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Critique of Tetra Purchase Flags Conflicts of Interest, Transparency Concerns

by Fatimah Waseem January 26, 2018 at 1:00 pm 64 Comments

A year-long study of Reston Association’s $2.65 million purchase of the Tetra property raises blistering concerns about the process that drove the controversial decision and cost overruns linked to the building’s renovation.

The critique, led by two Reston Association members, uses a trove of documents, interviews and an electronic paper trail to chronicle decisions that led to the purchase in 2015 after months of community debate. The purchase price was nearly double the most recent tax assessment and renovations to transform it into The Lake House have cost three times more than expected.

Members Moira Callaghan and Jill Gallagher found that RA’s Board of Directors, Chief Financial Officer and members were not privy to major decisions involving the purchase. The general contractor hired for renovations was a former employee of the project manager Cresa – raising a potential conflict of interest. The Tetra project was the contractor’s first job and Cresa did not initiate a formal request for bids, according to the review.

External players like the property’s owner and contracted staff, who often seemed to drive decision-making more than staff and the board, led discussions “with very little oversight.” In some cases, the members found very few documents – or none at all – supporting decisions made, the review found.

Gallagher, a management consultant and former budget analyst, was part of a Mediaworld Ventures LLC, which offered a proposal to complete StoneTurn Group’s work for a $1 fee. The proposal was abandoned after finger pointing.

They said their intention was not to assign blame. Their review, which they acknowledged reached conclusions limited by the information available or disclosed, was instead intended to offer a case study for lessons learned.

“Our goal is to provide the RA Board and community with our observations about the purchase, patterns of activities, and recommendations that we hope will spur further improvements in how RA manages itself and our assessment dollars,” Gallagher said.

The review also indicated several high-ranking individuals like the CFO and general counsel at the time flagged concerns about the high purchase price. In December 2014, the CFO at the time wrote the property seller would be “hard pressed” to find a buyer willing to pay $2.65 million. After reviewing monthly operating costs, the CFO also projected a potential deficit if RA proceeded with the purchase.

Even the property seller expressed concerns that the appraisal would not meet the asking price, according to the review.In some cases, critical decisions seemed to happen without the board’s input or knowledge. For example, the board was not made aware of discussions between the property seller and RA staff regarding negotiations until January 2015.

Other highlights include the following:

  • Information provided to RA members before the purchase went for a referendum vote was not clear. For example, a fact sheet said zoning allow for office space and expansion. Many members believed the property would be developed into a large restaurant and that development was imminent. Information also contained an image of a restaurant on the site – a plan that was removed from the site plan in the 1980s. Members found no county record of the proposed restaurant.
  • Paving repairs paid for by RA as part of the escrow agreement never occurred.
  • Some contractors began working before contracts were signed. Cresa, for example, began working before it submitted a proposal on in October 2015. The contract was not signed until mid-November of that year.
  • Information provided to the board was inaccurate at times. For example, a land use attorney told the board in February 2015 that the property is not at its “highest and best use,” even though the appraisal stated the highest and best use of the property was continuing building improvements as “an office use.”
  • An spreadsheet mapping stakeholders’ involvement at each juncture of the project indicated RA members and RA’s fiscal committee had limited input in the overall process.

RA’s board of directors heard the findings Thursday night. President Hebert said she was “blown away” and needed time to digest the work.

“We cannot pretend as though we did not hear this,” said board member John Mooney.

A video of the presentation before the board is online.

  • Practise makes perrfect

    Next, the golf courses the distillery and RTC parking facilities. For the latter we need a rent back agreement.

  • Drip

    Unless a civil lawsuit for some kind of breach of fiduciary duty gets going before the statute of limitations expires or criminal referrals takes place, the wealthy lakefront homeowners and Ken K will still sleep at night knowing that they got one over on the community. Meanwhile, the CEO is still employed by RA. Too bad RA can’t/won’t work to sell the property to a restaurant–that will be some poetic justice.

    • Mike M

      I continue to be stunned at how shamelessly some folks serve themselves at the expense of others. Some people are no better than roaches and deserve to be treated as such.

    • 40yearsinreston

      This should be turned into a dog park
      No business would buy it

    • Greg

      SoL is likely two years. Unless there’s been fraudulent concealment…

  • Tammi Petrine

    Please note that the current RA Board of Director’s composition has changed drastically from when the Tetra purchase was made. Only one member from that group still sits on the board and he leaves soon. Others elected after the referendum to purchase but who have bucked exposing the flaws are few. In fact, many new board members have run recently precisely to tighten up the ship.

