A Goodyear Family's Suit Against Jack Rose Claims He Lined His Own Pockets Instead of Developing Their Property
For a time, Jack Rose was the most notorious person in Arizona government.
I know, I know: You've never heard of him. But even if he's forgotten, the damage was clearly done. Rose's selfish actions not only left the taxpayers on the hook for an unprecedented $60 million jury verdict, but also ended the career of the politician stupid enough to hire him. Arizona Corporation Commissioner Jim Irvin had been a rising star in GOP circles, but by the time Rose was done with him, Irvin was forced to resign from office just to avoid impeachment.
The fascinating thing is that Commissioner Irvin's chief misdeed — interfering with the sale of a huge utility that he was supposedly regulating — didn't net him a penny. Irvin wasn't trying to get rich. He was just trying to help his buddy and former employee, Jack Rose, who'd set himself up to make millions if the utility was sold to an Oklahoma firm instead of one in Pennsylvania. Unlike Irvin, Rose did want to get rich . . . and he was willing to screw utility company shareholders, Arizona ratepayers, and the principles of good government to do it.
Even though Rose's scheme ended in debacle, he was never punished for it. The report recommending Irvin's impeachment, penned by a former U.S. Attorney, is devastating in its details of Rose's machinations, but he was never indicted. Nor did he ever suffer much of a financial penalty.
With a history like that, you'd think Jack Rose would never work in this town again. You'd think, among politicians, he'd be radioactive.
Today, just five years after Commissioner Irvin was forced to resign, Rose can count plenty of friends in high places. He's been a major backer of David Schweikert, the Republican candidate for the East Valley congressional seat held by Harry Mitchell. Rose, his employees, and relatives have kicked in a combined $21,200 to Schweikert's campaign, and he calls Schweikert a "friend." (Though Schweikert resists that label, his campaign says it appreciates Rose's support.)
And sources tell me that Rose has become something of a kingmaker in the West Valley. He's been a generous donor to suburban politicians of every stripe. At least twice, he flew several Goodyear city officials on a chartered private jet. Also in Goodyear, one of his businesses hired the mayor's wife; in another, he signed up a councilman as his partner.
As it turns out, in the wake of the Irvin scandal, Jack Rose set out for the fertile farmland of southwestern Maricopa County. His grandfather was a homesteader there back in the day, he explains.
There, Rose persuaded landowners to entrust him with selling and/or developing their property. He also made friends with plenty of politicians.
But while Rose lived high for a while — see: that private jet — some people in the West Valley believe that his empire may be headed for collapse.
The catalyst for much of the chatter is a lawsuit filed last month by a prominent Goodyear family, Rose's former business partners. Their suit says they trusted Rose when he promised to develop their property. Instead, they claim, he lined his own pockets, to the point that the project is now in bankruptcy.
And this isn't just any project. It's Major League Baseball — specifically, spring training stadiums for the Cleveland Indians and Cincinnati Reds.
I talked to nearly a dozen people with connections in the West Valley, and combed through a host of documents related to Rose and his business dealings. I also got a chance to talk to Rose.
What I found was a case of déjà vu, with Rose once again cleverly calling the shots.
The big difference: This time, everyone involved should have known better.
Siblings Ken, Pug, and Margaret Wood grew up in a 240-acre farm at the corner of Estrella Parkway and McDowell Road in Goodyear. Adjacent to the Phoenix-Goodyear Airport, the area became posh suburbia overnight.
In 2004, the Woods hired Rose and his company, now called Civica, to help them cash in.
And so you'd assume that when the city of Goodyear selected the Wood farm as the spot for spring training facilities for two major-league teams, the family got rich.
In fact, while stadium construction continues, the $38 million loan that Rose arranged for the development is in default. In August, the Woods' limited liability company filed for bankruptcy.
Not surprisingly, the Woods blame Rose. They're suing him as part of the bankruptcy proceedings, alleging that he fraudulently concealed the true cost of the project, breached their agreements and his fiduciary duty, and was negligent.
