary Schenk, etc., can rationalize as legit for the right fee.

KLOHS GIVES UP THE GHOST

Birgit Klohs is the executive director of the Right Place Program, the economic development agency for the Grand Rapids area.  The late Amway founder, Jay Van Andel, was the original patron for the program when Klohs founded it two decades ago.  Returning the favor, Klohs is the chief cheerleader for developing a "life sciences" infrastructure in River City to support her patron's biggest legacy, the Van Andel Institute.

As regular readers know, we are a bit skeptical about Grand Rapids successfully competing against the Bay Area, Boston, Seattle, San Diego, and other contenders for the title of North America's bio-tech capital.  We not even sure how Grand Rapids would displace Ann Arbor as top dog of Michigan's anemic Life Sciences Corridor.  That said, we wish everyone well who wants to invest their money in local bio-tech.  However, we don't think business ventures, especially risky ones like bio-tech that tend to move off to the coasts if successful, are any place for our tax dollars.  What doesn't get lost in that will otherwise end up in a lot of wasted bricks and mortar, concrete, and asphalt in a misguided "if we build it, they will come" pipe dream.

But our tax dollars are exactly what it's going to take to make a go of turning River City into a bio-tech mecca.  In a recent interview with the Business Review, Klohs made that plain.  She said that the effort to support the life sciences in Grand Rapids requires a united front of political leaders (read "taxpayers"), economic development agencies (read "taxpayers"), the education community (read "taxpayers"), finance and capital markets (read "buyers of taxpayer-backed bonds"), and the developers and construction firms (who will happily take the money from the rest of this "united front" to build anything they want).

No mention of the entrepreneurs needed to create the bio-tech business ventures that are supposed to provide all these great jobs and fabulous wealth for Grand Rapids.  Just a list of groups expected to pass around the existing wealth of taxpayers.  Then again, what entrepreneur is going to get excited about a city where he'll be taxed to help others get into a business that can't get started on their own?  Like I've said before, folks, whenever you here "bio-tech" from the locals these days, hang onto your wallets.  Klohs has warned you.

PHILANTHROPY DONE RIGHT

Here in River City we're pretty good on slapping ourselves on the back about what a generous community we are.  We like to point out the Van Andel this or the DeVos that as examples.  But you know, the generosity of the pyramid-builders' philanthropy is a bit strained, as I noted in last week's article on the CAA.  With the G.R. Press and the Amway P.R. team bragging up DeVos or Van Andel participation in a so-called public-private venture like the arena, we forget what genuine philanthrophy looks like.

Fortunately we have Fred Meijer's $5 million donation to the $9.9 million renovation of the Civic Theater downtown to remind us.  Meijer's gift is in the same league as Amway founder Rich DeVos's donation to the DeVos Place Convention Center and his late partner Jay Van Andel's donation to the Van Andel Arena.  However, Meijer is neither buying an ersatz legacy by getting his name plastered on the renovated theater.  Nor will he or his business partners profit from the operations of the theater or any other relationship with it.  Nor is his gift contingent upon further financing that sticks the taxpayers with a big bill.  In short, Meijer's donation to the Civic Theater is philanthropy done right.

DO YOU SMELL A RAT?

Of course no deal as dirty as the flip of the Autodie Fitness from Autodie to Rathbun to the Charlevoix Club is complete without a River Rat as the errand boy.  Starring in this episode was River Rat Robert F. Wardrop II of Wardrop & Wardrop P.C. (pictured to the right soiling himself).  Wardrop first represented Rathbun in the fitness center sale, and then -- in a marvel of flexibility that only a lawyer lacking the backbone of integrity can accomplish -- he switched sides to represent the Charlevoix Club.

For his efforts, it looked like Wardrop would get an interest in the B&G property the Charlevoix Club was supposed to redevelop for Butterworth Hospital.  But nothing came of that when the front men for the Charlevoix Club either went on the lam or to prison.  So, Wardrop lost out on getting any part of the B&G when Thomas Beckering of Pioneer Inc. was brought in to redevelop the joint as the Boardwalk, a.k.a. Toxic Towers.

Yes, folks, it's just one slimy deal after another here in River City, isn't it?

