Barry Ritholtz is very confident that Goldman Sachs is either going to lose or settle and wants to educate interested non-lawyer observers1 about certain assumptions being promulgated that are not accurate.
8. The case looks thin: What we see in the complaint is the bare minimum the prosecutor has to reveal to make their case. What you don’t see are all the emails, depositions, interrogations, phone taps, etc. that the prosecutors know about and GS does not. During the litigation discovery process, this material slowly gets turned over (some is held back if there are other pending investigations into GS).
Going back to who the prosecutor in this case is: His legal reputation is he is very thorough, very precise, meticulous litigator. If he decided to recommend bringing a case against the biggest baddest investment house on Wall Street bank, I assure you he has a major arsenal of additional evidence you don’t know about. Yet.
Typically, at a certain point the lawyers will tell their client that the evidence is overwhelming and advise settling. That is around 6-12 months after the suit has begun.
9. This case is Political: I keep hearing that phrase, due to the SEC party vote. It is incorrect. What that means is the case is not political, it means it has been politicized as a defense tactic. There is a huge difference between the two.
The Securities and Exchange Commission decided to sue Goldman Sachs Group Inc. over the objections of two Republican commissioners, suggesting an unusual split at the agency that could politicize one of its most prominent cases in years.
People familiar with the matter said the five-member commission held a lengthy meeting Wednesday to debate the civil-fraud charges against Goldman, and ultimately voted 3-2 in favor of pushing forward. The charges were filed Friday.
Normally the agency prefers to have unanimous support when bringing enforcement actions against the firms it regulates. Word of the SEC split could exacerbate partisan tensions in Washington over the Obama administration’s proposed financial-regulatory overhaul.
On Tuesday, SEC Chairman Mary Schapiro is likely to get a grilling over the internal dissent when she appears before the House Financial Services Committee for scheduled testimony.
People familiar with the vote said Ms. Schapiro—a registered independent—joined two Democrats on the commission, Elisse Walter and Luis Aguilar, in supporting the fraud case against Goldman. The two Republican commissioners, Kathleen Casey and Troy Paredes, were opposed, they said.
Again, this sounds like whining to me, there are five members of the SEC for a reason, just like there are 12 jurors in a criminal case, and 9 Supreme Court justices, sometimes there are differences of opinion on important matters. Expecting that every decision is unanimous translates into Doing Nothing, and while that is the Republican mantra, the rest of us would like Wall Street to be reined in.
Are wind turbines ugly? I think they are kind of cool looking, actually, sleek, modern, and of course they are a tangible symbol of alternative energy. I’d like to see a few spinning out in Lake Michigan.
EVANSTON, Ill.—Residents here are used to seeing nothing but water, sky and sailboats as they survey the horizon on Lake Michigan.
Now, many are wondering whether wind turbines would add to or detract from that view, as the city explores the possibility of harvesting the wind that barrels down Lake Michigan at an average speed of 18 miles an hour.
“We’re determined to find a way to reduce our carbon footprint,” said Elizabeth Tisdahl, mayor of Evanston, where the city council last week approved a plan to seek information from developers interested in building a wind farm about seven miles offshore.
The proposed wind farm, which is expected to be privately financed, is projected to cost $400 million, take about seven years to complete and include 40 large wind turbines capable of producing power for 40,000 homes. It is unclear how this would affect utility rates in the college town, which has about 30,000 homes.
All of those factors come into play with the biggest proposed development in the lakes so far, a $4 billion wind farm off Western Michigan proposed by Scandia Wind Offshore, a Norwegian-American concern. The project would supply enough power for 300,000 homes and have easy access to the Chicago and Detroit markets.
“This is the best spot in the U.S. for industrial wind power, without a doubt,” said Harald Dirdal, development director of Havgul Clean Energy, a Norwegian firm that is majority owner of Scandia Wind.
Scandia’s plans, unveiled late last year, have drawn heavy opposition from the tiny resort and retirement community of Pentwater, Mich., where residents fear the project four miles offshore would hurt property values while providing little benefit locally. Jobs would largely flow elsewhere, and the electricity would be fed into the regional grid.