The language is harsh: "Jack Rose and the Civica Entities breached the trust the Wood Entities placed in them. [Rose and Civica] negotiated and agreed to terms in the City Agreements with the City of Goodyear that are detrimental to the Wood Entities, commercially unreasonable, and in breach of the Civica Entities' obligation to manage the development in good faith."
Here's the kicker.
"Jack Rose caused the Wood Entities to agree to these terms not because they were in the Wood Entities' best interests," the suit says, "but because they satisfied Jack Rose's own selfish interests."
Does this remind anyone, just the littlest bit, of Jack Rose's dealings with the Corporation Commission?
I talked to Rose on Monday. I'd been warned that he is charming and smart and persuasive. Talking to him, it's easy to see how he was able to pull himself up from a Mohave Valley trailer park to Yale and Harvard Law and then a job at the Arizona Corporation Commission: He talks a very good game. I found myself liking him.
The facts, as he presented them, seem reasonable enough. Rose told me that he did a number of deals with one of the Woods, sister Margaret Wood Carl. She was a real estate broker, he says, and knew what she was doing.
He insists that the project was moving along just fine until the Woods screwed it up by overreacting to the sort of problems that plague any big development. He says they had no reason to file for bankruptcy: "They just shot themselves in the foot."
He claims he's an innocent victim. "What they're alleging is simply not true," he says. "I've been a friend of their family; we've done a lot of business together. They've made millions of dollars off their relationship with me." Now that the economy has crashed, he suggests, they've turned on him.
It all made sense. But then I went back to the evidence.
As it turns out, it's not just the Woods who are angry with Jack Rose. A suit has been filed over Rose's property dealings with a second family. And I talked to the representative of a third family who also made hefty payments to Rose, with little to show for it. I suspect they'll end up filing suit, too.
And though Rose argues that the Wood family gave him their blessing, he talks out of both sides of his mouth. Out of one side, he claims that Margaret Wood Carl was an experienced broker who knew what she was getting into. Out of the other, he claims that the Woods are only angry because they were too unsophisticated to understand that the project was on course.
So here are the facts.
As a broker, Margaret Wood Carl handled residential projects. She had no experience with development of this magnitude. That's why she brought on Rose.
And the Woods agreed to some terms that just seem absurd. When they originally hired Rose to help them sell or market the farm, they agreed to give him 6 percent of the selling price — plus $10,000 a month for five years, even though he's not a licensed real estate broker.
That meant Rose stood to make $600,000 even if he never sold an acre. Seriously.
Then there was the infrastructure. When the city agreed to buy the Woods' land for the stadiums, Rose set up the deal so that the Woods would take care of the basics, like grading and drainage. The city would reimburse up to $10 million.
Good deal, right? Except it was the Woods who were required to finance the work — and it was Rose who'd be getting the $10 million reimbursement.
Then there was the sales tax remittance. The Woods were to develop a "retail liner" around the stadium — shops, restaurants, maybe a bar. Because the family sold the land for the stadium to the city at far less than it was worth, the city agreed to give back up to $5 million in sales taxes.
Again, not a bad deal — except for one thing. The agreement was actually structured so the $5 million went to Rose, not the Woods. (And, of course, it was the Woods putting up both the land and the money.)
One final kicker: Rose started a new company to do the construction. The Woods claim the company ran up expenses, did work that wasn't necessary, and subcontracted to cronies.
And though Rose defends the work of his company, it's interesting to note that this is its first big project.
Phil Meyers is a Paradise Valley businessman, brought in by the Woods to restructure their deals in light of the bankruptcy. He says there were three national construction firms doing the actual work — but that Rose's company was supposedly managing them.
"To have a company as inexperienced as Civica there supervising them was just ridiculous," Meyers says. "Civica had never done a project like that before. They were in way over their head — and they cost everybody millions."