HOW TO STEAL $2.4 MILLION FROM YOUR LOCAL HOSPITAL AND NEVER SAY YOU’RE SORRY

Our series on local attorney Charles McCallum, the Fixer, has been very popular.  It’s prompted some questions from our readers.  One that surprised me was why it’s a bad thing to have a bigwig lawyer like McCallum putting time into a non-profit organization like the old Butterworth Hospital?  Somebody has to step up to the plate, right?  So why not prominent citizens as a way to pay back some of the success they have achieved in our community?

The short answer is that it’s not a problem.  It’s great that people want to use the talents that have made them successful to help run our schools, hospitals, and churches.  But here’s the rub, that only works if they aren’t helping themselves in the process.  Volunteering for the board of a local charity means you do NOT use that position of trust to direct the charity to become a client of your business.  That’s self-dealing.  At worst it can be a crime, like embezzlement.  At best, the IRS can step in to strip the charity of its non-profit status.  Always it’s morally repugnant, no matter what the excuses you will hear to justify it.

That’s why McCallum’s tenure as Butterworth Hospital’s chairman, secretary, and chief legal counsel was a bad thing.  McCallum ruled the roost at Butterworth in the late ‘80s and early ‘90s before he helped Amway founder Rich DeVos devour the hospital in the Spectrum Health merger.  He used his positions of trust at the hospital to secure for his law firm, Warner Norcross & Judd, the hospital’s legal business.  And guess who at Warner Norcross had the Butterworth account?  That’s right, McCallum.  That’s self-dealing.  But that’s not all.

While chairman he had the hospital set up through Butterworth Ventures, its for-profit arm, a company called Butterworth Occupational Health Corporation.  He then funneled from the hospital’s reserves a million dollars a year into BOHC.  Guess who was running BOHC?  You got it, McCallum’s wife Lois Temple.  And what happened to that million dollars a year?  Who knows?  Temple certainly got paid a hefty salary.  Although McCallum booked that annual subsidy as an investment of the hospital’s reserves, when BOHC was converted into a non-profit organization in 1994 to bury its financial irregularities, its balance sheet had no assets to show for the millions of hospital dollars dumped into it.

However, upon becoming a non-profit corporation, BOHC did receive one big infusion of capital from the hospital.  It was $2.4 million.  What happened to that money prompts the title for this tale.  You will recall from “The Fixer” series that McCallum had a client named Joe Spruit who was in deep financial waters in 1992 and 1993.  Spruit ran his company Autodie into bankruptcy, and he personally owed Michigan National Bank a lot of money.  He hired McCallum to bail him out.  McCallum could get from Butterworth Hospital the money Spruit needed to settle with Michigan National by having the hospital buy something from him.  Well, there was the Autodie Fitness Center on Ottawa Avenue that Spruit controlled.  So here’s how the deal went down …

McCallum had his wife Lois announce in late ’92 that BOHC was fishing around for a fitness center to operate.  That provided an explanation to Butterworth insiders why BOHC would soon need funds from the hospital’s reserves.  Then there was the matter of the fitness center’s title.  Spruit didn’t have it.  His company Autodie did, and Autodie was about to file Chapter 7 (complete liquidation) bankruptcy.  As it happened Autodie was buying through a land contract part of the lot underlying the fitness center from Spruit’s friend and business associate Joe Rathbun.  To wrest the fitness center’s title from Autodie ahead of its declaration of Chapter 7 bankruptcy, in February 1993 Rathbun filed in Kent County district court a foreclosure action against Autodie because it had defaulted on the land contract.  This gave Rathbun’s claim against the fitness center precedence when Autodie went into bankruptcy a few weeks later.  Eventually this would put the title into hands friendly to Spruit, and so that problem was squared away for the moment.

There still remained the problem of who would actually buy the fitness center.  If BOHC did so directly, Autodie’s creditors, knowing that Butterworth can afford it, would demand that its subsidiary pay the market price for the fitness center and then divvy up the proceeds among themselves.  This would not have been a problem except that McCallum’s objective was not to use this deal to pay off Autodie’s creditors, but to settle up with Spruit’s biggest creditor, Michigan National Bank.  That meant setting up a shill with all appearances of being penniless to front for BOHC’s purchase of the fitness center.  This way Autodie’s creditors would not suspect there was a lot of cash to be had from the sale of the fitness center.  To this end, long-time Butterworth benefactor and dealmaker Peter Cook gave two of his associates about $100,000 in cash to set up the shill.  This resulted in the creation of the Charlevoix Club III Inc. in May 1993.

