Council considers settlement in Town Toyota Center suit

June 26--This article was updated from an earlier version at 8:45 a.m. Thursday.

WENATCHEE -- The city of Wenatchee has reached a $1 million settlement with the developer of the Town Toyota Center, which the city alleged gave fraudulent financial projections for the arena.

The City Council is expected to approve the settlement agreement with Global Entertainment tonight. Global officials, including President Rick Kozuback, have already signed it.

"If that happens, then we'll officially be done with all the Town Toyota Center issue," Mayor Frank Kuntz said. "All the legal stuff will be done."

The agreement settles a lawsuit filed in March 2013 in which the city contended that Global failed to competently manage and promote the events center, as promised, and that revenues fell far short of Global's projections.

"Listen, we're just glad to have it put behind us," Kuntz said. "It's time to have this part of the deal done. In my opinion, it was a good, fair settlement."

He said the settlement follows through on a promise he made to neighboring communities that agreed two years ago to allow a public vote on a sales tax increase to help refinance the arena's debt. Kuntz told city and county officials back then that Wenatchee would pursue damage payments from parties involved in the building and financing of the arena.

The city has already reached settlement agreements with the bond attorneys and bond underwriter that worked on financing the nearly $42 million facility and with the Greater Wenatchee Regional Events Center Public Facilities District, which owns the arena.

Wenatchee sued Global Entertainment, its subsidiaries and its officers last year, seeking to recover millions of dollars in legal fees and payments to investors.

Last fall, the city hired a Seattle lawyer to represent the city on a contingency basis.

Global, which was represented by Wenatchee attorney Dale Foreman, had sought to dismiss the suit, stating in court documents that it built the arena at the "strong insistence" of the city. The documents state that the facility did not meet revenue projections because of the faltering economy.

Global argued that the city made it a "scapegoat" when it fired the company as managers of the facility in 2009 "without providing ... a fair opportunity to achieve the financial projections over time."

A federal Securities and Exchange Commission investigation into the arena's financing found that Global was urged by Wenatchee city officials to project more "optimistic" revenue projections for the arena before it was built.

The investigation concluded that Wenatchee Executive Services Director Allison Williams -- working closely with then-Mayor Dennis Johnson -- withheld critical financial information and lied in a statement to investors about the arena's viability.

The city's lawsuit against Global was scheduled to be heard in Chelan County Superior Court on Tuesday. But lawyers, insurance carriers and other parties for the city and Global met in Seattle on June 13 in what turned into a 12-hour meeting to hammer out a settlement, Kuntz said.

The meeting resulted in the $1 million agreement, he said.

Of that, just over $400,000 will go to the law firm representing the city, Williams, Kastner & Gibbs. The city will also pay some money to the events center district, but the amount has not been agreed to yet.

The city paid about $3.5 million to cover debt payments when the arena failed to earn as much money as Global Entertainment projected, and another $3 million in legal fees associated with the default on its debt and a Securities and Exchange Commission investigation of the arena financing.

Kuntz said the settlement money will likely be used to start paying down a $2.4 million bank loan the city took out to build the City Services Center on McKittrick Street. The city has been only paying interest on the loan since 2008 but must start paying on the interest by next year.

Reach Michelle McNiel at 509-664-7152 or [email protected]. Follow her on Twitter at @MichelMcNielWW.

___

(c)2014 The Wenatchee World (Wenatchee, Wash.)

Visit The Wenatchee World (Wenatchee, Wash.) at www.wenatcheeworld.com

Distributed by MCT Information Services