How law firm missed Family Court conflict

John H. Estey, appointed Delaware River Port Authority chairman by Gov. Rendell, had served as Rendell's chief of staff. He was hired by the chief justice for the court deal largely on the strength of his relationship with Rendell.
John H. Estey, appointed Delaware River Port Authority chairman by Gov. Rendell, had served as Rendell's chief of staff. He was hired by the chief justice for the court deal largely on the strength of his relationship with Rendell.
Posted: July 11, 2010

In May 2008, two days after starting work on a plan for a new Family Court in Center City, lawyer John H. Estey spent an hour or so reviewing a draft development proposal.

Written by lawyer Jeffrey B. Rotwitt, the document made a startling disclosure: Rotwitt, originally hired as the courts' representative, had gone to the other side of the deal and become a partner with developer Donald Pulver.

But Estey didn't sound an alarm.

As former chief of staff for Gov. Rendell, he kept his main focus on Harrisburg - making sure that Rendell released $200 million to build the courthouse.

For the next year and a half, Estey and other lawyers at the firm of Ballard Spahr never raised an issue about Rotwitt's potential conflict - even after charging the courts thousands of dollars for reviewing more documents that pointed to Rotwitt's double roles, documents show.

For example, the bills show, one Ballard lawyer spent hours reviewing and revising a draft agreement that identifies a company called Deilwydd Property Group FC L.L.C. as codeveloper - with Rotwitt listed as the contact person for Deilwydd. No flashing lights went off that time, either.

The apparent oversight had huge consequences.

Rotwitt's role as codeveloper in the deal came to light only this spring, when it was reported in The Inquirer. By that time, the court system had paid $12 million in fees to Rotwitt, Pulver, architects, and others.

The prospects for the courthouse are now uncertain. Since the revelations about Rotwitt, Pennsylvania Chief Justice Ronald D. Castille has canceled the deal, the FBI has opened an investigation, Rotwitt has been fired by his law firm, and Pulver has gone to court to hold on to the rights to the 15th and Arch courthouse site.

So far, Ballard has been paid more than $600,000, and counting. Estey is now charging the courts $760 an hour, less a 10 percent "professional courtesy discount."

In an interview last month, Estey said he hadn't been looking for a conflict involving Rotwitt because he had assumed Rotwitt was on his side - like him, a lawyer representing the courts.

Ethics rules say that attorneys must disclose such potential conflicts, and obtain a waiver from their clients.

"I think we're allowed in good faith to assume he's complying with the rules," Estey said.

Estey could not comment in detail. William G. Chadwick, hired by Castille to review the project, declined to comment on Ballard's work, and ordered the Ballard lawyers not to comment either.

"We are preserving the integrity of the review process so we can address concerns raised by the media and others in a single, comprehensive report," Chadwick said.

Ballard Spahr, one of Pennsylvania's most politically wired law firms, is an important player in the unfolding drama surrounding the Family Court project. The central question: Who knew about Rotwitt's side deal, and why didn't anyone connected with the court raise questions about it?

Castille, who was personally supervising the project, has said that he was blindsided by the news that Rotwitt was getting a cut of the development fees.

But Rotwitt has said he repeatedly told Castille and Ballard lawyers about his work with Pulver - and nobody objected.

"The documents speak for themselves," he said in a May interview. "The entire real estate community knew about it . . .. The court knew about it. Ballard knew about it."

As for Estey's criticism about his failure to disclose, Rotwitt has said it wasn't necessary because his work locating potential sites for the courts had ended by the time he joined Pulver on the development side.

But his former partners at Obermayer, Rebmann, Maxwell & Hippel disagreed. In firing him, they said they had never known he had joined with Pulver, either.

The detailed Ballard bills, along with e-mails, meeting minutes, and other documents, provide a window into the two years of behind-the-scenes deal making on the courthouse project, including numerous phone calls and meetings with Rendell and other top politicians.

The bills also raise other questions about Ballard's representation. One Ballard lawyer billed the courts on 46 occasions, for a total of $27,000, for work labeled only as "file review," "document review," or "project review."

"I have reviewed the billing invoices and am confident that they are appropriate and reflected work from the client," Estey said.

Documents show that Estey and another Ballard partner, Joanne Phillips, worked on the Family Court deal while in Rendell's administration before joining Ballard and contacting their old coworkers on Castille's behalf. Such revolving-door roles for lawyers are banned in the federal government and in other states, but not in Pennsylvania.

E-mails previously reported by The Inquirer show that the Ballard lawyers were highly skeptical of the millions in advance payments to Rotwitt, Pulver, and others - but that Castille followed Rotwitt's advice instead, and signed a letter authorizing those payments, some of which went to Rotwitt himself.

At the same time, e-mails and other documents related to the deal show, in excruciating detail, how many opportunities the Ballard lawyers had to discover Rotwitt's role as a codeveloper - and how obvious many of them were.

Estey was hired by Castille for the court deal in May 2008, largely on the strength of his relationship with Rendell. By that time, Rotwitt had been involved with the deal for more than two years. After years of failed efforts to build the new courthouse, Castille had settled on the 15th and Arch location, and the state legislature had appropriated $200 million to build it.

Estey's main task was straightforward: He was supposed to convince Rendell, his former boss, to release the money.

As chief of staff, Estey was Rendell's right-hand man and chief adviser, and he has maintained a close relationship since he left the governor's staff for Ballard in February 2008. Rendell appointed Estey chairman of the Delaware River Port Authority.

