The Sweetest Deal

Mayor White's friends made millions on the I-X Center. Cleveland got screwed for years to come.

I-X Center
Four years ago, FBI agent Christine Oliver wrote a confidential, 64-page affidavit that might well have been titled "The Pillaging of Cleveland." It detailed the culture of bribery that permeated former Mayor Mike White's dozen-year reign, contending that city and school contracts were up for grabs to anyone willing to offer kickbacks. And according to the FBI's sources, the epicenter of White's extortion racket was Hopkins Airport.

As Hopkins launched a $1.5 billion expansion project, contracts for everything from security to construction were won through bribes and kickbacks, the affidavit asserts. If you wanted in, you had to go through Nate Gray or Ricardo Teamor, close friends of the mayor.

The two men have since been convicted of corruption charges. No charges have been filed against White. But the FBI appears to still be examining the mayor's biggest deal of all: Cleveland's purchase of the I-X Center.

The center was White's Holy Grail. In the 1990s, civic leaders believed that the underperforming airport needed new runways if Cleveland was to remain competitive. The I-X Center stood in the way. White wanted to buy the center and tear it down. His friends were eager to help.

According to a confidential FBI source, Teamor "represented" Raymond Park, the I-X Center's multimillionaire owner. Another White buddy, prominent lawyer Fred Nance, negotiated for the city. With White's cronies on both sides of the table, the final price rose alarmingly high: $66.5 million.

Appraisals and the city's own documents suggest that Cleveland paid about twice what the I-X was worth. Half the money was paid up front, and the other $30 million took the form of a lease that allowed Park to keep running the center for 15 years, rent-free. But if Cleveland builds another convention center before that term is up, Park can break the lease, forcing the city to pay him millions of dollars from his unused "rent."

In a normal, well-functioning government, a $66.5 million deal would have been closely scrutinized. But in Cleveland, business leaders and the City Council gave it a routine stamp of approval.

At the time, White insisted that airport expansion was crucial to the city's economic survival. Seven years later, the only people who appear to have profited are Teamor, Nance, and Park.

In the mid-1970s, the I-X Center was an abandoned military-tank plant, taking up valuable space. Park was an entrepreneur on his way to becoming one of the richest men in America, according to Forbes magazine. He specialized in buying and selling steel mills and other industrial dinosaurs. In 1976, he bought the I-X Center for $8 million and transformed the plant into a trade show and convention hall.

By the mid-'90s, the center was attracting thousands of people a year, drumming up business for hotels and restaurants, and generating millions in tax revenue for the city of Brook Park. According to Forbes, the I-X Center was the largest privately owned convention center in America.

White started talking about demolishing it in the early 1990s. He needed the space to build a new runway for the airport, allowing it to handle more flights. But his grand plans were blocked by legal battles with Brook Park. So in 1998, he tried again. This time, he had the weight of Cleveland's corporate giants behind him.

In September of that year, a powerful group of CEOs known as the Greater Cleveland Growth Association -- which has since become the Greater Cleveland Partnership -- released a study saying the airport needed three new runways by 2020. Without such an expansion, "none of the city's grand plans for tourism and growth can be supported," The Plain Dealer reported.

The group's chairman was Patrick McCartan, managing partner of the Jones Day law firm. Within weeks of the study's release, White announced that he was negotiating to buy the I-X Center. Jones Day, coincidentally, was hired to represent Park.

Suddenly, the I-X Center became the most coveted property in town. Brook Park wanted it for the tax revenue and the trade shows it brought. White wanted his runway. Ray Park was sitting on gold.

In January 1999, Brook Park's law director, David Lambros, wrote a letter to Park, offering to buy the center. "We have determined the fair market value of the I-X Center and its properties to be $33 million," Lambros wrote.

He warned that if Park didn't sell, the city would take the land by eminent domain.

Within days, White had a proposal of his own. Even with no other competitors driving up the price, he inexplicably offered Park twice as much: $66.5 million. And he pushed the deal hard.

"What we're discussing here is 1,000 Browns deals," White was quoted as saying. "What we're discussing here is 2,000 Gateway deals, in terms of economic importance. We must expand, or we will die."

