In hindsight, agency’s ’2020′ land riddled with scandal

The Illinois Medical District Commission spent $8.8 million to buy back a property abandoned decades earlier by a medical school dragged into a scandal that helped bring down Gov. Rod Blagojevich, even though the obscure state agency had plenty of chances to reacquire the land for free, a Chicago Sun-Times investigation has found.

There was also another problem with the buyback plan: The commission didn’t have the money to pay for the property at 2020 W. Ogden St.

So it borrowed the money by selling bonds.

Having to pay back that money, though, caused major financial problems for the commission, which then brought in a Costco on a nearby property to bring in rent to help pay its bills.

Eight years later, 2020 W. Ogden remains just another vacant patch of land on Chicago’s West Side.

But the commission says it has a plan to change that. It’s giving control of the land to a group of clout-heavy developers to put up offices, hotel rooms, stores and apartments. The commission — seven people appointed by Gov. Pat Quinn, Mayor Rahm Emanuel and Cook County Board President Toni Preckwinkle — won’t release terms of the deal, which could last 150 years.

It’s the latest chapter in the star-crossed saga of a property and an agency long mired in scandal. Consider:

• For eight years, the medical district commission refused to hand over more than $10 million to the state treasurer — in violation of state law — after selling land for the FBI’s Chicago offices. Commissioners ignored repeated warnings from the Illinois auditor general and Illinois Attorney General Lisa Madigan to deposit the money in the state treasury. Finally, rather than do that, they got state legislators to let the commission keep the money.
• The commission’s longtime attorney, George W. Davis, was convicted of a felony and lost his law license after being caught with child pornography on his work computer.
• Leon Dingle Jr. — who was on the commission for 21 years and was its treasurer — is now on trial in federal court in Springield, accused of stealing more than $3 million in grants the state gave to three not-for-profit groups he controlled while serving on the commission. His indictment in October 2012 came seven months after he and four other commissioners were ousted by Quinn and Preckwinkle amid financial troubles resulting from borrowing to buy 2020 W. Ogden.

The commission refuses to discuss the future of 2020 W. Ogden. But its past paints a portrait of clout, scandal and failure:

Jan. 14, 1959 — Gov. William Stratton sold the 9.5-acre site to the Chicago Medical School for $206,417.96. The deed included a reverter clause, which says: “In the event of non-use of said premises . . . or of disuse of said premises for a period of one year, title to said premises shall revert” to the Illinois Medical District Commission, an agency created in 1941 to develop a swath of land on the West Side.

Fall 1960 — The school moved to a newly built 10-story building and research facility at 2020 W. Ogden.

1980 — The school abandoned the land, leaving the West Side for North Chicago, 40 miles away. The commission could have invoked the reverter clause at this point and tried to take the property back, and it probably wouldn’t have had to pay any compensation to the school, William McErlean, an attorney for the school, now says. In an interview, McErlean says the reverter clause would have expired, though, in 1988 — a theory that some former commission officials reject. In any case, the commission never tried to get back the property, on which the asbestos-riddled former medical school building sat vacant for more than two decades.

“That property was a can of worms for a long time,” says Julian D’Esposito, an attorney appointed to the commission in the late 1980s by Gov. James R. Thompson. “How it could be reused was complicated, what it would take to make the building useful. There were conversations that went on forever between the commission and the owner.”

1999 — Stuart Levine joined the medical school’s board, serving on its real estate committee overseeing 2020 W. Ogden. Levine gave heavily to Republican governors, who appointed him to various state boards, including the board that regulates casinos in illinois and another that invests pension funds for teachers across the state.

Aug. 1, 1999 — The school hired Levine’s associate, John Glennon, an attorney and real estate adviser, to determine the value of 2020 W. Ogden and its best use. He got an appraisal that valued the land at more than $13 million, presuming the vacant school is no longer there.

September 2001 — Glennon made a sales pitch to the American Red Cross, which ends up elsewhere in the district.

Feb. 5, 2002 — The commission’s seven members unanimously agreed to demolish the abandoned school.

Dec. 26, 2002 — The commission’s executive director, Thomas Livingston, signed a “stand-still agreement” with Michael Welch, the medical school’s chief executive oficer, promising the state wouldn’t move to take back the property for three years. The deal was drafted by Davis, the attorney later arrested for having child pornography on his work computer.

July 18, 2003 — Livingston, whose grandfather Park Livingston helped create the medical district, quit shortly before the abandoned school was demolished, a project that cost the state about $1.1 million, records show. In exchange for the state demolishing the building, the school gave two of the 9.5 acres to the commission.