“We won’t benefit from jobs, and we won’t benefit from reduced electricity [rates]. And we certainly won’t benefit from the windmills being in front of our sunset,” said Juanita Pierman, village president.
Scandia has since split the planned development in two, moving half slightly north of Pentwater and the other half offshore of Muskegon, where Scandia hopes a windmill manufacturer might locate a factory to take advantage of the large-scale development.
Any new project will have some Not In My Back Yard response, such as:
In Evanston, a community group called Citizens for a Greener Evanston spent about two years studying alternative energy sources, said Nate Kipnis, an architect who co-chaired the group’s renewable-energy task force. The group recommended the wind farm to the city council because it best captured the city’s most unique resource and could even become a draw for visitors, he said.
Others are skeptical. City Councilwoman Judy Fiske supported the vote to gather more information, but first read from three pages of questions she wants answered.
A picture provided by the backers meant to show how small the windmills would look from shore worried her. “It does give you a very strong sense that there is some development on the lake,” she said. “Suddenly you’ve lost that quality of serenity that comes from living on a large body of water.”
Poor lil’ Goldman Sachs didn’t get a memo from the S.E.C. before the case went public. Of course, when the police arrest a serial killer they give at least 48 hours to the suspect so that the evidence can all be boxed up neatly. Right? I don’t care if this is common practice for Wall Street criminals, it shouldn’t be. I hope the Security and Exchange Commission has changed their modus operandus, and no longer is complicit with covering up financial malfeasance.
Funny also how the Republicans are all for law and order, when it applies to non-white collar crimes, but when their donor class is threatened, the tune changes.
Goldman Sachs Group Inc. officials said they knew as far back as August 2008 that regulators were examining controversial mortgage securities created by the firm but were stunned by the bombshell civil fraud suit lodged against it Friday, with most having learned about it from news reports.
Firms typically get a chance to settle such suits, but not in this case, Goldman said. The Wall Street giant said it was alerted to the probe in the summer of 2008 and was warned that it might face a suit in July 2009. It says it then responded in detail to the Securities Exchange Commission’s inquiry in September, but heard nothing back from the government until Friday’s unveiling of the civil suit. The SEC usually notifies firms ahead of a lawsuit as a courtesy to give them a chance for a last-ditch settlement or to prepare for the public fallout.
Lawsuits by the SEC are subject to a vote by the agency’s five commissioners, and the tally on the Goldman case will be closely watched in Washington, as the current commission is split along party lines—with two Republicans and two Democrats, plus one independent who was appointed by President Obama.
The way the SEC launched the suit “certainly doesn’t follow the spirit” or practice of the agency, said Paul Atkins, who served as a Republican SEC commissioner.
Cloud Computing: buzz word of 2009, and apparently going to be the buzz word of 2010 too.
This year, Netflix made what looked like a peculiar choice: the DVD-by-mail company decided that over the next two years, it would move most of its Web technology — customer movie queues, search tools and the like — over to the computer servers of one of its chief rivals, Amazon.com.
Amazon, like Netflix, wants to deliver movies to people’s homes over the Internet. But the online retailer, based in Seattle, has lately gained traction with a considerably more ambitious effort: the business of renting other companies the remote use of its technology infrastructure so they can run their computer operations. In the parlance of technophiles, they would operate “in the cloud.”
Ah, the cloud — these days, Silicon Valley can’t seem to get its head out of it. The idea, though typically expressed in ways larded with jargon, is actually rather simple.
Cloud providers, large ones like Amazon, Microsoft, Google and AT&T, and smaller ones like Rackspace and Terremark, aim to convince other companies to give up building and managing their own data centers and to use their computer capacity instead.
I actually do see the usefulness of cautiously outsourcing the creation and maintenance of data centers, as long as certain privacy oversights are part of the process.