    What Ms. Callaghan and Ms Gallagher have done in their thorough presentation last night has been to give the current board members and newbies soon to be elected in 2018 a road map to excise dangerous insufficiencies and processes from RA. Bravo to these fine citizens who have spent 1,000’s of their free time hours to inform RA membership of exactly what happened. We all wanted to know. Kudos to the current RA board for facilitating their forum and for fulfilling their promises of transparency. No doubt soon we will see even more substantive changes at RA which, combined with the work already done by the current board will lead to a much improved HOA.

    Thank you to all who participate in shining daylight into dark corners. Let’s all work together to protect and enhance the planned community of Reston which we all love. Please keep informed. With your support, RA and Reston as we know it will survive and thrive.

    • Drip

      Why is the CEO still employed by RA?

      • On behalf of T P

        Cuz she said 2.65 mill is expensive

        • CitizenComment

          No the CFO and RA attorney said it was expensive

          • On behalf of T P

            In which case I just defer to the boss [bows3x]

    • 40yearsinreston

      The ‘senior staff’ and directors involved should be dismissed immediately for cause
      The CEO should be the first to go
      Her proven incompetence is unacceptable

    • Antietam

      Revolving HOA structures are simply problematic as I’ve heard many times over that the board members who were involved and/or should have provided oversight are no longer there. Hence, “water under the bridge” and let’s just move on. Simply not good enough…

  • 40yearsinreston

    Even the dogs on the street knew this was a scam by a few privileged property owners
    At least it is now part of the record
    It should be turned into a 24X7 dog park

  • Terry Maynard

    Jill and Moira’s presentation was absolutely stunning and damning of all those who were involved in the decision to purchase and renovate Tetra. It documents–and I mean “documents” with original source information from everyone from RA to the County and contractors–the totally inept and potentially wrongful handling of virtually all matters pertaining to this purchase. While it reinforces and expands greatly on the dozens of articles, posts, and op-eds that I wrote criticizing this deal at the time, I take no pleasure in the horrendous way the last RA Board, the RA staff, and contractors handled this transaction.

    It is easily the worst example of financial mismanagement by RA in my three decades-plus as an RA member.

    I strongly encourage RA members to click on the video link provided above and spend the hour or so it takes to hear Jill and Moira’s damning report. Processes & procedures need to change (or even be implemented for the first time). Some staff and contractors need to be let go. It is time for the RA Board to act.

    • 40yearsinreston

      Thanks for your efforts to expose this calumny

      Too bad its didn’t gain traction

      https://www.restonnow.com/2017/01/11/op-ed-vote-to-put-an-end-to-the-growing-tetra-mess/#disqus_thread

    • Antietam

      I totally concur with Terry’s comments. Jill and Moira did an absolutely superb job and should be commended by all of the membership. Thursday’s night’s presentation was simply daunting. So much, so wrong, for so long…

      • cRAzy

        It may have been a stunning presentation but I’d like to see it in writing. Along with their documentation and references.

        • Antietam

          Is is my understanding that will be forthcoming. I can also attest to viewing an exhibit (letter) Thursday evening from the seller expressing his real concern that the appraisal would not approach his asking price.

        • CitizenComment

          Wow cRAzy all this diligence and wanting to verify information now. Where were you when this deal was going down? Probably on the Board

        • cRAzy

          THE ABOVE IS NOT “THE REAL” cRAzy; I AM.

          I BELIEVE MS. CALLAGHAN AND GALLAGHER HAVE COMMITTED TO SHARING THEIR MATERIALS WITH THE RA BOD OF DIRECTORS FOR THEIR FOLLOW-UP ACTION. ASKING FOR A WRITTEN REPORT IS ABSURD GIVEN THE DETAIL THEY PROVIDED.

  • RestonRed

    This article keeps saying that RA Board and CFO didn’t know certain things or weren’t briefed on various aspects. Then who was aware? This sale didn’t just happen, others had to know. I honestly don’t know the inside people at RA, so it would help me understand if someone would say who pushed this through.

    • 40yearsinreston

      The real estate cabal and lawyers living on thelake
      Follow the money

      • LeftPolitico

        40yearsinreston: In your series of comments, the only person that you directly implicate is “the CEO.” Why are you reluctant to name others?

        • CitizenComment

          Others were called out Like construction company and project management company and legal staff on contracts – it was spelled out in article

    • cRAzy

      The Board Executive Committee (Graves, Kneuven, Sanio, Higgins), the CEO, a few senior RA staff, and the land use attorney (who seems to have driven the purchase decision) were at the core of those informed and making decisions on this transaction.

      RA attorney Chadwick was also involved to some extent. The incumbent CFO left during the process (Harris) and had only peripherally been in the loop prior to his departure. The other Board members, several of whom were relatively new, were not well informed or provided misleading information, such as the threat of alternative uses and not being allowed to see the appraisal until after the letter of intent to purchase was approved (by them!).

