Hotel partners and council members deny corruption allegation

The hotel partners in a downtown Greensboro project, along with one of their wives who is running for Congress, deny improperly influencing city council through promised campaign contributions.

Jeff Furr, a lawyer with the Atlanta-based firm King & Spalding and investor in Cone Denim Entertainment Center, laid out his partners’ legal strategy if the city went ahead with an easement condemnation to begin construction of a parking deck attached to a planned Westin hotel.

“Condemnation is a power that the city can exercise, but only in specific circumstances,” said Furr, addressing Greensboro City Council members during a marathon meeting on Dec. 19. “The city can exercise its power to take the private property of an individual or group, to put it to a public use. What the city cannot do is exercise that power to put that property to what is primarily a private use. If we have to file a lawsuit to enjoin this project, the nature of that lawsuit will be our claim that, in fact, if you look behind the screen you will that this condemnation will primarily benefit the private developers and that any benefit to the city will be only incidental to that.”

Council member Nancy Hoffmann offered a withering commentary on the concerns raised by the owners of the Cone Denim music venue, namely that construction of the parking deck will impede touring acts access to their backdoor and put them out of business.

“I’m also really amazed at people who would invest in a business and put themselves in a very precarious situation of not controlling parking and entrance and exit to their business,” Hoffmann said. “What were you thinking? Did you think that this very valuable piece of property in downtown Greensboro was going to be like this forever?”

Then, mentioning by name two of the four partners — George House and Greg Dillon — Hoffmann urged her colleagues to approve the condemnation and move forward.

“Mr. House and Mr. Dillon and their group cannot afford any further delay,” Hoffmann said.

True to Furr’s promise, the lawsuit filed on Jan. 9 seeking to halt the condemnation argues not only that the city’s decision to spend up to $30 million building a parking deck to support the Westin Hotel is bad public policy, but that it’s specifically designed “for predominantly private benefit to private persons and entities, yet only an incidental benefit and use (if at all) for the city and its citizens.”

The lawsuit makes electrifying albeit unsubstantiated claims that the hotel project partners and their spouses, including a Congressional candidate backed by the Democratic Congressional Campaign Committee, improperly influenced city council members, including promising campaign contributions in exchange for support for the project. The allegations cover the second and third iterations of the project, beginning with a Wyndham hotel proposed by the same partners in 2013 and 2014. The legal entity set up to build the hotel is Elm Street Hotel LLC, whose members include George House and Randall Kaplan of Greensboro; Daniel Robinson of Durham; and Greg Dillon of Frederick, Md.

“Based on the promise of political donations and other things of value to be given by [Elm Street Hotel LLC], or its members or its members’ spouses, the city agreed to provide approximately $2 million in incentives to build the Wyndham hotel at the Elm Street Center (without a parking deck), subject to ESH creating a certain number of jobs over a five-year period,” the lawsuit says. “The ESH Wyndham Plan never came to fruition.”

Later, after the partners scrapped the original proposal and worked out an arrangement to partner with the Westin hotel brand, the lawsuit alleges that “ESH members, House and Kaplan, and others, including Kaplan’s wife, Kathy Manning, an influential and wealthy business person with national political aspirations, began communicating with council members,” including Hoffmann and Zack Matheny, then a council member and now president of Downtown Greensboro Inc.

The lawsuit goes on to say that the partners and their spouses, described as “scheme participants,” “improperly influenced city officials to support the Westin Plan.”

Manning’s campaign responded through a prepared statement to Triad City Beat.

“The wild, fact-free, false allegations concerning Kathy are motivated by politics and the plaintiffs’ desire to get cash,” said Tori Taylor, Manning’s campaign manager. “These folks have already been offered compromises and compensation but just want more. We encourage the plaintiffs to stick to the truth and seek a remedy that works for the public good instead of playing politics just to get a payday for themselves.”

Monty Hagler, president and CEO of RLF Communications, issued a statement on behalf of the hotel partners.

