State knew of Family Court deal

When a no-bid deal to build a new Family Court surfaced last month, top development officials in the Rendell administration said the arrangement was news to them - and probably not permitted by state law.

"We haven't sat down with anyone and been briefed with what anyone has been talking about," said James P. Creedon, secretary of the Department of General Services. "None of that has been presented to us."

But in fact, Creedon and his top staff were getting regular briefings about the $200 million project starting in late 2008 from lawyers working for Supreme Court Chief Justice Ronald D. Castille, records show.

John H. Estey, Gov. Rendell's former chief of staff, and other lawyers from the firm of Ballard Spahr L.L.P. held more than two dozen meetings or phone calls with officials at the Department of General Services, the agency responsible for constructing state buildings.

They held two dozen more with Gov. Rendell and members of his staff, the records show.

Gary Tuma, a spokesman for Rendell, declined to comment Tuesday.

In an interview last week, Creedon said that he and his top staff knew the broad outlines of the court's idea to let developer Donald Pulver build the courthouse at 15th and Arch Streets without seeking other bids.

He said he was concerned all along the deal might not fly under state law - and said so to the Ballard lawyers.

"I had a lot of concerns," Creedon said. "Everybody knew we had issues."

But Creedon said it was not his place to give orders to the chief justice of the state Supreme Court, who was personally supervising the project.

"I don't know about you, but I'm not in the habit of doing that, just like he's not in the habit of calling me and telling me I'm full of crap," Creedon said.

". . . I don't think it was our responsibility to tell these guys they were spending their money in the wrong way, or were going down the wrong road."

As for his earlier statements, Creedon said: "It wasn't done in a sense to mislead you." He said he meant to say he did not know about a side deal in which Jeffrey B. Rotwitt, an attorney for the courts, was also acting as Pulver's codeveloper.

Castille terminated their arrangement last month after The Inquirer reported Rotwitt's dual role. Castille said he had no idea that Rotwitt, who was advising him on fees and other matters related to the project, was also receiving fees on the other side of the deal as codeveloper.

Rotwitt has said that he was open about his role as codeveloper with Castille and all other parties associated with the project and that he did not become Pulver's codeveloper until all his work for the courts was complete.

In any event, by the time Castille terminated the Pulver-Rotwitt plan, he had authorized $12 million in payments to Pulver, Rotwitt, architects, attorneys, and other consultants.

Estey, the Ballard Spahr lawyer representing Castille, said that he always thought the arrangement with Pulver was legal - and that DGS would eventually come around. While working for Rendell, Estey supervised development issues and was involved in the early stages of the Family Court project.

"Because I did not believe that DGS had expressed doubts about the structure, I did not communicate their 'doubts' to either Chief Justice Castille or other representatives of the court," Estey wrote in a statement.

He said he was not authorized by Castille to answer additional questions.

Despite all of the meetings with state officials, the question of how to structure a deal with Pulver was never settled.

A review shows that Ballard lawyers and DGS officials, even before the payments began, knew about the looming legal difficulties in the Family Court deal.

The money to build the courthouse was coming from a $200 million appropriation in the state capital budget, passed in 2007. The language of the bill, inserted by then-State Sen. Vincent J. Fumo, specified that the money had to be spent at 15th and Arch Streets.

That site, preferred by Castille, is a Philadelphia Parking Authority parking lot. Pulver had owned the development rights since 2004.

But state rules say the state cannot use the capital funds, financed by tax-exempt bonds, to pay for a privately built project.

Another Pennsylvania law, the Separation Act, requires a complicated four-stage bidding process for public buildings.

"I felt pretty strongly that it did apply" to the courthouse deal, said Michael Eichert, the Department of General Services' chief counsel.

With urging from Rotwitt, the legislature had also added a clause to the appropriations bill that said DGS could either construct the building itself or acquire it through a lease. Rotwitt, in an earlier interview, said he believed that opened the door to a deal with Pulver.

But Eichert said he did not think that clause could overrule the clear requirements to put public projects out for competitive bidding.

In November 2008, Rotwitt wrote a letter to a DGS official saying "our goal was to have the private sector develop the edifice so as to avoid the extra costs of government projects."

He laid out what he called a "possible basic structure." Pulver would build it, DGS would pay for it, and DGS would own it. The finished courthouse would then be leased back to the city.

Eichert said one thing struck him about the letter at the time: Rotwitt wrote it on his firm's stationery and kept using the words our and we, but never said who he was representing. By that time, Rotwitt has said, he was already partners with Pulver.

"What's outlined there struck me as a fundamentally noncompetitive arrangement," Eichert said.

Creedon and Eichert said they never signed off on the Pulver structure - no one asked them to. But they never gave a firm no, either.

As far as they were concerned, they said, the courthouse deal was not something they really had to worry about until Rendell committed to releasing the $200 million capital appropriation.

"Concepts can be thrown around, updates can be given," Creedon said. When "that money is released, and you have proposals in front of you, that's when these projects get serious."

Castille signed the fee agreement in November 2008, after the first conference call between the Ballard lawyers and DGS. Besides the design fees, it authorized monthly payments toward a $3.9 million fee for Rotwitt, $6.2 million in fees and assorted costs for Pulver, and other fees. All of the funds paid out to date have come from a surcharge on Family Court filings passed by the legislature, not from the $200 million capital appropriation.

By last month, Rotwitt had received $1.1 million from the courts, and $500,000 from his codevelopment deal. Pulver has been paid about $2.9 million.

The DGS officials said they had no idea that Pulver was getting paid, let alone that he was sharing his fees with Rotwitt. They knew the architectural firm EwingCole was working on drawings, but they said they were shocked to find out that the plans were already 90 percent done, at a cost of $5.6 million.

"Who knew what they were doing?" Eichert said.

Much of the conversations with Rendell's office concerned the fate of one of the Family Court's present buildings, at 1801 Vine St., modeled on a hotel in Paris.

Rendell said he would not agree to release the $200 million until he was assured the city would find a high-end use for the property. The city is seeking proposals for a possible museum and hotel.

This spring, when Rendell was close to releasing the money, the DGS officials started to research the question in earnest. But the question became moot when the Rotwitt/Pulver connection came to light, and the deal was canceled.

What is still unclear is how much of the expenses will turn out to be wasted - or how much money could be recovered.

Pulver has gone to Bankruptcy Court in a bid to keep control of the project, and possibly the EwingCole plans. A deal negotiated by Rotwitt, before termination of the development, stipulated that Pulver owns the plans.

Creedon said he hoped the legal disputes could be resolved.

"I don't want to do them over again," he said of those drawings. "It's going to cost the taxpayers a lot of money to do them over. It's going to take a lot of time.

"It's holding up what is obviously a necessary project," he said. "Nothing is ever simple in the city of Philadelphia."