CCIII, secretly backed by BOHC, then entered into an agreement to purchase the fitness center from Rathbun, secretly obligated to Spruit, for $3.6 million.  The terms of the deal were a $1.2 million land contract and $2.4 million in cash.  Autodie’s creditors knew only about the land contract and not the cash.  To persuade them to release their claims on the fitness center so that Rathbun could sell it to CCIII, Rathbun agreed to throw $300,000 cash into the kitty for the creditors.  To bolster the impression that this was the best deal the creditors were going to get, Michigan National’s attorney Robert Hendricks (now corporate counsel for Peter Secchia’s company, Universal Forest Products) wrote to the bankruptcy court a letter implying that $300,000 was the only cash available from this transaction.  Consequently, the Autodie creditors took the $300,000 from Rathbun, gave up their claims on the fitness center, and then in August 1993 Rathbun closed the sale to CCIII.

To conceal the receipt of $2.4 million in cash from the sale, Rathbun had his company Rathbun Engineering Inc. set up as the seller of the fitness center.  To prepare REI for this transaction, a month before it Rathbun transferred all of REI’s assets to Metro Engineering Inc., a company controlled by his children.  Once emptied out of any value, REI received the cash from the fitness center sale and then Rathbun disbanded the company before it would have to report its new-found wealth in its annual corporate report to the State of Michigan.  So, Butterworth’s $2.4 million, funneled through BOHC and then CCIII, disappeared down a corporate rathole and soon afterwards Michigan National Bank settled with Spruit and newly retired Rathbun moved out of Grand Rapids to a big new house in a luxury subdivision.

After the sale, McCallum and BOHC were also busy.  They had to paper the file to account for the transfer of $2.4 million of the hospital’s reserves from BOHC to CCIII.  Because BOHC had to maintain the pretense that it had not purchased the fitness center, McCallum’s boys at Warner Norcross drew up one of the most bizarre leases in real estate history.  On the face of it, the lease stated that BOHC was renting the fitness center from CCIII.  However, a careful examination of the terms reveals that BOHC had complete control of the property and CCIII was nothing more than the manager of the fitness center operation.  On top of this, BOHC held the mortgage to the property that gave it all the remaining aspects of ownership except for formal title.  For this reason, BOHC booked its “lease” as a $2.4 million asset.

So that’s how you steal $2.4 million from your local hospital.  You need to have McCallum the Fixer as your friend at the hospital who will help set up a sham transaction, take the cash from the hospital reserves to fund that transaction, and then funnel that cash through a shill into the hands of a friend of yours.  Easy as pie – if you have no conscience and so no apologies.
________________________

Note:  What is told here is not guesswork.  The money trail from the hospital to REI is documented.  We do know that the $2.4 million disappears with REI.  It's possible that Spruit and Michigan National Bank never received a dime of that cash, although it boggles the mind why the Fixer and BOHC would go through such machinations to give a multi-million-dollar gift to Rathbun, a man whom they owed nothing.  If you have any doubts about how much this deal stinks, consider that this transaction is the one that prompted local Asst. U.S. Attorney Tom Gezon to report self-dealing at Butterworth Hospital to Federal Trade Commission investigator Joe Lipinski.  It wouldn't be self-dealing if McCallum's client Spruit did not benefit from McCallum's influence at Butterworth.  If you want to know why the feds dropped the ball on this, click on the link above and learn what it takes to buy a favor from a U.S. Senator.

SOME SUNSHINE

Our city government is a dismal business to be sure (see below), but the sun still shines.  Helen Lehman, one of the directors of Catherine's Care Center when she is not busy financing affordable housing for those of us on the lower rungs of economic success or hosting evacuees from the wreckage of Hurricane Katrina, got a hold of me a couple of days ago.  She reported that Catherine's Care, once a program of the Creston Neighborhood Association, is now an independent non-profit corporation.  Congratulations!

Since St. Mary's hospital abandoned its mission to support this unique northeast side medical clinic for the indigent last May, Helen and the rest of the Catherine's Care crew have reinvigorated the clinic and found new support for it in the community.  In just this past week:  On Saturday the Creston business district association raised new funds for Catherine's Care by hosting a car show; also Ronald McDonald's Charities approved a grant of $12,900 for the clinic.  As St. Mary's fades into corporate gray, the warmth of human kindness still colors River City.

