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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
CHRISTOPHER JEROME, an individual, LEO JEROME, an individual, and STORY COMPANIES, LLC, a Michigan limited liability company,
Plaintiffs, v. Case No.: Hon.
PLAINTIFFS DEMAND A TRIAL BY JURY JOEL FERGUSON, an individual, VIRGIL BERNERO, the Mayor of the City of Lansing, in his individual capacity, LANSING ECONOMIC AREA PARTNERSHIP, INC., a Michigan non-profit corporation, ROBERT L. TREZISE, JR., an individual, CLARK CONSTRUCTION SERVICES, LLC, A Michigan limited liability company, CHARLES CLARK, an individual, FRANK KASS, an individual, CONTINENTAL DEVELOPMENT, INC., an Ohio corporation, HALLMARK CAMPUS COMMUNITIES, an Ohio partnership, FERGUSON DEVELOPMENT, LLC, A Michigan limited liability company, CHRISTOPHER STRALKOWSKI, an individual, FERGUSON/CONTINENTAL LANSING, LLC, A Delaware limited liability company, and RED CEDAR INVESTOR, LLC, a Michigan limited liability company,
Defendants.
COMPLAINT
Plaintiffs, Christopher Jerome, Leo Jerome, and Story Companies, LLC, by and though their attorneys, the Mike Cox Law Firm PLLC, for their Complaint against Defendants, Joel
Ferguson, Virgil Bernero, the Lansing Economic Area Partnership, Inc., Robert L. Trezise, Jr.,
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Clark Construction Services, LLC, Charles Clark, Frank Kass, Continental Development, Inc.,
Hallmark Campus Communities, Ferguson Development LLC, Christopher Stralkowski,
Ferguson/Continental Lansing, LLC, and Red Cedar Investor, LLC, state as follows:
INTRODUCTION
1. Defendant Joel Ferguson (“Ferguson”) has been running and continues to run a racketeering enterprise (“Ferguson Enterprise”)1 with his son David Ferguson and son-in-law,
Christopher Stralkowski (“Stralkowski”) through their company, Ferguson Development LLC
(“Ferguson Development”). Operating through Ferguson Development, Ferguson, David
Ferguson, and Stralkowski misuse Ferguson’s political influence to create a “pay-to-play” system for municipal and state contract approvals, political favors, and access to public tax dollars related to public contracts for highly profitable land development projects focused primarily in and around the City of Lansing, but extending throughout the State of Michigan.
2. Here, Ferguson and his cohorts have conspired with the Mayor of Lansing, Virgil
Bernero, (“Mayor Bernero” or “Bernero”) his staff, the Lansing Economic Area Partnership
(“LEAP”), LEAP CEO Trezise, and other local economic development officials controlled by
Mayor Bernero to rig the bidding process for public contracts, exchange gifts and bribes for political favors, and extort Plaintiffs in a successful effort to steal a development called the Red
1 The Ferguson Enterprise consists of Joel Ferguson, Christopher Stralkowski, and Ferguson’s company, Ferguson Development, which has been Ferguson’s instrument of corruption and improper political influence for personal financial gain for over two decades. Indeed, Ferguson lists Ferguson Development LLC on his Michigan State University business cards and Ferguson Development’s contact information is also listed on Ferguson’s trustee webpage. Stralkowski has been involved in the enterprise as project manager and officer of Ferguson Development, the conduit for Ferguson’s messages to the Plaintiffs, as well as the various political officials, and has also been involved in the political aspect of the Enterprise by serving as Ferguson’s campaign manager. Page 2 of 62
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Cedar Renaissance Project (formerly known as the Capital Gateway Project), (the “Project), which the Defendants call a “game changer” and worth up to $380 million. In stealing the Project from the Plaintiffs, Ferguson and his co-conspirators not only threatened economic harm to Plaintiffs, but have used and continue to use their political access and influence to gain governmental approvals, funnel public money to themselves, and maximize their private profits with the assistance of governmental and quasi-governmental organizations such as the Michigan State
Housing Development Authority (“MSHDA”), the Lansing Economic Development Corporation
(“LEDC”), Defendant LEAP, the Ingham County Drain Commissioner’s Office, the Lansing City
Council, and the Michigan State University Board of Trustees.
3. Such is the measure of Ferguson’s power that he routinely dispatched Mayor
Bernero and LEAP CEO Bob Trezise as messengers to deliver financial demands to Chris and Leo
Jerome (collectively, “the Jeromes.”) So brazen was and is Ferguson’s enterprise that he even wrote a demand letter in December of 2013 to the Mayor Bernero setting forth his demands for equity shares of the Project from the Jeromes. Ferguson was clear that this putatively City of
Lansing-run project would be taken from the Jeromes by Bernero if Ferguson’s demands were not met. Indeed, Ferguson’s demands continued to escalate, and he made good on his threats; ordering
Mayor Bernero and LEAP CEO to take the project RFQP award from the Jeromes—and in violation of Lansing contracting ordinances—award the Project on a no-bid basis to Ferguson’s company.
4. Such strong-arm racketeering tactics are a matter of course and the way of doing business for Ferguson. During his almost fifty-plus years in politics, Ferguson and companies associated with him have obtained tens-of-millions in public dollars and tens-of-millions in private
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profits from extortion schemes, bid-rigging, and political bribery in public-sector contracting, which include an empire of public housing projects and state government buildings (including the controversial Triangle Project Michigan State Police Headquarters).
5. This illegal racketeering, violations of 42 U.S.C. § 1983, and tortious interference with the Plaintiffs’ business expectancies continue as Ferguson and his co-conspirators’ currently attempt to misuse this same political power to push the Ingham County Board of Commissioners to put up $35 million in public bond money for Ferguson’s and the other defendants’ private gain.
6. This lawsuit seeks damages from Defendants pursuant to the civil Racketeer
Influenced and Corrupt Organizations Act (“RICO”) 18 USC § 1961 et seq., 42 U.S.C. §1983 for deprivation of Plaintiffs’ property without due process of the law, and state law claims of tortious interference with business expectancies. Plaintiffs respectfully request this Court award them, inter alia, compensatory and punitive damages caused by Defendants’ wrongful and tortious conduct related to Defendants’ fraudulent and extortionate racketeering scheme, specifically the scheme to steal the Project.
JURISDICTION AND VENUE
7. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §
1331 because Plaintiffs’ claims arise under the United States Constitution and laws of the United
States.
8. Among other things, Defendants have violated the Racketeering Influenced and
Corrupt Organizations Act (“RICO”), and this Court has jurisdiction over this matter pursuant to
18 U.S.C. § 1964(a).
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9. Further, Defendants have violated Plaintiffs’ constitutional rights and this Court has jurisdiction under 42 U.S.C. § 1983 and § 1988.
10. This Court has supplemental jurisdiction over the state law claims pursuant to 28
U.S.C. § 1367(a) because they form part of the same case or controversy as the federal claims.
11. This Court has personal jurisdiction over all Defendants.
12. Venue is proper in this judicial district pursuant to 8 U.S.C. § 1965 and 28 U.S.C.
§ 1391 because one or more Defendants is subject to personal jurisdiction in this judicial district and resides in this district.
PARTIES
11. Plaintiff, Christopher “Chris” Jerome resides in Chicago, Illinois and is a citizen of the State of Illinois.
12. Plaintiff Leo Jerome resides in Holland, Michigan and is a citizen of the State of
Michigan.
13. Plaintiff Story Companies LLC, is a Michigan limited liability company with its principal place of business in Michigan with an address of 1919 S. Creyts Road, Lansing, MI
48917.
14. Defendant, Joel Ferguson, is a principal and member of Ferguson Development
LLC. Ferguson is also the chairman of the Board of Trustees at Michigan State University
(“MSU”). Ferguson is a citizen of the State of Michigan.
15. Defendant, Virgil “Virg” Bernero is the mayor of the City of Lansing, a citizen of the State of Michigan, and is being sued in his individual capacity only. Defendant Bernero is not entitled to governmental immunity because he has deprived Plaintiffs of their federal constitutional
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rights in violation of 42 U.S.C. § 1983. None of Bernero’s actions to deprive Plaintiffs of their rights are otherwise protected by governmental immunity.
16. Defendant, Lansing Economic Area Partnership, “LEAP”, is an Internal Revenue
Service 501(c)(6), Michigan not-for-profit corporation with an address of 500 E. Michigan
Avenue, Ste. 202, Lansing, Michigan with its principal place of business located in Lansing,
Michigan. Through a contract between the Lansing Economic Development Corporation—a 9- member board appointed by Mayor Bernero—and LEAP, the City of Lansing uses LEAP to act as its agent to lead, manage, control, and handle all economic development in the City. LEAP is funded by Lansing area businesses, and prominently promotes these contributors as “investors” and “preferred vendors” on its website.
17. Defendant, Robert (“Bob”) L. Trezise (“Trezise”), is the Chief Executive Officer of LEAP. Trezise is a citizen of the State of Michigan.
18. Defendant, Clark Construction Services, LLC, (“Clark Construction”), is a
Michigan limited liability company with an address of 3535 Moores Drive, Lansing, Michigan, with its principal place of business located in Lansing, Michigan. Clark Construction is a building and civil construction general contracting firm.
19. Defendant, Charles (“Chuck”) Clark (“Clark”), is a principal of Clark Construction.
Clark is a citizen of the State of Michigan.
20. Defendant, Frank Kass (“Kass”), is a principal of Continental Development, Inc.
Kass is a citizen of the State of Ohio.
21. Defendant, Continental Development, Inc., (“Continental”), is an Ohio corporation, with its principal place of business in Ohio.
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22. Defendant, Hallmark Campus Communities (“Hallmark”), is an Ohio partnership, with its principal place of business in Ohio.
23. Defendant, Ferguson Development, LLC (“Ferguson Development”), is a
Michigan limited liability company with its principal place of business located in Lansing,
Michigan at 1223 Turner Street, Lansing, MI 48906.
29. Defendant Christopher Stralkowski (“Stralkowski”) is an executive project manager and officer of Ferguson Development and citizen of the State of Michigan. Stralkowski is also Joel Ferguson’s son-in-law and married to Joel Ferguson’s daughter, Jennifer Ferguson, who works for the Michigan Housing and Development Authority (“MHSDA”). Defendant
Christopher Stralkowski ran Mr. Ferguson’s last campaign for MSU Trustee as campaign manager.
He has been and remains a key political and business advisor to Ferguson for many years—they have known each other for at least two decades—on both local Lansing political issues and development projects.
24. Defendant, Ferguson/Continental Lansing, LLC is a Delaware limited liability company with its principal place of business located in Lansing, Michigan. Defendants Red Cedar
Investor LLC and Continental Development are members of Ferguson/Continental Lansing, LLC.
25. Defendant, Red Cedar Investor, LLC is a Michigan limited liability company with its principal place of business located in Lansing, Michigan. Joel Ferguson is a member of Red
Cedar Investor.
26. None of the Defendants are entitled to governmental immunity.
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COMMON ALLEGATIONS
The Enterprise
27. The Ferguson Enterprise consists of Joel Ferguson, Christopher Stralkowski, and
Ferguson’s company, Ferguson Development, which has been Ferguson’s instrument of corruption and improper political influence for personal financial gain for over two decades. Indeed, Ferguson lists Ferguson Development LLC on his Michigan State University business cards and Ferguson
Development’s contact information is also listed on Ferguson’s trustee webpage. Stralkowski has been involved in the Enterprise as executive project manager and officer of Ferguson
Development, the conduit for Ferguson’s messages to the Plaintiffs, as well as the various political officials, and has also been involved in the managerial and political aspects of the Enterprise by serving as Ferguson’s campaign manager. Stralkowski is also married to Ferguson’s daughter,
Jennifer, who is employed by the Michigan State Housing Development Authority (“MSHDA”).
