consultants are sandburs

Wednesday, February 13, 2013

[UPDATED AT START] Ramsey - Yesterday the council had another secret meeting about Jeff Wise and his property. And Darren hired a lawyer who talks too much, says too little, and obfuscates a simple point.

[UPDATE: For a factual report of the Ramsey HRA consideration of its agenda item concerning Landform and an anonymous letter that had been sent to city officials claiming its contract with the city involved impermissible real estate brokerage effort by parties not licensed to broker real estate in Minnesota; see the thorough ABC Newspapers report by Sakry, this link.]

Simple point first. The legislature has not delegated local governments the power to enter into contracts with an individual and his firm to broker real estate unless the State has licensed the operating person for that task.

Tossey fails to understand that. If the contract had been for Landform to execute Tossey, he would understand the notion of a flawed contract better, and limitations of town powers.

What Darren was doing was brokering real estate. If anybody wants to test that thought, deny him [Landform] the commissions for arranging land deals, let him sue, and see what a judge says.

The lawyer he hired made a big point that the City Attorney looked at the deal, on paper, but the fact is Darren and Heidi Nelson put their heads together with the core premise, "What do you want Darren," and the limitation being, "What I can get, and get away with."

Brokering real estate for a commission without a license to do so is not allowed. It can be debated that the arrangement exists not to protect consumers from flim flam, as much as to protect a group with a collective aim to keep the range of competitors in business limited. Doctors are licensed, police are, kind of, lawyers are, lobbyists are not, and are inadequately regulated but that's apart from Darren; and Backous, on council, knows about the Commerce Department and licenses to sell insurance. There are CPAs, and there are tax preparers, an interesting situation.

But only brokers can sell real estate as agents for a seller.

Whether you like the law being that way or not, or have hopes in some situations to circumvent it with a nod and a wink and a dubious and convoluted over-wordy contract, the principle is clear and simple.

And if a contract was hung out against the public interest by officials and a consultant, "against public policy," whereby a commission for land marketing and sale was promised (quaintly called "an incentive fee" which is exactly what a brokerage commission IS after all), with that promised commission to be paid in exchange for a land deal's selling/marketing effort by a non-broker, such a contract is unenforceable if the commission is withheld on the basis a license is/was lacking.

The non-broker lacks standing to sue on what, in fact by course of performance, was a brokerage arrangement for sale of land. Attach other stuff Landform may or may not have done, fine; but the commission arrangement was clearly there, the brokerage license was not, so that part of dealings is what is problematic. And other duties of Landform under the contract clearly are severable, and are not in dispute.

The key question is not what the damned thing says on paper, the question is what Darren did, his actions, his course of performance - course of dealing; and then even if someone on council wants to play Aunty Entity and say, "Well I was on the last council, and we voted, we had a deal, and bust a deal and face the wheel," the truth is those in city hall, both staff and council included, owe their duty to the public, to Ben Dover, to not spend Ben's money in ways state law says they need not spend it. That they are excused from spending it such a way.

That includes if others on an earlier council promised Darren commissions for arranging land deals, knowing he and fellow traveler Cronk had no license allowing them that line of real estate brokerage business - brokering real estate for a commission - they simply went ahead and cut a flawed deal. Because they and Darren wanted to. Whole, entire reason.

It's not rocket science, and the prior council at law lacked the power to enter into a contract having an illegal purpose, paying commissions for arranging land deals to one not licensed to broker real estate.

It seems simple to me. How about going beyond Thunderdome, do a rewrite, "Cut a wrong deal, face the wheel?"

Darren can go to a judge, and spin the wheel of fortune. With that lawyer that spoke last night, with a judge listening, with the city's side articulated by a lawyer representing the city. Regarding the commission part of the Landform contract, the best thing for Ben Dover, is the city keeps Ben's money, it has the money leaving Darren the complaint to litigate for it. To convince a judge he somehow merits getting a brokerage commission.


Jeff, he deserves a fair deal, and he and the council are in adversarial positions because the council must be protective of Ben Dover's money, and not give it away because Jeff's a nice guy, or a former council member, but because his property and the impacts of the road work bring the parties to where he has a Constitutional right to due process, no taking of private property without that, but he has no entitlement to a better than fair deal.

So what's fair?

You tell me.

If I had millions, a power to tax such amounts from others, I still would not pay $1.1 million for that site. Given that the good will and very portable inventory can be relocated with relative ease, then all that is being taken is a building and the land.

The business is Jeff's, if taken now he negotiates rent and other terms while the roadwork hangs fire because of the problem of financing it, and he moves when he does to a new site - separate from the taking although part of a negotiation can be a swap with boot as was contemplated earlier - but the entire problem is striking a fair balance between Jeff's right to a fair price and the public's right to not have officials waste Ben Dover's money.

Within those parameters there is much latitude, and the council and Jeff should work together to form a reasonable deal, one not too biased one way or the other. Usually the balance of power is such that the landowner stands at a disadvantage, and the government takes advantage, unless the landowner fights or the two sides are reasonable.

The Wiser Choice, is clearly both sides being reasonable.

How the details shake out depends on the quality of judgment on BOTH sides.

Time will tell.

Back to the Landform SNAFU, Sakry wrote:

This letter looks like it could have written by someone in the legal profession who did not have the courage to sign it, Tossey said.

