| Breaking the News | |
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10/2/2003 |
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Betsy Cowles apparently doctored a crucial RPS story and may have lied under oath about it.
RIVER PARK SQUARE DEVELOPER Betsy Cowles apparently edited a story in her family's newspaper in a way that misrepresented the expected cost of the RPS garage, a seven-year-old fax shows.
The fax, sent from the Spokesman-Review "editorial" department on October 22, 1996, was found by Camas among records produced in discovery as part of the RPS securities fraud case. The document is a marked-up draft of a story scheduled for the front page of the next morning's regional section.
The article reported on a lawsuit that had just been filed by Spokane lawyer Steve Eugster. The proposal for the city to buy an expanded RPS garage from the Cowles family for nearly $30 million, Eugster claimed, was so far beyond any plausible market value that it would violate the state's constitutional prohibition against public agencies making gifts of public funds.
The original story draft put the total cost of renovating and expanding the RPS garage at $8.6 million, less than a third the $30 million purchase price Cowles wanted.
"The cost of the renovations is estimated at $1.4 million," the draft article reported, "while the addition would cost $7.2 million."
These were the figures provided the city a few months earlier by Walker Parking Consultants. Walker's numbers clearly supported Eugster's allegation that the Cowleses wanted the public to pay far too much for their garage.
But the seven-year-old fax has extensive handwriting in the margin next to those numbers and a bracket drawn around the paragraph in which they appear. The marginalia notes the much higher cost figures that would actually be used -- in place of the Walker cost estimates -- in the next day's newspaper. The handwriting appears to be that of Betsy Cowles, chairwoman of Cowles Publishing Co., and the final version of the story quotes Cowles as saying "the construction budget" for expanding and renovating the garage is $20 million.
The document raises new questions about whether the Cowles family used their daily newspaper to mislead the public about the controversial deal, which subsidized the family with tens of millions of public dollars to build their downtown shopping center.
The deleted figures not only supported Eugster's lawsuit, they were later validated by an IRS report that found that the RPS garage transaction violated federal tax rules by transferring excessive private gains to Cowles real estate companies.
The altered story also raises profound issues about journalism ethics. The edited article advanced Cowles interests at a crucial juncture in the family's efforts to line up massive public subsidy for their mall, a project which, two years later, both Time and Forbes magazines would blast as a prime example of "corporate welfare."
Last month, Camas sent a copy of the fax to handwriting expert Gerald B. Richards of Laurel, Maryland. Richards is the former chief of the document operations and research unit at the FBI laboratory and is certified by both the FBI and the American Board of Forensic Document Examiners. Camas contracted with Richards to compare the document to copies of known samples of Betsy Cowles's handwriting.
Richards said his analysis was constrained by the limited number of comparable letter groupings between the samples provided and the handwriting on the fax, as well as the poor quality of the photocopies. Nevertheless, Richards said he found "a number of handwriting characteristics" between the samples and the fax document that he could compare. His conclusion was that "these characteristics indicate that she [Cowles] wrote the majority of the comparable writing" in the margins of the faxed news story.
"It is more likely than not," Richards said, "that the majority of the handwriting [on the faxed document] is that of Betsy Cowles."
After receiving Richards's analysis, a Camas reporter sent Cowles a copy of the document and requested a short interview. By email Cowles acknowledged receiving the document and asked "what is your question?" She then reported that she was reluctant to do an interview "because you and your business are so closely tied to the Siddoways."
This was a reference to Laurel and Doug Siddoway. The former is the city's special counsel for River Park Square litigation, and the latter is a well-known advisor to Mayor John Powers.
Although Doug Siddoway served as registered agent for Camas from April 2000 to April 2002, he has since been replaced. Camas criticisms of the city's RPS legal strategy in the hands of John Powers and Laurel Siddoway are well documented, as are the Siddoways' criticisms of Camas reporting on the RPS litigation. Moreover, Camas is currently adverse to the City of Spokane in a pending public records lawsuit in which Laurel Siddoway is representing the city. (See "Camas and the Siddoways.")
Cowles was asked to confirm that the handwriting on the document was hers, and was asked again to agree to a short interview. Cowles responded the following day. She repeated her concerns about Camas's "ties to the Siddoways," ignored the request to confirm her handwriting, and declined to do the interview.
"As you know," she wrote, "my deposition covered this general topic. It is old news and I stand by what I said then."
The magazine also requested an interview with Spokesman-Review reporter Alison Boggs, whose by-line appeared over the October 23, 1996 story in question. Boggs first replied that she needed to consult with Steve Smith, the paper's editor.
"After thinking this over," she wrote in an email the following day, "I have decided to respectfully decline your interview request."
As Cowles acknowledged, the "general" topic of her handling of Spokesman-Review news stories came up during her deposition.
The recently discovered fax could confront Cowles with a serious question: did she lie under oath when attorneys representing bond purchasers asked her earlier this year if she had ever edited Spokesman-Review stories about her family's mall?
