ST. LOUIS • The city of St. Louis won a partial victory Tuesday in its ongoing legal battle with developer Paul McKee’s primary lender, Bank of Washington, but a lawyer for the bank signaled that won’t stop its litigation.
In a 14-page ruling, St. Louis County Circuit Judge Michael Burton said the bank could not ask a court to partially undo a contract it had entered into with a city economic development agency as part of the effort to assemble 99 acres for the National Geospatial-Intelligence Agency.
That decision effectively negates the bank’s efforts to reinstate its claims on the land north of downtown that has since been transferred to the mapping intelligence agency for its $1.7 billion western headquarters.
But the controversial developer, who still controls hundreds of properties near the new NGA campus, says he deserves credit for ‘remarkable results.’
The judge also dismissed Bank of Washington’s accusations of fraud, negligent misrepresentation and unjust enrichment against the Land Clearance for Redevelopment Authority.
However, the ruling did not dismiss the bank’s claims of fraud and negligent misrepresentation against an affiliated entity, the LCRA Holding Corporation, which the city’s economic development arm used to assemble land for the NGA.
Even so, Gerard “Jerry” Carmody, an attorney at Carmody MacDonald representing the city agencies, said in a statement his clients were “pleased with the decision” and called it “another positive step in the redevelopment of north St. Louis.”
Bank of Washington attorney Paul Puricelli, whose firm Stone, Leyton & Gershman has also represented McKee for years, said his client intends to proceed with the claims in the lawsuit the judge allowed.
Though the city still faces the risk that McKee’s bank could win damages in court, Tuesday’s ruling bars its attempt to reinstate a claim on land where the federal government has already awarded a $700 million-plus construction contract and hopes to begin work soon on a massive intelligence campus.
Bank of Washington’s lawsuit, filed in July, came a month after the city ended its 2009 development agreement with McKee, who bought up hundreds of acres of north St. Louis property over the last 15 years and promised major redevelopments in the area. While little has been redeveloped, McKee helped first draw the attention of the NGA to the North Side neighborhood. The city assembled the remainder of the site.
The bank’s lawsuit claims the LCRA misled it into releasing its liens on McKee’s land in a January 2016 agreement following tense negotiations between McKee, his bank and the economic development agency.
The city has sought to make doubly-certain the real estate for the $1.7 billion NGA project can be transferred to the federal government next month.
That agreement said the city would try to renegotiate his development agreement in exchange for McKee selling his land to the city, including some he had purchased from its land bank just years earlier. But the Board of Aldermen never passed a new agreement that extended McKee’s development deadlines. In June, the Missouri Attorney General sued McKee's NorthSide Regeneration company for state tax credit fraud and the city broke off its long-term relationship with the developer.
McKee and the bank argued he had met his development obligations under the LCRA agreement, pointing to the now-open GreenLeaf Market and Zoom gas station, across Tucker Boulevard from each other. They accused the city of not intending to follow through with the promises made in the LCRA agreement, which Missouri law says “is a misrepresentation sufficient to demonstrate fraud.”
Jack Garvey, representing Northside Regeneration, calls those claims "more heat than light."
“The bank has clearly made sufficient allegations to support its fraud and negligent misrepresentation claims against LCRAH,” the judge ruled.
The bank’s claims against LCRA were dismissed based on a government’s legal immunity. However, the court said it wasn’t yet clear if the LCRA Holding Corporation met the same standard for being a public entity that would entitle it to similar legal immunity.
Two other legal actions related to the city’s dispute with McKee and the bank are currently in state appeals court after the city parties won lower court victories.
Editor's note: This article has been updated to clarify that the Missouri Attorney General sued NorthSide Regeneration LLC, not developer Paul McKee, for tax credit fraud.