Updated, Aug. 1: copyedit. Updated, 7:56 a.m.: Copy edit; 6:57 a.m.: Copy edits, information added
NORWALK, Conn. — The City of Norwalk and the Norwalk Redevelopment Agency are at odds over who will represent them in a lawsuit against two developers.
In a Tuesday letter to Redevelopment Agency Chairman Felix Serrano, Mayor Harry Rilling criticized the Agency’s attorney selection process, questioned the judgment of Agency leadership, expressed concerns about a conflict of interest, and professed dismay that a defendant in the lawsuit has information that the City believes he shouldn’t.
Rilling’s letter says that he raised concerns about Agency Counsel Marc Grenier’s ties to developer Jason Milligan last month, and that he insisted the Agency remove Grenier from matters involving POKO, a Wall Street redevelopment project in which Milligan recently became involved. “The fact that the agency did not properly address the conflict issue with Attorney Grenier before I was forced to raise it with you raises serious concerns about the judgment of Agency leadership,” Rilling wrote.
Milligan manages Wall Street Opportunity Fund, which bought “POKO” Phase II and III properties from the project’s original developer nearly two years after construction on Phase I stalled. The Redevelopment Agency and City contend in a lawsuit that the sale violated a Land Disposition Agreement (LDA) between the City, the Agency, and the original developer because the parties to the sale did not seek Redevelopment’s prior approval. The lawsuit, filed against entities controlled by Milligan and the original developer, seeks an injunction and damages.
Milligan responded to the lawsuit by announcing that another LLC that he manages, Komi Ventures, is seeking a deed-in-lieu property transfer on Wall Street Opportunity Fund’s POKO properties. Komi acquired POKO’s debt, and is taking the property from Wall Street Opportunity Fund, making the lawsuit against WSOF irrelevant, he said.
Grenier’s firm formed Komi Ventures and Grenier was its first agent. Milligan said last week that Grenier has represented him in previous transactions, “general attorney stuff” such as real estate closings, is not representing him in any legal matters now, and does not have any financial stake in the project.
The Agency last week hired Russo and Rizio as representation in the lawsuit, replacing Grenier.
In his Tuesday email to Serrano, provided to NoN by a third party, Rilling said he believed Grenier’s relationship with Milligan was “impacting his ability to appropriately represent the Agency (and in turn the City). I was concerned that neither Mr. Grenier himself, nor the Agency took action to recuse Mr. Grenier from the discussions related to POKO.”
“Additionally, as you know, during a recent phone call with representatives from Citibank, we were told that Mr. Milligan knew just about every detail from our most recent meeting with representatives from Citibank. We were all embarrassed and upset that this happened and potentially compromised the City and Agency position. I checked with everyone who attended on the City side (Mario, Brian and Laoise), as well as Mr. Sheehan, to confirm that none of them had any discussion with Mr. Milligan regarding that meeting. Mr. Milligan has indicated knowledge of the City and Agency’s strategy and considerations regarding the pending litigation. I am obviously concerned that the additional disclosure of confidential information and/ or strategy to Mr. Milligan regarding pending litigation or negotiations regarding the POKO project will continue to impair the interests of both the Agency and City.”
Citibank owns POKO Phase I because it foreclosed on POKO’s construction loan, and has been working with the City and Redevelopment Agency in efforts to restart construction.
“I certainly did not obtain any privileged information from Marc,” Milligan wrote early Wednesday in an email, asserting that he’s had “long detailed conversations” with the attorneys, officials and developers involved and has read and re-read all the legal documents. “I am 10 steps ahead of the city. I have the solution and they have not figured out the problem yet. It is very frustrating to wait for them. It is also time consuming and expensive. Granted I am further ahead of them because I have dedicated most of my waking hours to this and they have lots of other stuff to do.”
Rilling wrote that he was “surprised and disappointed” to learn about the Agency’s process in choosing Russo and Rizio in a process “done behind closed doors, with no consultation with the city (despite repeated requests), and Attorney Grenier was in charge of the process of finding and recommending the replacement counsel.”
Redevelopment Agency member David Westmoreland, who was appointed by Rilling to the Agency’s board on June 26, also protested the selection process in comments last week after the RDA’s executive session in which Russo and Rizio was discussed.
