Letting the Diamondbacks Slide
Misappropriation of funds.
All of these things, and more, are swirling around the Maricopa County Stadium District--an offshoot of county government entrusted with overseeing the spending of $253 million of taxpayer money on a stadium for the Arizona Diamondbacks.
The problems at the district surfaced briefly last week in two front-page stories in daily newspapers--stories that were leaked by county employees after New Times had obtained documents indicating a litany of problems at the district.
The stories come on the heels of the stadium district's hurried approval of a series of complex agreements that essentially give the Diamondbacks control of stadium revenue.
The articles in the Arizona Republic/Phoenix Gazette stated that the stadium district had improperly borrowed nearly $1 million from the fund set aside specifically for the Cactus League and used it for expenses related to construction of Bank One Ballpark.
The transfers appear to be illegal, because the statute creating the stadium district requires all funds raised by a $2.50 per vehicle rental-car tax to be spent strictly on Cactus League items. The news accounts portrayed the transfers as technical problems that had been corrected.
The stadium district knew it was operating on friendly ground when its spin doctors fed the story to the Republic and Gazette on March 22--after all, the newspapers have at least a $5 million ownership share in the Diamondbacks.
Not surprisingly, the R&G ignored the most crucial element in the scandal: that $1 million, taken from the Cactus League fund to cover legal and other expenses related to the stadium, was supposed to have been paid up-front by the Arizona Diamondbacks.
The Cactus League fund never would have been raided if the Diamondbacks had advanced enough money to the stadium district, as the team promised to do.
The team's failure to pay all of the up-front expenses strikes at the heart of the county's relationship with the Diamondbacks. The project got off the ground only after Diamondbacks' managing partner Jerry Colangelo promised, in 1993, to prepay all development expenses.
The Diamondbacks agreed to cover the district's initial expenses from the time negotiations started in 1993 until money from a quarter-cent sales tax became available in May 1995. The Diamondbacks were then to be reimbursed for outlays from the tax proceeds.
But sometime in late 1994 and early 1995, that pledge broke down. It is unknown whether the stadium district simply stopped asking Colangelo for money to cover expenses or if the team refused to provide it.
But what is certain is that those expenses were to be initially paid by the team.
In 1993, Colangelo dispatched Phoenix attorney Mike Rushman to the Maricopa County Attorney's Office to present Colangelo's fast-track plan to bring major-league baseball to Phoenix.
Joe Duke, chief of the county attorney's civil division, listened to the plan, which would send a team of county lawyers into overdrive to quickly develop a complex and expensive series of contracts.
Duke immediately threw a wrench into the plan.
"I said, 'Mike, this is very interesting, but I've got to tell you, we can't afford to talk to you,'" Duke recalls.
Duke says he told Rushman that the only way the county could negotiate with Colangelo's team of attorneys from the Phoenix powerhouse firm of Gallagher & Kennedy was for Colangelo to pay the county's up-front costs.
"That was the quid pro quo for us being able to negotiate on Jerry Colangelo's timetable," Duke says.
Colangelo agreed, and put up $250,000 for legal and administrative expenses at the Maricopa County Stadium District on November 24, 1993. Colangelo pumped in $500,000 more in February 1994 after the Maricopa County Board of Supervisors voted 3 to 1 to impose a quarter-cent sales tax to raise $238 million for the downtown baseball stadium.
But the $750,000 wasn't enough. The baseball team kicked in another $250,000, stadium district records show.
That still wasn't enough.
In fact, the district ran up nearly another $1 million in expenses in early 1995 during the frantic weeks that led up to Major League Baseball awarding a baseball franchise to Colangelo's partnership in March 1995.
But instead of the team covering the bills, the bills were paid for by the Cactus League fund.
Most of money was spent on stadium district legal fees. The Phoenix law firm of Snell & Wilmer topped the list at $395,169, followed by $156,877 to reimburse the Maricopa County Attorney's Office and $158,468 to the law firm of Mariscal, Weeks, McIntyre & Friedlander.
Former stadium district director Eric Anderson and the current director, Robert Williams, both say they didn't know there was a problem until it was discovered by an accountant last summer. Although the district is collecting $7 million a month in sales-tax receipts earmarked for the stadium, plus millions more from rental-car taxes for the Cactus League, it didn't have a full-time accountant until June 1995.
Barbara Smith, a certified public accountant, says it took her several weeks to sort out the paperwork mess left behind by former stadium district director Anderson. Once Smith completed her review, Williams quietly repaid the Cactus League fund account on October 13, 1995--from funds collected by the quarter-cent sales tax.
One senior county official says Williams should have required the baseball team to repay the Cactus League accounts and let Colangelo seek reimbursement from the sales-tax fund controlled by the stadium district.
"What they should have technically done was notify Mr. Colangelo and said, 'Send us a check,'" the official says.
Instead, Williams repaid the $1 million taken from the Cactus League and called for a private accounting firm to audit the district's books. The $17,000 audit began in December and is expected to be completed this month.
County supervisors, who double as stadium district directors, didn't learn of the audit until told by New Times last week.
"I haven't seen it and I haven't heard about it," says Ed King, who chairs the Board of Supervisors. "When you ask for an audit, that is something that should come to the board."