28. As detailed in this Complaint, Defendants Ferguson, Stralkowski, and Ferguson
Development (who are culpable persons) have conducted the Ferguson Enterprise in a manner that affects interstate commerce, through a pattern of racketeering activity (such as fraud, extortion, and bribery of public officials), to injure Plaintiffs’ business interests and expectancy as the winning RFQP bidder for the Project and deprive Plaintiffs of the profits and other financial benefits of being the “selected Developer.”
29. The other Defendants have conspired with the culpable persons to assist the
Enterprise in achieving its objectives, as detailed in this Complaint. The other Defendants have also deprived Plaintiffs of their constitutional rights to due process, and have otherwise tortiously
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interfered with Plaintiffs’ business expectancies in the RFQP and separately with an opportunity for the Plaintiffs’ joint development venture with Developer A.
Joel Ferguson’s and the Ferguson Enterprise’s Misuse of Ferguson’s Political Influence to Obtain Financial Windfalls: Ferguson’s Background and Historical Foundations of the Ferguson Enterprise
30. Joel Ferguson is one of the State’s longest-tenured and most influential political power brokers: from his initial election as Lansing City Council member in 1967, to his current decade-long chairmanship of the Michigan State University of Trustees, where he controls hundreds of millions of dollars in annual spending, Ferguson has wielded his political influence for his private and corrupt gain.
31. After his initial election in 1967 to the Lansing City Council, Ferguson has gained influence and patronage through a long list of politically-important appointments and elections, including, inter alia:
a. Chair of the Bobby Kennedy campaign for President in Michigan in 1968.
b. Chair of the Michigan delegation to the Democratic National Convention in
1972.
c. Chair of the Jesse Jackson campaign for President in Michigan in 1988.
d. In 1988, Ferguson began his 20-year plus membership on the Democratic
National Committee (“DNC”) where he served on and chaired many powerful
committees as well as becoming a vaunted presidential “Super delegate.”
e. Becoming a personal friend to former President Bill Clinton and former
Secretary of State and Democratic nominee for President Hillary Clinton.
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f. As a sign of Ferguson’s close relationship with Bill and Hillary Clinton, in
1996 President Clinton gave Ferguson a coveted and powerful presidential-
appointment to the Board of Directors of Federal Home Loan Mortgage
Corporation (“Freddie Mac”). Because of Freddie Mac’s dominant influence on the
building and financing of residential housing in the United States, this appointment
and the personal and political relationships developed there, served and continue to
serve Ferguson’s personal pecuniary gain as an investor-owner of thousands of
units of HUD Section 8 housing.
g. In 1986, Ferguson was elected to the Michigan State University Board of
Trustees. In addition to serving on the Board for the past 30 years, Ferguson has
served as the powerful Chair of the Board of Trustees for the past decade. As Chair,
Ferguson influences the spending of hundreds of millions of dollars in university
funds on items like construction expenditures as well as joint-venture financing.
Much of this financing goes to benefit Ferguson’s long-time friend and business
partner, Defendant Chuck Clark and Clark’s family-owned business, Clark
Construction.
h. Ferguson’s influence does not stop at the partisan shoreline. In February of
2016, Governor Rick Snyder appointed Ferguson to the Flint Receivership
Transition Advisory Board in attempt to defuse criticism of Snyder’s handling of
the so-called Flint Water crisis. https://www.google.com/webhp?
sourceid=chrome-instant&ion=1&espv=2&ie=UTF-
8#q=joel+ferguson+snyder+appointment&start=10. According to Ferguson,
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Governor Snyder frequently calls on Ferguson to get involved in state MSHDA
development projects.
The Ferguson Enterprise and Influence Peddling at Freddie Mac and MSHDA to Build A HUD Section 8 Empire
32. Section 8 of the Housing Act of 1937 (42 U.S.C. § 1437f) authorizes government payment of rental housing assistance through the use of voucher or direct cash payments to private landlords for the benefit of millions of low-income households.
33. Because Section 8 provides for guaranteed payment by cash or voucher, it is highly desirable to become a recognized Section 8 housing vendor. The guaranteed payment also facilitates access to low-cost financing for approved Section 8 developments.
34. For decades, Freddie Mac has been at the forefront of providing funds at very favorable rates and terms to Section 8 housing tract developers who meet Freddie Mac’s standards. http://www.freddiemac.com/multifamily/product/pdf/hud_section_8_financing.pdf.
35. In Michigan, the Michigan State Housing Development Authority (“MSHDA”) manages the federal grants of Section 8 vouchers and financing of Section 8 housing stock in
Michigan. http://www.sectioneightapplication.com/apply/mi
36. The MSHDA board consists of political appointees of the Governor. http://www.michigan.gov/mshda/0,4641,7-141-7559_49253_64548---,00.html.
37. To further facilitate the availability of low-income housing, such as Section 8,
MSHDA provides low-income housing developers with advantageous low interest financing. http://www.michigan.gov/mshda/0,4641,7-141-5587_5589-289060--,00.html.
38. The intersection of Section 8 housing, a Freddie Mac board governed by presidential political appointees, and local agencies like MSHDA governed by gubernatorial
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political appointees, permits the politically influential such as Ferguson to gain great wealth with little risk or investment. Such is the widespread use of this practice that even Paul Manafort, who was until recently the campaign manager for Republican presidential nominee Donald Trump, used his political influence to get Section 8 subsidies over 30 years ago. See, http://www.nj.com/politics/index.ssf/2016/04/trumps_convention_manager_once_embroiled_in_ nj_hou.html.
39. According to 2015 testimony by Ferguson in a case before the Cook County
(Illinois) Circuit Court, Ferguson entered world of Section 8 housing in the 1970s, without any construction or housing experience at all—only political connections – by preselling units that were not even built. “So I [Ferguson] presold it for 360,000-some and then I had to build it. I did not know how to build it.”
40. According to Ferguson, he now owns 3,000 apartment units, and manages another
2,000, in 17 different residential apartment complexes across Michigan, from Detroit to Lansing to Grand Rapids, from Adrian to Kalamazoo, from Traverse City to Bay City.
41. While building this Section 8 housing empire, Ferguson cemented his relationship with MSHDA by using his political connections to have MSHDA hire his daughter, Jennifer
Ferguson, who is also the wife of Defendant Stralkowski.
42. Ferguson recounted to the Cook County Circuit Court his ascendancy to the Freddie
Mac board in the 1990s, which proved indispensable in building his Section 8 empire: “Bill
Clinton got elected President. He liked me, and he put me on Freddie Mac for five years. Let me go to the White House, let me fly with him, have me play golf with him….”
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43. At Freddie Mac, Ferguson increased his political influence and wealth, while doing favors for his political friends and allies. In describing his influence, Ferguson told the Cook
County Circuit Court that while at Freddie Mac, he (Ferguson) once steered $500,000 to his friend
Jesse Jackson’s Rainbow Push Coalition.
44. Ferguson even bragged to Plaintiffs Chris and Leo Jerome that it was his
(Ferguson’s) influence that secured an appointment for former Michigan Governor John Engler’s wife, Michelle Engler, to the Freddie Mac Board of Directors in 2001.
The Ferguson Enterprise Using Influence Peddling to Build State-Office Buildings in Lansing
45. According to his own Cook County testimony, Ferguson began building State of
Michigan office buildings in the late 1990s with the construction of the Anderson House Office
Building, which houses the offices of the Michigan House of Representatives.
46. Ferguson and his partners originally leased the building to the House of
Representatives at a very high rate. Ferguson characterized the deal with the State of Michigan as
“a perfect deal” because the terms were so advantageous to him and attributed that advantage to political friendship and favoritism: “That was a perfect deal because I knew the State would never cancel their own lease. The speaker [of the House of Representatives] who is a friend of mine, he asked me, your rent is too high and then paying property taxes is a triple net lease, and he said, we would like to buy it.”
47. Ferguson and Ferguson Development have subsequently developed a number of
State of Michigan office buildings around Michigan on very lucrative and advantageous terms.
48. Perhaps one of the most well-known and controversial projects was the building of the so-called Triangle Project Michigan State Police (“MSP”) Headquarters in downtown Lansing.
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This project was the subject of much public, media, and legislative scrutiny for close to a decade because it was a $45 million dollar no-bid award given to Ferguson to build the MSP Headquarters during an economic downturn.
49. For close to a decade, legislators from both parties fought against building the
Triangle Project. See, for example, https://www.legislature.mi.gov/(S(i2tv0cqryy1m0f1eb4si0jxy))/documents/2007-
2008/resolutionintroduced/Senate/pdf/2007-SIR-0129.pdf;
50. While funding was delayed for many years, ultimately Ferguson convinced former
Governor Granholm to authorize the construction monies for the Triangle Project late in her administration.
51. At an August 27, 2012 meeting at the restaurant Troppo in Lansing, while discussing the Red Cedar Renaissance Project (“Project”) with the Jeromes, Ferguson boasted that the Triangle Project no-bid award was in exchange for Ferguson’s influence in getting the wife of then Michigan Governor John Engler, Michelle Engler, appointed to the Board of Directors at
Freddie Mac.
52. During a series of meetings between July and November of 2012, Ferguson told
Chris Jerome that Defendant Chuck Clark was Ferguson’s partner in the Triangle-Michigan State
Police Headquarters deal and that together Ferguson and Clark made over $28 million on the
Triangle Project.
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The Ferguson Enterprise and Influence Peddling in Higher Education: Conflicts of Interest and Steering Contracts to Friend and Business Partner, Defendant Chuck Clark.
53. Since his initial election to the MSU Board of Trustees in 1986, Ferguson has served almost 30 years. For the past decade, Ferguson has held the powerful position of Chairman of the MSU Board of Trustees.
54. As importantly, Ferguson is on the MSU Trustee Finance Committee which controls and recommends the awarding of construction contracts for vote by the full Board. https://trustees.msu.edu/board-committees/index.html; page 11 of https://trustees.msu.edu/policies/Policy-Manual-Updated-2016-05-07.pdf
55. Ferguson and Clark have an ongoing business partnership relationship—as well as what Ferguson described to Chris Jerome as a “business referral relationship”—in construction projects throughout the Lansing metropolitan area. For instance:
a. On the Ferguson Development company website, Ferguson Development listed
Mr. Clark and Clark Construction as partners with Ferguson Development in
developing and building projects across Michigan, including the Red Cedar/Capital
Gateway Project at issue in this matter. (Ex. 1, Ferguson Development Website.)
b. During 2012, both Joel Ferguson and Chuck Clark told the Jeromes on many
occasions that they (Ferguson and Clark) were partners in many development and
construction deals, not just the controversial MSP Headquarters/Triangle Project.
c. On December 11, 2012, during one of Ferguson’s many attempts to extort an
ever increasing share of the Project from the Jeromes, he also demanded an
ownership interest for Chuck Clark individually, with the ability of Clark to “break”
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any management deadlocks between the Jeromes and Ferguson. (Ex. 2, Dec. 11,
2012 letter from Ferguson to Bernero.)
