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Dry
Lake fund-raising scheme hits snag
Developers
who pledged to match donations
to preserve wetland cry foul
At
right: Flagstaff Ranch Golf Club as it appeared in late June,
2002.The sales office is visible in the background. A sprinkler
waters the golf grass in the foreground.
By Dan Frazier
Tea Party Editor
Just
when the successful battle to save the Dry Lake wetland from
development was beginning to fade from memory, Dry Lake is making
headlines again, and this time the news is not nearly so heartening.
It seems that two developers, Jim Mehen and Bob Semple, who had
previously agreed to donate up to $100,000 each to the Grand Canyon
Trust to help pay for the purchase of Dry Lake, now say the Trust
has not upheld its part of the bargain, and the developers have thus
far refused to pay up. The developers’ promise to donate was made
two years ago as a matching pledge meant to encourage concerned
individuals and small businesses to chip in to help save Dry Lake.
Now, Mehen and Semple are disputing many of these donations,
contending that they may not qualify for matching under the terms of
the Pledge Agreement.
Dry
Lake is Flagstaff’s Gettysburg or Normandy — the site of an epic
battle that, over time, begins to take on certain mythical
qualities. Though only about two years have passed since the battle
to save Dry Lake ended, the myth-making is already well under way.
Part of the reason for this is that, according to some tellings of
the tale, the battle of Dry Lake ended with both sides living
happily ever after — a legendary accomplishment in any battle. On
the one side was Flagstaff developer Jim Mehen and his partners at
Flagstaff Ranch Golf Club, who finally got the green light on their
gated community and golf course, though not on the exact spot they
initially had hoped for. On the other side was Friends of Dry Lake,
a grassroots group that mobilized hundreds of community activists.
These activists finally got their wish of preserving a rare
ephemeral wetland after showing up again and again at public
hearings that sometimes dragged on late into the night. The grassy
wetland was located on private land in a volcanic caldera rimmed
with a forest of ponderosa pine and aspen. The site is about four
miles southwest of Flagstaff.
The
mythical quality of the battle to save Dry Lake was only enhanced
when, on March 26 of 2000, the Arizona Daily Sun anointed Mehen as a
white knight in shining armor. The Sun ran a front-page photo of
Mehen sitting on a horse dressed as a knight in armor. The Sun
reported that one of Mehen’s partner’s, John A. Carr, had
described Mehen and Semple as being a bit like knights in armor
coming to the rescue when they finally agreed to a land swap.
Though
some on both sides have touted Dry Lake as a model of cooperation,
not everyone believes that Dry Lake deserves to be the poster-child
of win-win land-use negotiation and compromise. One of the most
vocal critics of the idea that Mehen and his allies deserve nothing
but praise is Friends of Dry Lake activist Norm Wallen. Wallen has
written extensively about the many unexpected twists in the Dry Lake
story. He has reserved special criticism for developer Bob Semple,
whom Wallen says has repeatedly slowed down negotiations with his
unreasonable demands and occasional temper tantrums. Semple got
mixed up in the Dry Lake saga simply because he owned land near the
volcanic caldera that was considered by many to be more suitable for
development.
Thanks
largely to the negotiating efforts of Coconino County Supervisor
Paul J. Babbitt, John Carr, and the Grand Canyon Trust, a
complicated land swap would ultimately save Dry Lake. The deal was
agreed upon on March 20, 2000, just prior to a pivotal meeting of
the Coconino County Board of Supervisors at which Flagstaff Ranch
Golf Club finally was allowed to proceed. One condition of the land
swap agreement was that Mehen and Semple each pledged to donate up
to $100,000 in matching funds to the Grand Canyon Trust in order to
encourage others to donate money to the Trust in support of its
effort to purchase Dry Lake. The deal also called for Semple to
trade 250 acres outside the caldera to Mehen. In exchange, Semple
got Mehen’s 247 acres inside the caldera, plus 36 acres of
Flagstaff Ranch Golf Club. In accordance with the negotiated
agreement, Semple eventually sold the 247 acres he owned in the
caldera to the Grand Canyon Trust for $3 million. Finally, on
January 3, 2002, the Trust announced that it had turned over the
caldera to the U.S. Forest Service, thus preserving this important
piece of land for wildlife and public recreation.
In
the two years since the land swap was negotiated, workers with heavy
machinery have been busy transforming Mehen’s new holdings just
east of the caldera into Flagstaff Ranch Golf Club, a 410-acre
development. Plans call for 210 homes, 7,000 yards of golf greens, a
practice range, an 18,000-square-foot clubhouse, a swimming pool,
tennis courts, and on-site fire, security and emergency medical
facilities, among other amenities. So far, only a few key buildings
have been built, and a few of the golf fairways are sculpted and
growing grass.