      Here are the Board minutes from the January 2015 meeting when the decision to purchase Lake House was approved: https://www.reston.org/Portals/3/2015%20GENERAL/FINAL%20January%2022%202015%20BOD%20Meeting%20Minutes.pdf

  • Greg

    Conflicts of interest? Imagine that! The RA? The RA with no code of ethics and an incompetent “CEO”?

    It’s time to clean house. Start by firing Cate Fulkerson!

    • John Farrell

      The Non-stock Corporation Act already has vigorous conflict of interest provisions.

      They need to be enforced and were in one board member’s case this past year.

      • Greg

        I wager that fewer than 10% of RA (or any volunteer) board’s members have ever heard of the non-stock corporation act. Of those who are aware of it, 90% of them have never read it. Of those who read it, few comprehended (or finished reading) its vigorous provisions. Of those who comprehend it, that comprehension could be subject to judicial actions.

        Boards come and go. Elected by friends and families. They are usually composed of those with issues with past boards, policies or some axe to grind.

        They are unpaid, sometimes (or often) unqualified to fulfill their duties, almost always they are never trained, and they don’t comprehend fiduciary, among other, duties.

        Enforcement is good; it’s also rarely done.

        • John Farrell

          Enforcement is rarely needed.

  • John Farrell

    The Code of Professional Responsibility does not allow an attorney to seek a blanket waiver of conflicts of interest in advance from a client.

    • 40yearsinreston

      Whats the penalty ?
      Bottom Line: RA agreed to it

      • John Farrell

        Some attorney prohibited actions are still prohibited even if the client agrees.

        The penalty is up to the State Bar.

  • 40yearsinreston

    Does RA have clear title to the the property ?
    No one knows

    • CitizenComment

      Not clear and no one really jumped up to say we do, so….??

  • John Farrell

    The Tetra Referendum passed by only 323 votes.

    If the information in the Callahan/Gallagher and Stoneturn reports was public in April 2015, it would not have passed.

    The Tetra Referendum was supported by Mike Sanio, Rescue Reston, Ellen Graves and Eve Thompson in OPEds posted on this blog. Andy Seigal and Julie Bitzer supported the purchase in their candidate statements posted on this blog. Without their support, it would not have passed.

    In light of the Callahan/Gallagher and Stoneturn reports, do they regret their support? Would they do it again?

    RA members deserve an answer.

    • Drip

      Every time a Rescue Reston member is reminded about their prominent advocacy role in supporting this debacle—despite placing their reputation on the line by taking suspect info at face value—they get extremely angry and defensive. Not angry for their poor advocacy, but angry for bringing it up.

      • John Farrell

        Their current anger might be explained by the rumor that RR was threatened with withdrawal of RA’s support in the RNG battle if RR didn’t support Tetra.

        Only the leadership of Rescue Reston can tell us if the rumors are true and who exactly made those threats.

        Reston Rescue members deserve an answer.

        • cRAzy

          That is true. There was a swap between Rescue Reston support for Tetra and RA’s support for protecting RNGC between leaders of both groups.

        • JoeInReston

          And in the end, Reston Rescue hurt their own cause:
          a) RA now has less budget resources to devote to the RNG battle.
          b) The public has less trust in the RA and their ability to defend open spaces.

    • ANDREW SIGLE

      Andy Sigle had left the board by the time Tetra was even discussed. Andy Sigle never supported the purchase. Andy Sigle, in the public comments portion of a board meeting pre the Tetra referendum, asked the board to tell members what the other best uses of the Comstock $650K would be if they did not use it on the Tetra purchase – they never replied. Andy Sigle, as a member, voted no on the referendum to purchase Tetra. Let’s get the facts correct.

      • John Farrell

        “In general, yes, I am in favor,” said Sigle.

        https://www.restonnow.com/?s=tetra+candidate

        • ANDREW SIGLE

          and continuing in the piece “…We can hold that space and make sure it stays the way RA wants it means a lot. But we need to ask the questions that need to be asked….” The article came out in March 2015 – I had been off the board since April 2014.
          Board questioning of the project is exactly what Moira and Jill suggested in their presentation that we needed more of in the process. After losing the election, I continued to ask questions and did not like the answers we were receiving – or the fact that we did not receive them – so I voted no on the referendum.

          • John Farrell

            We’ll never know how you voted and that’s not the issue.

            We do know that you publicly supported the purchase, even at $2.65 million.

            Even after Terry, Ed Abbott, Irwin Flashman and I posted multiple OPEds explaining the faults in the proposal

            And that public support, along with others, made the difference in a very narrow vote in favor.

            So after reviewing the Callaghan/Gallagher and Stoneturn reports, do you now regret your public support for this $2.65 million boondoggle?