56. As Chair and member of the Finance Committee, Ferguson has steered hundreds of millions of dollars in valuable university contracts to Defendant Chuck Clark and his company,
Defendant Clark Construction. Some of these contracts include:
a. $88 million for the MSU Grand Rapids Biomedical Research Center at
Secchia Medical School. It is currently under construction,
https://app.oxblue.com/open/msu/grrc, with an anticipated opening in 2017;
b. $69 million for the MSU Bioengineering Research Facility on campus in East
Lansing;
c. $49.8 million for the MSU Brody Hall dormitory expansion and renovation;
d. $66.5 million for the MSU Spartan Stadium expansion;
e. $17.1 million for the MSU Food Science Building;
f. $13.2 million for the MSU Shaw Hall dormitory dining room renovations;
g. $10 million for the MSU University Library Expansion/Renovation;
h. 10.2 million for MSU Emmons Hall dormitory renovations;
i. $8.5 million for MSU Clinical Center Facility C Wing; and,
j. $2.25 million for MSU Union renovation.
57. Like most major universities, Michigan State University has a conflicts of interest policy that applies to its Board of Trustees, including Ferguson. https://trustees.msu.edu/policy- manual/.
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58. Notwithstanding this policy, Ferguson has routinely used his political influence and the power of the MSU Board of Trustees to benefit his partner Defendant Clark in clear violation of the MSU Board of Trustees conflict of interest policy.
59. For instance, the Policy states, inter alia:
a. “II (a) A conflict of interests or other opportunities for personal benefit may
compromise, or reasonably appear to compromise, the Trustee independence of
judgment in fulfilling his/her Board duties” (emphasis added);
b. “(b) Trustees will endeavor to remain free from the influence of, or the
appearance of any conflicting interest in fulfilling board duties...” (emphasis
added).
c. “III. Contracts. No Trustee shall have a pecuniary interest, whether direct or
indirect, in any contract with the University that would induce or have the potential
to induce action on the part of the Trustee to promote the contract for his/her own
personal benefit.” (emphasis added.)
62. Upon information and belief, Ferguson is a partner of Defendants Chuck Clark and
Clark Construction in the MSU construction projects that he voted to approve. Even if Ferguson is not directly involved, his ongoing partnerships with Chuck Clark and Clark Construction violate the MSU Board of Trustees’ conflict of interest policy because, in addition to these relationships appearing to compromise Ferguson’s judgment as a Trustee, these relationships directly and indirectly have the potential to induce Ferguson to award contracts to his past and current partners for quid pro quos on current or future projects.
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63. Ferguson’s approval of the MSU-Clark Construction contracts in excess of $250 million also violate Michigan Compiled Laws 15.321 et seq,, which generally prohibit public servants like Ferguson from engaging in interested and conflicted contracts.
The Ferguson Enterprise and the City of Lansing
64. According to the Lansing Economic Development Corporation, MSU is the Greater
Lansing area’s second largest employer with 10,500 employees. https://msu.edu/state- transparency-reporting/assets/documents/2015-16Budgets.pdf. MSU spends close to $1.3 billion every year in the Greater Lansing area. https://msu.edu/state-transparency- reporting/assets/documents/2015-16Budgets.pdf.
65. As Chairman of the MSU Board of Trustees, Ferguson has an outsized role in decisions that greatly impact the Greater Lansing area’s public and private sector hiring and payroll decisions, private and public sector capital expenditure decisions, and greatly affect the economies of Lansing, East Lansing, and Ingham County.
66. Whether it is through relationships he built as a Lansing city councilman or his connections with political figures such as President Clinton or Governor Snyder or his roles at
MSU, Ferguson has an outsized political role in the City of Lansing—even though he had not held an elected position with the City of Lansing for over 40 years.
67. In both oral and written communications during the course of the Project, Ferguson told the Jeromes he controls four of the seven votes on the Lansing City Council.
68. Indeed, Ferguson told the Lansing City Pulse, a news magazine, about a 4 to 2 City
Council vote preventing a Mayor Bernero-backed plan to sell a Lansing-owned parking lot to the
Lansing Community College. Ferguson indicated that he would back the plan unless the City first
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considered a competing proposal by Ferguson. In Ferguson’s own words, “I have a lot of political influence.” http://lansingcitypulse.com/article-6470-a-one-sided-look-behind-the-curtain.html
Chris Jerome’s Concept and the Birth of the Capital Gateway Project
69. Father Leo and son Chris Jerome are part of the Story Family whose members have been prominent car dealers and civic boosters in the greater Lansing area for over 70 years. The
Jeromes owned, inter alia, two car dealerships—Story Oldsmobile “Story Olds” and Sawyer
Pontiac—located across from each other on the key commercial strip of Michigan Avenue, which is a gateway between the cities of Lansing and East Lansing. For the past 60 years, these properties have been highly valuable because of their prominent and key location.
70. Leo Jerome ran the two dealerships for most of the last 40 years. However, in 2009, with the closure of Oldsmobile by General Motors, and then subsequent bankruptcies of General
Motors and Chrysler, Leo Jerome closed Story Olds and Sawyer Pontiac. The properties, which total approximately 8 acres, became vacant for the first time in decades.
71. During this time, Chris Jerome—a Harvard Business School graduate who worked in Silicon Valley managing investment funds with assets as much as $6 billion—conceived and began to develop a plan to recruit major national investors and retailers to Lansing to transform the vacant parcels of land into a large, mixed use development.
72. Chris Jerome envisioned not only a mixed-use project involving the Jerome family properties, but also a much larger game-changing project that included the closed 60-acre City of
Lansing-owned Red Cedar municipal golf course.
73. Chris Jerome began contacting professional developers across the nation. Some of the parties he contacted included industry leaders such as Carpenter & Company of Cambridge,
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Massachusetts and Continental Development of Columbus, Ohio, who both had experience in developing and managing a complete project—or smaller subcontracts of a large project. Other potential developers, such as Campus Crest of Charlotte, North Carolina, had niches as developers of student housing. All of these developers actively engage in interstate commerce as developers, investors, and financiers of multiple-million developments.
74. Over this two to three year preliminary development period, Chris Jerome telephoned, emailed, and flew across America to meet potential developers, brokers, and financial institutions. His plan included the investment and spending of tens of millions – and eventually hundreds of millions – in goods and services that would flow across state lines into Michigan and constitute interstate commerce.
75. Chris Jerome spent hundreds of hours and several hundred thousand dollars in costs to achieve these goals–including for architectural renderings of the project—before 2012.
76. In November of 2011, Lansing voters approved a ballot measure to sell 12 of the
60 acres of the closed Red Cedar Golf Course.
77. During 2011, Chris Jerome met Continental and its founding partner and chair,
Frank Kass. Kass and Continental are mixed used developers who are active in the Midwest. Chris proposed to joint venture between the Jeromes and Kass and Continental and its related companies.
Kass agreed to a joint venture and used one of Continental’s subsidiaries as the joint venture vehicle. Kass subsequently characterized this agreement as “one large joint venture between a
Continental Hallmark entity and the Jerome Family.” (Ex. 3, Mar. 3, 2012 emails from Kass re
Joint Venture.)
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Jeromes Propose a “Game-Changing” Plan to the Mayor of Lansing
78. With a joint venture agreement with Frank Kass and his companies, Continental and Hallmark, in place, Chris and Leo Jerome approached the City of Lansing to share their plan to jump start the redevelopment of Michigan Avenue.
79. In May 2012, the Jeromes met with Mayor Bernero numerous times in his office during which:
a. Chris Jerome informed Bernero that the Jeromes, Kass, and Continental
were interested in not only developing the Jerome parcels, but also the full 60 acres
of the adjacent Red Cedar Golf Course property; approximately 48 of those acres
had not yet been approved for sale by the voters.
b. Mayor Bernero was very excited over the proposal’s scope and potential,
but told the Jeromes that any such development plan would need to get the support
of the Lansing City Council.
c. Mayor Bernero insisted the Jeromes go and meet with Joel Ferguson
because he controlled a majority of the City Council members’ votes.
Jeromes Meet with Ferguson: A Fraudulent Misrepresentation of Civic-minded Assistance Turns Into Extortive Demands for Equity in the Project.
80. While the Jeromes sought a meeting with Joel Ferguson, on June 6, 2012, the City of Lansing and Lansing Economic Development Corporation (“LEDC”) jointly issued a Request for Qualifications and Proposals (“RFQP”) for the “Sale and Development of Red Cedar
Renaissance Site,” – the remainder of the closed Red Cedar Golf Course—with proposals due on
July 9, 2012.
81. The RFQP stated in relevant part as follows:
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The Lansing Economic Development Corporation (LEDC) and City of Lansing are releasing this RFQP to make potential developers and other interested parties aware of a great development opportunity. The objective of this RFQP is to identify one developer who has the vision, experience, capacity and financial wherewithal to purchase and develop this site to its maximum potential. The selected developer will enter into a planning and negotiation process with the LEDC and City that should ultimately result in a Comprehensive Development Agreement. (Ex. 4, at 1, RFQP excerpts) (emphasis added).
82. The RFQP also specifically required that “Each responding developer’s proposal must identify its authorized agent who has unqualified authority to bind the developer with regard to all matters arising from or related to this process.” (Id. at 7.) (emphasis added).
83. The nine board members of the LEDC are appointed by Mayor Bernero and approved by the City Council. http://edc.lansingmi.gov/modules.php?name=Pages&sp_id=2&smenu_id=12. LEDC contracts with the Lansing Economic Area Partnership – LEAP – to provide LEAP’s officers and staff to assist in LEDC and City of Lansing economic development efforts. http://detroit.cbslocal.com/2012/07/02/lansing-edc-signs-contract-with-leap-for-economic- development/. Accordingly, Mayor Bernero controls both the LEDC and LEAP.
84. Following Mayor Bernero’s order to meet with Ferguson, on or about June 18,
2012, Chris and Leo Jerome met with Ferguson and Ferguson’s project manager and son-in-law,
Christopher Stralkowski. At this meeting :
a. Ferguson was immediately impressed with the Jeromes’ renderings of the
project that was eventually called the “Capital Gateway Project.” Ferguson told the
Jeromes that the project would be good for the community and he would help “free
of charge” because it was the right thing for Lansing.
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b. Ferguson promised Chris Jerome that Ferguson would obtain the votes of a
majority of the Lansing City Council to support the project.
c. Ferguson explained that his position as the Chairman of Board of Trustees
at MSU gave him great power and political clout in Lansing. Ferguson showed the
Jeromes his business card, which lists his title as Chairman of the Board of Trustees
at MSU. He laughed and stated that the business card is all he needs to push the
Capital Gateway Project through the Lansing City Council.
Initial Offer of Free Help Leads to Insertion of Ferguson Partners Into the Capital Gateway Project
85. Shortly after the June 18, 2012 meeting, Chris Jerome met with LEAP CEO Bob
Trezise at LEAP’s offices in Lansing. Trezise told Jerome that:
a. Area businesses received preferential access to municipal-related business
opportunities in exchange for contributions to LEAP.
b. Jerome must use LEAP investors and LEAP preferred vendors for the
Capital Gateway project or the Project would never be approved by the Lansing
City Council.
86. According to LEAP’s 2015 Annual Report, the largest portion of its operating budget comes from local corporate and individual donors. http://www.purelansing.com/Portals/0/2015%20LEAP%20Annual%20Report%20.pdf
87. A few days after the June 18, 2012 meeting, Chris Jerome again met with Ferguson at the Ferguson Development offices and Ferguson told Chris Jerome:
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a. That Chris must hire a local general contractor for the Capital Gateway
Project to get the required votes from the Lansing City Council to approve the
Project.
b. That Chuck Clark and Clark Construction were a good fit to be a general
contractor. Based on Trezise’s mandate and Ferguson’s statement, Chris Jerome
reluctantly agreed to hire Defendant Chuck Clark and Clark Construction in some
construction capacity.
