Burying the Hotel Hatchet

Two players in the continuing downtown convention center hotel soap opera have settled their legal battle, unfortunately aborting what promised to be a juicy trial full of allegation, innuendo and revealing confidential documents. Lobbyist and former Hotel Six defendant Ross Allyn and hotel developer Wayne Duddlesten reached a confidential agreement last week. They dropped their suits and counterclaims arising from Allyn's claim that Duddlesten owed him a lobbying fee of $200,000 to $800,000.

Allyn pronounced himself "very pleased with the settlement." Federal Judge David Hittner acquitted Allyn last year of bribery and conspiracy charges, so he now walks away from Hotel Six with an unspecified chunk of change. "It resolves all the past issues, and now I'm moving forward," the lobbyist declared.

Allyn had claimed Duddlesten promised him fees and a bonus for helping win 1996 City Council approval for Duddlesten's proposal to build the $160-million hotel. During the same period the FBI conducted an undercover sting, and Allyn was among six officials indicted for allegedly receiving bribes. Three remaining defendants, including two current councilmembers, are on trial.

When Allyn asked Duddlesten to discuss his lobbying bill in 1996, the developer responded by suing to void the claim. Allyn filed a counterclaim, asking for $2 million and alleging the developer slandered him in statements to the media.

While the settlement is confidential, court papers provide some insights into the hotel project, particularly Duddlesten's promises to include minority contractors and investors in the deal.

In one document Allyn alleges that Duddlesten promised that Allyn would be allowed to bring in several minority subcontractors. One was Texas Traveling Trowelers, a concrete company headed by Lambert Arcenaux. According to Allyn, TTT would get a $15-million contract, of which he would receive $225,000.

Likewise, the Ramirez Group contracting company would get $5 million to $8 million, of which Allyn would get 2 percent. Allyn also says he was employed by PENCO, a group operated by then-councilman Ben Reyes's brothers Greg and Tony. PENCO would have been a partner with an Asian-owned firm in the hotel deal.

During his campaign to win Council approval, Duddlesten made much of his commitment to include minority investors as one-third owners in the hotel. But in deposition questioning by Allyn attorney Tracey Conwell, the "commitment" seems to have been something far more ambiguous, namely an opportunity for minorities to seek 30 percent of the "available equity."

Asked what exactly he meant by available equity, the developer indicated it might be a lot less than 30 percent of the whole project. "Financing generally has first call," he explained. "And then a hotel operator had the possibility of having a call on equity. So I would not be able to determine [the final percentage] until much later in the process."

Duddlesten now opines that perhaps some of the councilmembers swayed by the promise of minority ownership just didn't grasp the nuances of his offer.

"I would understand that some might not understand the complexity of financing and understand what that language meant," said the developer. "But there was no intention to be misleading."

There is no minority investment in the current incarnation of the hotel, anchored by Crescent Real Estate Equities of Dallas. Duddlesten retains a 20 percent interest in the project.

Of course, even the majority owners of the hotel may ultimately wind up empty-handed. Duddlesten pleads ignorance to the day-to-day decisions being made by Crescent, whose own financial outlook appears increasingly shaky. Crescent's shares have fallen nearly 40 percent in value over the past year, and company officials say they may have to unload $500 million in property to raise cash. In a recent City Hall meeting, Crescent asked for advances on promised city tax rebates to help get the project off the ground.

"They don't share with me everything they are thinking," said Duddlesten, who seemed doubtful whether his partners would ever break ground on the ill-starred project.

"I think," said the developer, "that is uncertain as we sit here."
Almost as uncertain as that promise of minority ownership Duddlesten used to win the deal in the first place.

— Tim Fleck

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Tim Fleck
Contact: Tim Fleck