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Rio Nuevo’s own bank disputes claims board members have made

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Posted: Friday, November 18, 2011 12:00 pm

Leaders of the Rio Nuevo Multipurpose Facilities District continue to insist they don't have a full accounting of the district's finances, even as their own bank and City of Tucson officials say they've provided the requested statements numerous times.

"What we're trying to get from Wells Fargo Bank are actual bank statements," Rio Nuevo attorney Sean Brearcliffe told board members at a meeting earlier this month. Wells Fargo is the district's bond trustee.

Brearcliffe also said city officials have not provided accurate account information.

"We're unable to rely on what we've received from the city," Brearcliffe said.

Rio Nuevo Board member and treasurer Jeffrey Hill also said the district can't pinpoint its financial status.

"Today, I'm afraid we don't have a lot to enlighten us or the public on our finances," Hill told the board at the meeting on Nov. 10.

Rio Nuevo District Executive Director Larry Lewis made similar claims at the meeting, saying district accountants have been unable to complete a financial audit because Wells Fargo won't provide the requested information.

"A lack of Wells Fargo documents have hindered that," Lewis said.

Board Chairwoman Jodi Bain also said the city and Wells Fargo have not been up front with financial information, characterizing a cache of records Wells Fargo recently provided as "a Word document" and "transaction reports," and not full account information.

Wells Fargo has been the trustee of the bond accounts since 2002. In its role, the bank ensures that payments are received and made according to terms of the bond contract.

The downtown redevelopment plan known as Rio Nuevo was initially passed by Tucson voters in 1999. It ran effectively as a city department until late 2009, when the state Legislature stripped the city of power following the results of an audit showing $230 million had been spent on planning with few projects ever taking shape.

The new board operates independent of the city and its members were appointed by the governor, president of the senate and speaker of the house - Republicans all.

In an effort to acquire account details, Brearcliffe sent Wells Fargo a letter on Oct. 3 demanding the bank supply the information.

"The District has repeatedly reached out to Wells Fargo - via email, telephone calls, and even by providing Governing Board resolutions on Wells Fargo's request - to obtain that access to and control of the accounts," Brear-cliffe wrote.

Those claims, however, directly contradict what City of Tucson and Wells Fargo officials have told Inside Tucson Business.

Wells Fargo officials did not want to speak on the record for this story, but did provide a written statement explaining what records they have given the district.

"A disk containing a copy of the monthly statements - from inception - for each of the trust accounts maintained by the trustee under the various bonds issued by the District was sent to Ms. Bain at her business address, the offices of Munger Chadwick, where she works as an attorney. The disc was delivered on or about October 5, 2011," wrote Alan Elias, senior vice president and head of wholesale banking communications for Wells Fargo Bank.

Bain said the disc that was sent contained about 200 documents such as PDF and Word files, along with others that she said appeared like items cut-and-pasted from emails.

On Nov. 14, Brearcliffe sent Wells Fargo attorneys a second request for financial details, this time asking for a "transaction history" of each of the accounts, documents showing disbursement of funds from each account, "work papers" detailing what Wells Fargo accountants have done and "complete copies of the actual monthly bank statements for each District Account."

Bain said that was done because the district's accountants still don't have enough information to conduct a financial audit. She said the additional details amounts to "backup material" that auditors need.

"We can't get it (the account information), because they haven't released it to us," Bain said.

City of Tucson Finance Director and Assistant City Manager Kelly Gottschalk also disputes claims that Rio Nuevo doesn't have the information.

"The city has produced every request that they've asked for," Gottschalk said. "Often times, the same information over and over."

Gottschalk said city finance officials have given computer discs with Wells Fargo and other account information to Bain and uploaded the same information using a secure file exchange on the website of an accounting firm the Rio Nuevo district hired.

"We've offered to sit down and explain the information to them, they've not taken up the offer," Gottschalk said.

What the Rio Nuevo Board has done, however, was file a pair of lawsuits against the city demanding $47 million and city-owned west side properties.

The board also recently had its attorneys send a cease-and-desist letter demanding that the city remove from its website financial information about Rio Nuevo.

In the letter sent to the city, Brearcliffe wrote that Wells Fargo told district officials that the account documents "belong to bondholders and are private information."

Bain also said Wells Fargo told district officials that the accounts belong to bondholders.

"What they're saying is it's not yours," Bain said.

The city has temporarily agreed to take the information down, some of which, ironically, was the same account statements that Rio Nuevo officials said the city and bank wouldn't provide.

Gottschalk showed Inside Tucson Business some of those statements, which hold information like account balances, reserves and amounts of sales tax dollars that are used to pay off debt on bonds the district has issued.

"Just like the city would treat this information as a public record, I don't know why Rio Nuevo would not," Gottschalk said.

On Oct. 10, Inside Tucson Business requested from Rio Nuevo the account information that Wells Fargo sent.

"(Rio Nuevo attorney) Sean Brearcliffe is looking at the request because the statements may not be subject to FOIA (Freedom of Information Act) at this time," Bain said in an email reply to an Oct. 14 email to check the status of the request.

A second request for information was sent on Oct. 19 asking that the Rio Nuevo Board provide emails or other documents showing their attempts to reach Wells Fargo, what the responses were and any discussions board members or its attorneys have had about the issue.

The district has not honored either request, despite numerous reiterations.

With nearly two years passed since the state legislature stripped city oversight and remade the board, some have begun to question what they have accomplished.

"If this was the private sector, and they didn't know their financial position after two years, they would be fired," Tucson City Councilman Steve Kozachik said.

For now, while the board and city continue to point fingers, no downtown projects are being funded through Rio Nuevo.

The Rio Nuevo District-owned Tucson Convention Center, which needs millions of dollars in upgrades and renovations, is but one project the board could fund.

"We need projects downtown," Gottschalk said. "They (Rio Nuevo) are getting money that they could be putting into downtown."

Contact reporter Patrick McNamara at pmcnamara@azbiz.com or (520) 295-4259.

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