Former Attorney General sues city over Wilmanor Apartments; Lautenschlager representing Spodick in case

Jim Spodick is taking his $650,000 claim against the city to court, and he has a big-name attorney by his side.

Former Attorney General Peg Lautenschlager filed a lawsuit in Racine County Circuit Court Thursday claiming the city reneged on a deal to knock $200,000 off of a mortgage on a low-income apartment building that Spodick had turned around. The complaint alleges Spodick had a deal with former Mayor Gary Becker and City Development Director Brian O'Connell to reduce the mortgage, but the city backed out just before Spodick was to sell the property.

Lautenschlager, who served one term as Attorney General, now works for the Madison-based law firm Bauer & Bach. Daniel Bach, one of the lead partners, is a Racine native.

The suit was delivered to City Hall on Friday and the case has been assigned to Judge Richard Kreul.

Here's the key graph:

That in 2008 and 2009, Jim Spodick had several conversations with city officials regarding the amount  required to pay off the loan. Gary Becker, who serve as mayor of the City of Racine, and Brian O'Connell, who served and serves as Director of City Development, promised Spodick the mortgage payoff amount would be reduced from $675,000 to $475,000 if Spodick could find a buyer for the property.

The city has 20 days to respond to the claim. Kreul will then decide if the case can proceed to trial.

Read our past coverage of the story here.

To recap, the deal surrounds a mortgage Spodick took on in 2006 for the Wilmanor Apartments at 255 N. Memorial Drive. At the time, the low-income apartment building had been through at least three professional management companies, but was deteriorating quickly due to unpaid rent and crime. Becker, knowing Spodick through his work on low-income apartments on West Sixth Street, asked Spodick to takeover the building in hopes of avoiding a default on the mortgage. The default would have been costly for the city because it had received low-income housing tax credits for the property. If the building failed, the city would have had to pay the money back to the federal government.

Spodick and his wife took over management of the building, spent several hundred thousand dollars on renovations, managed the problem tenants and made the apartments profitable. After stabilizing the building, Spodick looked to sell the apartments with the understanding that the city would reduce the mortgage on the property by $200,000 to compensate Spodick for part of the renovations. (Incidentally, it was almost a fluke the city got any money back on the property. Two banks dismissed over $2 million in loans on the property - well more than the apartments were ever worth. The city then fell into first position on the loan, allowing them to collect when Spodick sold the building.

In the lawsuit, Spodick claims he went ahead with a sale assuming the city would reduce the $675,000 mortgage by $200,000. When the city refused the deal, he was on the hook for the money, which cost him an opportunity to buy another building. Spodick is claiming he lost $450,000 because he was unable to complete the purchase.

After the council rejected his request to reduce the mortgage, Spodick filed a claim against the city. The council rejected the claim on Nov. 17, opening the door for Spodick to sue the city.

He'll have a tough case to prove. City Council members argued in November that even if Becker or O'Connell made the deal with Spodick, the council has to give it final approval. But he can also tell a good story about how he helped turn around a problem building and preserved its low-income tax credits, only to lose money in the end.

The wild card may be Becker, who, despite being in prison, could testify in the case. If Kreul allows the case to proceed, Lautenschlager and Spodick may call him to verify their claims of a handshake deal on the property. Then again, it's hard to say how much credibility the former mayor would have under oath.

City: Email vote was to expedite property sale; Records show board regularly voted by email

The city put out a press release today responding to stories that its Loan Board of Review illegally voted by email. Here's a breakdown of the press release, including a major omission:

1. The press release was emailed by Deputy City Attorney Scott Letteney, but was titled: "City of Racine Press Release" and was unsigned.

2. The press release noted the Loan Board of Review was created in 1979. It's made up of specific city staff members (and no elected officials).

3. At the Loan Board of Review's June 18, 2009 meeting, the board deferred action on developer Jim Spodick's request to reduce a city loan to wait for a financial analyst's report, according to the release. RacinePost filed an open records request Tuesday for a copy of the analyst's report.