Jan. 20, 2004 — Glennon struck a deal with the owner of Superior Ambulance, David Hill III, to pay $5.75 million for nearly 10 acres at 2020 W. Ogden. But they never finalized the deal, which had been reached a few months after Hill’s brother-in-law, Scott Fawell, went to prison for using state resources to help Secretary of State George Ryan win the governor’s race in 1998.

June 2004 — The FBI issued subpoenas to the medical school, by then renamed the Rosalind Franklin University of Medicine and Science. And Welch, the president, fired Glennon. Levine resigned from the board.

May 4, 2005 — A federal grand jury indicted Levine for his role in kickback schemes involving construction projects while he served on the medical school’s board and also on the state board that oversaw hospital construction under Blagojevich. Levine eventually pleaded guilty and agreed to cooperate with federal prosecutors, helping them win the convictions of Blagojevich, former Chicago Ald. Edward R. Vrdolyak and political fixer Tony Rezko. Levine, who got a 67-month prison sentence, is due to be released in 2017.

July 20, 2005 — The grand jury indicted Glennon over $700,000 he was paid for work on 2020 W. Ogden, saying he was illegally paid out of tax-exempt bonds issued to build an addition to the medical school. Glennon eventually pleaded guilty to a felony, got two years of probation and lost his law license.

Glennon acknowledged in court documents that Levine and the school board wanted to sell 2020 W. Ogden to make money for the school but feared the state would take it back without compensation. “Because CMS [Chicago Medical School] had essentially abandoned the 2020 property, it was in danger of losing the property to the Chicago Medical District because of a reverter clause triggered by non-use for a medical purpose contained in the orginal documents that had conveyed the property to CMS,” according to the 16-page sentencing memoradum Glennon signed two years ago.

“It was also critical to CMS because the school’s future depended on turning the 2020 property into a revenue-generating asset, and upgrading its facilities and programs at the Lake County campus to meet the concerns of academic reviewing entities and to jumpstart its fund-raising activities with third parties.”

Jan. 24, 2006 — The Illinois Finance Authority issued $40 million in bonds for the district to fund various projects, the most expensive being the $8.8 million purchase of the remaining 7.5 acres at 2020 W. Ogden from the medical school. The commission never formally considered using the reverter clause to retake the now-vacant land.

“The problem was that, first of all, the reverter is a very draconian remedy,” says attorney Michael Leroy of Neal & Leroy, a clout-heavy law firm that has helped the commission and other government agencies acquire real estate. “There was a question as to whether we would be successful in getting the property back without paying for it.

“There’s no guarantee the court is going to give the property back to the commission without compensation . . . I think the commission was trying to use it as a means to get the medical school to redevelop the property because it was definitely a problem.”

There were no negotiations over the property, according to the medical school. “The Illinois Medical District presented the university with an offer of $8.8 million,” according to a written statement from the school. “We accepted their offer without negotiation in the hopes that the property could be repurposed to meet the district’s needs.”

March 2012 — Quinn and Preckwinkle replaced five of the seven commissioners following a report from Illinois Auditor General William Holland warning that the bond issue had created financial problems for the commission. Quinn gave the commission a $4.5 million grant and put its finances under the control of his director of capital markets, John Sinsheimer. “The projects the bonds were supposed to build weren’t built,” Sinsheimer says, explaining why the commission turned to other projects, including a Costco store, to bring in revenue it had anticipated receiving from the still-vacant 2020 W. Ogden. The commission owes $36 million on the bonds.

September 2013 — Higgins Development Partners — owned by Jack Higgins, a longtime friend of the Daley family — was selected to redevelop 2020 W. Ogden with offices, stores, apartments and a hotel, his second deal with the commission. Higgins and his former partner, Penny Pritzker, who is now President Barack Obama’s commerce secretary, built the FBI building on land purchased from the medical district for $10.6 million — the money the commission never turned over to the state treasurer.

November 2013 — Higgins backed out of the project at the commission’s urging after the Sun-Times reported that he and his wife Martha were behind in paying their federal income taxes — which now totals more than $2.8 million. The commission then sought new proposals.

July 22, 2014 — Higgins was among a new group of developers — also including longtime City Hall insider Elzie Higginbottom — chosen by the commission for the $300 million redevelopment project. Though the commission won’t release the agreement, it says the developers will lease the land for 75 years with an option for another 75 years. Higgins was allowed back in on the deal, according to district officials, because he has worked out a payment plan with the Internal Revenue Service to pay his back taxes.

Higgins and his team initially are to pay the district $1 million a year, according to executive director Warren Ribley, who says the district won’t release the details of the agreement until the developers finish their “due diligence.”

Besides the Higgins team, the commission also got proposals for 2020 W. Ogden from three other developers, including one that included Tur Partners, the company created by former Mayor Richard M. Daley. Daley’s group dropped out before a developer was chosen.