Under pressure from business leaders, Council quickly and unanimously approved the deal. A few council members -- Michael Dolan, Bill Patmon, and Mike Polensek among them -- raised questions, but were easily outvoted. Years later, the details would come back to haunt them.

The deal essentially paid Park to keep his own property. Since at least 1994, he had publicly stated that he was willing to sell the I-X Center to Cleveland, as long as he could still use the building. That's exactly what happened.

The lease guaranteed him use of the I-X Center for 15 years. Though Park would pay taxes and cover maintenance, he would lease the building rent-free -- a perk both sides valued at $30 million. So for the next 15 years, the city was paying Park $36.5 million simply to have the deed in its name.

Granted, this was better than paying $66.5 million in cash. But there was a catch. City and county officials had long discussed building a larger convention center downtown to replace the one on Lakeside Avenue. If they build one of 300,000 square feet or more before Park's lease is up, the city will have to pay whatever is left of his $30 million "rent."

For example, if a new center is built in 2009, Cleveland will be forced to pay Park $14 million. Two years later, the price falls to $9 million.

No matter what the final price, the deal ensures that any new convention center will be burdened by additional costs. Meanwhile, the I-X Center -- the downtown venue's biggest competitor -- gets a hefty public subsidy.

"The whole thing was a foul ball," Councilman Polensek says. "It's a bigger foul ball now."

Some people questioned why the I-X land was even needed. Former Brook Park Mayor Tom Coyne hired consultants who showed that a runway could be placed on a different path. Furthermore, a new runway on the northeast side of Hopkins was already planned, so there seemed no reason to purchase the I-X Center right away.

Polensek worried that a runway over the I-X Center would not only take out the center; it would also force the demolition of a new $116 million Continental concourse that had just been built.

"I thought it was absolute insanity," Polensek says. "I don't know how the White administration could've come up with such a harebrained idea."

But "the biggest business people in this town" were urging Polensek to vote for the deal, and eventually he did. "I just only wish I had been more aggressive," he says.

Other council members were busy questioning the deal's price tag.

During the 1990s, the value placed on the I-X Center had fluctuated wildly. Estimates started as low as $28.5 million, then ran mostly between $36 million and $52 million. The Cuyahoga County Board of Revision valued it at $36 million for the 1997 tax year, according to a letter written by the Berea School District's lawyer. Today, County Auditor Frank Russo places its value at just under $45 million.

In fact, the only appraisers who came up with higher figures were the ones hired by Ray Park and the City of Cleveland. They added millions to the price tag, valuing the center at $63.8 million and $78 million, respectively.

After learning of the lower appraisals at a committee hearing, a "flabbergasted" Patmon walked out, Dolan remembers.

But White's people argued that buying the I-X Center would give Cleveland a "tactical advantage" in the legal battle with Brook Park, Dolan says. "I voted for it, because I thought it was important that we own it."

Also, he didn't feel that his protest would make a difference. Then Council President Jay Westbrook wasn't known for being his own man, preferring to follow in lockstep behind White.

"That deal was going to be approved, period," Dolan says. "It could've been $100 billion."

Ultimately, not even Park or the city appeared to believe that the center was worth $66.5 million. In the lease the two parties signed, they seemed to agree that the I-X Center was worth only half that.

"Tenant has prepaid the rent by causing Park to deliver to Landlord property valued at least at $30 million," the lease reads.

So if the I-X Center was worth just $30 million, why did Cleveland pay so much?

During the White years, city officials treated public money like Paris Hilton's trust fund. There seemed to be an endless supply, and no one knew exactly where it went.

According to one confidential FBI source, airport contracts were awarded to White's friends and relatives, and they made sure the price tags were high.

"Projects are not based on merit but based on cost, the more the better," a source told Agent Oliver in the affidavit.

Bribes were an essential part of the process. To get a piece of the action, you had to cut a deal with White's henchmen. According to one source, Oliver wrote, "a company cannot obtain a City of Cleveland contract involving CHIA unless it goes through Gray or Teamor."