Almost every big company is cautiously testing the waters these days. 3M, the St. Paul, Minn., conglomerate, is using Microsoft’s new Azure cloud service to allow advertisers and marketers to tap into a service that mathematically analyzes promotional images and evaluates how visually effective they are likely to be. “It took a lot of the risk out of whether to commercialize it or not,” said Jim Graham, a technical manager at 3M.
But most big organizations say they are wary of placing more critical software and business operations on another company’s computers.
Government agencies are looking at it too. NASA’s Jet Propulsion Lab currently runs various experiments on the computers of Amazon, Microsoft and Google — to avoid committing to a single company, said Tomas Soderstrom, the I.T. chief technology officer there. Among other experiments, the agency is using Amazon’s servers to process vast amounts of telemetry data coming from the rovers on Mars.
But NASA executives also tell of the seven months it took to reach its licensing agreement with Amazon. NASA wanted, among other things, to be able to inspect the hardware it was using; Amazon declined.
Goldman Sachs, aka Gold Sacks, aka corporate criminals, are not having a good PR month. They are an easy target – so greedy, so arrogant that even their allies are keeping mum. Whether any real penalties will be levied against Goldman Sachs remains to be seen.
Paul Krugman writes, in part:
Most discussion of the role of fraud in the crisis has focused on two forms of deception: predatory lending and misrepresentation of risks. Clearly, some borrowers were lured into taking out complex, expensive loans they didn’t understand — a process facilitated by Bush-era federal regulators, who both failed to curb abusive lending and prevented states from taking action on their own. And for the most part, subprime lenders didn’t hold on to the loans they made. Instead, they sold off the loans to investors, in some cases surely knowing that the potential for future losses was greater than the people buying those loans (or securities backed by the loans) realized.
What we’re now seeing are accusations of a third form of fraud.
We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.
And Goldman isn’t the only financial firm accused of doing this. According to the Pulitzer-winning investigative journalism Web site ProPublica, several banks helped market designed-to-fail investments on behalf of the hedge fund Magnetar, which was betting on that failure.
So what role did fraud play in the financial crisis? Neither predatory lending nor the selling of mortgages on false pretenses caused the crisis. But they surely made it worse, both by helping to inflate the housing bubble and by creating a pool of assets guaranteed to turn into toxic waste once the bubble burst.
and the part that interests me, as a non-Wall Street banker, will the proposed financial reforms stop future meltdowns?
The obvious question is whether financial reform of the kind now being contemplated would have prevented some or all of the fraud that now seems to have flourished over the past decade. And the answer is yes.
For one thing, an independent consumer protection bureau could have helped limit predatory lending. Another provision in the proposed Senate bill, requiring that lenders retain 5 percent of the value of loans they make, would have limited the practice of making bad loans and quickly selling them off to unwary investors.
It’s less clear whether proposals for derivatives reform — which mainly involve requiring that financial instruments like credit default swaps be traded openly and transparently, like ordinary stocks and bonds — would have prevented the alleged abuses by Goldman (although they probably would have prevented the insurer A.I.G. from running wild and requiring a federal bailout).
or whatever number of columns he’s squeezed out over the years.
Matt Taibbi writes, in response to a recent co-column by Gail Collins and Davy Brooks:
Gail Collins:I’m sorry, when the difference is one weensy basket, I’d say Duke won neither by privilege nor hard work but by sheer luck. But don’t let me interrupt your thought here. I detect the subtle and skillful transition to a larger non-sport point.
David Brooks:Yes. I was going to say that for the first time in human history, rich people work longer hours than middle class or poor people. How do you construct a rich versus poor narrative when the rich are more industrious
I had to read this thing twice before it registered that Brooks was actually saying that he was rooting for the rich against the poor. If he keeps this up, he’s going to make his way into the Guinness Book for having extended his tongue at least a foot and a half farther up the ass of the Times’s Upper East Side readership than any previous pundit in journalistic history. But then you come to this last line of his, in which he claims that “for the first time in history, rich people work longer hours than middle class or poor people,” and you find yourself almost speechless.