CITY FLUSHING PARKS DOWN THE TOILET

A few months ago Grand Rapids Mayor Heartwell and the gang approved a $5 million tax subsidy for Amway billionaire Rich DeVos's new hotel downtown, but they won't part with twelve hundred bucks to keep the restrooms open in Aberdeen Park for ordinary city residents to use.

Well, that does sound like a lot of money for a couple months of water and sewage.  Maybe Heartwell should have the City Engineer take a look at how to conserve water usage in the park's restrooms, so the City can keep them open for us.  You know the City Engineer, don't you?  That's Bill Cole who retired from the City Engineer's post three years ago to start collecting a big pension from the taxpayers and then immediately double-dipped by taking back his old job at full salary.

But don't worry, folks, Heartwell and the City Commission have just approved a $50,000 study by a private consulting firm to figure out how they can make the City more efficient:  Like shutting down the restrooms in Aberdeen Park.

A couple of weeks ago, Robert Harrison, the coach of Creston High School's girls tennis team, discovered during a practice session at Aberdeen Park that its restrooms were closed.  This concerned Robert because the park is a bit of hike from the high school and there are no other public restrooms in between.  Besides, his team needs the park both for practice and hosting matches with the other teams, so they really need to use the restrooms at the park.  Robert also noticed that other residents were frustrated by the unannounced closure of the park's restrooms.

So Robert talked with Tom Zelinski, chief of the maintenance division of the Parks & Recreation Department.  Zelinski told Robert that it is just too expensive because of budget cuts made by City Manager Kurt Kimball (who still maintains a bloated staff) to keep the toilets operating at Aberdeen Park.  According to Zelinski that cost was about $1,200 for water and sewage through the fall.  Hardly a budget-buster, but that was that.

Robert then contacted the City Commission about the absurdity of closing down the restrooms at Aberdeen Park when the residents clearly needed them.  Commissioner Jim Jendrasiak offered to find a port-a-john for Robert's tennis team, plainly oblivious to the fact that 16- and 17-year-old girls wouldn't be caught dead in such a contraption.  To limit use of the restrooms and keep that "huge" water bill down, Robert offered to take responsibility for a key to the restrooms, open them only for the use by his team, and keep them cleaned up.  The City responded:  No dice.

So do you see how it works, folks?  Ordinary citizens like us are going to get the shaft during the City budget crisis.  The things that are actually useful to us, like the parks, will be made as miserable as possible.  Meanwhile, Heartwell, Kimball, and the City Commissioners are making sure that the wealthy suburbanites in Grand Rapids Township get fire protection from us.  Billionaires will continue to get their tax subsidies for hotels no one needs.  Greedy double-dipping bureaucrats will get both a paycheck and a pension check from us for as long as they want.  And jaw-jacking private consultants will be paid big bucks as they have always been to produce worthless studies.

Who's to blame for this wretched state of affairs?  You and me, dear readers.  Until we vote to toss out these bums, our elected officials are going to toady for the players and the City staff -- not us.

FIFTH THIRD TANKING

The stock of Fifth Third Bancorp (ticker symbol: FITB) is dropping like a rock today on the NASDAQ exchange.  It's down two bucks this morning at around $38 per share.  That puts the bank's stock at nearly half of its $75 per share peak in 1999 when it began the process of acquiring Old Kent Bank.  Since closing the Old Kent deal in April 2001, there's been nothing but bad news for the big bank from Cincinnati, which has been dogged with a federal investigation, a class-action shareholder suit, and the prospect of a $40 billion environmental liability, all stemming from that transaction.

The collapse of Fifth Third's stock price is worse news for it than it would be for other banks, because Fifth Third has depended upon an inflated stock value to grow by using its shares like currency to buy other banks.  Cheaper stock sinks that growth strategy, which had helped to mask problems with Fifth Third's loosey-goosey controls over assets it took over from acquired banks.

