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Wednesday, February 19,2014

Renaissance fair?

Jeromes allege their plans for Red Cedar Renaissance were stolen by Ferguson and team, seek $1M in damages. Ferguson: ‘How can I steal something I’m not using?’ Bernero: ‘It’s a shame things devolved the way they did.’

by Andy Balaskovitz

Suit Summary

Leo and Chris Jerome and their entity that owns property near the Red Cedar Golf Course, Story Companies LLC, are suing the new development team leading the Red Cedar Renaissance project for breach of contract, tortious interference with business expectancy and civil conspiracy. They are requesting a jury for the case and seek in excess of $1 million in damages sustained by the new team allegedly stealing their plans. 

The defendants in the case are Columbus, Ohio-based Continental Real Estate Co. and its subsidiary, Hallmark Campus Communities, Clark Construction Co., Huntington Bancorp, architects Hobbs Black Associates Inc. and Ferguson Development, LLC. Frank Kass and Jack Lucks of Continental, Lansing’s Joel Ferguson, Rick Kirk of Hallmark and Chuck Clark of Clark Construction are individuals named in the suit. 

The case was filed on Dec. 23 (and amended on Feb. 6 to include more defendants) in Cook County Circuit Court in Chicago, where Chris Jerome lives.

The phone calls and emails stopped being returned to Leo and Chris Jerome in May 2013.

The father/son team had been working for years on a grand vision to redevelop the former Red Cedar Golf Course on Lansing’s East Side. But after bringing local power-broker developer Joel Ferguson on board, the Jeromes say Ferguson and Columbus, Ohio-based developer Frank Kass stole their plans and cut them entirely out of the plan for Red Cedar Renaissance, formerly called the Capital Gateway.

They make their claim in a lawsuit filed Dec. 23 in Cook County, Ill.: The Jeromes against Ferguson Development and his team of developers, contractors and architects. The suit — which includes counts of breach of contract, tortious interference with business expectancy and civil conspiracy — seeks in excess of $1 million in damages. Mayor Virg Bernero said the suit “certainly has the potential” to stall the project.

The Jeromes allege that after winning exclusive rights as the developer, the Ferguson team stole their plans and presented them as their own and used confidential information to “wrongfully divert” the development “for their own benefits.” The Jeromes allege the new team used “Ferguson’s political strong-arming and influence over the Lansing City Council” to divert the project from the Jeromes. They also allege, in an amended claim filed on Feb. 6, that Ferguson injected himself into the project with “ever increasing demands.”

Chris Jerome, based on advice from his attorney, declined to comment for this story. But Ferguson, in interviews on Tuesday with City Pulse, reduced the case to “a bunch of bullshit” and “a joke.” He called Chris Jerome a “total egomaniac.”

“The guy thinks someone stole something from him. We didn’t steal anything,” Ferguson said. For one, Ferguson says the latest renderings for the site design are different from what the Jeromes originally proposed. “If anyone stole the plan that no one is using, that seems like a dumb piece of theft.”

But the documents filed in Circuit Court in Chicago, where Chris Jerome lives, offer a glimpse behind the curtain of what goes into a major redevelopment project in Lansing. According to the Jeromes’ claims, old partnerships, politics and behind-the-scenes meetings turned one father and son’s vision into a good-old boys network of familiar development faces. Ferguson counters that bad development terms and unqualified developers for the Red Cedar property were weeded out.

The outcome of the case is uncertain, as is how, if at all, it will affect the timeline of the project that’s being showcased around town by the developers and economic development officials.

Plenty is at stake. The Red Cedar Renaissance is one-seventh the size of the $733 million spent for 114 private-investment developments in the city since 2006, according to the Lansing Economic Development Corp. It’s the city’s biggest project in at least the past 20 years. The development — which includes plans for a hotel, health care offices, park space, retail and housing — is paired with a massive drain infrastructure project to disrupt pollution runoff into the nearby Red Cedar River.

However, the Red Cedar Renaissance has been anything but, mired in politics and business arguments out of the view of the public.

Disagreeable terms

The second half of 2012 was a contentious period between the Jeromes and Ferguson. They went back and forth over ownership stake in the project. In July of that year, Ferguson’s proposed cut was 5 percent of the project. By October, Chris and Leo were at a MSU/Wisconsin football game in Madison, Wis., sitting at the 50-yard line with tickets from Ferguson. During the game, Chris Jerome received an email from Ferguson’s son-in-law, Christopher Stralkowski. It gave Ferguson 50 percent of the project and “ousted Chris as the General Manager of the project,” according to court documents. This was less than two weeks before Lansing voters approved the sale of nearly 40 more acres of the property for a bigger project. The last weekly meeting on the project involving developers and the Lansing Economic Area Partnership came a day after the election, according to the suit.