88. Later that same summer Ferguson told Chris Jerome, inter alia, that Clark, a “Lead
Investor” of LEAP, and Clark Construction, were a “Preferred Vendors” of LEAP. Ferguson also told Chris Jerome that Ferguson and Clark had a business referral relationship.
89. On numerous occasions between June 21, 2012 and July 9, 2012—the latter being the date the Capital Gateway Project proposal was submitted to the City and LEAP in response to the RFQP—either Ferguson’s secretary at Ferguson’s direction or Stralkowski telephoned Chris
Jerome in Chicago to either discuss by telephone or in person. During one of these conversations the following occurred:
a. Chris Jerome told Stralkowski and Ferguson that the student housing
component of the Capital Gateway Project would target international students
because MSU opposes competition from private developers for highly profitable
undergraduate student housing near campus.
b. Ferguson rejected that idea and stated that conventional student housing is
much more profitable.
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c. Some days later, Ferguson told Jerome that he met with “Vinny”, a high-
ranking MSU housing official and had reached an “understanding”: MSU would
not oppose any undergraduate student housing complex adjacent to MSU if it were
part of the Capital Gateway Project.
90. At another one of these meetings between June 21, 2012 and July 9, 2012,
Stralkowski told Chris Jerome that Ferguson would involve the Michigan State Housing
Development Authority (“MSHDA”) in assisting with the Capital Gateway Project.
91. Stralkowski told Chris Jerome that Ferguson’s empire of public housing (Section
8) contracts are facilitated by his close relationships at MSHDA and that Stralkowski’s wife
Jennifer (Ferguson’s daughter) works for MSHDA.
92. On July 9, 2012, Chris Jerome submitted the Capital Gateway Project proposal in response to the RFQP issued by the City of Lansing and the LEDC. As stated above, by July 9,
2012, LEAP had taken the place of the LEDC with respect to the RFQP.
After June 18, 2012 Meeting: Chris Jerome Focuses on Completing the RFQP, Joel Ferguson Focuses on Adding Ferguson Enterprise Partners to the “game changing” Project
93. Between meeting Ferguson on June 18, 2012 and the July 9, 2012 deadline for submission of proposals in response to the RFQP, Chris Jerome continued to work on the proposal with the national partners he had contacted such as, inter alia, Campus Crest of North Carolina,
Carpenter & Company from Boston, and others.
94. In contrast, Defendants Ferguson and Stralkowski focused on promoting and pushing their longtime business partners into the project proposal, for example:
a. Adding Chuck Clark and Clark Construction as potential contractors or
subcontractors;
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b. Adding longtime Ferguson development partner Hobbs + Black as potential
architects even though Chris Jerome has already had architectural renderings prepared by
a different national architecture firm;
c. Adding Huntington Bank—a MSU corporate sponsor and frequent Ferguson
lender—as a potential lender;
95. All of the Ferguson additions were redundant to the national team of investors and
developers that Chris Jerome had already put together.
Chris Jerome Submits the Project Proposal in Response to the RFQP, and the City of Lansing and LEAP Select Jerome’s Project Proposal.
96. On July 9, 2012, Chris Jerome submitted the Project proposal to the City of Lansing and LEAP in response to the RFQP. The Project proposal was paid for and created by Chris Jerome and his family. As required by the RFQP, the Project proposal named Christopher Jerome as its
“Authorized Agent” to meet the RFQP’s requirement that each “proposal must identify its authorized agent who has unqualified authority to bind the developer with regard to all matters arising from or related to this process.” (Ex. 4, at 7.)
97. On August 13, 2012, the City of Lansing announced Chris Jerome’s Capital
Gateway Project proposal was selected as the RFQP winner.
98. To meet Chris Jerome’s vison for a much larger development than the initial 12.5 acres of the Red Cedar Golf Course approved for sale by Lansing voters in 2011, the Lansing City
Council authorized a ballot proposal for the 2012 election authorizing the City of Lansing to sell the rest of the Red Cedar Golf Course.
99. From August 13, 2012 through November 6, 2012, Chris Jerome was the public face of the Project as he campaigned tirelessly to rally public support for the November 6, 2012
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ballot initiative asking Lansing community voters to authorize the sale of the entire Red Cedar
Golf Course property for the Capital Gateway Project.
100. On November 6, 2012, Lansing voters approved the sale of the additional acreage and approved the vision of Chris Jerome.
The Ferguson Enterprise Extorts Increasingly Larger Equity Stakes of the Capital Gateway’s Project from Plaintiffs
101. Within days of agreeing to help the Jeromes for “free” and “to benefit Lansing,”
Ferguson and Stralkowski began demanding equity in the Capital Gateway Project in increasingly larger amounts.
102. Between June 21, 2012 and June 29, 2012, either Ferguson’s secretary or
Stralkowski telephoned Chris Jerome to schedule a meeting with Ferguson at Ferguson
Development’s offices in Lansing to discuss the Project proposal that was due on July 9, 2012.
103. In response to calls from either Ferguson’s secretary or Stralkowski, between June
21, 2012 and June 29, 2012, Chris Jerome traveled to Lansing to meet with Ferguson and
Stralkowski at Ferguson Development’s offices several times.
104. At the first meeting between June 21, 2012 and June 29, 2012, Ferguson demanded a 5% equity stake in the Project in exchange for his “assistance” in securing the requisite votes from the Lansing City Council. Ferguson made clear that if his demand was not met, he would use his political influence with the Lansing City Council to block the Project.
105. At a second meeting between June 21, 2012 and June 29, 2012, Ferguson upped his demand to a 10% equity stake in the Project.
106. Pushed by Mayor Bernero to deal with Ferguson, the Jeromes met Ferguson a third time and reluctantly agreed to give Ferguson 20% equity in the Project, as long as Ferguson agreed
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that Chris Jerome was in charge and Ferguson’s demands for increased equity would stop.
Ferguson agreed to those conditions and enthusiastically hugged both Leo and Chris Jerome to seal the deal.
107. On June 29, 2012, the day of this third meeting, Ferguson’s attorney, Patrick Reid, emailed paperwork for the formation of the “Capital Gateway Project, LLC,” which gave Ferguson a 20% equity stake in the Project.
108. Soon after the June 29, 2012 email that included a demand for a 20% equity stake in the Project, Stralkowski telephoned Jerome in Chicago and scheduled another meeting at
Ferguson Development’s offices in Lansing to discuss further demands for equity made by
Ferguson.
109. On July 18, 2012, Ferguson’s attorney, Patrick Reid, emailed an a new draft operating agreement for the “Capital Gateway Project, LLC” to Ferguson and Jerome which contained terms with changed voting rights that essentially gave Ferguson control of the project, while having him remain as a minority stakeholder.
110. This email began a continuing pattern: Jeromes would agree to terms for ownership and management of the Capital Gateway LLC/Red Cedar Renaissance Project; then Ferguson or
Stralkowski (or their attorney Mr. Reid), in person or by telephone or by email, would breach the current agreement by demanding more equity. Each of these demands were accompanied by either an implicit or explicit threat the Jeromes should acquiesce or risk losing the RFQP award if
Ferguson used his four votes on City Council to kill the project.
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111. On or around July 19, 2012, Ferguson handed Leo Jerome a third draft operating agreement which, inter alia, increased Ferguson’s demand to a 33% equity stake in the Capital
Gateway Project.
112. To further increase the pressure on the Jeromes, in early August Ferguson and
Stralkowski relayed, after-the-fact, the details of a prior meeting between Ferguson and Mayor
Bernero to demonstrate their political power.
113. Ferguson told the Jeromes that he had heard a competing local development firm,
DTN, was under consideration by the Mayor’s appointees on the joint City-LEAP board review of the RFQP proposals.
114. Ferguson then met with Mayor Bernero at Lansing City Hall and told Mayor
Bernero that a joint RFQP award and joint development venture with DTN was not acceptable.
115. Ferguson threatened Mayor Bernero by telling him that the Ferguson-controlled
City Council votes would block any competing project.
116. Ferguson demanded that Mayor Bernero ensure that LEAP awarded the project to the Capital Gateway Project.
117. According to Ferguson and Stralkowski, Mayor Bernero caved to Ferguson’s threats and told LEAP to not consider DTN.
118. On October 25, 2012, Ferguson mailed a letter summary and another proposed new operating agreement for Capital Gateway Project LLC by United States Postal Service to Leo and
Chris Jerome with a new demand of 50% equity for “The Ferguson Family.” In a startling exposition of his political power, Ferguson in the letter again threatened economic harm – loss of the RFQP – to the Jeromes:
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a. In Section II, Ferguson boasted of “Joel’s political expertise” and claimed
“Joel’s role was and is critical to obtaining the necessary governmental approvals
throughout the development process.”
b. Ferguson described his use of inside information and his dispatch of bid
competitors: “Initially, LEAP decided that the Capital Gateway proposal would be
combined with the proposal by DTN for the 12 acre development. Joel immediately
met with the Mayor…Joel Ferguson communicated to the Mayor that a joint
venture with DTN was unacceptable and that Capital Gateway proposal should be
accepted as the exclusive RFP proposal…”
c. Ferguson was clear about his source of power: “Joel Ferguson promised that he
could deliver four (4) votes from the City Council if the Mayor could deliver three
(3) votes.”
d. Ferguson details the Mayor’s acquiescence to his power: “Following Joel’s
meeting with the Mayor, the LEAP was instructed by the Mayor to accept the
Capital Gateway RFP proposal…As a result of the Mayor’s directive, LEAP
announced the Capital Gateway RFP proposal had been selected…”
e. Ferguson then went on to describe his lobbying the City Council to approve the
Project. (Ex. 5, Oct. 25, 2012 letter and summary)
119. Ferguson’s letter put in writing what Stralkowski’s prior telephone calls to Chris in
Chicago had threatened: if Ferguson was not paid, then his power could and would kill the Project, to the detriment and great financial expense to the Jeromes.
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120. For added emphasis, on or around October 27, 2012, Chris Jerome received an email from Stralkowski that admonished Chris for his lack of respect for Ferguson and praised
Ferguson’s “honed political skills and influence that he has earned over the last 50 years.” For emphasis Stralkowski attached to this email the same documents Ferguson sent by mail two days earlier including the proposed operating agreement with 50% equity share for Joel Ferguson and the narrative of Joel Ferguson’s political power.
121. After the voters approved the sale of the entire Red Cedar Golf Course on
November 6, 2012, the Jeromes faced a Hobson’s choice: either give into Ferguson’s extortionate demands or risk loss of Project RFQP award when Ferguson exerted his control over Mayor
Bernero and the Lansing City Council.
122. According to Ferguson’s Cook County testimony, at this same time Ferguson was talking with Mayor Bernero about his negotiations with the Jeromes and ordering Bernero to tell the Jeromes to agree to his terms. These conversations took place during golf foursomes and other social occasions involving Mayor Bernero, Mayor Bernero’s wife, Teri Bernero, Ferguson, and
Ferguson’s common-law wife, Anna.
123. On December 5, 2012, Joel Ferguson sent an email from his AOL account to Leo
Jerome’s GMAIL account with a memorandum addressed to Chris and Leo Jerome that was dated
December 4, 2012. This memorandum attacked a November counteroffer by Chris Jerome, while proposing a new operating agreement for Capital Gateway Project LLC with the 50% equity demand repeated.
124. This proposal, however, had a new and threatening written wrinkle: the memorandum carbon-copied Mayor Bernero and LEAP CEO Bob Trezise with the clear message
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that if the Jeromes did not accept this “reasonable” offer, then the Mayor and his economic development agents would take the Capital Gateway/Red Cedar Renaissance Project RFQP away from the Jeromes.
