Few cash in during the season of political fund-raising like Tony DiIorio, owner of Massimo da Milano, a restaurant that brightens the otherwise blighted corner of West 25th and Detroit.
Mayor Jane Campbell toasted her campaign staff here last year and throws herself an annual birthday bash at Massimo. In the last few weeks, Cuyahoga County Judges Kenneth Callahan and Eileen Gallagher have both used it for fund-raisers. Cuyahoga County Commissioner Peter Lawson Jones holds his this week, and the other commissioners are frequent diners, as are ranking city officials, state reps, and members of Congress.
But where political funds are raised, so are suspicions. During the time DiIorio has wined and dined the most influential decision-makers in town, he has had fabulous luck attracting government tenants to the buildings he owns.
For about $35,000 a month, DiIorio rents the three floors above his restaurant to the Cuyahoga County Community Mental Health Board. The building he owns next door is the headquarters for Employment Alliance, a county-contracted agency that connects the mentally ill to jobs. It pays DiIorio about $13,000 a month.
In a third DiIorio building nearby, the Social Security Administration is a tenant. But the agency is apparently not a fan of open government. When a reporter went to see about its lease, he was promptly booted from the premises. "Reporters aren't allowed in here," said a security guard. It took a call to the General Services Accounting office in Chicago to get the rent: $12,600 a month.
Altogether, that's a tidy $727,200 annually, which has long led to whispers that DiIorio's political friendships are paying off in handsome ways.
As far as business districts go, the intersection of 25th and Detroit is sagging. Much of the foot traffic comes from two nearby housing projects and St. Malachi's Church, where the homeless huddle for free meals. When DiIorio purchased the old Forest City Savings and Trust Bank building in the late '80s, its windows were boarded up and its roof caved in. DiIorio was then owner of DiIorio Sheet Metal, in the Clark Avenue stockyards. But with all the cars circulating through the intersection, he pegged it for a prime restaurant location.
Investors he spoke with didn't share his vision. "It was too scary, because there were projects, you had all these bums walking around, and so [investors] were worried about security," says DiIorio. He took out loans, got a second mortgage on his house, and poured it all into the renovation effort.
Massimo quickly became popular among Cuyahoga Metropolitan Housing Authority staff, whose headquarters was across West 25th. "I got 30-40 people here a day that worked at CMHA," says DiIorio.
Among the regulars was CEO Claire Freeman.
But the restaurant struggled throughout the early 1990s, as the city launched a two-year rehab of the Veterans Memorial Bridge -- Massimo's lifeline to downtown. "It was very scary," says DiIorio. "I cried in this building." He tells of cutting staff till only he and his wife remained, and of how bridge workers and CMHA employees were his only customers.
Yet a state audit of CMHA suggests that, during this period of tribulation, DiIorio was making piles of money off the agency.
Van Dorn Iron Works is a crumbling brick monstrosity at East 79th and Woodland. By 1990, it had endured a half-century of heavy industry. DiIorio agreed to move part of his sheet-metal business there. Halfway through the acquisition, the deal fell through.
But through his acquaintances at CMHA, DiIorio learned of the agency's need for a maintenance and security services warehouse. "They wanted to keep CMHA around the area [of the near East Side]," says DiIorio. "I said, 'I own a building over there you can lease.'" Freeman agreed.
Though DiIorio didn't actually own the building yet, he soon finalized his purchase of the Van Dorn complex, paying $600,000 for about 400,000 square feet. Then, just nine days later, CMHA signed a purchase agreement. It would pay DiIorio $639,800 for 137,000 square feet. CMHA would get less than half the space, but it would pay DiIorio more than he paid for the entire complex.
It was a lopsided deal. But that wasn't the worst of it, according to the Department of Housing and Urban Development, which controls CMHA's federal funds. George Engel, HUD's regional manager at the time, says the agency requires inspections before a building is purchased.
"We knew the damn thing had environmental problems, because that's where Van Dorn had been for 50 years or something," says Engel. "You have all sorts of goop in there that would never pass an environmental review."
HUD sent a letter to CMHA, warning of asbestos, underground storage tanks, waste sites, and stored chemicals in the warehouse, all of which needed to be neutralized before HUD would give CMHA money for the purchase. HUD wanted DiIorio to pay for an environmental study.
But not only did CMHA free him of that obligation; the agency never even conducted its own study. When HUD refused to pay for the building, CMHA scraped up money of its own.
All of which led to a theory being aired around town: Freeman wanted to give her friend DiIorio a deal, regardless of whether her agency got the short end.