Though
Dry Lake has been saved, the financial maneuvering is not over yet.
In order to purchase the land inside the caldera, the Grand Canyon
Trust had to come up with $3 million, plus more than $800,000 to
cover holding costs (mostly interest on loans). The Trust is a
Flagstaff-based nonprofit organization dedicated to protecting and
restoring the canyon country of the Colorado Plateau. It has deeper
pockets than many environmental groups in the Southwest, but coming
up with nearly $4 million was a daunting challenge, even for the
Trust.
Fortunately,
a big chunk of the money would come from the federal government in
the form of a $2.5 million appropriation thanks to the efforts of
Sen. Jon Kyl. Grand Canyon Trust would raise the rest of the money
from other sources.
One
of these sources was expected to be developers Jim Mehen and Robert
Semple, each of whom had signed separate but similar pledge
agreements on March 20, 2000. Mehen signed on behalf of his company,
Flagstaff Ranch Golf Club. Semple signed on behalf of his company,
Flagstaff Ranch Development. Each developer agreed to donate 50
cents to the Trust for each dollar that the Trust received from
certain types of donors during a specified time period. Each
developer agreed to donate up to $100,000. Thus, under a best-case
scenario, the Trust would raise $200,000 from other donors in the
specified time-frame, and Mehen and Semple would then match these
donations with gifts totaling $200,000.
Unfortunately,
what has transpired has not been a best-case scenario. This is clear
from various documents obtained by Flagstaff Tea Party, including
copies of the Pledge Agreements, and more recent letters and other
documents describing the current dispute between the two developers
and Grand Canyon Trust.
Apparently,
the first sign of trouble came in February of this year, when Jim
Mehen provided the Trust with a copy of a new agreement that he and
his lawyers had drafted. The document was titled “Supplemental
Escrow Instructions.” The document further clarified what actions
Mehen expected of the Trust before Mehen would release the $100,000
he had placed in escrow in connection with his matching pledge to
the Trust. The document also called for binding arbitration in the
event of a dispute over the funds in escrow. Subsequent documents
indicate that the Trust has not signed the Supplemental Escrow
Instructions, and that Mehen has refused invitations from the Trust
to discuss his pledge until the Trust signs his new instructions.
Mehen’s
Supplemental Escrow Instructions state that the Trust “did not
establish the Pledge Trust or otherwise segregate the Pledged Funds
in the manner set forth in the Pledge Agreement. Accordingly, FRGC
and GCT submit these Instructions to Escrow Agent in order to set
forth a procedure for establishing the total amount of the Pledged
Funds that are eligible for FRGC matching. …”
One
of Mehen’s primary concerns, mentioned in the above passage, is
that the Grand Canyon Trust did not set up an escrow account to
deposit the monies received from other donors during the time-frame
Mehen believes the March 2000 Pledge Agreement called for. Another
concern for Mehen is that some of the donations that the Trust has
received appear not to have been received during the time-frame
specified in the Pledge Agreement. Among other things, the
Supplemental Escrow Instructions clarify this time-frame.
The
time frame for setting up an escrow account and for collecting
donations has become an issue because the original Pledge Agreement
contained an ambiguous passage that could be interpreted in one of
two ways. The passage reads:
…
Flagstaff Golf hereby agrees, commits and pledges to the Trust that
it shall match, for each $1.00 collected and deposited by the
Trust into an escrow account to be established pursuant to this
agreement between July 1, 2000 and April 30, 2002 from
individuals, partnerships, small businesses and institutions (but
excluding any governmental agencies or municipalities, large
corporations and current pledges already received as of the date
of this Pledge Agreement), an amount equal to fifty cents (50¢),
not to exceed a maximum amount of $100,000.00 (the “Flagstaff Golf
Pledge Obligation”).
The
underlined portions of the passage above are especially confusing.
What exactly was supposed to happen between July 1, 2000 and April
30, 2002? Was this the period during which the Trust was to set up
an Escrow account into which donations would be deposited? Or
perhaps this was the period during which the Trust was supposed to
collect donations? Was it OK to start collecting donations on March
21, 2000, the day after the Pledge Agreement was signed? The
exclusion of “current pledges already received …” seems to
suggest that donations could be accepted as early as March 21.
The
Supplemental Escrow Instructions indicate that Mehen only intends to
match those donations that were received between July 1, 2000 and
April 30, 2002. Apparently, Mehen had expected that the Trust would
set up an escrow account on or about July 1, 2000. Donations
eligible for matching would then be deposited into this account as
they were received by the Trust.