The Ballard firm has always held a special relationship with Rendell, who earned a $254,000 salary there during the two years between his positions as Philadelphia mayor and governor. Rendell famously said he did "practically nothing" for the money. Rendell's chief of staff during his time as mayor, David L. Cohen, served for a time as Ballard's chairman.

Since 2000, Ballard employees have contributed more than $2.5 million to city and state political candidates - with $1 million going to Rendell's campaigns.

In the years since Rendell became governor, Ballard has become one of Pennsylvania's most successful firms in landing legal work from state government, receiving more than $19.4 million in fees.

A Rendell spokesman said last week that the governor agreed to release the Family Court money because of the urgent need for a new courthouse, but ordered the state Department of General Services to take over.

Advocates have fought for years to replace the current cramped and dingy buildings where judges hear divorces, abuse hearings, and custody disputes.

"That was his reason," said spokesman Gary Tuma. "In recognizing the need for a new Family Court facility, he has a lot in common with thousands and thousands of other Philadelphians."

While working for Rendell, Estey held meetings on the project with former Supreme Court Justice Sandra Schultz Newman and Rotwitt. Newman, who then was supervising the project, wanted the governor's support.

In the early stage of the discussions, in 2006, Estey wrote a letter that said the project wouldn't fly unless the courts had a dedicated source of funding.

The next year, partly through Rotwitt's efforts, the state legislature appropriated the $200 million.

Less than three months after joining Ballard, Estey was hired by Castille.

"We hired Estey specifically because of his expertise in state government," Castille said in an interview in May. "He knows all the people out there. We hired him because we wanted another pair of eyes looking at this thing."

On May 7, 2008, on his second day on the case, Estey billed 1.3 hours for a phone call to a lobbyist and for reviewing a "Rotwitt draft agreement."

That document, a proposed development deal, had been sent by Rotwitt to Castille and other courts officials a month earlier. In the introduction, Rotwitt wrote: "As part of the development services, Consultant has become a constituent partner in Landlord and will codevelop" the courthouse.

Rotwitt was the consultant. The landlord was a Pulver company, Northwest 15th Street Associates.

That agreement was never signed. Instead, Rotwitt and Pulver began pursuing an alternate plan. The courts would start to design the building - and begin paying fees to Pulver - even without a final development deal. Rotwitt was being paid for his work with the court, and at the same time he got a share of the development fees from Pulver.

Ballard lawyers objected, but Castille went ahead and signed a letter that authorized the payments. He has said he believed Rotwitt's warning that the project might have collapsed otherwise.

In December 2008, Rotwitt, Castille, Family Court judges, and others attended a construction meeting with architects and other people working on the project - including a Ballard real estate lawyer, Alan Ritterband.

Minutes of that meeting show Rotwitt and his son, Adam, who work together on real estate deals, were representing Deilwydd Property Group FC L.L.C.

A search of Pennsylvania corporate records, available for free on the Department of State website, would have shown that Jeffrey Rotwitt is the president of Deilwydd. Deilwydd, Welsh for "trees in foliage," is the name of Rotwitt's mansion in Radnor.

In July 2009, Rotwitt sent Castille a new version of the fee letter extending the payments for another year, saying it was "identical" to the first one. In fact, it had an important difference: This one said Deilwydd was being paid as codeveloper.

Ritterband charged the court for reviewing the letter, the bills show.

"That was one of the things that slipped by us," Castille said in May. "No one even picked it up."

The Deilwydd name showed up again in November 2009, in another proposed development deal sent by Pulver's lawyer. This one lists Deilwydd as a developer, and Rotwitt as its contact, with his Obermayer office as the address.

"This is another example of the various ways that Jeff Rotwitt's role as codeveloper is disclosed," said Rotwitt's lawyer, Catherine M. Recker.

Ritterband worked on that document off and on for nearly three months, the bills show - making revisions, and calling and e-mailing Pulver's attorney, David M. Scolnic. He spent time on the agreement on 15 different days, charging more than $7,000 total, the bills show. That document also was never signed.

Lawyers have a duty to their clients to catch things like Rotwitt's role in Deilwydd, legal experts say.

"If you're reviewing documents and a new party steps into the transaction or there's someone you don't know, you want to ask some questions," said Ellen C. Brotman, of the Philadelphia firm of Montgomery, McCracken, Walker & Rhoads, L.L.P.

"Especially in a public works project, you want to make sure that there are no improper relations."

Starting in July 2009, Ballard lawyer Marc A. Woolley joined the Family Court team. Woolley had also worked at the DRPA, serving as Rendell's assistant.

In a background role in the Family Court matter, Woolley charged the court a total of $121,000, the bills show. Woolley declined to comment.

Ballard's billings also illustrate the tight association between the firm and the Rendell administration. Phillips, for example, worked at Ballard before joining the Department of General Services, supervising all real estate matters for state government.

At DGS, she was briefed by Ballard lawyers about the Family Court deal; after rejoining the firm this year, she had meetings and phone conversations about the project with her old DGS colleagues.

Pennsylvania's ethics rules say state employees cannot lobby their old departments for a year after leaving office. But the rule doesn't apply to lawyers, the state Ethics Board ruled. The state Supreme Court has ruled that it is responsible for regulating lawyers.


Contact staff writer Joseph Tanfani

at 215-854-2684 or jtanfani@phillynews.com.

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