The immediate cause of Fifth Third's freefall today was its downgrading as an investment by the five top financial advisors on Wall Street.  Even at its recent trading range in the low forties, Fifth Third was still an expensive stock on a P/E basis compared to other banks.  So the word from the advisors set off wave after wave of institutional selling of Fifth Third's stock.  As for a more fundamental cause of Fifth Third's demise, in August its shareholders motioned the U.S. district court in Dayton, Ohio, to approve the settlement of the class-action suit mentioned above.  On Tuesday the presiding judge convened a closed meeting between Fifth Third and the shareholders' attorneys.  No news has come out of that meeting, but it is likely that the details of the payment by Fifth Third to shareholders was hammered out in it.

Meanwhile, Fifth Third's development company for the Boardwalk project at the north end of downtown, 940 Monroe L.L.C., remains on the hook for huge environmental liabilities for dumping 26,000 tons of hazardous waste in the middle of the city.  Moreover, state and federal law enforcement has not closed the books on the bank's role in that dumping - and all this is just the tip of the iceberg of the foulness arising from Fifth Third's snatching of Old Kent three years ago.  The big bank is now beginning to reap the whirlwind for its profligacy.

WHITE ELEPHANTS AND BLACK HOLES

The Grand Rapids Business Journal that Billboard Magazine ranks our very own Van Andel Arena as the top grossing venue of its size in North America during the first six months of this year.  Not only that, the Van Andel ranks third in the entire world.  Pretty impressive.

That's good news for us taxpayers stuck with the bill for the place.  Or it would have been except that our local elected officials have lumped the Van Andel Arena in with that money-losing white elephant called the DeVos Place Convention Center.  Both are now a package deal for taxpayers since the City of Grand Rapids and Kent County put the facilities under the supervision of the Convention Center & Arena Authority (CAA).  So the profit the Van Andel produced for taxpayers has been sucked down the financial black hole of the DeVos.

Well, not all the profit.  A smidgen remains.  About $400,000 is leftover for the taxpayers at the conclusion of the CAA's fiscal year ending on June 30th.  That, folks, is a pitiful return on the couple hundred million dollars of public investment our politicians have shovelled into the arena and convention center.  Just to show how skinny that margin is, it would be like saving only $150 out of a $75,000 annual salary.  Not a lot to brag about at the end of the day.

Perhaps we can take some solace in the fact that others, if not the taxpayers, are profiting from the Van Andel and the DeVos.  For example, the CAA has hired SMG Corporation of Philadelphia, Pennsylvania, to manage both facilities.  SMG earned $604,000 in FY 2004, and another $652,000 in FY 2005.  Not bad wages for skippering a leaky ship that is expected to produce even less money for the taxpayers by the end of the current fiscal year.

Of course, we wouldn't have named these places the Van Andel and the DeVos if the Amway clans didn't have their fingers in the till.  The Van Andels and the DeVoses also got their share of the loot generated by the arena and the convention center through sport teams, promotions, concessions, and ticket sales.  Now, dear readers, you really didn't think the Amway gang donated money to build these facilities out of the goodness of their hearts, did you?  What they coughed up was in effect a downpayment on these facilities, if that.  In exchange, you the taxpayer got stuck with the mortgages while they got the inside track to make money off these places.  Meanwhile, no apologies from the pyramid-builders about the absence of Amway convention-goers that were supposed to keep the DeVos Place convention center in the black.

Nevertheless, the Van Andels and the DeVoses don't have to worry about hanging onto their plums when the CAA's chairman is Steve Heacock.  He is a former partner of the DeVoses' favorite attorney, the Fixer Charlie McCallum, and current pal of the Van Andels for whom he moonlights as chief administrative officer of the Van Andel Institute.  If that raises eyebrows, then maybe we can have some confidence that the CAA's books are in the sure hands of Birgit Klohs.  You know her, protege of the late Jay Van Andel and now one the biggest boosters of the Van Andels' bio-tech boondoggle for River City.  Hmm, maybe that isn't so reassuring now that I think about it.

OK, sure, lots of conflicts of interest at the CAA.  No worries, people.  The CAA's chief counsel, River Rat Dick Wendt, knows all about scrubbing the stink off problems like that.

YELLOW JOURNALISM

Craig Crawford of "The Congressional Quarterly" was on the Imus radio show this morning hawking his new book about the role of the media in modern politics.  What he had to say wasn't all love and kisses for his comrades in the press.  He said that the biggest problem with the media is not the bias and fraud that occur throughout it.  Crawford said it was cowardice.