Bob
Semple, representing Flagstaff Ranch Development, also signed a
Pledge Agreement on March 20, 2000, containing nearly identical
wording. Documents obtained by FTP suggest that Semple shares
Mehen’s interpretation and assumptions about the original Pledge
Agreement, though Semple’s position may in fact differ somewhat
from that of Mehen. The Supplemental Escrow Instructions do not
mention Semple or his Flagstaff Ranch Development company.
In
any case, Grand Canyon Trust was clearly operating on assumptions
that differed greatly from those of Mehen. Geoffrey S. Barnard,
president of the Trust, has released an undated but potentially
recent written statement in which he explains, “Beginning
immediately after March 20th, Grand Canyon Trust began
fundraising for the matching contributions. …” The statement
goes on to say, “On December 21, 2001, Grand Canyon Trust escrowed
$200,000 with First American Title Company. Between that date and
April 30, 2002, we raised and deposited an additional $112,000 in
Bank of America, bringing the total raised to meet the developers’
matching pledge to $312,000. We have provided FRGC and FRD with
documentation (canceled checks, deposit slips, etc.) for each
donation.
“The
only remaining step is for FRGC and FRD to instruct First American
Title Company to release their matching $200,000 to the Grand Canyon
Trust,” concludes Barnard.
One
other major feature of the Supplemental Escrow Instructions is a
passage about donor verification and pledge documentation explaining
how it will be determined if a specific donation is eligible for
matching. The passage stipulates that the Trust “shall provide
FRGC … one or more of the following (A) a copy of the donation
check, (B) a letter signed by the donor, remittance advice or
separate donor verification.”
This
passage addresses Mehen’s concern that without documentation
requirements, the Grand Canyon Trust could claim that certain
donations it has received are eligible for matching, even though
some of the donors who made the donations were unaware of the
matching offer — perhaps even unaware of the effort to save Dry
Lake.
This
concern is made more explicit in a document from Jim Mehen dated May
6, 2002. The document is titled “Flagstaff Ranch Golf Club
Matching Contribution Audit.” Mehen’s document reads in part,
“”On May 06, 2002 Jim Mehen and Bob Semple reviewed the
documentation supporting the gifts listed by the Grand Canyon Trust
as qualifying for matching donations. … The May 1, 2002 letter
from Evelyn Sawyers, Director of Finance for the Trust, states in
part, ‘We have $338,667 of pledges and donations that we believe
qualify for the challenge match.’” Mehen then writes, “Our
review of the pledges and collected donations revealed a number of
items that I believe do not qualify for the match.”
Mehen
then summarized his findings, listing $278,462 worth of donations
that he believed did not qualify for matching. These include $73,670
in donations that Mehen describes as “General Fund unrestricted
donations internally allocated to the Dry Lake fund by the Trust.
None of these had any documentation from the donor that they were
for Dry Lake.”
The
original Pledge Agreement makes no mention of a need for
documentation. However, it could fairly be argued that the need for
documentation was implied by the wording of the Pledge Agreement.
The wording specified not only the time period during which
donations would be matched, but also what types of donors could have
their donations matched. If it is ultimately decided that
documentation is required for all donations, this requirement could
disqualify many of the donations from matching eligibility.
Barnard,
in his written statement, used bold letters to emphasize one passage
that included this: “Hundreds
of people donated nickels, dimes and quarters in the donation boxes
that school kids designed and were placed in small businesses around
town.” Presumably, these donations would be among the first to be
disqualified under Mehen’s documentation requirement.
The
Pledge Agreement also did not explicitly stipulate that donors had
to intend or specify that their donation be used to purchase Dry
Lake in order for the donation to qualify for matching. Nor did the
Pledge Agreement stipulate that donors must understand that their
donation would be matched in order for their donation to qualify.
Once again, the wording of the original Pledge Agreement was
ambiguous. The wording indicated only that donations received in
response to solicitations from Grand Canyon Trust in connection with
its efforts to purchase Dry Lake would qualify, provided that they
also met other criteria. Nowhere does the Pledge Agreement suggest
that donors must provide any written evidence of how they intended
their donation be used.
Mehen’s
Matching Contribution Audit also objects to $84,000 from a
well-known local philanthropist who, according to Mehen, was
“specifically excluded from the matching challenge at the time the
Pledge Agreement was signed.” The philanthropist is not
mentioned in the Pledge Agreement.
Mehen
also objects to $25,792 received by the Trust prior to July 1, 2002.
Furthermore, he objects to $70,000 in stock received from a member
of the Trust’s Board of Trustees who lives in Fort Worth, Texas.
The donation was received by the Trust in September of 2000.
However, a letter from the donor designating the donation as being
for Dry Lake apparently has a January 2002 date on it — some 15
months later.
