"We the citizens of Bowling Green and Warren County charge our political leaders and law enforcement officials to get to the bottom of this financial disaster regarding the downtown parking structure wrap. We trust that they will fulfill their obligations to do so and find whoever is guilty of misuse of public monies whether by indictment and jury trial or other means. On the other hand, we depend on the legal system to find those accused not guilty if that be the case. Regardless, we the taxpayers deserve the absolute truth."-Galen A. Smith Sr.
Suit outlines alleged effort to appropriate tax dollars (A Top Front Page News Story Published By The Bowling Green Daily News)
By WES SWIETEK wswietek@bgdailynews.com
Sep 13, 2017
Clinton(from left), Chris and Ed Mills pose for a photograph June 21, 2012, on the downtown parking garage. The city filed a federal civil lawsuit Monday in U.S. District Court in Bowling Green regarding the development. It names as defendants Mills Family Realty and its predecessor MR Group; the officers of that group, Ed Mills, Chris Mills and Clinton Mills; and Bowling Green businessman Rick Kelley. The lawsuit seeks a jury trial and unspecified damages.Miranda Pederson/Daily News
A lawsuit filed by the city of Bowling Green regarding the initial development of the wrap around the downtown Bowling Green parking garage, then known as Hitcents Park Plaza, paints a picture of businessmen looking to pad their pockets with taxpayer money.
The defendants, however, call the suit frivolous and a waste of taxpayer money.
The city filed a federal civil lawsuit Monday in U.S. District Court in Bowling Green regarding the development.
It names as defendants Mills Family Realty and its predecessor MR Group; the officers of that group, Ed Mills, Chris Mills and Clinton Mills; and Bowling Green businessman Rick Kelley. The lawsuit seeks a jury trial and unspecified damages.
A civil complaint represents only a plaintiff’s claim, and the defendants have the right to file a response in court. No formal responses had been filed as of Wednesday morning, according to court filings.
The suit accuses the defendants of “fraud, breach of contract, breach of fiduciary duty, civil conspiracy and conversion. Defendants, engaged in – and conspired to engage in – a pattern of racketeering activity intended to defraud the Plaintiff out of millions of dollars. Defendants also committed fraud, violated their fiduciary and contractual duties to Plaintiff, and engaged in a civil conspiracy to enrich themselves at the expense of the Plaintiff.”
The suit alleges that “as a direct result of Defendants’ tortious and fraudulent conduct, Plaintiff has suffered and continues to suffer several million dollars in damages.” The suit alleges that the defendants “wrongfully diverted and illegally used bond funds ... to establish and operate their own private businesses.”
Mills Family Realty was chosen in 2012 as the developer of the project, which was financed by about $22 million in county bonds.
Mills Family Realty hired Kelley, the former owner of Mariah’s restaurant, as a consultant for the development. Mariah’s eventually moved into Hitcents Park Plaza.
The suit alleges that Bowling Green Mayor Bruce Wilkerson in May 2013 asked members of the Mills family whether Kelley was involved in the restaurants in the development, with Wilkerson expressly stating “that the bond funds are not a ‘Rick Kelley Bankruptcy Bailout Fund,’ ” according to the suit. In response, Wilkerson was assured that Kelly wasn’t involved in the project, according to the suit, but that “in fact, upon information and belief, Rick Kelley eventually earned as much as $2.07 million dollars from his involvement with the Project.”
The suit alleges that the defendants improperly commingled various revenue in the project, altered an operating agreement without the city’s knowledge to operate their own businesses and used and overspent Tax Increment Financing District revenue “on working capital for their own benefit, resulting in the project’s collapse.”
Ed Mills and his sons Clinton and Chris Mills are also affiliated with the project’s initial namesake tenant, the Hitcents technology firm.
Mills Family Realty had a subsidiary subtenant known as MR Group to operate restaurants in the development.
“MFR ultimately spent over $12.7 million on tenant improvements for restaurants and banquet space leased and operated by its subsidiary, MR Group. (An amount over $9 million more than the total allowance in the construction agreement, and over $7 million more than that allowed in the sublease agreements.) This was done for the sole benefit of Mills Defendants, who are all owners and operators of both MFR and MR Group,” the suit alleges.
The alleged mismanagement led to the project’s troubles and the city “did not discover – nor could it reasonably have discovered – this fraudulent conduct ... until sometime in 2014-15, when the Project unraveled and Defendants’s fraudulent conduct came to light.”
The defendants’ actions, the suit argues, amount to a violation of the federal racketeering statutes, common law fraud, breach of contract, conspiracy and five other related offenses. It asks for damage amounts to be determined, but says damages are “believed to exceed $500,000” on each of the nine counts.
Clinton Mills said Tuesday the Millses feel “confident that the city’s basis for the claim are inaccurate.”
It is “unfortunate that the city is wasting taxpayer money on such an exercise. We look forward to defending our position,” he said.
Kelley’s attorney, Alan Simpson, called the suit “frivolous” and “an outrageous waste of taxpayer money.”
The suit stems from issues related to the development of the wrap around the downtown parking garage, which became public when contractors filed more than $2 million in liens in February 2015 on the almost-complete project, saying they were not being paid for their work. Restaurants in the building also closed and several lawsuits followed. Ultimately, the county issued a new $30 million bond to pay contractors and finish the project with a new developer.
A review conducted by then-state Auditor Adam Edelen and released in December 2015 concluded that there was overspending on the project of $9.7 million, resulting in a $4.5 million deficit; poor oversight on the project by elected officials; and numerous, often contradictory, agreements guiding the project.
“The city, especially the mayor, have been trying to vilify Rick Kelley for years now. This is the latest attempt to do so,” Simpson said Tuesday. “This lawsuit is frivolous and they know it. Every one of the expenditures was approved by the bond counsel ... there is no mistake in that. Why wasn’t the city’s bond counsel sued? The city all along knew bond proceeds were being used for working capital.”
Warren County Commonwealth’s Attorney Chris Cohron said in December 2015 that his office is reviewing the state audit, but he has not since provided an update on the status of his investigation.
Simpson said Tuesday that the FBI had also reviewed the case “and has taken no action. For the city to file (a suit claiming violation of federal laws) flies in the face of law enforcement.”
Last month, the Bowling Green City Commission in a 4-1 vote approved allowing the Keating Muething & Klekamp law firm of northern Kentucky to file the civil action, with only Commissioner Brian “Slim” Nash voting no. Nash said he did not believe the city could recoup any money through the suit and that it would place a black cloud over continuing downtown development.
The case was assigned to the docket of U.S. District Court Chief Judge Joseph H. McKinley Jr., according to court records.
– Follow News Director Wes Swietek on Twitter @BGDNgovtbeat or visit bgdailynews.com.
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