Building raises difficult issues
Montgomery County's commissioners are trying to figure out why their predecessors spent $26 million to buy an office building that wound up needing an estimated $22 million in repairs and may have to be sold.
After the 2006 purchase, one of the largest ever made by the county, officials uncovered major structural flaws in the 10-story building. One Montgomery Plaza, where about 3,000 county employees work, has been a headache for years for both Republican and Democratic administrations. It is now surrounded by fences and nets that catch debris as it drops from the facade.
Democrat Josh Shapiro, chairman of the commissioners, said the county solicitor was reviewing what action was warranted in light of the problems. He declined to elaborate on the county's options.
Among officials' questions: whether the structural defects were fully considered before the purchase, whether the costliest repair needs should have been detected sooner, and whether county officials acted properly in having a deputy solicitor guide them through the purchase after she told them she was a minority owner of the building.
Shapiro said that when the commissioners' Democratic majority took office in 2012 and began reviewing the condition of all county infrastructure, some problems were right before their eyes.
"The most glaring example was One Montgomery Plaza," he told The Inquirer, noting that the commissioners' offices are in the building. "We walked in to work through scaffolding."
Taxpayers already have footed the bill for about $4 million in repairs, and officials estimate that $18 million worth of work is still needed. The commissioners have taken bids to sell the building, with the specification that any buyer would make the repairs and lease it back to the county. The review of bids in now underway.
Thomas Jay Ellis, a Republican who was chairman of the commissioners when the building was bought, has repeatedly said it was a good deal for the county.
Prior to the purchase, he has pointed out, the county was leasing much of the building for more than $2 million a year, and rents were rising sharply.
"It bothers me sometime when I read about the re-constructionist history," Ellis said in an August interview. "But it was a good idea to buy at the time."
The other Republican commissioner then, James R. Matthews, said he largely deferred to Ellis' judgment. Matthews was running for lieutenant governor in 2006 and spent much of his time outside the county - which he said made it difficult to monitor the sale process.
"I felt kind of like the guy in the back seat," he said.
The third commissioner at the time, Democrat Ruth Damsker, attended numerous meetings on the sale but said she, too, deferred to the chairman.
"It was Tom Ellis' baby," said Damsker, adding that she had only a vague recollection of the purchase process. "This is something he really wanted to do."
Over the years, the building's woes became well-known. In 2010, Matthews, then chairman of the commissioners, said at one of their meetings that although he was shocked by items such as a $3.8 million repair bill for the underground garage, it was just one of the problems at One Montgomery Plaza.
"It's like it was built to fail," he said at the time.
In the August interview, Ellis said some of the biggest problems that have been uncovered were impossible to detect at the time of the purchase.
"We knew the problems of the building, except for some of the problems under the façade, which you couldn't possibly know when you're buying a building," he said.
"And we had lots of different surveys, brought in different engineers, but nobody would have found anything under the bricks," he said. "I mean, it's impossible. It's just like a house."
The garage defects were detected more than three months before the purchase. The engineering firm Highland Associates conducted a limited inspection and told the county that the building's structure was "in generally good condition," but that the steel-and-concrete parking deck had problems.
The firm said water and brine had so weakened some areas of the flooring that some of the concrete and reinforcing steel had disintegrated.
In 2010, when the problems became clear, the county solicitor's office conducted a review and found that officials had mistakenly estimated the cost for garage repairs at less than $200,000. It said there were no records explaining that estimate.
Two months before the purchase, the county announced plans to buy the building and commit $2 million to renovations - including garage repairs. When the county said it was issuing a bond to finance the purchase, it again used the $2 million figure for planned renovations.
But the solicitor's 2010 review noted, "The offering statement for the bond issue did not provide any basis to support the estimated repair cost."
The review, which took place when Republicans still held a 2-1 majority of the commissioners, did not assign blame for the problems or explain why they were not addressed earlier.
In addition to saying the purchase was a good deal for the county, Ellis defended the commissioners' 2006 decision to involve then-deputy county solicitor Carolyn Tornetta Carluccio in the purchase.
He said Carluccio, a former federal prosecutor who is now a Montgomery County Court judge, told him and the other commissioners that she and her family were minority owners in the building.
