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Jerry's Law

Revolving door: The D-Backs bar has had four owners in seven years.
Jackie Mercandetti

There are two rule books for doing business in downtown Phoenix.

One is for Jerry Colangelo and his stable of businesses revolving around the Arizona Diamondbacks and the Phoenix Suns.

This rule book is very thin. In fact, open it, and there's only one page containing four words:

Cut Jerry a break.

There's another big fat book that lays out the rules of business for the rest of us. But the driving philosophy behind this encyclopedia of do's and don't can be summed up in five words:

You must pay to play.

Jerry gets. We pay. There's nothing fair about this, but it's the way it has been for the last 20 years in Phoenix.

If a small business wants to put on a special event in downtown Phoenix, it's required to pay through the nose ($60 an hour) for off-duty Phoenix cops to provide security. But Jerry doesn't have to pay for the cops directing traffic at every home baseball and basketball game. Taxpayers do -- to the tune of more than $300,000 a year.

And when Jerry needs parking for a special event in a downtown space -- such as the soiree last week for Charles Barkley's induction into the Suns' Ring of Honor --Maricopa County suddenly makes available a parking garage for the evening.

When local artists wanted use of the same garage for a special event, the county didn't even bother to respond to the request.

Jerry, you see, is considered different from the rest of us because he's managed to siphon more than $300 million in public funds to build arenas, ballparks and a theater.

The theory is, we will all benefit from Jerry's success.

I'm the first to say that I enjoy the sporting events at Jerry's venues. But for the bar and restaurant owners near Jerry's World who have no connection to the Godfather, the trickle-down benefits of all that public money going to the Colangelo empire have been negligible.

Downtown businesses that hooked their star to Jerry's wagon have had a very rough row to hoe indeed. This despite Colangelo's claims that the stadium and the arena would revitalize downtown Phoenix.

In fact, it's laughable to bar and restaurant owners who were once true believers in the Colangelo mystique that spillover from America West Arena, Bank One Ballpark and the Dodge Theater has brought anybody prosperity.

There are fewer downtown businesses today than before the BOB was opened in 1998. Instead of creating a vibrant downtown, the ballpark and arena have concentrated downtown entertainment spending inside the walls of the sports edifices.

The bars and restaurants near the stadium and arena count every dime they manage to get from fans attending events in one of Jerry's tents. So when they see the Diamondbacks-owned nightclub on the ballpark plaza getting break after break from state and city regulators, they tend to get upset.

The two-story nightclub the Diamondbacks built on Bank One Ballpark plaza was supposed to be a gold mine for Colangelo and his stable of investors.

Instead, it turned into a financial sinkhole that lost Jerry and his buddies several million dollars when they operated it as Leinenkugels brewpub from 1998 through 2000.

The experience must have taught Jerry first hand just how difficult it is for neighboring small businesses to capture even a sliver of the $10 million a year he and his investors are collecting inside the ballpark from concessions and souvenirs.

Jerry and his partners bailed on the bar business in 2001, deciding to lease the building to a Chicago-based operation called High-Tops.

Even though Jerry and his partners no longer operated the bar, the team still controlled the building. The principle of cutting Jerry a break stood fast.

Since early 2001, a litany of serious problems have cropped up at the place that have been largely ignored by city and state regulators -- including at least two aggravated assaults on police officers and more than 18 police calls related to assaults. Patrons have suffered serious injuries at the bar, including one man who was nearly killed when a drunk threw a table off the second floor balcony into a crowd.

Meanwhile, the State of Liquor Licensing and Control has issued more than half a dozen citations for violations, including selling alcohol to minors, over-serving intoxicated patrons, illegally using the plaza to sell alcohol, allowing customers to leave the bar with open containers and bartenders drinking while on duty.

The department should have issued at least one more citation, but failed to discover that one operator submitted a fraudulent application to obtain a state liquor license.

If you or I owned a building leased to nightclub operators with such problems, the doors of our structure would be chained shut in no time.

 

But not Jerry's joint -- which has had four tenants in the last seven years.

Not only have the state and city allowed this renegade nightclub to continue operating under a revolving door of names and managers, regulators are cutting its latest incarnation a break on its liquor license.

On March 26, the State Department of Liquor Licensing and Control issued what is known as a No. 12 liquor license to the bar, now known as Sliders.