Craig Jones, former owner of the All American Detective Agency, told Oliver that he bribed Gray for airport-security contracts in the early 1990s. He said that Gray told him he would have to "play ball" to get the deal, which meant bribing Gray with about $2,000 up front. He also had to pay Gray a percentage for each guard on duty -- the hourly kickback started at $1 per guard and rose to $3 per guard.

"Gray also told Jones that the money Jones had to pay Gray would be 'helping the mayor,'" the affidavit says.

If Gray was White's bag man, as the FBI alleges, Teamor sealed the deals. David Tallichet, owner of the 100th Bomb Group Restaurant, ended up hiring Teamor when he found out the city wanted to move his restaurant to make room for the new runway, according to a confidential source. White wouldn't return Tallichet's phone calls until he hired Teamor. After that, "everything went well for him regarding the relocation," the affidavit states. But Tallichet had to pay.

"Tallichet remarked that he has never paid an attorney as much as he paid Teamor," the affidavit states. Tallichet, who lives in California, could not be reached for comment.

Teamor was also involved in the I-X Center deal, according to the FBI's sources. In fact, White's friends were involved on all sides.

Fred Nance, managing partner of the Squire, Sanders & Dempsey law firm, negotiated on behalf of the city. He was close to White -- his website boasts that he served as the White administration's "primary outside counsel" for more than a decade. White rewarded him handsomely in return. City records indicate that Squire, Sanders earned at least $7.1 million for a dozen years of city business. In 2001, White's last year in office, the firm made $2.1 million. Two years later, that figure had plummeted to just $497,000.

Park says he was represented by Jones Day. Indeed, the names of Jones Day lawyers Stephen Mixter and Randall Cole appear on the city's lease documents.

But as Dolan remembers it, Park had two teams of lawyers: Jones Day and Ricardo Teamor. He remembers thinking Teamor's inclusion was odd: "What the hell was he doing in on that deal?"

The FBI found it unusual too. A confidential source told the agency that Teamor "represented" Park on the deal -- and got a sizable cut.

"The City of Cleveland paid $66 million for the I-X Center and, according to [the confidential source], it is only worth $33 million," the affidavit states. "Teamor got $6.6 million -- 10 percent of the sale price -- and Park got a lot more than it was worth."

Curiously, the deal required the city to wire Park $6.9 million the day the sale was closed. The rest of the money wasn't due until nine months later.

Park denies that Teamor was involved. "He did do some representing for us . . . but that wasn't one of them," Park says.

He also doesn't think he made out well on the transaction, sounding as if he were an innocent bystander caught between two warring cities.

"We didn't want to sell it," he says. "We either had to make a deal with Cleveland or be taken by eminent domain . . . We didn't have any choice, except to try to negotiate the best deal possible."

Cole, of Jones Day, says that he doesn't remember whether Teamor worked on the deal.

But for those who know how White's administration worked, Park's story is hard to believe. "Teamor made out like a bandit," says Polensek. "The city wound up getting the shaft."

Seven years after Cleveland's grand purchase, the I-X Center is still standing. John Mok, the city's director of port control, is very careful when discussing what might happen to it. He says the airport is still planning a new runway; he's just not sure when it might be built. The drop in air travel after 9-11, followed by a more recent travel surge, has made the timing hard to pin down.

"When it will be done is the question we continually review," Mok says.

Meanwhile, the men responsible for the I-X purchase aren't talking. White, who now owns an alpaca farm in Newcomerstown, did not respond to phone calls for comment. Teamor is under house arrest. As part of his plea deal with federal prosecutors, he agreed to talk about his role in corrupt airport deals. But neither he nor his lawyer, Robert Dixon, responded to Scene's interview requests.

Fred Nance is chairman of the Greater Cleveland Partnership, a business group that's pushing for a new convention center. Recently, Mayor Frank Jackson appointed him to a committee helping to select a new airport director. He didn't respond to Scene's calls either.

Park is the only one acting as if nothing is wrong. In fact, he's negotiating with the city to extend his lease on the I-X Center. But this time, Dolan says, Park should at least have to pay rent.

"I think he should be paying a heck of a lot more money," Dolan says.

Park, meanwhile, says he won't add a clause making sure he gets paid if Cleveland builds another convention center. "We're willing to forget that, anyway."

He can afford to be generous. After all, the city has been very generous with him.

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