“The partners of Elm Street Hotel LLC have never engaged in any wrongdoing in our dealings with the city of Greensboro,” the statement said. “The plaintiffs in the lawsuit have made outrageous and unsupported claims to bring unjustified attention to their dispute with the city. These defamatory statements have no basis and the plaintiffs have been reckless with their inclusion. This includes the allegation against Kathy Manning, who has never been involved in the hotel project and has never spoken to any city official on behalf of the hotel group. We continue our efforts to bring our hotel to downtown and support the continuing economic resurgence of downtown.”

Hoffmann told TCB that she “absolutely and unequivocally” denies that she agreed to support the hotel project based on the promise of campaign contributions.

“I have never had a conversation with Kathy Manning,” Hoffmann said. “I have never had a conversation with Randall Kaplan or George House or any other partners outside of a closed executive session.”

Mayor Nancy Vaughan said she’s not worried about what might come out in discovery if the lawsuit goes to trial.

“I am an open book with this or any other transaction with this or the previous hotel,” she said. “I don’t want to comment further since we’re in court at this point.”

Matheny said that for the time being at least, he will refrain from commenting on the allegations.

The plaintiffs, who include Furr, Rocco Scarfone and Amiel Rossabi, found an unlikely ally in former city council member Mike Barber, who unsuccessfully negotiated on behalf of the city to try to find a compromise with the Cone Denim Entertainment Center owners, but lost his seat to Michelle Kennedy in the November election.

Barber said in an affidavit filed on Jan. 19 that he and other council members were aware of “the current business challenges” of the Elm Street Center, a venue near the proposed hotel site, “and the debt associated with and being carried by the existing business.” Kaplan is listed as the managing member of the LLC that owns the property. Barber also said in the affidavit that council members “were consistently eager to support a large project in this location as we were aware of the benefits to the tax base.”

Barber, who could not be reached for comment of this story, went to say in the affidavit: “Based on the financial projections and related documents that I received while on the city council, the financial outlay committed by the city, the historical parking revenues for the city, the lack of binding contractual commitments for parking spaces in the Dixie Deck and the cost of the captioned lawsuit, it is my belief that it will require many years to recoup the cost of this project, if at all.”

The Dixie Deck, also known as the February One Parking Deck, is the city-financed deck to support the planned Westin hotel.

Barber’s statement undermines the city’s position that the parking deck project fulfills a public purpose.

As noted by Barber and others, the city hasn’t conducted a parking study for downtown since 2008, and that study did not identify a need for more parking spaces in the area of the proposed hotel.

A timeline on a city web page with information about the parking deck project states that Lincoln Financial committed in 2015 “to bring up to 600 new employees downtown.” A spokesperson for Lincoln Financial declined to confirm the number, telling TCB that “because we make hiring decisions based on the evolving needs of the business, we cannot speculate on future hiring plans.”

The city offered three public benefits to building the February One Parking Deck and another deck associated with a separate hotel planned by developer Roy Carroll in a presentation in December. One is promoting job growth and economic development, another is increasing the tax base and a third is supporting dense and compact urban development.

Megan Weathersbee, general manager of the Downtown Marriott, questioned the viability of the two proposed hotels in comments to city council on Dec. 19, challenging the assumption that the projects will lead to new employment and visitor spending.

“We are the only full-service hotel in downtown Greensboro,” Weathersbee said. “We run an annual occupancy of 59.3 percent — well below the US downtown hotel average of 65.5 percent.” Weathersbee said the Downtown Marriott’s occupancy dropped slightly from 2016 to 2017, questioning the effect of adding inventory and charging that the proposed hotels are premised on an “if you build it they will come” mentality that isn’t financially sound.

“If we can’t fill our hotel with the current business level that are being seen in downtown Greensboro, how will these new hotels survive?” Weathersbee asked. “Without committed events and business coming to downtown Greensboro you are essentially voting to eliminate jobs from the downtown Greensboro area. We estimate that by building these hotels without the contracted business, increasing the occupancy in downtown Greensboro will have the economic impact to our business that will result in an impact of 30 employee layoffs — close to 25 percent of my staff — due to lower occupancy levels.”

Weathersbee ended with a commitment that the Downtown Marriott will invest $6 million to renovate its property in 2018, but before she could say more Mayor Vaughan cut her off, as her allotted speaking time had expired.