4. The Loan Board of Review's email vote was done to expedite Spodick's sale of the Wilmanor Apartments, according to the press release. It also suggests the vote was in the city's interest, which allows officials to balance the city's interest against the state's open meetings law.

4.5 Records show the loan board voted by email prior to Spodick's claim. The board voted March 25, 2009 to affirm two "electronic polls" to help two local homeowners increase loans. They did the same on Feb. 21, 2008, May 15, 2008, Aug. 21, 2008, and Nov. 20, 2008.

5. The press release then disassociates Spodick's $650,000 claim against the city from the Loan Board of Review's actions. It suggests that Spodick made a deal with former Mayor Gary Becker and that deal is under review as part of a larger review of Spodick's claim.

6. Missing from the press release is any mention of the Loan Board of Review's odd/dishonest/potentially illegal decision to alter the official minutes of the June 18, 2009 meeting to reflect a vote that never occurred.

7. The JT continues to pump this story, which they learned about by reading RacinePost. They've asked the state Attorney General's office for a ruling on the email vote. The AG responded that a decision could take a couple of weeks.

8. This entire incident is potentially embarrassing for the city because it involves senior city officials, including City Attorney Rob Weber, who is well-versed in the state's open meetings law. Weber's involvement makes it an interesting choice to have the city's official response come out of his office.

9. Mayor John Dickert banned email votes in city government today. Since email votes are already illegal (in order for any public body to vote, they have to hold a public meeting), his word should be followed.

10. Since the JT borrowed the first half of this story from RacinePost, we'd recommend Editor Steve Lovejoy direct reporters to take a closer look at the particulars involving Spodick's deal with the city and who made the deal to lower the loan amount. They may specifically want to investigate why Spodick was brought in at all.

'Raytown Roadhouse' gets liquor license approved; Two others turned down

Public Safety and Licensing Committee Monday night.

Yeehaw, Racine! You're a step closer to getting a country-western bar.

The City Council's Public Safety and Licensing Committee voted unanimously Monday night to grant the "Raytown Roadhouse," 522 Sixth St., an alcohol license. The new bar and restaurant will have a country-western theme featuring live music, a steakhouse and a mechanical bull.

The "Raytown Roadhouse" is the creation of Jim Spodick and Pete Karas, who got the idea for the restaurant and bar walking around 7 Mile Fair. They noticed people drawn to a country music singer and realized there's an untapped market not only in Racine, but southeastern Wisconsin.

The new bar and restaurant is a career change for Karas and Spodick. Karas ran for mayor earlier this year, served on the City Council and used to sell insurance. Spodick opened the Historic Century Market at 522 Sixth St. and has hosted a number of businesses on Sixth Street, but he's still looking for a knockout success.

The same night the committee approved a liquor license for the Raytown Roadhouse, it rejected two other requests.

Tommy Daniels' bid to reopen a bar in the former "Cash Money's" at 901 S. Memorial Drive failed on a 3-1 vote with Alderman Jim Kaplan the lone member to support giving Daniels a license. Alderman Robert Mozol argued against the license, noting a murder occurred outside of the bar when it was open, but few, if any, incidents have been reported since it closed.

Kaplan supported the license because Daniels agreed to a series of security measures for the new business. But the video cameras, extra security and other provisions Daniels agreed to were not enough to convince Mozol and aldermen Sandy Weidner and David Maack.

Alderman Mike Shields, whose district includes the proposed bar, spoke in favor of the license. That leaves the vote total at 3-2 against heading into the next City Council meeting, where the license likely will be debated.

The committee also rejected Dwight Mosby's application for a liquor license at 1846 Mead St. Mosby wanted to open a bar that would be affiliated with the adjacent Prince Hall on Mead Street. He planned to limit the bar to patrons 25 and older.

Alderman Bob Anderson, whose district includes the proposed site, spoke against the license. He said neighbors strongly opposed the tavern. "Everybody said, 'Absolutely not,'" Anderson said.

Mosby's application now goes to the City Council for a final vote up or down.