By cowardice he meant the media's repeated refusal to hold powerful people to account for their statements and actions.  Crawford's right, and we see that happen right here in our very own backyard.  It's true that Grand Rapids is a bit of a media backwater.  The stars of journalism don't shine here.  But we're not talking about talent or charisma.  We're talking about ethics.  The courage to do what is right and air out the stench of the crooked deals River City's players strike with each other doesn't depend upon a reporter's good looks for the camera or way with the written word.

Remember, the media is protected by the First Amendment to safeguard its critical role as a watchdog of the public's interests.  Yet time and again, stories like that of the Fixer and his powerful clients go unreported.  Why?  Because our reporters will not go out and get the facts for themselves.  They wait to be spoon-fed the official line from the authorities.  This is why the Grand Rapids Press would not investigate the Toxic Towers dumping scandal that implicated Boss Logie, his business clients Fifth Third and Spectrum Health, and prominent local developers.  The MDEQ, relying upon the discredited Marshall Report (see below) and ignoring all the physical evidence to the contrary (see here if you're up to a fact-intensive review of the MDEQ's misfeasance), told reporter Jim Harger there was nothing to the scandal.  Because Big Brother said "Forget about it", the Press dutifully did so.

Some watchdog:  Let's take the government's word for it and pretend that the videotape, photographic, and scientific analytical evidence refuting the official line doesn't exist.  That way we don't have to take on the big dogs in town our bootlicking publisher pals around with.

In fact, the Press's response to this scandal was worse than that.  Our efforts to bring the Toxic Towers polluters to heel through the state and federal courts was reported sporadically by the Press with open ridicule and barely concealed contempt.  No doubt this stemmed from the personal animosity of editor Mike Lloyd towards us as we repeatedly challenged him to get the Press to act like a watchdog.  Heaven forbid that Lloyd should put an important story of the public's exposure to 26,000 tons of hazardous waste in the middle of our city ahead of petty spite.  Heck, he might even have to order his reporters to expend a little foot leather to check out the facts instead of making bets and trading players in their fantasy sports leagues.

Actually, the Grand Rapids Press did not ignore the Toxic Towers dumping scandal when it came to the paper's own self-interest.  Once publisher Danny Gaydou recognized that the dumping scandal put a stop to the Monroe Avenue free-for-all where you could dig up the filthy poisonous urban fill underlying it and dump the stuff anywhere you like, he axed the Press's plan to build a new printing facility on the environmentally contaminated lot due north of the Press's current facility on the corner of Michigan and Monroe and moved the whole she-bang out to a farm field in Walker.

So, the Grand Rapids Press with all of its happy, huggable news dripping with saccharine smiles on the front page will not use its constitutionally-enshrined role as a watchdog to keep you informed of the crap going on behind closed doors, but it certainly will use that same information to protect its own interests.  Consider that, dear readers, when it's time to renew your subscription.

THE PRESS IS SWEET ON DICK JR.

In the Sunday edition of the Grand Rapids Press a couple of weeks ago, a news article on Dick DeVos's campaign for governor begins ...

"He stood there, on the dusty floor of a show barn, for three hours, look directly in the people's eyes, talking, laughing at jokes, but mostly listening."

Finished gagging?  It gets worse from there.  I don't think I O.D.'ed on such sugary sweetness since I was a kid devouring my Halloween treats.  But this is what passes for objective news reporting on the DeVos family in the Press under publisher Danny Gaydou.  You'll never get in his paper the inside scoop on how the DeVoses suck our local institutions dry, like we tell give you in "The Fixer" series.  Hell will freeze over before one of his reporters takes time away from playing their rotisserie league games to look under a rock to find out what these pyramid-builders are doing.

Then again, maybe Danny just has a taste for leather.  That might explain why licking the boots of Dick's old man, Amway founder Rich DeVos, isn't enough for him.  But do the puff pieces of the hype machine really have to kick in so early?  The election isn't until November 2006, and no one else, including Guv Jen, can be bothered to get out on the campaign trail.  Then again, maybe Danny is publishing such passionate prose because he is getting into the big buck business of romance novels.