“I don’t agree with this anonymous attorney out there,” he said.

While he wants the era of the city being a master developer of the COR to be over, “I also want the people who deal with the city to know the city honors its word,” Tossey said.

“What message does this send to other contractors if we don’t fulfill our end of the contract,” he said.

To me, the message this sends is that if chumped earlier, or there was a sweetheart deal, there may be a Ramsey learning curve to not stay chumped, just as the federal government had the sense to undo mistakes by getting out of Vietnam and Iraq, Afghanistan next. I see no harm to that message. I see it as good notice to others.

As to Landform's lawyer being quoted by Sakry:

To take the action to get a legal opinion on concerns raised by an anonymous letter, “will have a chilling effect on contracts,” Shainess said.

It is chilling to know an anonymous letter writer can come in off the street and challenge something the city has done due diligence on, he said.

My simple answer to that is the bigger the chill, the better, for those in the future possibly wanting overreaching contracts with City of Ramsey. As to whether there was due diligence, my response is to remind everyone, Heidi Nelson and Darren Lazan put their heads together and cooked up the resulting thing, and that initial contracting with Landform, if I remember correctly, was when McGlone, Bob Ramsey, Jeff Wise, and Look were an arrogant four-man majority bloc. I suggest under the circumstances that there was insufficient due diligence, or that greater due diligence would have mattered little.

___________FURTHER UPDATE___________
My brother-in-law suggests analysis need not go beyond the "quacks like a duck" dimension of things Darren did since first showing up in town and getting a contract.

As to the McGlone, Ramsey, Wise and Look voting bloc which instigated Landform cash flows from our town, it is fair to say only one of the four, Look, is reported to have ever co-owned an aircraft with Darren Lazan. Bob Ramsey and Colin McGlone each told me at one of the former mayor town hall sessions that neither of them knew Lazan before he showed up. I have no cause to doubt that. Look is on record noting early on that Senator Jungbauer was affiliated with Landform back in 2009 when Darren first showed up seeking business with the city. Apparently, the aircraft at one point was Jungbauer's.

___________FURTHER UPDATE___________
I find it interesting that despite the slippry-slope scenario laid out by Lazan's lawyer at the meeting (at great length and with repetition used to enhance the point); Elwyn Tinklenberg appears to not be at all chilled in his desire to contract with City of Ramsey. Tinklenberg appears warm to the idea. One might even say he has been both prompt and eager. I was somewhat disappointed to see no chill that way at all.


Anonymous said...

My understanding is Attorney Bill Erhart provided the council with another legal memorandum he commissioned and it reaches the same conclusions as the "anonymous letter." So how Tossey and this lawyer can say everything is being based off an anonymous letter is very mysterious.

eric zaetsch said...

Anon - Three items were posted as part of the City's agenda for the question. One was the Erhart item.

I think Tossey is saying less that an anonymous item cannot be true and must be disregarded, and more that the last council had power to cut a deal and did, so live with it. Wrap it up as written, move on, seems his point.

Sakry's report quotes that part of things. It was the lawyer for Lazan who was trying to lessen the question of what Lazan was doing and whether it was unlicensed brokering, by questioning the major item as unsigned.

Signed or not, it was well written and persuasive.

If you cannot win on the facts argue the law, if you cannot win on the law, argue the facts. If you cannot win on the law or the facts, blow lots of smoke.

I believe that lawyer created a smoke-filled council chamber that evening, taking much time at the podium to do so.

eric zaetsch said...

Anon and other readers - To expand a bit -- As a "how do I read the tea leaves" comment,

Darren is not dumb nor is Cronk, and Cronk has his ties and relations with Flaherty, who also is not dumb and who likes things smooth and bump free.

Starting from that, and from the new council being independent of the old and not dumb, I see a settlement, not litigation.

If Darren files, claiming outstanding fees owing or possibly so, the defense is unlicensed brokerage action; along with a counterclaim for restitution, claiming that all "incentive fees" previously paid were improper.

So, if Darren litigates he would be stepping into a bear trap, and could end up broker, in one sense, if held to have acted like a broker in another sense of the word.

He and his engineer co-owner at Landform have no incentive to face that risk. So, they settle; promising to give all documents, leads, relevant information to the city in exchange for a covenant not to sue on "incentive fees" already paid; conditioned on the city retaining the right to sue if subsequent facts show Darren/Landform held stuff back and did not wind things up in full and total good faith.

That's where I would cut the deal, somewhat in line with Tossey's stance - what's been flowed out of city coffers is water under the bridge, BUT staunch the wound.

It makes sense, leaves the city best positioned to turn the transferred information over to a buyer of the risk position, taking the city out of land development in competition with the private sector, and it has the added benefit of showing others that the city is neither overly harsh, nor "hinged at the heels" in maturely handling contracts and the unwinding of unfortunate situations.

Contrary to Tossey's argument, I suggest such a result would leave the city with a quite helpful image. If the city were to sue for previously paid "incentive fees" it would arguably look vindictive, it would not result in a favorable unwinding of information, and it arbuably might tarnish an image, as Tossey argued.

Tea leaves, to me, say settle.

Settle reasonably, not harshly, not overly permissive. But settle.