125. Bernero immediately reacted to Ferguson’s memorandum: Bernero held a meeting the following day—December 6, 2012—at Lansing City Hall with Chris and Leo Jerome, Joel
Ferguson, Christopher Stralkowski, LEAP CEO Bob Trezise, and Bernero’s Chief of Staff Randy
Hannan to discuss Ferguson’s memorandum. At this meeting:
a. Bernero pushed the Jeromes to agree with Ferguson.
b. Ferguson stated “They [the Jeromes] didn’t sign them [earlier documents] fast
enough” and as a result “the price just goes up.”
b. Ferguson stated that the project existed only because of his control of the City
Council and if his demands are not met, the Project will die.
126. On December 11, 2012, the written threat became even more explicit when
Ferguson’s attorney, Patrick Reid, sent an email from Reid’s AOL email account to LEAP CEO
Trezise at his LEAP email (@purelansing.com), with carbon copies to Leo Jerome at his AOL account, Chris Jerome at his GMAIL account, and Chuck Clark at his corporate account
(@clarkcc.com) with an attached letter that Joel Ferguson sent that same day to Mayor Bernero with the subject line “Re: Capital Gateway Project, LLC.”
127. In this letter—concerning private negotiations between the Jeromes and Ferguson about the structuring of a private company —Ferguson complained to the Mayor that the Jeromes’ most recent compromise offer was not acceptable because it “included a number of egregious provisions.” On the second page of the letter, Ferguson stated his services are worth 50% of the
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project “and I also believe you would recommend settling somewhere between 33% and 50%, which would give me approximately 41% ownership interest.” (emphasis added).
128. Ferguson’s letter then proposed a new split: “I am proposing to accept 32% so long as Christopher Jerome and Leo Jerome accept 64% and have the remaining 4% membership issued to Chuck Clark.” (emphasis added).
129. However this equity split would have an unusual voting component: “all voting on major issues should be based upon me [Ferguson] having 50% of the vote and the Jerome [sic] having 50%. In the event there is any deadlock, then such matter will be presented to Chuck Clark, who can break the deadlock by voting his 4% interest.”
130. Put differently, while the Jeromes assumed more financial risk, Ferguson had equal control. And, if the Jeromes and Ferguson disagree about management of the entity, Ferguson’s business partner – and the beneficiary of Ferguson’s MSU largesse – Chuck Clark, would break the tie.
131. Ferguson closed this December 11, 2012 letter to Mayor Bernero by proposing the
Mayor revoke the August 13, 2012 RFQP award if the Jeromes do not accept this compromise and then thanked the Mayor “for your time and efforts in working toward a settlement in this matter.”
(emphasis added). (Ex. 2.)
132. This letter is an explicit and written acknowledgment that under the color of law and using the power of his office, Mayor Bernero and his appointees and political allies such as
LEAP CEO Trezise illegally cooperated and aligned with Joel Ferguson and the other Defendants to threaten economic harm to the Jeromes unless they gave into Ferguson’s demand.
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133. On December 20, 2012, the Jeromes met with Mayor Bernero, Deputy Chief of
Staff Randy Hannan, and LEAP’s Bob Trezise at the Mayor’s request. Here, Mayor Bernero continued to push the Jeromes to accept an agreement with Ferguson.
134. On January 2, 2013, Chris Jerome traveled to Lansing to meet with Trezise at
LEAP’s offices in response to a call from a member of Trezise’s staff. At this meeting:
a. Trezise informed Jerome that Ferguson had threatened to derail the Mayor’s
reelection campaign by accusing the Mayor of being a racist if the Mayor did not
meet Ferguson’s demands with regard to the Capital Gateway Project.
b. Trezise told Jerome that the racism claim would cripple the Mayor
politically even if it did not remove him from office.
c. Trezise told Jerome that Ferguson had had control over Lansing politics for
years and told Jerome a story about a time when Ferguson had boasted that taxpayer
money was flowing from MSU into the pockets of Lansing City Council members.
135. Just after the New Year, on January 10, 2013, Christopher Stralkowski followed up on Ferguson’s December threats in an email from his Hotmail account to Chris Jerome’s Gmail, admonishing and threatening Chris Jerome:
a. Stralkowski wrote Jerome, “when you ignore the Mayor, remember he insisted
on actual negotiation over these Critical Agreement issues, your actions, or lack
thereof, reflect no respect for the process, no respect for the Mayor, and no respect
for Joel…” (emphasis added)
b. Further, “[s]ince you and Leo have been indifferent to Joel’s numerous offers,
he has taken his compromise off the table…”
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c. And then Stralkowski threatens “no one but the Mayor himself has control of the
Red Cedar property and this potential development project. Everything is still just
pretty pictures and words on a piece of paper. If we cannot somehow find a way to
agree on a fair Operating Agreement, the Mayor said he will walk away from the
deal…” (emphasis added). (Ex. 6, Jan. 10, 2013 email from Stralkowski to Chris
Jerome.)
136. Five days after Stralkowski’s proverbial “stick” email threatening Chris Jerome, on
January 15, 2012, Stralkowski sent an email with a “carrot” to demonstrate the benefit of cooperating with the Ferguson Enterprise and an additional “stick” for not working with the
Ferguson Enterprise: :
a. The carrot: Because of Ferguson’s negotiating skills, Ferguson, Chuck
Clark and the Drain Commissioner, Pat Lindeman, and the City had reached an
agreement that “would potentially save millions in construction costs” by having
the Drain Commissioner build the foundations for the Red Cedar Renaissance
Project.
b. The stick—compromise or else: “Most importantly, the Mayor told Joel he
needs an agreement from us in place by February 1st or he will act to modify the
RFQP…Not an ideal outcome to say the least.” (Ex. 7, Jan. 15, 2013 email from
Stralkowski to Chris Jerome.)
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Ferguson Enterprise’s Use of Mayor Bernero, LEAP, LEAP CEO Trezise and the Mayor’s Staff and LEAP Staff Extort Plaintiff and Force Them to Capitulate to Ferguson’s Demands or Lose the RFQP
137. As described above—including Mayor Bernero’s secret meetings with Ferguson at
Ferguson’s home and the Lansing Country Club; the meetings on December 6, 2012; December
20, 2012; and January 2, 2013, among others—and the through use of the Office of Mayor of
Lansing, Lansing’s economic development arm, LEAP, and the Ingham County Drain
Commissioner Pat Lindeman—the Ferguson Enterprise (Joel Ferguson, Christopher Stralkowski, and Ferguson Development) used public officers and their offices, and quasi-public officers and their offices to extort the Jeromes for equity and property interests in the Project. The Enterprise also conspired with Defendant Mayor Bernero to force the Plaintiffs to associate with businesses and individuals they would not have otherwise chosen—and disallow the Plaintiffs association with competing businesses and individuals who were engaged in interstate commerce—thereby causing Bernero, Trezise, and LEAP to deprive Plaintiffs of their property without due process of law.
138. The Enterprise’s acts impacted the interstate commerce of goods and services.
Other factual events that include inter alia these same acts of racketeering, violations of the federal
Hobbs Act, 18 U.S.C. § 1951, state extortion laws, tortious interference with business expectancies and deprivation of individual rights guaranteed by 42 U.S.C. § 1983 include the following:
139. Soon after the award of the RFQP on August 13, 2012, LEAP CEO Bob Trezise started weekly meetings involving Chris Jerome, the Mayor’s Office, and other public entities at
LEAP’s offices in Lansing to coordinate the private-public interface of the Red Cedar Renaissance
Project. These meetings included private individuals who were not the “authorized agent” of the
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RFQP winner— Chris Jerome—and thus forced Chris Jerome to consider as development partners persons including Joel Ferguson, Christopher Stralkowski, Chuck Clark, and Hobbs + Clark architects. These meetings necessarily excluded other potential national partners that the Jeromes wanted to work with.
140. Trezise soon began meeting with Mayor Bernero, LEAP officers, City of Lansing and Mayor’s office staff, Ferguson and/or Stralkowski, Chuck Clark, and Drain Commissioner
Lindeman in secret without the knowledge or consent of the RFQP authorized agent, Chris Jerome.
141. The violation of the RFQP award conditions became more flagrant during the fall of 2012 when the LEAP sponsored meetings were canceled and Ferguson began holding his own weekly meeting with Drain Commissioner Lindemann, Chuck Clark, LEAP CEO Trezise, and others at his office starting in November of 2012 – again without either of the Jeromes including the RFQP authorized agent Chris Jerome.
142. In the days immediately before March 6, 2013, someone in Mayor Bernero’s office telephoned Chris Jerome in Chicago to schedule a meeting with him at Lansing City Hall.
143. On March 6, 2013, Jerome traveled to Lansing to meet with Mayor Bernero and his
Chief of Staff Randy Hannan regarding the Project. At that meeting, while attempting to force the
Jeromes to give up more of their equity position, Mayor Bernero called Ferguson “our version of
Kwame Kilpatrick” and told Chris Jerome that Ferguson and Clark had recently sat in his office and demanded that Mayor Bernero give the Capital Gateway Project to them outright and cut the
Jeromes out completely.
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144. The following day, March 7, 2013, Trezise informed Jerome that Ferguson was increasing the political pressure on Mayor Bernero to force the Jeromes to capitulate to Ferguson’s equity and control demands, or alternatively to cut the Jeromes out of the Project.
145. Mayor Bernero and LEAP CEO Trezise asked Chris Jerome to give a progress update on March 26, 2013, to their staffs in a conference room in Lansing City Hall to outline
Chris Jerome’s progress. Chris Jerome brought out-of-state developers such as Carpenter &
Company, on retailers like Whole Foods, Campus Crest of North Carolina on student housing, as well as renown 9/11 Memorial architect Jeffrey Lee of Washington, D.C, who as a group intended to invest and spend well over $100 million from out-of-state in Lansing to the meeting.
146. At this presentation, Mayor Bernero told Chris Jerome that Ferguson would use his control of the Lansing City Council to derail the Project, regardless of its value to the City, if the
Jeromes did not give in to all of Ferguson’s demands.
147. On or about June 11, 2013, Chris and Leo Jerome talked with Mayor Bernero in front of City Hall. During this conversation Mayor Bernero told the Jeromes:
a. Bernero and Trezise had been secretly talking with Chris Jerome’s Boston-
based investment group, including Carpenter & Company, without approval from
Chris Jerome, the Project’s authorized agent.
b. “I may be Mayor for life” and unable to find another job, and as a result, he
(Bernero) has to acquiesce to Ferguson on Ferguson’s demands related to the
Project.
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148. At a subsequent meeting on August 9, 2013, Mayor Bernero admitted that
Ferguson and Ferguson Development had been secretly working to cut Jerome out of the Capital
Gateway Project and stated Frank Kass and Continental were Ferguson’s partners in that effort.
149. On September 9, 2013, David Ferguson, Joel Ferguson’s son, handed Leo Jerome a proposed Memorandum of Understanding (“MOU”) and demanded Leo Jerome sign the MOU.
The MOU purported to dissolve the Capital Gateway Project partnership between Jeromes and
Ferguson Development, and provided for the sale of the Jerome family properties at below market value, gave David Ferguson a commission.