I would give just about anything to sit David Brooks down in front of some single mother somewhere who’s pulling two shitty minimum-wage jobs just to be able to afford a pair of $19 Mossimo sneakers at Target for her kid, and have him tell her, with a straight face, that her main problem is that she doesn’t work as hard as Jamie Dimon.
Only a person who has never actually held a real job could say something like this. There is, of course, a huge difference between working 80 hours a week in a profession that you love and which promises you vast financial rewards, and working 80 hours a week digging ditches for a septic-tank company, or listening to impatient assholes scream at you at some airport ticket counter all day long, or even teaching disinterested, uncontrollable kids in some crappy school district with metal detectors on every door.
Most of the work in this world completely sucks balls and the only reward most people get for their work is just barely enough money to survive, if that.
Democratic with a small d, as in the sense of Thomas Jefferson’s small farmers who are now one or two person mobile computer application programming businesses:
The App Store must rank among the most carefully policed software platforms in history. Every single application has to be approved by Apple before it can be offered to consumers, and all software purchases are routed through Apple’s cash register. Most of the development tools are created inside Apple, in conditions of C.I.A.-level secrecy. Next to the iPhone platform, Microsoft’s Windows platform looks like a Berkeley commune from the late 60s.
And yet, by just about any measure, the iPhone software platform has been, out of the gate, the most innovative in the history of computing. More than 150,000 applications have been created for it in less than two years, transforming the iPhone into an e-book reader, a flight control deck, a musical instrument, a physician’s companion, a dictation device and countless other things that were impossible just 24 months ago.
Perhaps more impressively, the iPhone has been a boon for small developers. As of now, more than half the top-grossing iPad apps were created by small shops.
Those of us who have championed open platforms cannot ignore these facts
As far as I know2 there has been zero instances of malware or other malicious applications released on the Apple iPhone store. Not a few, zero. Every single app has been vetted by some Apple employee, sometimes causing great gnashing of teeth on the part of the developer, but for an end user, that isn’t really as important as remaining assured that the app you are about download is safe.
And although I have not done any iPhone programming myself3, this rings true as well:
The fact that the iPhone platform runs exclusively on Apple hardware helps developers innovate, because it means they have a finite number of hardware configurations to surmount. Developers building apps for, say, Windows Mobile have to create programs that work on hundreds of different devices, each with its own set of hardware features. But a developer who wants to build a game that uses an accelerometer for control, for example, knows that every iPhone OS device in the world contains an accelerometer.
The maniacal attention to detail and usability in Apple’s consumer products also applies to its software development platforms. However much developers might complain about the torturous app approval process or the sharing of revenue, most will tell you that the iPhone development tools are a delight.
Apple took a lot of heat waiting a year after the introduction of the first-generation iPhone to open the App Store. At the time, it contended that it wanted to ensure that the development tools it shipped met its standards. The success of the App Store suggests that this patience was well worth it.
Unlike virtually all of its competitors, JPMorgan Chase steeled itself early for the collapse of the subprime market and emerged from the rubble of the global financial meltdown with both its balance sheet and reputation intact. But the storied firm stands alone among its Wall Street rivals in another area, too. JPMorgan backstops one of the most destructive mining practices in the world: mountaintop removal coal mining. And it continues to do so even as other major banks have cut ties to this practice.
“Chase is the single largest remaining player in this game,” says Scott Edwards, advocacy director for the Waterkeeper Alliance, an environmental advocacy group comprised of lawyers, scientists, and activists, among others. “They just absolutely refuse to take responsibility for their role in this absolutely devastating industry.”
Mountaintop removal (MTR) mining, focused in Appalachian states like West Virginia, Tennessee, and Kentucky, involves deforesting huge swaths of land and blasting the summits off of mountains to expose the black veins of coal underneath. The waste and rubble from the demolition is then dumped into nearby rivers and streams, burying local water sources in toxic byproducts, choking off tributaries that feed into larger rivers, and wiping out plants and wildlife, according to numerous scientific studies. Despite the mining industry’s claims, there are no successful ways to mitigate the effects of MTR, according to Margaret Palmer of the University of Maryland Center for Environmental Science. The effects on the nearby environment, she says, are long lasting and often irreversible.
