Friday, Aug. 29, 2008 | In 2002, Nancy Graham was summoned to Miami to negotiate a condominium deal with one of the richest men in America.
Graham was then a private developer, still three years away from moving to San Diego to take the helm of the Centre City Development Corp., the position she resigned last month.
She was traveling with her husband, Kevin Lawler, and they knew to expect trouble. They were sitting down with Jorge Perez, the managing general partner of The Related Group, a massive Florida development company. And the two were trying to squeeze Perez for as much profit as they could. They’d been pushing the condo deal forward and they expected 33 percent of its profits. Perez only wanted to give 20 percent.
Graham knew she couldn’t bluff Perez, a billionaire investor that Forbes estimates is the 271st wealthiest man in America. Perez knew that neither Graham nor her husband could afford the deal without him. Graham wasn’t a builder. She was a land-use attorney and former politician. The meeting, Graham later testified, was “brutal.”
“You walked in,” she testified. “Jorge said: This is the deal. This is it. A third is ridiculous. We’re not going to do this. This is it. Twenty percent.”
The controversy about Graham’s potential undisclosed conflicts-of-interest that has unfolded in the last month at the Centre City Development Corp. can be traced back to that Miami meeting. It is when Graham consummated a condominium deal with The Related Group and Lennar Corp., a venture that personally netted her almost $3 million. Some of that income came to Graham while she was CCDC’s president and in negotiations with Lennar and an affiliate of Related about projects proposed downtown.
The Florida deal led to a lawsuit that has revealed the inner workings of the complex real-estate deal. Graham’s 167-page deposition in the case — given under oath — offers a unique window into the agreement, answering vital questions in San Diego about when Graham earned money and how much she got.
Graham and her husband took a break from the 2002 meeting with Perez to call the man who ultimately brought the lawsuit that led to the deposition. His name was Ryan Weisfisch. They’d met him at a monthly luncheon and had struck an agreement for him to be their investor, their financial muscle. When they called him, they were frustrated with Perez’s negotiating tactics. “We were so very unhappy and insulted and pissed off,” Graham testified.
They got Weisfisch on the line and told him what was happening. They delivered an ultimatum: “Are you ready to write the check to close on this deal to buy the property, because if so, we’re going to tell [Perez] to, excuse my language, fuck off and walk out of this room.”
Weisfisch responded that he wasn’t comfortable. And that wiped out Graham’s negotiating leverage with Perez.
“We were basically fucked,” Graham testified. “We basically had no choice but to go back into the room and accept.”
Graham and her husband squeezed another 5 percent out of Perez, taking their share to 25 percent of the profit from condo sales and retail leases in the development, the Moorings at Lantana. When the deal went through, Graham and Lawler never paid Weisfisch. They argued that he hadn’t lived up to his promise. He argued that he’d fulfilled his obligation by appearing to be their financial muscle and by agreeing to back them if the deal fell through.
Had they paid Weisfisch, he wouldn’t have had reason to sue them. And the confidential terms of the condo deal would’ve remained secret.
But Weisfisch believed he was owed money, and he filed a lawsuit against Graham and Lawler in 2006, pointing to a signed contract that required the development duo to pay him a share of their profits.
Graham’s August 2007 deposition from that case has been an essential cog in deciphering her profits from the deal. Without Graham’s sworn testimony, little if anything would be known about the intricacies of her undisclosed business dealings, which have delayed and threatened several downtown development proposals.
Graham’s own deposition puts her on the record admitting that she got money from two developers who at the time had projects pending at CCDC. When she filled out annual conflict disclosure forms, she never reported receiving that money.
The deposition also contradicts Graham’s version of her involvement that she offered when asked in May about the transaction. It has now prompted CCDC to review every project proposed or planned while Graham led the agency, hoping to determine whether she unduly influenced any projects on behalf of her business partners. That review is expected to take at least a month.
As soon as CCDC reviewed Graham’s four-hour-long deposition, the agency closed a narrower investigation that aimed to determine whether she had a conflict-of-interest in negotiating a downtown project proposed by a Related affiliate at 7th Avenue and Market Street.
After reviewing the deposition, the agency said continuing the investigation was unnecessary. The testimony, offered under the penalty of perjury, now threatens to stop the proposed $409-million downtown skyscraper and delay other major projects.
It was the spring of 2002 when Graham and her husband first signed plans to do a deal with Lennar Corp., a large nationwide builder. The Related Group wasn’t involved at the start.
Graham and Lawler had formed a development company in 2001, working on urban development deals. Their projects followed similar structures. Someone would buy land, and then Graham and her husband would increase its value by getting necessary city permits and approvals. Once a piece of property was primed for development, the investor would sell it and reap a profit. They’d get a percentage of profits.
Graham and her husband followed that plan with the Moorings at Lantana, which ultimately netted them $7.5 million. But the deal was complex, and their original investor acted skittish.
“It was in the middle of nowhere,” Graham testified. “People thought we were nuts buying it. It had railroad tracks, old shipyards. It was not an attractive piece of property. It was pretty bad.”
So when Graham’s investor wanted out, she and her husband faced a tough choice. They wanted to buy out the investor, and they didn’t have the $1 million they needed to do it. They turned to Weisfisch and his father, Rami.
They’d met Graham at a Hotel Motel Association monthly luncheon and introduced themselves. Graham said she was initially skeptical. Her eight-year stint as West Palm Beach’s mayor — and her award-winning redevelopment work in the city’s downtown — gave her a high profile. Potential investors had approached her before and deals hadn’t panned out.
But the timing was right. So they went to the Weisfisches’ home in West Palm Beach for a meeting. Its grandeur alone impressed Graham. “I didn’t know these people from Adam,” Graham testified. “I think it helped when I went to their house because they have a magnificent house and (it) gave a little bit more credibility driving in (that) these people might be real.”
After several meetings, they ultimately agreed to a deal’s outline. The Weisfisches would assume a role in financing the project, giving Graham and her husband the money they needed. In return, Graham and Lawler promised them a portion of their profits.
Graham and Lawler had several options for getting the condos built. They thought the Weisfisches could finance it. But they’d also been pushing the complicated deal forward with Lennar. They liked their potential profit from that deal: They believed they could reap a third of the project’s profits.
The deal moved forward smoothly, until Lennar brought in The Related Group as a financing partner. Everything changed, Graham testified.
Graham already knew Jorge Perez, whose company was the lead developer of a $600 million mall in downtown West Palm Beach. That project, called CityPlace, advanced while Graham was mayor and is largely credited with revitalizing the city’s once-blighted urban core.
But when Perez saw the Moorings project, he didn’t like its design or location.
“Jorge was nervous about the project where it was located,” Graham testified. “I mean again, this was trailer parks next to it. It was not a clean site.”
Suddenly, Graham’s profits were cut from 33 percent to 20 percent, potentially eliminating millions in rewards from a project that had required a lot of effort. That share of profits climbed to 25 percent, enough to net $7.5 million for Graham and Lawler.
Graham’s husband ultimately settled Weisfisch’s suit for $1 million.