Disclosure: The original version of this article was published in 2008 by an author who participated with former Spokane City Council member Cherie Rodgers in the 2007 criminal referral concerning River Park Square. The original page does not state that the author had a financial interest in the outcome. This update adds the September 5, 2008 DOJ findings, court records, the IRS bond determination, the 2007 IRS professional-responsibility settlement and clearer sourcing for the public financing.
The River Park Square Scandal did not end when federal prosecutors closed their investigation on September 5, 2008. What ended that day was the possibility of a federal criminal case.
The Department of Justice announcement, titled DOJ Closes River Park Square Investigation With No Criminal Charges, said investigators found no evidence that anyone involved in the Spokane development had acted with criminal intent to defraud.
That conclusion deserves to be stated plainly. So do the problems DOJ acknowledged in reaching it.
Investigators were examining events that were already close to a decade old. Records were missing. Memories had faded. Prosecutors also said the statute of limitations had removed some potential criminal charges before the investigation could reach them.
The River Park Square Scandal Was Built Around Public Money and a Parking Garage
The dispute centered on the redevelopment of River Park Square and the financing of its downtown Spokane parking garage.
In Eugster v. City of Spokane, 139 Wash. App. 21, No. 24472-5-III, decided February 15, 2007, the Washington Court of Appeals described the structure clearly. The City borrowed $22.65 million from HUD against future Community Development Block Grant funds and lent the money to a developer. Garage revenue was supposed to repay the debt.
That revenue did not perform as expected.
A December 2004 proposed settlement in Eugster v. City of Spokane, Cause No. 00-204265-0 in Spokane County Superior Court, stated that the City considered the entire $22.65 million principal still outstanding, while the River Park Square parties placed the figure at $22.28 million. The same document said about $1.5 million in HUD block grants had already been called on as collateral because of payment defaults and insufficient security. The settlement text was published by The Spokesman-Review on December 9, 2004.
The Financing in Dates
| Date | Event | Document |
|---|---|---|
| 1997 | Spokane City Council supports the River Park Square redevelopment | Eugster v. City of Spokane, 139 Wash. App. 21 |
| 1998 | City borrows $22.65 million from HUD for the garage financing | Washington Court of Appeals |
| August 2001 | Standard & Poor’s places the 1998 parking revenue bonds in default after a scheduled principal payment is not made | S&P Global Ratings |
| June 22, 2004 | IRS Tax Exempt Bond Group issues a proposed adverse determination | Spokane Research & Defense Fund v. Spokane County |
| December 2004 | Settlement document records roughly $1.5 million in HUD block grants called as collateral | Settlement Agreement and General Release of All Claims |
| September 5, 2008 | DOJ closes the federal investigation without criminal charges | U.S. Department of Justice |
The June 2004 IRS Letter Is One of the Strongest Documents in the Record
The tax status of the garage bonds was not merely a later criticism from opponents of the project.
A June 22, 2004 letter from the IRS Tax Exempt Bond Group informed the Spokane Downtown Foundation that the agency had made a proposed determination that interest earned by the bondholders was not excludable from federal income tax.
The document is described in detail in Spokane Research & Defense Fund v. Spokane County, 139 Wash. App. 450, 160 P.3d 1096, Nos. 25095-4-III and 25129-2-III, decided June 28, 2007. The opinion identifies the letter as Exhibit L and names Derek Knight, manager of the IRS Tax Exempt Bond Group, as its signer.
The IRS controversy continued.
On December 6, 2007, the IRS Office of Professional Responsibility issued IR-2007-197, announcing a settlement with attorneys Michael C. Ormsby and David O. Thompson over a $31 million municipal bond issuance involving River Park Square in 1998.
The IRS said its allegations involved the scope of due diligence under Circular 230 and the tax aspects of the bond opinion. The attorneys denied the allegations, and the settlement expressly stated that it was not an admission of wrongdoing or a sanction.
That last point belongs in the record too.
The Statute of Limitations Was More Complicated Than “Five Years”
The 2008 DOJ release said a five-year statute of limitations applies to most federal offenses and that some obvious potential charges were unavailable by the time prosecutors investigated.
The general rule is 18 U.S.C. § 3282, which gives prosecutors five years unless another statute provides a different period.