150. Four days later, on September 13, 2013, LEAP CEO Trezise telephoned Leo
Jerome and asked him to meet Trezise, Mayor Bernero, and Chief of Staff Hannan at the Mayor’s office:
a. At Bernero’s office, Leo Jerome received an operating agreement for a new
entity named Ferguson/Continental Lansing, LLC, with an attached one-page
proposal entitled “Jerome Proposal.” Neither of the Jeromes were aware of the new
entity until Leo Jerome received the operating agreement.
b. The operating agreement purported it was a joint venture between
Continental – the Jeromes’ former joint venture partner—and Red Cedar Investor,
LLC. Ferguson was identified as the Managing Member of Red Cedar Investor,
LLC with a 51% equity stake in the Ferguson/Continental Lansing, LLC.
Continental owned the other 49% equity stake in Ferguson/Continental Lansing,
LLC. The Ferguson/Continental Lansing, LLC operating agreement had been
executed three months earlier on June 28, 2013.
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c. The one-page proposal offered Leo Jerome an opportunity to participate in
the Ferguson/Continental Lansing LLC and develop the Red Cedar Renaissance
Project–even though the Jerome Family was already awarded the RFQP and Chris
Jerome was the authorized agent for the “selected Developer.”
d. The one-page proposal offered Leo Jerome only 1/3 equity in
Ferguson/Continental Lansing LLC (with Ferguson and Continental each
possessing 1/3), but only if the Jerome family sold their Sawyer Pontiac property
on Michigan Avenue for $3,500,000 – which was 50% under the fair market value
of the Sawyer Pontiac property.
151. After Leo Jerome arrived at City Hall, Mayor Bernero told Leo Jerome that if the
Jeromes did not accept this proposal then they would be cut out of the Red Cedar Renaissance
Project despite their winning of the RFQP.
152. Later that same day, LEAP CEO Trezise interfered with the Jerome business relationships and expectancies with Jeromes’ partners by calling representatives of Carpenter &
Company in Massachusetts—who Chris Jerome had brought to Lansing to meet City of Lansing and LEAP officials many times to share Carpenter & Company’s ideas on the financing and design of a $100 million piece of the Red Cedar Renaissance Project to include amenities like Whole
Foods, boutique luxury hotels, and an outside concert pavilion/ice rink. Trezise told the
Carpenter’s representative that that Jeromes’ status in the Project was “uncertain” and that
Carpenter’s participation was no longer desired.
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153. On December 2, 2013, Jerome received an email from Karl Dorshimer, the COO of LEAP, informing him that Jerome and his Capital Gateway Project have been relieved of their award of the project by LEAP and the City of Lansing.
154. On December 12, 2013, without rebidding the Red Cedar Renaissance Project, and in violation of Chapter 206 of the Lansing City Ordinance, “Purchasing, Contracts, and Sales,”
Mayor Bernero and Trezise held a surprise press conference and awarded the Red Cedar
Renaissance Project to the Ferguson/Continental Lansing, LLC controlled by Joel Ferguson and
Frank Kass – an entity that had never bid for any City of Lansing RFQP, let alone the Project that was bid out in June of 2012.
155. Less than three weeks later, shortly before January 1, 2014, Mayor Bernero and
Ferguson traveled to Pasadena, California to watch MSU’s football team participate in the Rose
Bowl. Upon information and belief, during this trip, Teri Bernero, and Anna (Ferguson’s girlfriend/common-law wife) shopped together on Rodeo Drive in Beverly Hills, California. This trip continued a pattern of gifts and bribes – including golf fees, clothes, tickets, meals, trips – as well as political endorsements and donations (including thousands in Clark Construction corporate contributions) that Ferguson gives and has given to Mayor Bernero to do Ferguson’s bidding regarding Lansing public projects.
156. Upon information and belief, Ferguson has given Bernero many other goods and services of value including a club membership, greens fees, tickets, meals, trips and other items over a period of years, in exchange for political influence and favors, such as for example, delivering the four City Council votes as referenced in the Ferguson narrative of October 2012.
(Ex. 5.)
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Ferguson Enterprise’s Continued Racketeering and Misuse of Its Municipal Political Power to Appropriate the Jerome’s Project, Cause the Jeromes Economic Harm, and Appropriate the Red Cedar Renaissance Project
157. On November 6, 2014, the City of Lansing entered into a Real Estate Purchase and
Development Agreement for the sale of the Red Cedar Golf Course property to
Ferguson/Continental Lansing, LLC.
158. Under the terms of the Agreement, the Joel Ferguson and Frank Kass-controlled
Ferguson/Continental Lansing, LLC purchased the Red Cedar Golf Course property for
$7,147,604, a purchase price of only $220,000 per acre.
159. Because of the influence of the Ferguson Enterprise, this sale of City land was dramatically below fair market value. For comparison, directly across the street, the Jeromes sold the Story Olds property for $2,117,000 per acre. Further, just one year later on August 6, 2015, three separate parcels near the Red Cedar Golf Course totaling approximately 1.4 acres sold at auction for $8,000,000, or approximately $5,714,000 per acre.
Defendants’ Extortion Tactics Continue with Respect to the Jerome Family’s Parcels
160. On March 14, 2014, a representative of Developer A, a national developer with experience in multi-family, luxury, market rate, senior, and student housing developments who were interested in partnering with the Jeromes to develop a $90 million stand-alone project using one Jerome parcel, met with LEAP CEO Bob Trezise and LEAP COO Steven Willobee.
161. At this meeting, Willobee, speaking for LEAP and Trezise, told the Developer A representative “it was probably best if the Jeromes were not involved as it would risk our company receiving approvals for the project.” When questioned by a representative of Developer A, LEAP
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COO Willobee stated further “the City would not look positively on our proposal if the Jerome family was involved…”
162. As a result of Trezise’s threats and the interference by Ferguson and Mayor
Bernero, the Jeromes lost out on a second development opportunity – a project in excess of $90 million – and were ultimately forced to sell their 3.3 acre Story Olds property at a reduced price of $7.05 million to Developer A.
163. On May 7, 2015, LEAP CEO Trezise told the Developer A representatives that
Mayor Bernero wanted them to meet with Joel Ferguson regarding Developer A’s development project on the Jerome family’s Story Olds property. While Developer A had no interest in meeting with Ferguson, the Developer A representatives did not want to risk any ill-will with LEAP or the
City of Lansing that would slow down their proposed $90 million young professional and student housing project. As a result of Trezise’s comments, the Developer A representatives agreed to meet with Ferguson
164. On May 14, 2015, Developer A representatives met with Mayor Bernero, LEAP
CEO Trezise, and Ferguson at an office on the campus of MSU. At this meeting, Ferguson attempted – under the auspices of his connections with Bernero and LEAP –to solicit confidential information and intimidate this potential competitor:
a. Ferguson demanded to know the details of Developer A project on the
Jerome Story Olds site.
b. Ferguson told the Developer A representatives that he had managed to
convince MSU to assist in financing a large portion of the Red Cedar Renaissance
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with a master lease arrangement. This development if true could potentially hurt
the competitiveness of the Developer A project.
c. Ferguson also told the Developer A representatives that MSU was acting as
a joint venture partner with Sparrow Health for one portion of the Red Cedar
Renaissance Project and acting as a joint venture partner with Ferguson (and
presumably Kass/Continental) for residential housing. This development if true
could potentially hurt the competitiveness of the Developer A project.
165. During the last two weeks of May of 2015, Ferguson and Stralkowski incessantly called and emailed the Developer A representative. In increasingly hostile terms, they demanded confidential information from the Developer A representatives about its intended project on the
Jerome family’s parcel. Developer A never provided any information to Ferguson, Stralkowski, or
Ferguson Development.
166. On or around June 5, 2015, a Developer A representative met with Kelly Rossman of Truscott Rossman, a Lansing public relations firm, to discuss hiring that firm for public relations related to the Jerome family’s parcel. Ms. Rossman – a LEAP board member – pressured the
Developer A representative to call and meet with Mr. Ferguson.
167. As a result, the Developer A representative met with Ferguson later that date.
Ferguson told the Developer A representative that the Developer A project was “dead” unless two things happened:
a. Developer A pay Ferguson $147,000;
b. Developer A persuade Jerome to drop a lawsuit Jerome had filed against
Ferguson, Ferguson Development, Kass, and Continental in Cook County, Illinois.
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168. On November 11, 2015, Mayor Bernero signed a development agreement with
Ferguson/Continental Lansing LLC to develop the Red Cedar Golf Course.
169. As part of that agreement, the City of Lansing agreed to directly pay up to $38 million in infrastructure costs for this private development headed by the Mayor’s golf partner,
Rose Bowl traveling companion, and so-proclaimed holder of 4 of the 8 votes on the Lansing City
Council – Joel Ferguson.
170. Earlier this year, on January 2, 2016—confirming an email Stralkowski sent Chris
Jerome 3 years earlier on January 15, 2013 (see above) that “Ferguson, Chuck Clark and the Drain
Commissioner, Pat Lindeman, and the City had reached an agreement that ‘would potentially save millions in construction costs’ by having the Drain Commissioner build foundations for the Red
Cedar Renaissance Project,”—Drain Commissioner Lindemann filed a permit with the Michigan
Department of Environmental Quality to begin work on a $30 million public project that would keep water run-off from flowing through the closed Red Cedar Golf Course. This drain construction will save Joel Ferguson, Frank Kass, and their companies millions of dollars in extra costs to develop the Red Cedar Renaissance Project.
171. On or around March 27, 2016, Easter Sunday,—Drain Commissioner Lindemann along with Ferguson and Kass spent $250,000 to cut down hundreds of trees on the Red Cedar
Golf Course—even though the Red Cedar Golf Course has not yet been sold the
Ferguson/Continental Lansing LLC. This expenditure of public funds (the Drain Commissioner’s dollars) was not approved by the taxpayers of Lansing or Ingham County—yet it was done to promote a private development.
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172. This move by Lindemann and Ferguson/Continental Lansing LLC was done in the hope of beginning the groundbreaking before this coming October 1, 2016. Under rules of the U.S.
Fish and Wildlife service and the Michigan Department of Environmental Quality, Michigan trees that may be home to Indiana or Long-Eared Bat species cannot be cut between April 1 and October
1 for fear of hurting young or nursing bats. If the Red Cedar Golf Course trees were cut before
April 1, 2016, then groundbreaking of the Red Cedar Renaissance Project can occur before October
1, 2016. This tree cutting constitutes a trespass upon land still owned by the City of Lansing.
173. Having received the commitment of up to $38 million public dollars from the City of Lansing, the Ferguson Enterprise – Joel Ferguson, Christopher Stralkowski, Ferguson
Development– is now working with Mayor Bernero, LEAP CEO Trezise, Chuck Clark, Frank
Kass, and Drain Commissioner Lindeman to convince the Ingham County Board of
Commissioners (which includes representatives from communities other than Lansing) to agree to bond an additional $35 million in public dollars (beyond Lindemann’s January commitment) to fully raise over $70 million public dollars to assist in financing this private development.
174. Once this last grab of public dollars is accomplished, the Ferguson Enterprise and its co-conspirators will have fully accomplished their goal of appropriating the Jeromes’ project and the use public dollars to maximize the Ferguson Enterprise’s – and its co-conspirators – profits from the Red Cedar Renaissance Project.
Frank Kass’s and Continental’s Tortious Interference with the Jeromes’ Business Relationship and Expectancy with Ferguson and Business Expectancy in keeping the RFQP
175. In 2011, Kass and Continental met with Chris Jerome to discuss a joint venture or partnership to work as a general developer on the Project and to develop inter alia student housing.
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176. As part of the initial joint venture agreement with Kass’s companies, Chris Jerome insisted on a “Confidentiality & Non-Compete Agreement” to protect the intellectual property of the Project with Hallmark Campus Communities (“Hallmark”), one of Continental’s family of related companies that is Continental’s student housing development arm and was housed in the
Continental offices in Columbus, Ohio.
