Terminated Toledo arena consultant threatens suit

12/19/2007

Lucas County is facing a $385,000 settlement offer or a possible lawsuit over its termination of a consultant contract for the new multipurpose arena in downtown Toledo.

Attorneys for Pizzuti/Garfield Traub LLC submitted a settlement offer to the county last week and issued a Jan. 8 deadline for county commissioners to respond.

Steve Papadimos, chief of the county prosecutor s office, civil division, said Pizzuti/Garfield Traub asked for a payment of $385,000 and a favorable reference letter for its work on the arena, in exchange for a mutual release of all parties involved from future liability.

Commissioners Pete Gerken and Tina Skeldon Wozniak approved an agreement with Pizzuti/Garfield Traub and Gateway Consulting Group on March 14, 2006, for project management and fiscal consulting services. The agreement which then-Commissioner Maggie Thurber voted against was broken into phases and provided outs for each party.

Commissioners Gerken, Wozniak, and Ben Konop took one of those outs on Feb. 13 by terminating the contract. And yesterday Mr. Konop called for an internal audit of the agreement. The agreement stipulates that an audit can be requested.

Gateway Consulting Group was approved as the arena project s sole consultant through a commissioners resolution on Feb. 27. The arena is scheduled to open in the fall of 2009 and is expected to cost between $80 million and $105 million.

Pizzuti/Garfield Traub is a combination of two separate companies.

Pizzuti Cos. of Columbus is part owner of the Columbus Blue Jackets, a National Hockey League franchise, and is a master developer fired from the Marina District project by Toledo Mayor Carty Finkbeiner in April, 2006. Garfield Traub LLC is based in Dallas.

Records show the county paid Gateway and Pizzuti/Garfield Traub about $325,000 for planning and other preconstruction work on the arena.

According to the agreement, those tasks included completing an arena action plan, which was to contain items such as estimated costs, funding, site selection, possible tenants, and a preliminary convention center study.

The consultants also were to complete a selection process for the arena s construction manager, architect, and operator, the selection of a construction site, the structuring of public ownership of the arena, and the orchestrating of regular meetings with the county and the arena s development team.

Commissioners Gerken and Wozniak and county Administrator Mike Beazley all said Pizzuti/Garfield Traub performed those duties well, but their services were no longer needed once the project management team was selected.

This is not a reflection on the work of Pizzuti/Garfield at all, Mr. Gerken said. But we reached a point where we felt we as commissioners ... could assume some of the responsibilities they would ve liked to assume.

Mr. Beazley also said the agreement was terminated as a cost-saving move. In a memo he wrote in January, he said the county would end up paying Pizzuti/Garfield Traub and Gateway about $2.7 million over the life of the project.

The county s exclusive consulting contract with Gateway calls for the company to be paid no more than $735,000 through 2010.

But in a letter dated Feb. 21, Pizzuti/Garfield Traub s attorneys said the county breached its agreement and its duty of good faith and fair dealing.

The letter, from Lane, Alton, & Horst LLC, of Columbus, said the commissioners decision to move forward with the arena project after initial phases were completed bound them to continue to move forward with the agreement.

In a written response, Mr. Papadimos said the commissioners were simply following the terms of the contract, which allowed either party to terminate the agreement if mutual consent to proceed to the next phase was not given within 21 days after one phase is completed.

Mr. Papadimos, in a letter to Pizzuti/Garfield Traub s attorneys, said the consultants may be owed some additional payment for work done in late January and early February. But he told The Blade yesterday that the county has not received invoices for the work.

That s why we re all in agreement over this audit, Ms. Wozniak said. We need to see all these invoices and verify what, if anything, we owe them.

With the serious threat of a lawsuit, I need to be in a position to figure out what we owe them, Mr. Konop said. It s unclear to me what services [Pizzuti/Garfield Traub] provided that we may have to pay them for.

Mr. Konop also questions the invoices the county already received and paid for work done by Pizzuti/Garfield Traub.

He said invoices from May, 2006 through Jan. 23 which total about $300,000 contain almost no explanation of the work Pizzuti/Garfield Traub completed.

Those invoices, which were obtained by The Blade, generally describe reason for payment as consulting fee income, save for one invoice in which reimbursement for marketing services provided by the local firm Funk Luetke Skunda Marketing was itemized.

Basically, it s very vague as to what services were provided for the significant expenditure of $325,000, Mr. Konop said.

An attorney at Lane, Alton, & Horst who is involved in the matter did not return a phone message seeking comment.

Yesterday the commissioners approved a contract with Lathrop Co. of Maumee to be the arena project s construction manager.

The contract calls for Lathrop to be paid a set fee of $4,995,000 for reimbursements and hiring of staff over the life of the project. Lathrop will also receive a construction manager s fee of 3.73 percent of the arena s guaranteed maximum price, which may not be set for months.

Contact Joe Vardon at: jvardon@theblade.com or 419-410-5055.