Who got the winning hand?

May 19, 2008 9:19:42 PM PDT
Months after 13 Undercover exposed questionable county real estate deals, we find out just how much of your money might have been wasted. Tuesday morning, county commissioners will get the official report. It's the first public admission that real estate deals now under scrutiny by the FBI may have short-changed you big time.

The FBI is now probing the players in these real estate deals and the government officials they seem so close to. When we did our winning hand investigation, the chorus was these deals may have looked funny, but they were good deals for you. Well, maybe not.

For months, we've been exposing the cozy county real estate game and who got the winning hand. The focus -- seven Harris County real estate deals. The county deciding not buying buildings, but lease to buy them; high stakes real estate projects worth tens of millions of your dollars.

"Lease purchase in that arrangement made a lot of sense to me," said Harris County Commissioner El Franco Lee.

Among the winners, three players with deep connections to members of the Harris County commissioner's court:

  • Michael Surface, the former county building official turned developer. Commissioners had appointed him as chairman of the powerful Reliant Stadium project within days of his first real estate deal.
  • Developer Andy Schatte, a member of the finance committee for Commissioner El Franco Lee. His company is also the landlord for the private company Lee ran.
  • Architect Leroy Hermes. He's given lots of campaign money and he designed Commissioner Eversole's house in the Heights, and helped design the sheriff's big ranch
It may have looked like a small world, but taxpayers were assured they were good deals, even the most recent project on Antoine.

"The deal came out very well for the county," said Harris County Purchasing Director Jack McCown.

Now, the county's own budget office will dispel the notion publicly that these real estate deals were good deals after all; added costs of up to $5.3 million for taxpayers just in the cost of financing.

And those aren't the only chips that were lost.

The county may have paid millions more than the appraised value for the CPS building on Murworth, three times more than the appraised value for the Precinct 1 facility on El Rio.

The county real estate department, it turned out, never bothered to get independent appraisals on most of the property.

"Will you commit to the public that there will be all the I's dotted, all the T's crossed on any real estate deal we do," we asked Harris County Judge Ed Emmett.

"Yeah, I can make that commitment," he answered.

The lease purchase deals include administrative fees of $57,000 a year. The report says it's unclear what administrative efforts are covered.

On a county building on OST, the report says the county "effectively paid twice for the property for a three month period."

"A lot of frustration, almost to tears," said businessman Eli Sasson.

Sasson was the losing bidder on the latest real estate project under scrutiny, the one on Antoine.

"Let me tell you something. Justice needs to be done," he said.

"We're a county of four million people," said Emmett. "We need to do business completely out int heopen."

Developers Andy Schatte and Michael Surface were indicted early this year in a city corruption probe. They deny wrongdoing and their lawyers insist these real estate deals weren't bad deals.

We'll see if commissioners want to explain their votes and their relationships tomorrow.

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