"There clearly is a conflict, and that's why she brought it to my attention," said Ellis, a lawyer and longtime SEPTA board member who was a county commissioner from 2003 to 2008. "She was the first one to recognize there was a conflict."
"All the commissioners knew well ahead of time that she had a small piece, or that her family trust had a small piece of it," he said. "We waived the conflict."
Matthews and Democrat Damsker, as well as then-County Solicitor Michael D. Marino, confirmed that Carluccio had alerted them to her ties to the building, and that she was allowed to continue working on the purchase.
The decision to proceed after Carluccio revealed her tie raised the eyebrows of ethics experts contacted by The Inquirer. They said that even if officials with conflicts make honest decisions, the public may wonder whether their real motivation was to help taxpayers or to help themselves.
Robert P. Caruso, executive director of the state Ethics Commission, said "you can't waive state law" that bans officials from acting in matters where they have a financial interest.
Caruso said the ethics commission no longer has authority to investigate the sale because it was more than five years ago, the time limit for such probes. He said that if he had known at the time, he would have investigated.
Carluccio, who was elected to the bench in 2009 and also is the first judge to head the county bar association, was hired as deputy solicitor on Feb. 2, 2006, moving from her previous post as the county's chief public defender.
Five days later, Ellis met with the chief executive officer of the firm that owned the property to discuss buying the building, according to a chronology in the solicitor's 2010 review.
Carluccio, who held a real estate license, was assigned to begin working on the effort to purchase the property. She said she promptly disclosed her interest in the building to the commissioners, the county solicitor and the seller.
She and other members of her family held a 2.3 percent interest in the property, Carluccio said. Once the mortgage and other expenses were deducted, her family's share of the proceeds was about $120,000, she said.
She had a one-fourth interest in that holding, which she had for eight years prior to the sale, she said, estimating that her share was about $30,000.
Carluccio said her role was as the county's attorney, making sure required steps were taken before the purchase.
"I was a worker bee. I was doing what I was told to do," she said.
She said the idea of seeking Ethics Commission advice "never crossed my mind, because I disclosed it to all the commissioners, the solicitor and the seller."
She added that she had received no instruction from the county on state ethics law when she started as a deputy solicitor. Since 2012, all new county employees have been given that training.
Carluccio said she has always tried to be open in disclosing her finances. Indeed, four months after the purchase, she reported on her annual state ethics form that she had "a minority interest in One Montgomery Plaza, sold to Montgomery County on December 28, 2006."
She also disclosed her holding in a Feb. 10, 2006, e-mail to Brian K. Friedman, general counsel to the seller, AMC Delancey Group Inc. He replied that he already knew of it.
"I am totally comfortable working with you - conflict (if any) officially waived," Friedman answered.
Carluccio said the building was properly inspected before the sale, but that the county postponed starting repairs that had been slated to begin promptly after the purchase.
Ellis said Carluccio "ran all the due diligence" before the purchase. He said she saved the county up to $750,000 that an independent broker would have charged. (An area broker, Glenn Blumenfeld of Tactix Real Estate Advisors, said the brokerage fees would have been far lower than Ellis' estimate.)
For his part, Matthews called Carluccio's ownership stake "a non-issue, a de minimis [minimal] interest."
He said he felt she was just part of a family holding and that her family, which owns Tornetta Realty Corp., "has unblemished integrity."
Ellis initially said in the interview that he believed a conflict of interest could be waived "as long as it's out in the open."
When told that Caruso of the Ethics Commission had said state law didn't allow such a waiver, Ellis said it would have been up to the county solicitor at the time, Marino, to advise the commissioners on how to handle conflicts. He said he was unsure if he or others commissioners had asked Marino in 2006 for his advice on the matter.
Marino, a Republican who was county district attorney for 12 years and served four as a commissioner before becoming solicitor, said he had no memory of being asked by other county officials whether Carluccio's conflict could be waived.
"I don't even know if it could have been waived," Marino said.
The Ethics Commission's Caruso said that if an official's family had a 2.3-percent interest in a $26 million building, he viewed that as significant.
"The investigative division would not look at that as 'de minimis,'" he said. "I'm surprised no one caught it back when it happened."
Contact Mark Fazlollah at 215-854-5831 or email@example.com