Chase is happy to make some short-term profits at the expense of all our lives
Over the past 17 years, JPMorgan Chase has helped to underwrite nearly 20 bond or loan deals, worth a combined $8.5 trillion, for some of the biggest players in the MTR mining business, according to data from Bloomberg. Other large banks have either halted financing companies engaging in the practice outright or signaled their intent to do so. In December 2008, for instance, Bank of America publicly announced plans to “phase out financing of companies whose predominant method of extracting coal is through mountain top removal.” Wells Fargo has cut ties with coal giant Massey Energy. And a Credit Suisse official says the bank has a “global mining policy” that ensures “we explicitly do not finance the extraction of coal in a mountaintop removal setting.” But JPMorgan continues to back the practice.
By underwriting MTR, JPMorgan ties itself to some of the nation’s biggest polluters. Take Massey Energy, which leads the nation in MTR mining. In 2008, the company extracted more than 21 million tons of coal using mountaintop removal mining, according to opensourcecoal.org, an online database for coal production statistics. That same year, JPMorgan acted as lead manager on a $690 million bond offering by Massey, according to financial records.
Good! Stupid that genes have ever been patented. Science may have discovered specific genes, but they didn’t create them from scratch. Why should evolutionary processes be privatized by large companies?
A federal judge on Monday struck down patents on two genes linked to breast and ovarian cancer. The decision, if upheld, could throw into doubt the patents covering thousands of human genes and reshape the law of intellectual property
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The American Civil Liberties Union and the Public Patent Foundation at the Benjamin N. Cardozo School of Law in New York joined with individual patients and medical organizations to challenge the patents last May: they argued that genes, products of nature, fall outside of the realm of things that can be patented. The patents, they argued, stifle research and innovation and limit testing options.
Myriad Genetics, the company that holds the patents with the University of Utah Research Foundation, asked the court to dismiss the case, claiming that the work of isolating the DNA from the body transforms it and makes it patentable. Such patents, it said, have been granted for decades; the Supreme Court upheld patents on living organisms in 1980. In fact, many in the patent field had predicted the courts would throw out the suit.
Judge Sweet, however, ruled that the patents were “improperly granted” because they involved a “law of nature.” He said that many critics of gene patents considered the idea that isolating a gene made it patentable “a ‘lawyer’s trick’ that circumvents the prohibition on the direct patenting of the DNA in our bodies but which, in practice, reaches the same result.”
The case could have far-reaching implications. About 20 percent of human genes have been patented, and multibillion-dollar industries have been built atop the intellectual property rights that the patents grant.
Easier said than done, we are buried in mounds of paper from years past. Shredding documents takes effort, and time, and it is usually easier to box papers up, and stash them somewhere. Still, there is compelling reasons to act, and clean up.
According to Catherine M. Williams, vice president for financial literacy at the credit counseling firm Money Management International, there are two main reasons to keep financial records. “It’s either for backup to a tax issue or for proof that you did something like make a payment,” Ms. Williams said.
The Internal Revenue Service requires that individuals be able to produce records proving any income, deductions or credit claimed for at least three years from the date of a return, the statute of limitations for how long the I.R.S. has to assess additional tax if all income was reported correctly. In addition, the I.R.S. requires that individuals be able to produce such records for six years if they fail to report income that is more than 25 percent of their gross income. There is no statute of limitation for failure to file or tax fraud.
Therefore, experts generally recommend keeping anything that verifies the information in your tax return for at least six to seven years. “My recommendation would be never throw away copies of your tax returns and checks made out to the government — anything else, I would say keep for at least six years,” said Jude Coard, a tax partner at accounting firm Berdon L.L.P.