But the River Park Square investigation involved possible crimes that do not all share the same deadline.
| Potential Offense | Limitations Period | Conduct Date Identified by DOJ? | Expiration Date Given by DOJ? |
|---|---|---|---|
| Racketeering | Generally 5 years under § 3282 | No | No |
| Bank fraud | 10 years under 18 U.S.C. § 3293 | No | No |
| Securities fraud | Depends on the specific statute and timing | No | No |
| Conspiracy | Generally 5 years under § 3282 when no special period applies | Not identified as a separate charge in the DOJ release | No |
That is the unanswered part of the limitations discussion. DOJ said time had closed off potential cases, but its public release never mapped a particular offense to a particular act and expiration date.
Without that map, readers cannot tell from the release which potential prosecution disappeared first or how much investigative time had already been lost.
DOJ Also Examined James McDevitt
James McDevitt, then U.S. Attorney for the Eastern District of Washington, was part of the controversy because he had performed limited work connected to River Park Square before becoming U.S. Attorney.
The 2008 federal investigation examined whether he had concealed that history.
DOJ said he had disclosed the work during his background investigation and cooperated with investigators. The agency also said it found no evidence that River Park Square had been formally referred to the U.S. Attorney’s Office for criminal review before the summer of 2007.
The original author argued that McDevitt should have removed himself from River Park Square issues much earlier. That is an opinion about conflict and timing. It is different from the factual question DOJ investigated about disclosure, and the two should not be presented as the same claim.
The Jo Ellen Savage Case Followed a Different Path
Jo Ellen Savage died on April 8, 2006 after her vehicle went through a barrier on the fifth level of the River Park Square garage and fell more than 50 feet.
Federal prosecutors concluded that no federal criminal statute covered the facts they had reviewed. They obtained permission to provide limited grand jury material to Spokane County Prosecutor Steve Tucker for a possible state case.
The matter continued after the federal investigation. In 2009, the Washington Attorney General’s Office reviewed the evidence, and Spokane County ultimately declined to file criminal charges.
The Appraisal Issue Still Needs a Careful Label
The original article says prosecutors acknowledged at the September 5, 2008 Spokane press conference that an appraisal connected to the HUD loan collateral did not comply with FIRREA appraisal standards.
That statement does not appear in the archived DOJ press release, and I could not verify a public transcript or recording of that exchange.
For that reason, it should be presented as the original author’s account of the press conference, not as a written DOJ finding.
The underlying financing problem is independently documented. The City borrowed $22.65 million against future HUD grants, garage revenue later fell short, and the December 2004 settlement recorded $1.5 million in block grants already called as collateral.
What the River Park Square Scandal Record Actually Shows
The federal investigation did not establish racketeering, bank fraud, securities fraud or another federal crime. That is the official 2008 conclusion.
It also did not erase the documented problems surrounding the project.
The City borrowed $22.65 million through HUD. Parking revenues failed to support the financing as planned. The 1998 revenue bonds went into default. The IRS later challenged their tax treatment. HUD block grant funds were exposed as collateral. Years of litigation followed.
The strongest criticism of the 2008 investigation is therefore not that prosecutors were required to charge someone. Criminal charges require admissible evidence proving every element beyond a reasonable doubt.
The more useful question is why a transaction that generated so many documented financial and legal problems reached the criminal-review stage only after records had disappeared, memories had faded and prosecutors themselves said some potential charges had become unavailable.
That is the part of The River Park Square Scandal the September 2008 announcement never fully answered.
Sources
- U.S. Department of Justice, “DOJ Closes River Park Square Investigation With No Criminal Charges,” September 5, 2008
- Eugster v. City of Spokane, 139 Wash. App. 21, No. 24472-5-III, February 15, 2007
- Spokane Research & Defense Fund v. Spokane County, 139 Wash. App. 450, Nos. 25095-4-III and 25129-2-III, June 28, 2007
- Settlement Agreement and General Release of All Claims, Eugster v. City of Spokane, Cause No. 00-204265-0, December 2004
- IRS IR-2007-197, “IRS Announces Groundbreaking OPR Settlement with Attorneys,” December 6, 2007
- 18 U.S.C. § 3282, General Five-Year Limitations Period
- 18 U.S.C. § 3293, Financial Institution Offenses