Gary Ceriani, lead attorney for institutional bondholders who have accused Cowles companies, the city and other parties of securities fraud, asked her to talk about the circumstances under which she reviewed the newspaper's articles about River Park Square prior to publication. Cowles explained that the practice stemmed from a "longstanding" policy known as the "no surprises" rule whereby the publisher would be given a chance to review stories involving the family and family-owned business prior to publication. Under that arrangement, Cowles testified, she was "occasionally" asked to look at stories "for basic facts" or for "accuracy" of quotes attributed to her.
"Do you recall ever editing any of the drafts of articles relating to River Park Square that were submitted to you for review prior to the publication of the article?" Ceriani asked.
Cowles: I did not serve as an editor, no, I did not edit articles.
Ceriani: Well, I was using edit in the generic sense, not the newspaper sense. What I meant by edit was change, correct, modify, alter. Did you ever do that to an article that was submitted to you for review before its publication?
Cowles: I recall a, I recall instances where a fact was incorrect and I would call the City desk and say no, the project is not an $80 million project, it is now a hundred million dollars project, that kind of thing.
Ceriani: Do you know whether the same courtesy was afforded to any other person who were quoted in those articles, i.e., a chance to review them prior to publication?
Cowles: No.
The evidence is clear that both Betsy Cowles and her brother Stacey, the newspaper's publisher, were deeply involved in trying to maneuver the River Park Square garage deal through city hall at the time the October 23, 1996 story was published. Behind the scenes at the same time Boggs's story was being purged of the unwelcome Walker cost estimates, the Spokane city council was reeling from the sticker shock caused by the Cowleses's asking price.
That hidden drama is recounted in a memo Stacey Cowles wrote to his sister on the same day, October 23rd. In the memo Stacey Cowles relayed political intelligence on the council's deliberations that had been gathered by "Karen" -- probably Karen Valvano, then-president of the Downtown Spokane Partnership. Mr. Cowles was chairman of the DSP's board of directors.
"Laurent Poole did an incredible amount of damage," Mr. Cowles wrote. Poole, an executive with the Sabey Company, had recently made a presentation to council members. The Sabey Company then operated the Northtown Mall and was complaining, among other things, that the proposed RPS garage deal was an unfair and unwise public subsidy to a competitor.
"Council opinion," Mr. Cowles continued, "now is that garage at $30mm [sic] is not a good deal."
Later in the memo, the publisher wrote, "They [council members] all need a life line to weather criticism from Sabey and Eugster's suit: what can they stand up to public scrutiny? [sic]"
In Boggs's published story, the higher garage cost numbers are attributed to Betsy Cowles. At a minimum, journalism ethics should have required that both sets of numbers be published: the estimate from the city's consultants (as the prospective buyer), and Cowles's number (as the prospective seller).
Documents continue to surface as part of the securities fraud case that indicate that the original Walker numbers were the more accurate, largely because the $20 million-plus "construction" numbers pushed by River Park Square inflate the actual garage construction costs with items (utilities relocation costs, attorneys fees, public relations fees, sales tax, mall tenant relocation costs, etc.) that are, at best, arguable as legitimate expenses for a public garage.
In preparation for the RPS securities fraud trial scheduled for next spring, the City of Spokane recently hired a Seattle engineering firm to take a fine-tooth comb to the garage construction records. The firm returned an August 1, 2003 report that put total construction costs at $9.9 million. Likewise, a document turned over in discovery by R.W. Robideaux and Assoc. shows River Park Square was approached by the Washington Department of Transportation in 2001 to provide construction cost documentation for the work of the Robert B. Goebel Company, the RPS project's general contractor. The documents submitted by Robideaux to the state put the Goebel work on the RPS garage at $9.6 million. (RPS documents indicate that the Edifice company, a Nordstrom contractor, was paid an additional $1.5 million for work on the portion of the garage beneath the Nordstrom store, but $350,000 of this was returned to RPS as a "credit" because the garage unit also serves as the foundation for the Nordstrom store.)
The controversy over the garage numbers was exacerbated when Betsy Cowles adamantly refused -- in the wake of the Camas/KXLY "Secret Deal" investigation -- to disclose her company's actual costs for what, ultimately, was a $26 million garage sale plus a very lucrative land lease. But that was in mid-2000. By then the RPS garage deal was all over but the shouting.
In October 1996, the future of the ill-fated Cowles mall hung in the balance. That's when the public need for information was the greatest. At that crucial juncture, the record now shows, RPS developer Betsy Cowles, not a Spokesman-Review reporter, decided what the public got to know.
THE END
For purchasers and Gold subscribers --
Downloads:
The edited story fax
Memo from Stacey to Betsy Cowles
Camas articles are researched, written and edited by Tim Connor, Larry Shook and Judy Laddon.
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