Finally, Mehen objects to a $25,000
donation that was pledged on April 12, 2002, but which was not
received until May 9, 2002, well after the April 30 cut-off date.
Mehen notes that the remaining
donations total $60,205. He then adds, apparently in reference to
this figure, “Of these donations approximately 1/3 have either no
notation that they are for Dry Lake or the notation was made in a
hand other than the check writer.”
Mehen ends his audit document with:
“Conclusion: None yet. This needs to be discussed.”
It is not clear if there has been
much substantive discussion between Mehen, Semple and the Trust
since May. It appears clear however that the dispute remains
unresolved. An e-mail message sent to local activist groups by the
Friends of Dry Lake on or about June 18 said, “Two years ago the
Arizona Daily Sun tried to portray Jim Mehen as a knight in shining
armor, but those of us who fought him in his efforts to ‘Pave Dry
Lake’ (his words), know better. Now he and fellow-developer Bob
Semple are once again showing their true colors. They are backing
out of their promise to match $200,000 in donations raised to help
pay for Dry Lake.”
The message went on to urge
residents to attend a Planning and Zoning meeting at which Mehen was
expected to “ask for an exemption from county building code height
restrictions. He wants his Dry Lake mansions to extend above the
skyline.” Perhaps as a result of this message, Mehen ended up
withdrawing his exemption request prior to the meeting.
Earle B. Hoyt, Jr. a member of
Friends of Dry Lake who has met separately with Jim Mehen and
Geoffrey Barnard in an effort to understand this dispute, and
perhaps help resolve it, has this take on the dispute, articulated
in a March 27, 2002 letter to County Supervisor Paul Babbitt:
“FRGC is exploiting ambiguity in the original agreement to
challenge the GCT fundraising for the purchase of Dry Lake. In its
place, FRGC is unilaterally submitting a ‘supplemental
agreement’ which changes the rules, adds new conditions and
essentially states what FRGC wishes were in the original Pledge
Agreement and clearly are not.
“Mr. Mehen told me that despite
invitations from GCT he refuses to talk with the GCT unless and
until the ‘supplemental agreement’ is signed by all parties. I
can not imagine how or why anyone would agree to such an odd
request.”
Another letter from Hoyt describes
in some detail documentation he has seen from Nordstrom Associates
Certified Public Accounts. Nordstrom was asked by the Trust to
verify that donations the Trust claimed were eligible for matching
were in fact eligible for matching. Hoyt describes how Nordstrom
verified that donations qualified in a letter Hoyt sent to John Carr
March 19, 2002. Carr is one of Mehen’s partner’s who helped to
facilitate the original negotiations that saved Dry Lake.
Nordstrom’s efforts at verification appear thorough, as described
by Hoyt. Among other things, Nordstrom “reviewed the supporting
documentation for all pledges received in the amount of $1,000 or
greater and a random sample of pledges received under $1,000. …”
However, Nordstrom’s verification efforts were based on the
Trust’s interpretation of the acceptable time-frame for donations.
Thus, Nordstrom verified as eligible for matching a number of
donations received prior to July 1, 2000.
Norm Wallen, a member of Friends of
Dry Lake who has been in touch with people at the Trust, told FTP in
late June that the Grand Canyon Trust may bring a lawsuit against
Mehen and/or Semple soon. He made clear that this was his
understanding and not an official statement from the Trust. The
Trust apparently has been hoping to avoid a lawsuit.
Mary Sojourner, an activist with
Friends of Dry Lake, said in late June, “It looks to me as if the
only way to go at this point is a lawsuit.” Sojourner added that
she was not speaking as a representative of Friends of Dry Lake, and
she declined to speculate on who might be suing whom.
Steele Wotkyns, communications
director for the Trust, declined to say much about the dispute when
reached by phone in late June. He referred FTP to the Trust’s Katrina
Rogers for comment. Rogers however was out of the office and did not
immediately return a message left on her voicemail. Wotkyns did
however briefly comment, describing the current dispute as, “the
classic Dry Lake next wrinkle.” He said, “It’s just
unfortunate as hell that we can’t protect the damn place and be
done with it.”
See also the lengthy
essay Norm Wallen wrote for the Sierra Club in April, 2000 and
the essay he
wrote for Flagstaff Tea Party in February 2001.
Gary Ghioto, a former
reporter at the Arizona Daily Sun, also wrote a number of
informative stories about the battle for Dry Lake. These are
available on the Arizona Daily Sun Web
Site. One of his most thorough reports
was published March 26, 2000 (it appears to have been incorrectly
assigned the date of March 25 on the Sun Web site).
For more about Grand Canyon Trust, visit their Web
site.
For more about Flagstaff Ranch Golf Club, visit
their Web site.
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