SUPERIOR ENVIRONMENTAL Q & A

Last week reader Dave VerSluis had some questions about the fraudulent Marshall Report that state-contractor and Toxic Towers defendant Superior Environmental Corporation submitted to the Michigan Department of Environmental to get that agency off the trail of contractors Pioneer Incorporated and Dykema Excavators Inc., who had illegally dumped 26,000 tons of hazardous waste at the Monroe Avenue Water Filtration Plant and elsewhere in northeast Grand Rapids.

Dave's questions were in response to the article reprinted immediately below, first run on July 24, 2004.  Our Q&A follows the article.

Stunning ...

The Marshall Report, the entire foundation for the MDEQ's exoneration of the Berkey & Gay developers from any wrongdoing, has now been disavowed by the company that produced it.

In pleadings Superior Environmental Corporation filed yesterday in Kent County Circuit Court in response to the hazardous waste complaints that the Michigan Court of Appeals re-instated last month, that company explicitly refused to affirm the validity of the Marshall Report. Superior Environmental produced the Marshall Report on behalf of the Berkey & Gay developers in January 2001.

The purpose of the report was to substantiate the alibis the developers had given to the MDEQ to explain the movement of contamination soil at the Berkey & Gay site during its redevelopment into The Boardwalk. The Marshall Report included false affidavits and fabricate test results as corroboration of the developers' alibis. However, videotape, photographic, and other hard evidence had shown the Marshall Report was nothing but a tissue of falsehoods.

Thus, Superior Environmental disavowed it now that it had to, for the first time, account for the Marshall Report in a court of law. This should help pull down the MDEQ's stonewall around this matter, which had relied upon the Marshall Report as recently as this April of this year as a reason to not hold the Berkey & Gay developers accountable for their dumping of hazardous waste at the Monroe Avenue Water Filtration Plant and other locations in the Grand Rapids vicinity.

Dave: Why did Superior produce a false report [i.e., the Marshall Report] in the first place?

Your Executive Director: Because the Superior consultant who did the original Phase I and Phase II ESA's [environmental site assessments] for the Boardwalk project mischaracterized the soil's contamination to reduce the remediation needed in response to it. When the MDEQ investigated the Boardwalk site a year later, they demanded evidence supporting the conclusions of the original ESA's. So Superior drafted a report based upon false affidavits and phony test results to comply with the MDEQ.

Dave: Because Superior has now issued a mea culpa, does that exonerate them for their earlier acts?

Your Executive Director: Superior hasn't exactly taken responsibility for the false statements in the Marshall Report. They have said to the court that they no longer affirm the truthfulness of the report. Even so, this does not relieve Superior of liability for making false statements, which can be construed as a criminal act under Part 201 of the Michigan's Natural Resources and Environmental Protection Act.

Dave: Did others rely on their false report?

Your Executive Director: Yes, to the public's detriment. The MDEQ relied upon the report's evidence as being legit to exonerate Superior and the Boardwalk developers. However, the MDEQ did so in the face of damning evidence against Superior and its cohorts, including videotapes, photographs, soil tests, and the admission of one employee that his affidavit was false. So you have to question the MDEQ's reliance upon the Marshall Report when it had so much evidence showing it was false. However, that doesn't excuse Superior for producing a false report in the first place.

Dave: Do they have liability now?

Your Executive Director: Yes. Superior is a defendant in the hazardous waste lawsuit we filed against them and the developers in Kent County Circuit Court.

Dave: Are they claiming that they were lied to? Were they negligent? Were they paid off? Were they a partner in the venture, thus with a potential conflict of interest?

Your Executive Director: The lawsuit against Superior has not progressed far enough to get know what defense Superior will put up. I have my suspicions. There does appear to be a pay-off that might include big contracts with the state. We'll have to see if they are confirmed.

Dave: I am sure they have a large professional errors and omissions policy which might come in to play in this matter.

Your Executive Director: No doubt. Whatever it takes to clean up the mess Superior helped to create.

EDUCRATS WANT GUARANTEED PORK

There is a petition circulating the state to collect signatures to put a proposal on the 2006 general election ballot.  The usual suspects of the public education establishment -- e.g., teacher unions, adminstrator associations, and other educrat lobbies -- are financing this petition drive.  Why?  The proposal, if approved by voters, will guarantee public schools, colleges, and universities automatic increases in spending funded by your taxes.  This guaranteed pork will take priority over other budget items including transportation, law enforcement, and public health services.