“Over the course of the next several weeks, Ferguson engaged in a pattern of egregious conduct to take control of the Capital Gateway Project” that included unauthorized meetings and advising contractors to sign confidentiality and non-compete agreements, the Jerome suit alleges.

After a series of meetings with potential investors, economic development officials and city leaders, the Jeromes allege that by May 2013 were getting cut out of the deal. After Leo Jerome turned down an offer to be part of the project in September, “Bob Trezise contacted the representative of the Capital Gateway investor group and informed him that the group would not be allowed to make their final presentation or bid for any of the land in the Red Cedar Golf Course,” court documents say. Trezise is CEO and president of LEAP, which is facilitating meetings between the city and developers.

That was less than six months ago. A counter offer was presented to Leo Jerome, who came back with demands that Ferguson and Kass were unwilling to meet.

Ferguson not biting

The early stages of the Jerome/Ferguson breakup comes from a December 2012 memo — about four months after the Capital Gateway was the chosen project — from Ferguson to the Jeromes.

In it, Ferguson rejects “not only unacceptable, but completely commercially unreasonable” the terms the Jeromes proposed in their latest operating agreement proposal. Dissecting their offer, he refuses to give up voting rights in the company (“In my 20s, I was the first black elected to the Lansing City Council, and I was active in the Civil Rights movement, working to protect not only my voting rights but the voting rights of everyone”); he alleges the car dealerships’ value was over assessed, “intended to dilute my percentage membership interest”; and that holding Cook County Circuit Court as a legal venue is an “entirely unacceptable and illogical consideration” given the location of the project. He also took issues with Chris Jeromes’ fees, which included a $1,000 a month car allowance, reimbursement for living expenses in Chicago and company credit cards for entertainment and travel, according to Ferguson.

“When I have developed projects jointly,” Ferguson wrote, “neither partner had any separate agreements for development fees, manager compensation, travel reimbursement, living expense reimbursement or any other of the fees you have in your agreements. All profits earned in each of these developments have been divided equally among partners.”

Ferguson also points out that the Jeromes’ operating agreement with Hallmark, Continental’s subsidiary — of which the Jeromes say confidentiality was breached in the lawsuit — did not include such provisions. “It appears that it was not inexperience or lack of judgment that motivated Christopher to draft the documents I received,” Ferguson wrote. “I firmly believe the motivation was Christopher and Leo’s complete voting and monetary control over the project. I completely reject this arrangement.”

Chris Jerome declined to comment on the memo Tuesday.

The nail in the coffin, it appears, came in September, when the last attempt to include Leo Jerome in the project broke down.

A Sept. 24 memo from Ferguson and Kass to Leo Jerome reads, in part: “Since you and your son are self-professed ‘not developers,’ neither you or Chris Jerome would ever be granted a voice in the management of Ferguson/Continental.” The memo goes on to dispute Chris Jerome’s claim that he is the authorized agent for the project.

Now what?

Till now, Ferguson and city officials have played it coy about the Jeromes’ exit. Officials announced the new development team at a press conference in December (10 days before the suit was filed in Chicago) at the LEAP’s offices in REO Town.

Ferguson said he and Kass will dispute the venue of the suit in Chicago. He disputes Jerome’s claim that either of them have even had business transactions in Chicago. And even if Jerome wins, Ferguson believes that a judgment from Illinois can’t be enforced in Michigan.

As for the project, Ferguson said three major findings still need to happen before there’s a shovel in the ground: The price of the land (“That’s going to be an argument”), a comprehensive development agreement and identifying what economic incentives might be used.

It’s unclear what implications the suit might have on the project. Will it stall a comprehensive development agreement between the city and the Ferguson/Kass team? Will Ferguson and Kass wipe their hands of it and settle with Jerome out of court? Will the project forge ahead despite the lawsuit?

Bob Trezise, president and CEO of LEAP, issued a statement Tuesday evening: “A lawsuit has apparently been filed between certain private parties that in the past have potentially been involved in the Red Cedar process. The city of Lansing and LEAP have not been named in this lawsuit, so we know very little. We hope that the issue is resolved between those private parties, but we remain confident that the Red Cedar Renaissance project itself, which promises so much hope for uplifting development along Michigan Avenue, will continue its process.”

Mayor Bernero says the suit “certainly has the potential” to stall the project. He declined to comment on the suit Tuesday, citing the pending litigation, but offered:

“It’s a shame that things devolved the way they did.”

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