"If I had to make a guess, I think this was a done deal because of that relationship," says Engel.
The deal became more suspicious when Freeman was fired in April 1998, right after the CMHA board learned that she used $100,000 in agency funds to pay loans on a Virginia townhouse.
Assistant U.S. Attorney Tom Getz, who prosecuted Freeman, says investigators looked hard at the Van Dorn deal, but found no evidence of misconduct. Freeman did not respond to letters mailed to the Fort Worth, Texas penitentiary where she is serving an 18-month sentence.
Louise Harris, then a CMHA board member, said the deal was "fishy," though not necessarily improper. "To me it just never made sense," she says. "I wouldn't have paid for it, [what] with all the money that they had to put in it."
For several years, Harris and the other CMHA commissioners didn't even know how much money their agency was dumping into the building. Though CMHA already owned a portion of the building, the agency's attorney arranged to lease the rest of the complex, plus two smaller buildings DiIorio owned next door, at a rate of $25,000 per month, from 1994 to 1997.
"We didn't find out we were renting the building until we suspended Claire Freeman and had the big investigation," says board member Dwayne Browder. "Well, guess what? We don't own the building, and we've been paying a lot of rent for a lot of years."
The agency ceased making lease payments in 1997, but remained in the building as it shopped for a new location. DiIorio came out the winner. He had paid just $600,000 for the entire complex, only to immediately turn around and sell a portion to CMHA for $640,000. Add up the years that he received $25,000 in rent every month, the fact that CMHA did its own renovating, and the $300,000 the agency paid for utilities, and DiIorio's profit stands at about $1 million, before taxes.
Auditors counted at least $2 million in CMHA expenditures over six years. Today, the county assessor places the building's value at just $700,000.
"What a country!" exclaims Engel, who is genuinely impressed by DiIorio's business acumen.
DiIorio believes the figures are wrong: "No, no, no. Everybody's all fucked up."
He claims that his $600,000 was only used to buy the Van Dorn building, and that he paid a few hundred grand more for adjacent buildings that he leased to CMHA. (The audit makes no mention of those buildings.) For the $2 million CMHA spent on the properties, DiIorio insists he could have made much more by renting it to an industrial firm. "I'm the one that got screwed."
But it is hard to make that case with Freeman in prison -- she was convicted last February of lying about a loan, mail fraud, and stealing public funds. CMHA evacuated its last employees from Van Dorn in the spring. Neither current CEO Terri Hamilton Brown nor board chairman Robert Townsend would discuss the matter with Scene. Today, DiIorio still owns the largest stake in the building, and whether CMHA has any equity to show for its $2 million-plus is a mystery.
Last year, DiIorio told The Plain Dealer he wouldn't sell the title for anything less than an additional $2.1 million. Today, he denies having made that statement and says CMHA only needs to sign the title to take possession of the entire complex.
"Do you know how long I've been sending papers there for them to sign?" he asks and insists that CMHA needn't pay him another cent.
But CMHA spokeswoman Dorothy Noga says the agency remains locked in negotiations with DiIorio because he won't give up the title without payment. She would not say how much DiIorio is demanding. "The board's position is we're interested in taking the title to the property, but we don't feel we should be paying any more money for it," she says.
To board members, the issue is an unwelcome distraction, one of several that have haunted them since the fall of Freeman. Board member Browder also won't discuss DiIorio, out of concern for "possible litigation," but it is apparent that he regrets the agency's link to the restaurateur.
"When the investigation did happen with Claire Freeman, the warehouse was one of the centers of attraction," says Browder. "I would use all my power to make sure we never get into a situation like that again."
Some wonder whether history is repeating itself with DiIorio's other government tenants. "He seems like a connected guy," says one downtown-office leasing agent. "There are a bunch of fund-raisers in his restaurant -- and he has a disproportionate share of local agencies in his buildings. You have to wonder whether [those agencies] are getting hosed on the rent because someone higher up told them 'That's where you're going.'"
Then again, there's no evidence that any of the leases at 25th and Detroit involved favor-trading. And officials at the Mental Health Board and the Employment Alliance are pleased with their accommodations.
"He's donated food, donated space, for our benefits," says Spectrum Support Services CEO Steve Morse, whose mental health agency oversees the Employment Alliance. "As a landlord, he's as good as any I've ever had."
Massimo is a popular place to throw a fund-raiser, DiIorio says, because of its central location, cheap parking, and inexpensive cuisine. If there's a secret to his success, it's his affection for customers, he says.
"I kiss everybody that comes into this restaurant. They love me. And they love Massimo."