          • ANDREW SIGLE

            At the time the article was written, there was much data from many sides swirling around that needed to be questioned and synthesized – as much of it was conflicting. As the article was published, I was still in that process. My stance then as written was that I am a proponent of open space in Reston, but that many questions on the specific deal had to be answered before I could support it. The only thing I publicly supported on the proposed deal was digging deeper for more answers and more transparency. I lost the election and made no further comments on the project in the press. As stated above, as the referendum approached and I did not feel comfortable with the answers we as members were receiving from RA – especially as related to the price – coupled with reviewing the info others were posting about the project in the press, I chose to vote “no” on the referendum.

          • John Farrell

            Since you choose not to you make your change of heart known to those who had heard your earlier support and voted for you in the election, more Restonians voted for the boondoggle than might otherwise had. That could have made a difference in the outcome.

            Do you now regret your silence on your change of position?

          • ANDREW SIGLE

            After losing that election, I decided to take some time away from public discussion of my views. If after losing the election, it would have helped others make up their minds by letting them know that I had come to the conclusion to vote “no” on the referendum, then I probably should have done that.

          • Illegal pre/!mmature camp

            As some of you know I’ve been ill for a few days, despite being on tramadol I’m still in agony. That aside it has given me time to reflect as we all do occasionally. I have noticed that Restonnow has allowed Trolls to target people for no reason at all. At first I used to reply hoping that these people would just be nice, sadly it appears that once they have had a lobotomy there is nothing that can be done for them except a prayer. I will no longer be dragged into a pointless debate to score points, instead I will just suggest to ignore their comment. We have some fantastic candidates on here and will spend time learning and appreciating. Have a good day and keep smiling.

          • CitizenComment

            You are right. There was a lot of information that was often opposing. It sounds like some of the information given to the members before the vote may not have been completely correct – this is a problem. We voted on the project based on that information.

        • John Higgins

          I get it, it’s election season and none of us have the time to fully evaluate the many things we will hear and see. To be fair, this quote from Mr. Sigle needs context. His “in general” qualifier referred to RA ownership as a means of protecting this parcel from undesirable development. (The only substantial argument we heard for the purchase.) He is also quoted to have said, “we need to ask the questions that need to be asked.” That’s what did not happen, leading to this now-regretted purchase.

          • John Farrell

            Elections are how we hold officials accountable for their pronouncements and actions. It’s an upgrade from pitchforks and torches! 😉

            The question now is whether, in light of the Callahan/Gallagher and Stoneturn reports, he regrets his public support for the purchase during the 2015 campaign?

            If he intends to seek a position on the RA Board ever again, he needs to answer the question.

          • John Higgins

            Fair enough. Let’s hear from Mr. Sigle. I’m not sure I am ready to retire the pitchfork, but I’m all for true accountability.

          • John Farrell

            And from Mr. Wedell who described this $2.65 million debacle as a “no brainer.”

            And from Ms. Bitzer who supported this farce.

            And from Mr. Pinkman who was a leader of Rescue Reston when it endorsed this fiasco. Was RR threatened with withdrawal of RA’s support on RNG?

        • cRAzy

          Classic Farrell, a single out of context quote. Working on the election already John? I hear you’re hoping to be hired by the RA Board as in-house counsel, well you’ll need your cronies for that, that’s for sure! But hey! Nothing unethical about that right? Like you and the other John meeting with candidates last year to bully them out of running. No, nothing at all wrong with that. I guess if the ends justify the means.

          • cRAzy

            AGAIN, THE ABOVE STATEMENT IS NOT BY “THE REAL” cRAzy. I AM THAT PERSON AND DISAGREE WITH THIS COMMENT. THE EDITOR NEEDS TO PREVENT THIS FROM HAPPENING.

          • Reston Now

            We have banned the user and will continue to monitor.

    • cRAzy

      Oh this must be where John Farrell begins his campaign to become Reston Association’s In-House Counsel. I can only hope, for the sake of Reston that enough of the current board doesn’t return so we can keep that from happening.

      Also why am I unable to download a copy of this document presented by Callahan and Gallagher? It seems that we should have the opportunity to review it and digest it. I’m sure its perfect, but still.

      • cRAzy

        THE WRITER ABOVE IS NOT “THE REAL” cRAzy. I AM THAT PERSON AND I DO NOT SHARE THIS TROLLS VIEWS WHATSOEVER.
        IT IS UP TO THE EDITOR TO PREVENT THIS FROM HAPPENING.

        • Reston Now

          We have banned the user.

          • cRAzy

            THANKS.

  • Richard Stillson

    Jill and Moira. Great job. Thank you. You did on your own what we were not allowed to do. Dick Stillson, member of Mediaworld team.

  • Ambulance chasers unite!

    95% of all commenters did not watch the video in its entirety even though its rainy

    Oh I forgot its campaign season, tears for rain drops

  • Jillian Morris

    Jill and Moira will you please send a copy of your presentation and accompanying reference material to RA so it can be included in the official notes? I’m sure many in the community would be appreciative.

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