Plus, Rose is a lawyer. When he said he had the Wood family's best interests at heart, they trusted him, Meyers says. According to their suit, Rose would frequently hand them documents just before city council meetings, for example, telling them to sign in a hurry. The Woods didn't even give them a cursory read before putting pen to paper.
Rose insists that the Wood family had a lawyer through it all, a guy named Jim Rossie. "He was involved from Day One," Rose says. "Now, in some of the agreements, they chose not to use him. Margaret [Wood Carl] is very conservative about spending money. She didn't want to pay a lawyer to look at some of these things . . . But I begged them — I introduced them to other lawyers . . . If she didn't want to pay a lawyer to look at these agreements, that's hardly my fault."
But Meyers says Rose is distorting the truth. Rossie, he says, merely helped the Woods structure their limited liability companies for tax purposes.
There was no begging, either. In fact, at one point, Rose actively tried to block the Wood family from hiring a lawyer, Meyers says.
The Woods, Meyers adds, had no choice but to file bankruptcy in order to get out of their "agreements" with Rose.
"Margaret Wood Carl hired Jack and his companies thinking they were the experts," Meyers says. "But if you hire a heart surgeon and you find out he's horrible, you've got to get the problem corrected. You fire him. And that's exactly what happened here."
Jack Rose will tell you he's stayed out of politics since the Irvin affair.
"I'm not thrusting myself into the political arena, as you say," he tells me. "When good candidates come and ask for support, I support them."
But after asking around, I just don't believe it.
Today, Rob Antoniak is the vice mayor of Goodyear. But when he was a 27-year-old neophyte first running for the council, in 2003, he says he got an unsolicited call from Rose.
"He stated that he knew I was running for office and was asking how he could assist me," Antoniak recalls. "I neither needed nor desired or his assistance . . . I had other plans for my campaign." Antoniak took a pass.
What's most fascinating about that incident, I think, is the timing. It was December 2002 when a federal jury agreed on the staggering $60 million verdict against Corporation Commissioner Irvin, for interfering with the utility company sale and trying to help Rose make money. It was 2003 when Irvin resigned in the face of impeachment.
During that same timeframe, Rose was asking a would-be councilman how he could help him — even as he was being tarred and feathered in the papers almost every day. Talk about chutzpah.
Needless to say, not everyone in Goodyear was as prudent as Antoniak. Sources tell me that Rose has raised money for politicians in that city. And one councilman, Frank Cavalier, has admitted that he's a partner in one of the companies accused of bilking the Woods.
And then there's the bank.
Don't ask me why, but for some reason, the feds let Rose and his cronies start West Valley National Bank.
Rose sits on the bank's board of directors. So does Goodyear attorney Mark Dioguardi, who does the legal work for Rose's companies and was also implicated in the Irvin scandal.
At one point, Goodyear Mayor James Cavanaugh was on the bank's board — and Councilman Cavalier's wife still is. Cavanaugh's wife, I'm told, was hired and now works there.
Go figure, the bank handled $1 million of the Woods' $38 million loan. (That's right there in the bankruptcy papers.)
With the loan in default, Rose's empire in financial trouble, and rumors flying, the question is whether Jack Rose will manage to walk away unscathed.
It's kind of amazing, but he did it last time. As I noted earlier, a federal jury agreed in December 2002 on the staggering $60 million verdict against Irvin. And, in 2003, Irvin resigned.
But Rose hardly missed a step. What the hell — he wasn't on the hook for $60 million. (Claiming poverty, in fact, he'd settled for $60,000.) He also managed to get himself an immunity deal and cooperated with the impeachment proceedings against Irvin.
When the U.S. Attorney announced he wouldn't prosecute, there was no one who could touch him. By 2004, Jack Rose was home free.
He was free to head to the West Valley and start a development company.
He was free to represent the Wood family.
He was even free to help start up a bank.
Is it any wonder this country is in the mess it's in?
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