When deciding to either sign the petition or later to vote on this proposal, remember the double-dippers of the Winter-Water-Wonderland who are already among the highest-paid public school teachers and administrators in the country.

DOUBLE-DIPPING ILLEGAL SEZ RETIRED SCHOOL OFFICIAL

A few weeks ago we noted a Grand Rapids Press survey as evidence of the spreading phenomenon of double-dipping by public officials.  Double-dipping is the practice of a public employee retiring to begin collecting his pension and then being rehired into his old job at full salary as a private consultant.  The article in the Press put the best face on this avarice at taxpayer expense, although the editorial page belatedly following our lead finally concluded double-dipping was not good public policy.

A retired Otsego public school district official, Robert McParlan thinks double-dipping is even worse than that.  In a letter he wrote to the Grand Rapids Press, he stated that the practice violates state law regulating the $38 billion pension fund for public school employees.  State law anticipates that school districts might find it useful at times to hire retirees, who are already drawing a pension, on a limited part-time or per diem basis.  To prevent the abuse of double-dipping, the wages for retirees drawing a public pension are capped.  McParlan points out that school boards deliberately circumvent the cap by rehiring new retirees through third parties (for example, temp services).

School boards believe this ruse lets them give a cap-busting full salary to the pension-drawing retiree.  But this is actually a fraud upon the taxpayers.  The only purpose of the ruse is to circumvent the double-dipping law.

ENCORE: RIVER CITY'S HEAR-NO-EVIL MONKEY

[Note:  Now that the FOIA fight with the City Attorney's office is full steam ahead -- see below -- this is a good occasion to recall the abject failure of River City's newspaper of record to report upon the city government's obstruction of our right to see public records.  This article was first published on February 24, 2005.]

    

The Grand Rapids Press preens itself as a defender of open government.  For example, on the January 31st editorial page it took Grand Rapids Mayor Heartwell to task for making changes to the City Commission’s committee structure that circumvent the Open Meetings Act.  Just yesterday, the Press editorialized against a high court dismissal of a Freedom of Information Act lawsuit to compel Eastern Michigan University to disclose a report to its board regarding the misappropriation of public funds to build a $6 million palace for the university’s president.

The Press yelped mightily over the EMU case, but then its ox was being gored.  The FOIA complaint was filed by the Ann Arbor News, which is a sister publication to the Press.  Let’s be clear.  We at the Local Area Watch are in complete agreement with the Press about Heartwell’s assault upon the OMA and EMU’s disregard for FOIA.  However, the Press’s sanctimony is more than galling when it has suppressed any coverage of the biggest FOIA scandal to involve the City of Grand Rapids:  The deliberate destruction by the City Attorney’s Office of public records to prevent their immediate disclosure to the Kent County Circuit Court and their availability as evidence in a pending federal lawsuit and investigation.

Those documents recorded then-Mayor Logie’s statements to the City Commission, in closed sessions on March 6, 2001, and May 8, 2001.  He dissuaded the commissioners from making any inquiries into the dumping of hazardous waste at the Monroe Avenue Water Filtration Plant.  The dumping had benefited the two largest clients of Logie’s law firm, and Logie had knowledge of pending state and federal examinations of what occurred there when he convinced the City Commission to not act.  By quashing action by the City Commission, Logie prevented the City from producing information that might implicate his clients’ involvement in state and federal offenses.

The minutes of these meetings were evidence of Logie’s actions against the interests of the City’s residents and taxpayers in favor of his business clients.  Therefore, Assistant City Attorney Daniel Ophoff arranged for the destruction of the minutes before any court order was put in place to compel their disclosure.  We know of these closed-session discussions only because City Commissioner James Jendrasiak informed LAW executive director William Tingley of what happened immediately afterwards.  Nevertheless, neither Jendrasiak nor anyone else in the City government has been willing to hold Ophoff accountable for his utter contempt for the laws that enforce open government.

Worse, that self-styled defender of open government, the Grand Rapids Press, has not had a single word to say about any of this, despite the pile of evidence that exists.  Of course, the fact that the publisher of the Press, Danny Gaydou, also happened to be at the time the chairman of Spectrum Health, one of those big clients of Logie’s law firm who benefited from the dumping at the Filtration Plant, is surely only a coincidence.