Sunday, April 24, 2011

A blind spot toward the ESDC, and some questions of legal ethics regarding Atlantic Yards representations

Yesterday, wry New York Times columnist Gail Collins wrote about "angry" new Republican governors in Wanna Buy a Turnpike?:
In Ohio and Wisconsin, angry new governors John Kasich and Scott Walker are taking economic development out of the hands of state bureaucrats and giving the job to new quasi-private entities that will be much more effective and efficient.

In Florida, where the Legislature did all that in the 1990s, the angry new governor Rick Scott has a bold plan to improve economic development by creating a State Department of Commerce that will be much more effective and efficient.

Really, just so there’s change and it doesn’t sound socialistic. “We don’t want to leave any money on the table,” said Kasich, who is planning to sell five prisons, the lottery and maybe do something with the turnpike. I’m from Ohio, and while I never did like the turnpike, I’ve always been a fan of history. I wonder if I could get a good deal on the Warren Harding homestead.
Collins might want to look in her own backyard, where the Empire State Development Corporation is a quasi-public (or, alternatively, quasi-private) entity that cuts through red tape in service to business, such as the New York Times Company (which benefited from eminent domain in building the Times Tower with Forest City Ratner) and Forest City Ratner, in its Atlantic Yards project.

Atlantic Yards and legal ethics

Yesterday, in Applying the Principles of Legal Ethics to New York Development: Lawyers Are Not Supposed to Represent Deceiving Clients, Noticing New York's Michael D. D. White pointed out that lawyers have an ethical duty to not only withdraw from representing a client who behaving dishonestly but to do so "noisily."

White, at a legal ethics seminar asked some hypothetical questions: does this apply to the lawyer representing the developer of a publicly financed real estate project, where, in essence, the public is the buyer.

The answer--given to a hypothetical, and with the caveat it wasn't actual legal advice--was yes.

White allows for a gray area, in which the Atlantic Yards hype might be dismissed as dubious assumptions and insufficiently backed up assertions, both of which are permissible.

He adds:
One area where it seems that misrepresentations of fact did occur is with respect to the misrepresentations to Justice Marcy Friedman about the legitimately expected timetable for the development of the mega-project was: With lawyer assistance it was represented to the justice that Forest City Ratner and ESDC officials expected to complete the project within ten years while withholding from her (and the plaintiff parties representing the public in opposing the project) documents between them providing for and clearly envisioning a multi-decade build-out.

Similarly, sale of the EB-5 investments to prospective Chinese “investors” has been rife with misrepresentation. Technically, the misrepresentations being made to the Chinese are being made to them as private parties on the other side of a business transaction (rather than just an unwitting public being subjected to a spiel) so a high standard should apply respecting any misrepresentations. On the other hand is there thinking that as the Chinese are not American citizens they should not be expected to benefit from the full protection of U.S. law?
The issue regarding the timetable was brought before Friedman in March, in a motion for sanctions against the lawyers representing the state and Forest City Ratner, though Friedman refused to hear oral argument.

The EB-5 misrepresentation seems like a stronger case. We'll have to see how that plays out.

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