“It’s disappointing we were not able to find additional competitive bids,” Westmoreland said. “… I am also concerned at how this process was done. From an appearance standpoint we need to always be as above board as possible. We need to take issues of conflicts of interest seriously. We need to resolve ourselves without being urged by the City to do so.”
Serrano replied, “While not required to go through a full bidding process we did through Agency Council, through discussions with the chairman, direct him with the metric we we looking for, interview these other firms and come to where we are with the recommendation today.”
Sheehan on Monday provided NoN with Redevelopment’s metric:
- Litigation Experience
- Contract Experience
- Government Experience
- Not Conflicted
- Reasonable Hourly Rate
Redevelopment Agency staff was not involved in the Special Agency Counsel review process, Sheehan said, asserting that the information came from Serrano.
Rilling in his Tuesday letter said that Russo and Rizio may have a conflict.
The firm is representing John and Todd McClutchy, a.k.a. JHM Group, in Bridgeport projects, Rilling said, pointing out that the McClutchys are Citibank’s preferred developers for “POKO Phase I.”
“I am concerned about the Agency’s response to Mr. McClutchy whereby the Agency concluded that there is no conflict based on the technicality that the McClutchys have not yet sought approval to become the preferred redeveloper,” Rilling wrote. “After recently replacing counsel due to a conflict of interest with one of the parties, it is inconceivable to me that the Agency would knowingly move forward with a firm who has an on-going relationship with another party involved in the project.”
The McClutchys may not be the official redeveloper but they have been in every meeting about POKO and everyone involved knows that they’ll be submitting a formal request to redevelop Wall Street Place, Rilling wrote, commenting, “This appears to be a clear conflict of interest.”
Rilling asked that Serrano and Redevelopment Agency Executive Director Tim Sheehan speak to the Council next week in an executive session set for Tuesday, and answer a series of questions. The letter poses 10 questions to Serrano, and requests replies in writing before the executive session.
The questions include pointed inquiries about Grenier’s relationship with Milligan, asking if RDA sought conflict waivers from Grenier in previous negotiations with Milligan as well as the “POKO matter.”
“If Attorney Grenier has a conflict with regard to the pending lawsuit against Mr. Milligan, why would it be appropriate for him to handle the selection process for a replacement counsel?” Rilling asked, going on to request documentation that Grenier will not be sharing information with Milligan.
“How is the Russo law firm supposed to appropriately represent the Agency (and in turn the interests of the City) in its negotiations with Mr. McClutchy when the same law firm is representing Mr. McClutchy in other legal matters?” Rilling asked.
Serrano said in a late-night email that he is “taken aback” by Rilling’s letter and will attend the executive session next week.
“I am in receipt of the letter from the Mayor and I plan on attending the Executive Session of the Common Council on Tuesday.
“I am however taken aback – the Mayor and I agreed in June that Special Counsel should be retained. I immediately informed Agency Counsel of that decision as well as the other Commissioners at that time. I worked with Agency Counsel in reviewing the firms being considered up to the point of the agreed upon firm of Russo & Rizio. Had the City indicated to me that either Corporation Counsel or the Mayor wanted to be involved in the review process, I would have welcomed their comment, but that request was not made of me. On a July 3rd phone call with the Mayor as a secondary issue the Mayor asked me what firm had been selected. I told him Attorney Russo’s firm from Fairfield. Nothing more was asked of me by the Mayor or Corporation Counsel regarding the selection.”
Former Norwalk Corporation Counsel Peter Nolin, in a comment on NancyOnNorwalk, called the concerns raised last week by Westmoreland “a little overblown.”
“In a relatively small legal community such as we have in Connecticut, conflicts are inevitable,” Nolin wrote on July 11. “The standard remedy is for the conflicted firm either to obtain waivers from all involved parties or to step down from the particular matter in which there is a conflict. Given the sensitivity of this matter it appears that Attorney Grenier and his firm decide not to seek waivers and instead stepped a sided from this matter for the Agency. That is something that happens routinely to the commercial firms practicing in Fairfield county.”
Nolin is former Vice Chair of the Norwalk Republican Town Committee and is a partner in the law firm Carmody, Torrance, Sandak, and Hennessey, which often represents real estate developers seeking approvals for projects in Norwalk.
Rilling did not reply to a Tuesday evening email from NancyOnNorwalk.
NancyOnNorwalk missed last week’s Redevelopment Agency meeting discussion about retaining an outside law firm but has since obtained a recording.