177. Hallmark Continental executed the Agreement on or about January 17, 2012. Kass subsequently characterized their agreement as “one large joint venture between a Continental
Hallmark entity and the Jerome Family.” (Ex. 3.)
178. The Agreement provided inter alia that all Confidential Information would be kept confidential by Hallmark and its Representatives. “Representatives” were defined in the
Agreement as Hallmark’s “directors, officers, employees, agents or advisers (legal, financial or otherwise), potential financiers or any other representative.”
179. The Agreement further provided that the Confidential Information disclosed to
Hallmark would remain the property of Jerome and could not be copied, reproduced, or disclosed in any manner with anyone other than Hallmark Representatives without the express written permission Jerome.
180. In reliance on the Agreement, Chris Jerome shared Confidential Information with
Kass and Continental (and Hallmark)—information that cost Chris Jerome hundreds of thousands of dollars to develop.
181. According to Ferguson testimony in Cook County, Ferguson and Kass began talking to each other – without the knowledge of the Jeromes – shortly after the Jeromes met
Ferguson in June of 2012.
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182. On or around June 29, 2012, Kass told Chris Jerome by telephone that Kass and
Continental Hallmark were ending their joint venture with the Jeromes.
183. Unknown to the Jeromes, upon information and belief, that same month, Kass and his professionals engaged in secret discussions with Ferguson, using in part, the Confidential
Information obtained from Chris Jerome.
184. These secret discussions severed the joint venture between Kass, Continental,
Continental-Hallmark, and the Jeromes and thus destroyed the business expectancies of the
Jeromes regarding the Project and the RFQP.
185. According to Ferguson’s Cook County testimony, Ferguson and Kass had reached their own agreement regarding the Red Cedar Renaissance Project by October of 2012. This agreement was memorialized with the operating agreement signed on June 28, 2013.
186. From June of 2012 to the fall of 2013, Ferguson feigned cooperation with Jerome on the Capital Gateway Project, yet over the next year, Ferguson and Kass hammered out details of their own operating agreement for the Ferguson/Continental Lansing, LLC, which was finally executed on June 28, 2013.
187. The plans that were submitted to the City of Lansing by Ferguson/Continental
Lansing, LLC’s which led to their illegal no-bid award of the Red Cedar Renaissance Project award in December of 2013 largely appropriate in form and substance the proprietary plans and specifications originally developed by the Jeromes and shared with Kass, Continental, and
Hallmark in reliance on the Confidentiality Agreement.
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COUNT I – VIOLATION OF THE RACKETEERING INFLUENCED AND CORRUPT ORGANIZATION ACT, 18 U.S.C. § 1962(c), (DEFENDANTS FERGUSON, STRALKOWSKI, AND FERGUSON DEVELOPMENT.)
188. Plaintiffs re-allege and incorporate the above allegations in this Complaint, as if fully set forth in this paragraph.
189. This Count is against Ferguson, Stralkowski, and Ferguson Development, (the
“Count I Defendants”).
190. The Count I Defendants are a group of individuals and a limited liability company associated in fact, constituting an enterprise (“Ferguson Enterprise.”) The Ferguson Enterprise is an ongoing organization whose members continue to function to achieve the objectives of the
Ferguson Enterprise. The members of the Ferguson Enterprise at a minimum include defendants
Joel Ferguson, Christopher Stralkowski, and Ferguson Development.
191. The Count I Defendants are all associated with the Ferguson Enterprise.
192. The Ferguson Enterprise was and continues to be engaged in interstate commerce.
The Ferguson Enterprise’s activities also affect interstate commerce.
193. The Count I Defendants agreed to and did conduct and participate in the conduct of the Ferguson Enterprise’s affairs through a pattern of racketeering to accomplish the objectives of the Ferguson Enterprise.
194. Pursuant to and in furtherance of their racketeering scheme, the Count I Defendants committed multiple related acts of fraud and fraudulent misrepresentations involving multiple violations of 18 U.S.C. § 1341 mail fraud and 18 U.S.C. §1343 wire fraud between June of 2012 and September 13, 2013 to hide and keep concealed Count I Defendants’ plans with defendants
Kass, Continental, Red Cedar Investor LLC, and Ferguson/Continental Lansing, LLC, to
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appropriate and steal Plaintiffs property including inter alia, the Project RFQP award to the
Plaintiffs, architectural renderings and other proprietary intellectual property costing hundreds of thousands of dollars, and tens of millions of dollars in value and expected profits related to developing the Project.
195. Additionally and in the alternative, pursuant to and in furtherance of their extortionate and bribe-infused racketeering scheme, the Count I Defendants also committed multiple related acts of extortion and other illegal acts in violation of the Hobbs Act, 18 U.S.C. §
1951 and Michigan Compiled Laws 750.213 and 750.118 between October of 2012 and September
13, 2013. In committing these racketeering acts, the Count I Defendants worked with their co- conspirators to appropriate and steal Plaintiffs’ property including inter alia, the Project RFQP award, architectural renderings and other proprietary intellectual property costing hundreds of thousands of dollars, and tens of millions of dollars in value related to developing the Red Cedar
Renaissance Project.
196. The Count 1 Defendants were successful in obtaining these properties and property interests from the Plaintiffs.
197. The alternate acts of racketeering described above – either through fraudulent means and/or extortionate means—constitute a pattern of racketeering activity pursuant to 18
U.S.C. § 1961(5).
198. Additionally and in the alternative, through their conduct described above in the
Common Allegations section of this Complaint, the Count I Defendants agreed to and did conduct and participate in the conduct of the Enterprise’s affairs through a pattern of racketeering activity and for the unlawful purpose of intentionally defrauding Plaintiffs and the Lansing taxpayers and
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the Michigan State University. In other words, the Count I Defendants have inter alia orchestrated and facilitated “pay-to-play” government contract awards, misconduct in public office, bribery of public officials, fraudulent and extortionate conduct used to steal the Project, and extortion of at least $147,000 from Developer A.
199. The Count I Defendants’ pattern of racketeering shows no signs of abatement—
Ferguson Development has been used as a vehicle for Fergusons’ and his family enrichment for over two decades, and was involved in, inter alia, the controversial Triangle Project development that cost the Michigan taxpayers at least $45 million. Moreover, the Count I Defendants’ racketeering activities did not stop with their acquisition of Plaintiffs’ RFQP award and interest in the Project—indeed, the Count I Defendants continued to interfere with Plaintiffs’ business interests by using their extortionate tactics to tortuously interfere with the Plaintiffs’ new development partner, Developer A. The Count I Defendants are currently seeking to cajole or force Ingham County and the Drain Commissioner to approve $30 million in public dollars to build foundations for this private development.
200. As a direct and proximate result of the Count I Defendants’ racketeering activities and violations of 18 U.S.C. § 1962(c), Plaintiffs have been injured in their business and property in that they lost the award of the Project and all expected attendant profits as well as hundreds of thousands of dollars in costs and the loss of intellectual property. While not parties, the City of
Lansing, its taxpayers, and the Michigan State University have additionally suffered damages from this racketeering enterprise. Additionally, the Count I Defendants’ racketeering activities and violations of 18 U.S.C. § 1962(c) have interfered with Plaintiffs’ business dealings with Developer
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A and directly and proximately caused damage to Plaintiffs’ business expectancies with Developer
A related to the sale and development of Plaintiffs’ property.
WHEREFORE, Plaintiffs respectfully request that this Honorable Court enter judgment in their favor and against the Count I Defendants, as follows:
(i) For compensatory damages in an amount to be proven at trial in excess of $75,000.00;
(ii) Treble damages;
(iii) Attorneys’ fees; and
(iv) For such other relief as the Court deems just and proper.
COUNT II – CONSPIRACY TO VIOLATE THE RACKETEERING INFLUENCED AND CORRUPT ORGANIZATION ACT, 18 U.S.C. § 1962(d), (DEFENDANTS BERNERO, TRESIZE, LEAP, FERGUSON, STRALKOWSKI, FERGUSON DEVELOPMENT, CHUCK CLARK, CLARK CONSTRUCTION, RED CEDAR INVESTOR LLC, AND FERGUSON/CONTINENTAL LANSING LLC.)
201. Plaintiffs re-allege and incorporate the above allegations in this Complaint, as if fully set forth in this paragraph.
202. This Count is against Defendants Bernero, Trezise, LEAP, Ferguson, Stralkowski,
Ferguson Development, Chuck Clark, Clark Construction, Red Cedar Investor LLC, and
Ferguson/Continental Lansing, LLC (the “Count II Defendants.”)
203. As set forth above, the Count II Defendants intentionally agreed and conspired to violate 18 U.S.C. § 1962(c). Specifically, the Count II Defendants have intentionally conspired to conduct and participate in the conduct of the affairs of the enterprise through a pattern of racketeering activity § 1962(c). The Count II Defendants worked together to make fraudulent representations to the Plaintiffs regarding their rights and status as the “selected Developer” on the
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Project. These fraudulent representations, designed to induce Plaintiffs to surrender valuable confidential development information, were made through the use of interstate mails and wires
(email, telephone, postal service).
204. Additionally and alternatively, the Count II Defendants also intentionally agreed and conspired to engage in bribery and extortion, in violation of both federal and state law, to create a political system in Lansing where Plaintiffs were forced to surrender equity and use preferred contractors in exchange for political approvals. For example, and as detailed further in the Common Allegations, the Count II Defendants agreed to pressure the Plaintiffs into surrendering equity in the Project and using certain specified contractors, under the threat of using their political power and connections to take the Project away from the Plaintiffs. The Count II
Defendants benefitted from their conspiracy financially and politically.
205. The Count II Defendants knew that their predicate acts were part of a pattern of racketeering activity and agreed to the commission of those acts to further the schemes described above. That conduct constitutes a conspiracy to violate 18 U.S.C § 1962(c), in violation of 18
U.S.C. § 1962(d).
206. As direct and proximate result of the Count II Defendants’ conspiracy, the overt acts taken in furtherance of that conspiracy, and violations of 18 U.S.C. § 1962(c), Plaintiffs have been injured in their business and property in that they lost their award of the Project and all expected attendant profits as well as hundreds of thousands of dollars in costs and the loss of intellectual property. Additionally, the Count II Defendants’ racketeering activities and conspiracy to violate 18 U.S.C. § 1962(c) have interfered with Plaintiffs’ business dealings with Developer A
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and directly and proximately caused damage to Plaintiffs’ business expectancies with Developer
A related to the sale and development of Plaintiffs’ property.
WHEREFORE, Plaintiffs respectfully request that this Honorable Court enter judgment in their favor and against the Count II Defendants, as follows:
(i) For compensatory damages in an amount to be proven at trial in excess of $75,000.00;
(ii) Treble damages;
(iii) Attorneys’ fees; and
(iv) For such other relief as the Court deems just and proper.
COUNT III – VIOLATION OF PLAINTIFFS’ FOURTEENTH AMENDMENT RIGHT TO NOT BE DEPRIVED OF PROPERTY PURSUANT TO 42 U.S.C. § 1983 (DEFENDANTS BERNERO, TRESIZE, AND LEAP)
207. Plaintiffs re-allege and incorporate the above allegations in this Complaint, as if fully set forth in this paragraph.
208. This Count is pled against Defendants Bernero, Trezise, and LEAP, (“Count III
Defendants”) who at all pertinent times were acting under the color of state law to deprive Plaintiffs of their rights under the Fourteenth Amendment of the United States Constitution, specifically of
Plaintiffs’ right to not be deprived of property without due process of the law.