A No. 12 license requires that a business generate at least 40 percent of its sales from food and is relatively inexpensive at $2,585 a year.

Nearby competitors insist that it's extremely unlikely that Sliders will be able to document that 40 percent of its business comes from food sales. Sliders, they say, should have been forced to get a No. 6 liquor license issued to bars -- which costs a whopping $80,000.

"It's just ridiculous to say that you will have six or seven beer tubs on the outdoor plaza and claim you are going to sell 40 percent food," says the manager of a nearby bar. "All of us had to get a No. 6 license. How come they don't?"

The former operator of High-Tops, which leased the space from Jerry in 2001 and 2002, says there is no way the nightclub can operate profitably as a restaurant.

"If they are operating under a No. 12, they are operating illegally," says Hal Rothstein, who continues to operate Hi-Tops bars in other cities, including Chicago.

Rothstein should know.

During the two years his company ran the Phoenix Hi-Tops, he too was operating under a No. 12 license. But he says alcohol sales accounted for 90 percent of his revenue by the end of his tenure. He claims he planned to get a No. 6 license but the D-Backs terminated his contract in January 2003.

State Liquor Licensing and Control director Leesa Berens Morrison says the department issued the No. 12 license to Sliders after it conducted an investigation of its owner, Baltimore businessman Reed Cordish, and concluded Cordish will operate it as a restaurant.

I was amazed that the department had even conducted an investigation -- since it failed to turn up the fact that Cordish had a hidden interest in the nightclub's operation last year when it was called McFadden's. McFadden's operated the club between March and November 2003, after High-Tops was booted out.

Even more surprising, the liquor department failed to discover that McFadden's had used a front man who submitted a false application to obtain the liquor license.

Excuse me, but the liquor department is supposed to scrutinize the owners, managers and operators of bars and restaurants serving liquor. It's why we pay them.

Bottom line here: The department either dropped the ball on investigating McFadden's, or more likely, simply adhered to what I call Jerry's Law.

In March 2003, the Diamondbacks had announced that Hi-Tops was out and that McFadden's would be operating the plaza nightclub. McFadden's management, however, had previous liquor violations from when the company operated Have A Nice Day Cafe in Tempe. You may recall that Have A Nice Day closed in 2002 after a patron was killed in a fight just outside of the club.

To pull the wool over the state's eyes, McFadden's managers enlisted a bartender named Timothy Scott Rogers to create a shell company that would pretend to own McFadden's. This company, called 201A Fourth Street, was used to apply for the liquor license for the establishment.

Rogers says he went along with the scam because he needed the job. He submitted a fraudulent liquor application stating his company owned McFadden's and that it was paying $10,000 a month in rent to the Diamondbacks.

"On paper, I was the owner," he told me recently. "That's the way they set it up."

Not only did Rogers not own McFadden's, the rent his front company was paying didn't even go to the Diamondbacks.

Instead, Rogers says it went to Cordish, the Baltimore businessman who had entered into a sublease of the nightclub with the Diamondbacks.

Cordish confirms that he subleased the club and, in turn, leased it to McFadden's. The arrangement was never formally disclosed to state liquor department officials as required by law.

Last November, the liquor department shut down McFadden's after it failed to respond to a September citation issued for over-serving alcohol to an intoxicated customer.

In January, Cordish created a new company that -- with the Diamondbacks' support -- applied for the No. 12 liquor license to open Sliders as a restaurant. The grand opening of this latest plaza-bar venture is scheduled for April 6, the D-backs home opener.

 

The fact that Cordish was secretly collecting rent from McFadden's, which had obtained a fraudulent liquor license, wasn't an issue to the liquor department when it issued the No. 12 to Cordish. Department director Morrison wasn't aware that Cordish was collecting the rent on McFadden's until I told her the other day.

Phoenix also has the power to nix a liquor license, especially if it appears that problems have persistently occurred at a club.

Betty Hicks, Phoenix's liquor-license services supervisor, told me that the city also had no clue that Cordish had leased the club to McFadden's.

But don't expect Sliders to lose its liquor license because of Cordish's connection with the fraudulent McFadden's deal. Whether it's Cordish or anybody else involved in Jerry's ballpark plaza bar, city and state liquor regulators will look the other way.

To do anything else would be to violate that unwritten law of downtown Phoenix: cut Jerry a break.

E-mail john.dougherty@newtimes.com, or call 602-229-8445.


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