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VOL. 124 | NO. 178 | Thursday, September 10, 2009

Beale Street Report Overshadowed by Wilkins Flap

By Bill Dries

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HERE'S YOUR PROOF: Memphis Mayor Pro Tem Myron Lowery this week parted company with attorney Ricky E. Wilkins, who had been the city’s legal counsel on a long-running case involving Beale Street. Brandishing a copy of Wilkins’ legal invoices, Lowery chastised City Attorney Elbert Jefferson for hiring him. -- PHOTO BY BILL DRIES

The handing over of the case files is still being worked out. So is a motion for a change of counsel. And the final invoice from attorney Ricky E. Wilkins for his work on the Chancery Court case involving the Beale Street Entertainment District is yet to come.

The decision by Memphis Mayor Pro Tem Myron Lowery to replace Wilkins comes at a crucial time in the long-running case.

Special Chancellor Don Harris is about to unseal a report on the entertainment district that has already been partially leaked. The report from Philadelphia accounting firm Parente Randolph was being prepared for release late last week as Wilkins and Lowery began a testy e-mail exchange that ended with Lowery firing Wilkins earlier this week.

For the past year or so of former Mayor Willie Herenton’s tenure, the city, represented by Wilkins, was zealously pursuing an accounting of money from Beale Street since 2002.

Money pit

The money is supposed to flow from the nightclubs on Beale Street to management company Performa Entertainment to the Beale Street Development Corp. and finally to the city. The money hasn’t flowed to the city at all, even though the city owns the district. On that, all sides agree.

The BSDC is the nonprofit board that holds the lease from the city, and Performa has a contract to run, manage and develop Beale Street with the BSDC.

Performa CEO John Elkington contends the district wasn’t profitable for a long time after its dedication in late 1983. Elkington said he and Performa put their own money into it. Under his contract, Elkington said he can and should recoup the money when the district turns a profit.

Wilkins contended in court that Performa mingled the Beale Street money with Performa ventures in other cities. It’s an allegation Elkington has adamantly denied.

“That’s nowhere in the report,” Elkington said in his only positive reference to the Parente Randolph findings.

Advocacy wars

The report by Paul Pocalyko, a principal of the accounting and consulting firm, concluded Performa owed the city of Memphis more than $6 million in profits from the district.

Press reports of Pocalyko’s multimillion-dollar bottom line had the political effect of stalling plans by Lowery to settle the lawsuit and fire City Attorney Elbert Jefferson.

“My overall goal is to save the taxpayers money,” Lowery said this week, denying that he is trying to “squash” the accounting of profits from the district. “If this case can be settled, I want it settled. If it must go to court, then it will go to court. But the overall goal is to improve the efficiency of this city.”

Elkington has been Beale Street’s developer since the district between Second and Fourth streets reopened 25 years ago.

“They spent $500,000 on an audit that is not an audit,” he said.

Elkington recently hired attorney John C. Speer, a member of Bass, Berry & Sims PLC, to represent Performa.

Speer wouldn’t comment on the content of the Pocalyko report.

But he said, in general, the report mistakenly counted revenue, to the tune of millions of dollars, as due the city.

“That document is not an audit. It’s an opinion,” Speer said. “We are disappointed that it wasn’t an audit because we think an audit would have a credibility that would have supported the conclusion we have that there’s not any money owed to the city.”

Earlier this week, Speer was awaiting his own full copy of the report and both sides were still arguing about what would be redacted from it.

“The conclusions and opinions in there are not supported by fact,” Speer said. “They are opinions that are designed to support the position taken by the city’s attorney.”

That included approximately $2 million merchants made from selling wristbands over the seven-year period starting in 2002. The wristband sales allow patrons to get in several clubs for one cover charge.

“That money never goes to us. That’s $2.1 million,” Elkington told The Daily News. “So a third of what they are alleging went to the merchants.”

Another $900,000 was disallowed because it was a credit some tenants were given on their rent after they made property improvements. But Performa claims it has a 1991 letter with then-city chief administrative officer Greg Duckett approving the credit arrangement.

“What they’re trying to do is rewrite the lease,” Elkington said. “We’ve always said, ‘If we owe some money, we’ll pay it.’ … Right now, this is stuff that is conjecture.”

‘Black hole’

Lowery has said one of his first actions on taking office was to direct city Chief Administrative Officer Jack Sammons to find a way to settle the Beale Street lawsuit.

A settlement had been one of three priorities – along with a Mid-South Fairgrounds redevelopment contract and an agreement for Bass Pro Shops to develop The Pyramid – Herenton had set for his final weeks in office but never achieved.

Lowery had the same goal for his tenure, which lasts until the special election on Oct. 15 if he doesn’t win the right to fill out Herenton’s term.

Lowery’s immediate concern was millions of dollars the city was paying outside attorneys to pursue litigation. That concern was why Lowery tried to fire Jefferson within minutes of taking the oath of office on July 31. He held Jefferson responsible for what he termed a “black hole” of legal expenses approved on Jefferson’s watch as city attorney.

Lowery mentioned prominently the $35,000 a month to Wilkins and his law firm for work on the Beale Street case.

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