Caterpillar Inc. of Peoria has jumped to the forefront of manufacturing companies complaining about the cost of the federal health care overhaul. On March 18 the company sent a letter to Speaker Nancy Pelosi and Representative John A. Boehner, the Republican leader, saying mandated changes would cost it “$100 million in the first year alone.”
According to a regulatory filing by the company last week, the $100 million figure is Caterpillar’s estimated total cost for as long as the newly enacted Patient Protection and Affordable Care Act remains in effect. And the $100 million charge is an accounting change, a noncash cost that has no affect on the company’s operations.
In addition, the $100 million figure does not arise from changes to decades-long practices at Caterpillar. Rather, it comes about because the new law removes a tax break codified in 2003.
No company sneezes at the elimination of a $100 million tax break. But in 2008, Caterpillar had $51 billion in sales, and profits topped $3.5 billion for the third straight year. The projected profits for 2010 are a relatively weak $1.56 billion, and the $100 million tax charge would mean an additional 6 percent reduction.
Thankfully, the ubiquitous Classmates.com banner ads are less prevalent than they once were. I never had a weak moment and signed up, but some did, and some got compensated for their blinding loneliness.
Classmates.com has agreed to refund nearly $10 million to users who were told that long-lost school chums were looking at their profiles, only to find, once they’d ponied up a subscription fee, that no one they knew was looking for them at all.
The proposed settlement would end a lawsuit filed in November 2008 on behalf of Classmates.com user Anthony Michaels who sued after he spent $15 to upgrade to a Gold Membership at Classmates.com, one of the net’s original social networking sites. But that fee was a rip-off, he said.
“Upon logging into his Gold Membership profile in order to view the classmate contacts … Plaintiff discovered that in fact, no former classmate of his had tried to contact him or view his profile,” the complaint read. “Of those www.classmates.com users who were characterized … as members who viewed Plaintiff’s profile, none were former classmates of Plaintiff or persons familiar with or known to Plaintiff for that matter.”
While Classmates.com denies it engaged in any deception, it agreed to pay up to $9.5 million to the estimated 3.16 million people who signed up for the service after seeing ads and e-mails encouraging users to upgrade in order to see what members had been looking at their profiles. Each will be offered $3 in cash or a $2 certificate towards future membership.
The real winners, of course, are the class action lawyers1, who as always get the major portion of the settlement. Most members of the class get $3, if you were a primary defendant, you get $2,500, but the attorneys get $1,300,000. Pretty much par for the course.
But this week, the U.S. Ninth Circuit Court of Appeals put a damper on the business model of legal extortion by trial lawyers filing frivolous lawsuits.
Frank has become the proverbial fly in the trial lawyers’ ointment, objecting again and again to bogus nuisance settlements that make up the bread and butter for some. In January, his objection helped convince a court to throw out a settlement between Classmates.com(the online social site with the annoying popup ads) and some users who felt they had been duped into signing up.
In that case — whose merits appear much stronger than the Bluetooth case — the lawyers had negotiated $117,000 for the aggrieved class, and a million-plus-dollar fee for themselves.
Frank’s organization, a nonprofit 501(c)(3), is currently fighting settlements that are overly generous to trial lawyers in cases against Kellogg, Volkswagen and Toys “R” Us, among others.
note: this link to the PDF is currently not working [↩]
Local high profile designed Maria Pinto (we’ve discussed her store before) is closing down her boutique, located at 135 N. Jefferson St in the West Loop.
All of the praise for Michelle Obama’s grape- and tomato-colored sheaths couldn’t bear enough fruit to spare their Chicago-based designer — Maria Pinto — from the recession’s blight.
Pinto, whose work has been worn by not only the country’s first lady but also queen-of-talk Oprah Winfrey, will open her West Loop boutique for five final days starting Tuesday. Her daywear, eveningwear, wraps and one-of-a-kind accessories will be liquidated at 50 percent to 70 percent off their original prices.
In January, Pinto arrived at the decision to close her shop and cease wholesale operations, she said. A fashion designer for 20 years who previously worked for Geoffrey Beene, Pinto launched her own line in 1991. Bergdorf Goodman, Saks Fifth Avenue, Barneys New York and Takashimaya in New York, as well as high-end boutiques across the country, carried her pieces.