209. Bernero acted in his capacity and role as Mayor of Lansing under the color of state law.
210. Trezise and LEAP acted as agents of the City of Lansing and under color of state law.
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211. Plaintiffs submitted a bid in response to the RFQP issued by the City of Lansing and LEAP.
212. Plaintiffs were selected as the “selected Developer” and “authorized agent” (for
Chris Jerome) in response to Plaintiffs’ submission and bid for the RFQP.
213. As the selected Developer, Plaintiffs are entitled to, inter alia, the following property rights pursuant to the RFQP:
a. The selected developer will enter into a planning and negotiation process with the
LEDC [LEAP] and City [of Lansing] that should ultimately result in a Comprehensive
Development Agreement. (Ex. 4, at 1.)
b. The developer selected to purchase the Property (the “Developer”) will work with
the Public Entities to develop the Property. (Id., at 7.)
c. The proposed Developer is to be the sole representative and point of contact with
regard to development, site purchase, construction, condominium and lease related matters
and any cost or expense charges. (Id., at 10.)
214. Plaintiffs reasonably relied on their selection in response to the RFQP, and their property rights as the selected Developer that Plaintiffs as “[t]he selected developer will enter into a planning and negotiation process with the LEDC and City that should ultimately result in a
Comprehensive Development Agreement.” (emphasis added). Included in the award of the RFQP, the City guaranteed that Plaintiff Chris Jerome would be the sole “authorized agent who has unqualified authority” to negotiate with the City of Lansing and its agent LEAP.
215. Plaintiffs had a property interest in these rights and promises related to their selection as the selected Developer—for example, Plaintiffs’ selection had a direct effect on
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Plaintiffs’ ability to obtain financing for the Project, to borrow money, to issue debt, and to otherwise do business.
216. However, after Plaintiffs rejected Joel Ferguson’s repeated and escalating demands for equity in and control of the Project, the Count III Defendants agreed and conspired to rescind the Plaintiffs’ selected Developer status and to award the Project instead to Joel Ferguson and his companies.
217. Without a hearing or rebid, Bernero, Trezise, and LEAP worked together to rescind
Plaintiffs’ selection as “selected Developer,” and to instead award the Project, on a no-bid basis to
Joel Ferguson’s company, Ferguson/Continental Lansing, LLC.
218. Additionally, in re-awarding the Project on a no-bid basis, the Count III Defendants violated Chapter 206 of the Lansing City Ordinances, Purchasing, Contracts, and Sales.
219. Specifically, the Count III Defendants acted under the color of law to rescind the
Project award from Plaintiffs, and to deprive Plaintiffs of their “selected Developer” status and attendant property rights without any notice, let alone any due process of the law.
220. On December 2, 2013, Chris Jerome received an email from Karl Dorshimer of
LEAP, informing him that Plaintiffs have been relieved of their award of the project by LEAP and the City of Lansing.
221. On December 12, 2013, instead of rebidding the Red Cedar Golf Course development project as Mayor Bernero had promised Chris Jerome and the Lansing taxpayers,
Mayor Bernero and Trezise held a surprise press conference and awarded the Red Cedar Golf
Course development project to the Ferguson/Continental Lansing, LLC. Thus, Defendant Joel
Ferguson obtained Plaintiffs’ property interest as the new “selected Developer.”
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222. Earlier in 2013, Trezise informed Chris Jerome of Joel Ferguson’s threats, for example to derail the Mayor Bernero’s reelection campaign by accusing him of being a racist if the Mayor did not meet Ferguson’s demands with regard to the Capital Gateway Project. Trezise also told Chris Jerome that the racism claim would cripple Bernero politically even if it did not remove him from office.
223. Trezise then told Chris Jerome that Joel Ferguson had had control over Lansing politics for years and told Chris Jerome a story about a time Joel Ferguson had boasted that taxpayer money was flowing from Michigan State University into the pockets of Lansing City
Council members.
224. On January 10, 2013, Stralkowski emailed Chris Jerome and threatened to take Joel
Ferguson’s latest set of demands (styled as a “compromise”) off the table and indicated that
Defendant Mayor Bernero will terminate the Project if Joel Ferguson’s demands were not met.
225. During meetings in March of 2013, Trezise and Mayor Bernero continued to represent that Joel Ferguson was putting political pressure on Mayor Bernero through Joel
Ferguson’s control of the Lansing City Council, and that Joel Ferguson was prepared to terminate the Project through his control of the Lansing City Council if Plaintiffs did not agree to Joel
Ferguson’s demands for equity and control.
226. Plaintiffs have a right under the Fourteenth Amendment to the United States
Constitution to not be deprived of property without the due process of the law.
227. Defendants Bernero, Trezise, and LEAP by their unlawful acts and acting under the color of law, deprived Plaintiffs of their property right as the selected Developer under the RFQP
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and related property rights in violation of Plaintiffs’ rights not to be deprived of property without due process under the United States Constitution.
WHEREFORE, Plaintiffs respectfully request that this Honorable Court enter judgment in their favor and against the Count III Defendants for the following:
a. For compensatory damages in an amount to be proven at trial in excess of $75,000.00;
b. For reasonable costs and attorneys’ fees pursuant to 42 U.S.C. § 1988;
c. For such other relief as the Court deems just and proper.
COUNT IV – TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCY – THE PROJECT (DEFENDANTS KASS, CONTINENTIAL, HALLMARK, AND TRESIZE)
228. Plaintiffs re-allege and incorporate the above allegations in this Complaint, as if fully set forth in this paragraph.
229. This Count is pled against Defendants Kass, Continental, Hallmark, and Trezise
(the “Count IV Defendants.”)
230. Plaintiffs had a business relationship and expectancy with Joel Ferguson for the
Project. This relationship and expectancy manifested itself thorough the various offers and operating agreements circulated to Plaintiffs by Joel Ferguson, demanding increased equity and increased control over the project. Bernero, Trezise, and Ferguson represented to Plaintiffs that
Plaintiffs needed Ferguson’s involvement and support to obtain the necessary political approvals for the Project. Additionally, Plaintiffs attended numerous meetings regarding the Project with both Ferguson and officials like Bernero and Trezise in the same room.
231. Following their win of the RFQP and their selection as the “selected Developer,”
Plaintiffs also had a business expectation and property rights associated with their selection, such
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as right be the sole project representative and negotiate with the City of Lansing for a
Comprehensive Development Agreement.
232. The Count IV Defendants had knowledge of the Project and Plaintiffs’ rights and expectancy related to the Plaintiffs’ initial negotiations with Ferguson, as well as the Plaintiffs’ rights and expectancy related to Plaintiffs’ selection as the “selected Developer” pursuant to the
RFQP. Indeed, Plaintiffs had previously engaged Kass and Continental as potential partners for the Project, but Kass told Chris Jerome he was no longer interested in the project due to Ferguson’s involvement.
233. As part of the potential partnership, Plaintiff Story Companies and Hallmark executed a Confidentiality and Non-Compete Agreement on or about January 17, 2012.
234. However, Defendants Kass, Continental, and Hallmark intentionally, willfully, and without justification interfered with Plaintiffs’ rights and business expectancies by inter alia: (1) meeting and talking with Joel Ferguson after Ferguson and Plaintiffs had already met and agreed to work together on the Project, with the intent to divert Ferguson’s efforts for Kass’s and
Continental’s own gain; (2) misappropriating and stealing the plans and depictions of the Capital
Gateway Project for their own use; and (3) otherwise misrepresenting to the Plaintiffs that Kass and Continental were no longer interested in the Project because of Ferguson, where in reality,
Kass and Continental were actively working to divert Ferguson’s influence for their own financial benefit, and to the detriment of the Plaintiffs.
235. Separately, Defendant Trezise intentionally, willfully, and without justification interfered with Plaintiffs’ rights and business expectancies in the Project by inter alia by calling representatives of Carpenter & Company in Massachusetts, on or around September 13, 2013.
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Carpenter & Company was one of the developers who Chris Jerome had brought to Lansing to
meet City of Lansing and LEAP officials many times to share Carpenter & Company’s ideas on
the financing and design of a $100 million piece of the Project to include amenities like Whole
Foods, boutique luxury hotels, and an outside concert pavilion/ice rink. At the time, in September
2013, Plaintiffs were the “selected Developer” awarded the RFQP and had valuable property rights
associated with that status, such as for example, “to be the sole representative and point of contact
with regard to development, site purchase, construction, condominium and lease related matters.”
236. Trezise however intentionally violated that expectancy and right. Trezise told the
Carpenter representative that that Jeromes’ status in the Project was “uncertain” and that
Carpenter’s participation was no longer desired.
237. As a result of the Count IV Defendants’ actions, Plaintiffs have lost not only their
business relationship and expectancy with Ferguson, but also their business expectancy related to
being named “selected Developer” and winning bidder for the Project. Plaintiffs have suffered, as
a consequence, damages in excess of $75,000.00.
WHEREFORE, Plaintiffs respectfully request that this Honorable Court enter judgment in
their favor and against the Count IV Defendants for the following:
a. For compensatory damages in an amount to be proven at trial in excess of $75,000.00;
b. For such other relief as the Court deems just and proper.
COUNT V – TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCY – DEVELOPER A – (DEFENDANTS TRESIZE, LEAP, AND FERGUSON) a. 238. Plaintiffs re-allege and incorporate the above allegations in this Complaint, as if
fully set forth in this paragraph.
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239. This Count is pled against Defendants Trezise, LEAP, and Ferguson (the “Count V
Defendants.”)
240. Plaintiffs had a business relationship and expectancy with Developer A for the sale and development of property owned by the Jeromes, specifically a $70 plus million development, independent of the Project. The Jeromes obtained this business relationship and expectancy following the Defendants’ actions to deprive Plaintiffs of their rights as “selected Developer” for the Project and to otherwise interfere with Plaintiffs’ business interests, as described throughout this Complaint.
241. The Count V Defendants had knowledge of the business expectancy and relationship with Developer A because, at a minimum, Developer A representatives met with
Trezise in 2014.
242. The Count V Defendants intentionally, willfully, and without justification interfered with Plaintiffs’ rights and business expectancies by inter alia: (1) telling Developer A that the Jeromes should not be involved in the project, or otherwise the project would not receive the necessary governmental approvals; (2) directing Developer A representatives to meet with Joel
Ferguson, and then solicit confidential information and intimidate Developer A to give up its status as a potential competitor; (3) using Ferguson’s position and influence at MSU to threaten
Developer A and making extortionate demands from Developer A, including to make a cash payment to Ferguson, and to force Chris Jerome to drop a related lawsuit in Cook County, Illinois.
243. As a result of the Count V Defendants’ actions, Plaintiffs have lost their business relationship and expectancy to develop their parcels with Developer A and have thereby lost their expected profits from the business relationship and expectancy.
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WHEREFORE, Plaintiffs respectfully request that this Honorable Court enter judgment in their favor and against the Count V Defendants for the following:
a. For compensatory damages in an amount to be proven at trial in excess of $75,000.00;
b. For such other relief as the Court deems just and proper.
****PLAINTIFFS DEMAND A TRIAL BY JURY****
Dated: September 9, 2016 Respectfully submitted,
THE MIKE COX LAW FIRM PLLC
s/ Michael A. Cox (P43039) Michael A. Cox (P43039) Danila V. Artaev (P74495) Attorneys for Plaintiffs 17430 Laurel Park Drive North, Suite 120E, Livonia, MI 48152 (734) 591-4002 [email protected] [email protected]
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