Cactus League funds were diverted to the downtown stadium project at a time when the stadium district was publicly complaining it was short of cash.
In the fall of 1994 and in early 1995, Anderson was in contentious negotiations with officials in Mesa and Chandler over how much money the district would contribute to improve spring-training facilities in those cities.
Chandler and Mesa city officials were angry that the stadium district was not chipping in enough. The controversy boiled over in December 1994 when the Milwaukee Brewers issued an ultimatum telling the stadium district the team would move to Florida unless a deal was struck.
After talks between Mesa city officials and the stadium district stalled, the Chicago Cubs began making noises about pulling out of Mesa. Officials recognized that the loss of the Cubs and Brewers could jeopardize the entire Cactus League.
The stadium district's apparent cash-flow problems spurred Supervisor King, in November 1994, to demand to see the district's balance sheet and financial records--a request that was ignored by Maricopa County's top administrator David Smith.
That same month, the media disclosed that Anderson had accepted airline tickets from Huber, Hunt & Nichols, a construction company seeking to win the construction-management contract for Bank One Ballpark. Anderson denied any wrongdoing, but was removed as stadium district director. (Huber, Hunt & Nichols won the $5 million construction-management contract in early 1995.)
Despite Anderson's removal as district director, the district rehired him as a $16,000-a-month consultant to assist with the critical negotiations between the stadium district and the Diamondbacks.
Anderson says he routinely spent tax monies, generated for the Cactus League, on the downtown baseball stadium and submitted the bills to the Diamondbacks for reimbursement. The team would then repay the district.
Anderson says many of the bills incurred by the district in late 1994 and early 1995 were not accounted for until Barbara Smith conducted her financial review. Without an accurate total, Anderson says, it was impossible to ask the team for additional funds.
"How can you ask for more security if you don't know what's the amount?" Anderson says. "Until Barb went through and reconciled the books, you're kind of whistling in the wind."
That excuse doesn't wash with county Supervisor Betsey Bayless, who says sloppy accounting is no excuse for using Cactus League money to cover Diamondbacks' expenses.
"My sense of the thing is ask the county attorney to take a look at it," Bayless says.
This latest round of turmoil has already produced at least one casualty. Anderson resigned suddenly from his consulting position on March 27.
"For the past 18 months, there has been a concerted effort by certain individuals to discredit my work and to force my removal from the affairs of the district," Anderson says in his resignation letter.
As events began to tumble out of control in late March, stadium district officials hunkered down in their ninth-floor office in the Luhrs Building.
District director Robert Williams began pulling public records from district files, storing them at the County Attorney's Office. The records removed include crucial weekly construction updates with information on potential cost overruns and construction problems.
The records are becoming increasingly important as the cost of the stadium escalates from the original estimate of $279 million to $330 million.
Williams says he and the team agreed to keep the documents out of the public's eye.
"Documents associated with this project that are involved with claims or dispute discussions I cannot release and I'm not going to release," Williams says.
Among the documents the stadium district refuses to release are unpaid bills from the Arizona Diamondbacks' extravagant groundbreaking ceremony.
Colangelo promised the county that no taxpayer funds would be used to pay for the ceremony, which included a sod infield, bleachers and lights. But records indicate at least one stadium construction subcontractor did work for the groundbreaking ceremony and hasn't been paid by the team. Instead, the company sought payment from the district.
The subcontractor, Ames Construction, submitted a letter to the district requesting payment for about $6,000 for earth-moving work related to the groundbreaking. After receiving the letter, Williams says he contacted the team and was assured the Diamondbacks will pay the bill.
"The district will not pay for this," he says.
When asked to produce a copy of the Ames' letter seeking payment, Williams claimed that it was missing and he didn't have time to get a copy. When pressed further, Williams said an Arizona Republic reporter may have taken the letter from the district files. The reporter, Eric Miller, says he saw the letter but did not remove it.
Besides sending letters requesting payment, construction companies typically submit change orders when something unusual crops up during construction--such as a request to prepare a groundbreaking site.
The four change orders in the district files submitted by Ames Construction do not include any reference to the groundbreaking work. On three separate occasions, Williams angrily told New Times that no change order existed for the work done by Ames Construction at the groundbreaking ceremony.
"I've dealt with you openly, honestly and in good faith," Williams told New Times.
Late last week, New Times obtained a copy of a January 22 change order signed by Ames Construction and Huber, Hunt & Nichols, the construction manager, requesting payment in the amount of $6,384 for preparing the site "for the November 16, 1995, Groundbreaking Ceremonies." The change order is not in the county files.
When confronted Monday, Williams said he didn't know about the change order. "It hasn't been processed" by the stadium district, he says.
Williams says the change order may have been prepared before he contacted the Diamondbacks and received their assurance that they would pay the bill. Once the Diamondbacks agreed, the change order was never submitted to the district, Williams says.
Vanishing letters and missing change orders notwithstanding, Ames Construction is still waiting for someone to pay the bill.
Get the This Week's Top Stories Newsletter
Every week we collect the latest news, music and arts stories — along with film and food reviews and the best things to do this week — so that you’ll never miss Phoenix New Times' biggest stories.