I’ve glanced at her store window a few times, and I didn’t see any item that entranced me. Perhaps her best work was customized to particular customers, and not for display on a clothing rack.
And this statement mostly sounds true:
“In the general scheme of things, our store was doing very well. But our other retailers are paring down their open-to-buys (merchandise purchases) and looking to build sales through trunk shows,” she said. “It’s difficult because it makes your forecasted cash flow challenging. You’re waiting for the show to happen, waiting for things to happen. Before, the stores were committed to larger inventories.”
Any avid shopper can see the shift, she said.
“Walk through the stores and see how the stores are buying very differently. Saks had blast-out sales going in November 2008. November this year, there was very little in stores that was on sale. What was left was bottom-of-the-barrel. Everyone is having to reposition themselves.”
For 2009, total U.S. apparel sales fell 5.2 percent to $188.5 billion, market research firm NPD Group reported last month.
Mayor Daley’s budget is in deficit, municipal projects don’t get funded, schools don’t get funded, yet developers can get as much TIF money1 as they need, no matter what. No consequences, no strings. Just plain ole corporate welfare.
A city panel approved another major increase in financial assistance for planned Loop apartment development that has struggled to get off the ground because of rising costs and the tough lending climate.
The Community Development Commission signed off Tuesday on a $34-million tax-increment financing subsidy to help pay for the conversion of a vintage Loop office tower at 188 W. Randolph St. into a 310-unit apartment building.
That’s more than four times the $8 million in TIF funds the city initially approved for the development back in 2006, when its total cost was estimated at $79 million.
But the projected cost had soared to $139 million in 2008, and the project’s developer, Village Green Cos., went back for more. The city complied by hiking the subsidy to $20 million.
When, in 2006, a developer announced plans to rehab Vitzhum & Burns Steuben Club Building at 188 W. Randolph, an $8 million dollars contribution from the massive Central Loop TIF was going to kick in about 10% of the $79 million cost.
But wait – there’s more! The project is also getting $40 million dollars in tax-exempt bonds from the state, plus $37 million in tax credits. You, lucky taxpayer, kick in almost half of the project cost and the private developer gets the building. Socialism, Chicago style.
When Draconian cutbacks are effecting everything in Chicago from the CTA, to the schools, to 4th of July Fireworks, the city is diverting another $26 million in tax revenues to an economically unsustainable development.
Really disgusting. The Vitzthum & Burns Steuben Club Building is not a cookie-cutter square box, but it isn’t in the upper echelon of Chicago architecture either.
from a CBS Chicago report (presumedly based on the press release from Village Green Companies)
The Community Development Commission approved a plan to redevelop the vacant and historic Randolph Tower at 188 W. Randolph St. into 310 apartments, retail and commercial space, according to a release from the CDC.
The action recommends the designation of Village Green Companies as the developer for the proposed $145 million renovation.
Plans call for the mixed-use building, formerly known as the Steuben Club Building, to be converted into 168 studios, 98 one-bedroom and 44 two-bedroom units, the release said. Sixty-two of the residential units will be made affordable to households at or below 50 percent of median area income.
Village Green bought the 45-story office building out of bankruptcy in 2005 and will convert the 80-year-old structure into apartments. Plans also include 9,500 square feet of ground floor restaurant and retail space. Village Green will occupy 11,400 square feet on the second floor as its Chicago regional office.
Amenities will include a fitness center, swimming pool and spa. A social club will be located on the 38th and 39th floors, offering 360-degree views of the skyline and Lake Michigan, the release said.
The Gothic-style building will have extensive work done to preserve its historic terra cotta façade and other ornamental details and a gut rehabilitation of the interior.
The CDC also approved a redevelopment plan for the proposed Randolph/Wells tax increment financing district. Creation of the district will support the renovation of Randolph Tower and help redevelop other underutilized and vacant buildings in the area.