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FILE PHOTO: Developer Paul McKee (center) applauds as high ranking politicians from Missouri hold a press conference in St. Louis on Friday, April 1, 2016 celebrating the announcement that St. Louis was chosen as the site to build the new western headquarters for the National Geospatial-Intelligence Agency. Photo By David Carson, dcarson@post-dispatch.com

ST. LOUIS — Missouri Attorney General Eric Schmitt’s office has agreed to dismiss a 2018 lawsuit accusing Paul McKee’s NorthSide Regeneration of state tax credit fraud and waived all future claims against the developer for its use of a now-lapsed tax credit program.

The settlement was entered in St. Louis Circuit Court following a status hearing Monday morning.

The lawsuit, filed in 2018 by then-Attorney General Josh Hawley, sought the repayment of $2.62 million in tax credits. The state claimed the credits were issued on property NorthSide later gave back to sellers. In all, the state sought damages worth nearly $7.1 million, according to NorthSide’s attorney, though Schmitt's office said the damages could not total $7.1 million because the counts were filed separately.

In its settlement, NorthSide Regeneration agreed to pay the state $323,930.

Under the now-lapsed Missouri Distressed Area Land Assemblage tax credit program, NorthSide was eligible for tax credits worth half the value of property — totaling almost two square miles — it acquired in north St. Louis. NorthSide received $43 million in state tax credits from 2009 through 2013 — nearly all of the $47 million in credits the program issued.

NorthSide does not admit any liability or wrongdoing in its settlement with the state. The state agreed to take no further action against NorthSide for any tax credits it received under the lapsed DALA tax credit program.

“In addition to the money clawed back by the Department of Economic Development, the attorney general’s office has collected several hundred thousand dollars in this case,” Schmitt press secretary Chris Nuelle said in a statement. “Given the circumstances surrounding this suit, we are very pleased with the outcome and will continue to work with community partners to improve neighborhoods in north St. Louis.”

The clawback referred to by the attorney general’s office involved $1.875 million in tax credits the Department of Economic Development issued — then later withheld — in the sale of the Buster Brown shoe factory to NorthSide. In that transaction, the building’s owner financed the sale, and after NorthSide secured the tax credits, it deeded the property back to the seller. That deal was not specifically referenced in the attorney general’s lawsuit.

The lawsuit, however, did list another transaction involving a property on North 15th Street known as the Pierce-Elkay building. In that instance, a former state economic development official testified the state never recouped almost $2.5 million in tax credits issued for the $4.9 million transfer of the building to NorthSide. As in the Buster Brown transaction, NorthSide relied on seller-financing for the property transfer and later deeded the property back to the seller, listing the sales price as $0, according to the attorney general’s lawsuit.

Paul McKee testified at a trial in May 2018 related to St. Louis’s use of eminent domain on the Buster Brown building that “there’s no process for paying it back, but I’m more than happy to sit down with the state” to discuss the credits issued in that deal.

In another transaction flagged by the attorney general’s team, NorthSide said it purchased a property on Madison Street in December 2012 for $275,000. But in July 2016, the St. Louis Circuit Court awarded $180,732 to the original seller of the property in an eminent domain proceeding, not NorthSide.

In a statement, NorthSide attorney Paul Puricelli said the payment represents “statutory fines relating to the failure to meet technical reporting requirements, the reimbursement of the state’s litigation costs and expenses and the amount that (NorthSide) would have been required to spend to vindicate itself of all claims in what was expected to be prolonged and expensive litigation.”

“With this matter’s resolution, (NorthSide) looks forward to focusing all of its attention to building on the success it has achieved in North St. Louis, with the relocation of the NGA (National Geospatial-Intelligence Agency) facility and its 3,100 jobs, and the recent opening of the GreenLeaf Market/Zoom C-store project creating 72 new jobs,” the statement concluded.

Editor's note: This article has been updated to reflect that the Attorney General's office doesn't believe the total damages could not total $7.1 million because the counts in the lawsuit were filed separately. 

Jacob Barker is a business reporter for the Post-Dispatch. 314-340-8291