Wednesday, June 17, 1998

Stormy Times for the Rainmaker

Ethical lapses put the brakes on Ed Armentrout’s two-year ride at the Center City Commission.

Memphis Flyer [Link to original article]
By John Branston

Ed Armentrout was too brazen for his own good.

And that, as much as anything, cost him his lucrative job as head of the Center City Commission – a job that has allowed him to virtually write his own check to the tune of more than $500,000 in the two years he has been here.

A few weeks ago, Armentrout was on a panel of newsmakers appearing before a Leadership Memphis class meeting in an auditorium at The Commercial Appeal. When it was his turn to talk, Armentrout criticized media coverage of the CCC, which had focused on conflicts of interest in contract awards.

The media, he said, report what someone says and what someone else says in on-the-one-hand, on-the-other-hand fashion. But the media “don’t tell the truth.” Then he sat down and, while a panel of reporters and editors took their turn, drew elaborate doodles on a legal pad.

As the saying goes, be careful what you wish for. Among those in the audience were moderator Otis Sanford, assistant managing editor at the CA, Charles Bernsen, the newspaper’s Metro editor, and a half dozen other reporters and editors from the print and broadcast media.

None of them said anything. But in the weeks to come, a lot more news would come out about Ed Armentrout. And if it was not the elusive “truth,” it was at least an undeniable part of the picture that Armentrout was greedy, overreaching, and seemingly determined to take every perk he could from the top job at downtown’s on-again, off-again development agency.

Last week Armentrout became the second downtown leader to resign recently, following Wes Brustad’s departure from his briefly held position as executive director at Memphis in May. But in a surprising show of independence, Armentrout’s board declined to accept his resignation even though it had been endorsed by the city and county mayors and board chairman Earl Blankenship, lest the agency slide into “purgatory.” No sale, said the board on a 5-3 vote (three members were absent; there are two vacancies on the board). The stumbling blocks were a $50,000 buyout provision and a feeling that the commission is overly secretive.

Armentrout’s rise and fall tarnishes downtown’s shaky claim to the moral high ground of Memphis. And it also offers some instructive lessons on the selective power of the media, the role of independent-minded board members, and the mutual backscratching of the downtown development network (see graphic on opposite page).

The Rainmaker

Armentrout was a rainmaker. That was the reputation he brought with him when he came to Memphis from Ohio two years ago. He succeeded three caretakers in a job that had not enjoyed such powers since John Dudas resigned in 1987. Armentrout could make things happen and create business and opportunity for architects, contractors, consultants, developers, ad agencies, politicians, real estate agents, accountants, bankers, attorneys, publications, and scores of other people who make a living off downtown.

“Ed’s energy and sense of purpose allowed us to accomplish more in the time he was here than we had in probably the previous 10 years,” says CCC vice president of operations Janet Pfaff, who has worked for five CCC presidents dating back to 1985. Employees were shocked and somber when they learned of his resignation last Monday, and applauded warmly when he held a final press conference Thursday.

Armentrout’s philosophy and personal style were symbolized by his decision to move the Center City Commission offices and his personal office into the Crump Building. Named for E.H. “Boss” Crump, who ruled Memphis for some 50 years, the quirky old building sits on the southeast corner of the plaza bordered by city, county, state, and federal office buildings. Like dozens of other downtown buildings, it had been vacant and deteriorating for years before Armen-trout pushed through a $1 million expansion and renovation. Not insignificantly, the move put the CCC on the same playing field, so to speak, as the city and county mayors.

But there is a key difference, of course. The mayors are accountable to a city of 600,000 people and a county of 800,000. Armentrout can focus on downtown in a way that, say, Shelby County Mayor Jim Rout cannot. Rout has to run for reelection. And he has to take a broader view of what’s good for Shelby County. To take one example, the new downtown baseball stadium was a big feather in Armentrout’s cap and helped him win public acclaim and a hefty salary incentive bonus. But from the point of view of a youth baseball coach in Germantown or Cordova or Bartlett or Collierville, where a majority of baseball players, parents, and fans live, the location may well be considered a mistake.

Real estate developer Earl Blankenship, who signed off on $100,000 of incentive payments to Armentrout, remains chairman of the Center City Commission.

Rout has been involved with downtown projects for 20 years as mayor and, before that, as county commissioner. His chief administrative officer, Jim Kelley, used to have Armentrout’s job. Rout’s public-affairs chief, Tom Jones, has been on the CCC board and the Pyramid building authority for more than a decade and could write a book about downtown politics. For the sake of expedience, Jones pleaded with the board to accept Armentrout’s resignation and buyout.

“It is paramount in the public interest for the CCC not to skip a beat,” he said.

His counterpart from city government, CAO Rick Masson, was even more forceful.

“There is probably reason where most of you would say it’s time for Ed to leave for this agency to move forward,” said Masson.

But Masson made a couple of miscalculations. One was not lining up sufficient friendly forces to rubber-stamp the deal that he, Jones, Blankenship, and City Attorney Robert Spence had hammered out with Armentrout. (Among the missing board members was councilwoman Pat VanderSchaaf, one of the city of Memphis appointees.) Another was failing to make clear exactly what the “reason” was for Armentrout’s forced resignation. The documentation of Armentrout’s benefits bonanza only came out later that day as a result of several weeks of digging and prodding by The Commercial Appeal.

Enter state Senator Steve Cohen, who, along with other board members, had been advised of the plan over the weekend.

“I’m tired of buyout agreements with anybody,” Cohen said, gaining clout and confidence from a vigorous second by board members Ron Walter and Shep Wilbun. Nearly three hours later, Armentrout’s buyout was history and his salary and perks were headed for the front page of the paper.

A Selective Look at Perks

Armentrout’s pay package is a dandy. But it is by no means unique to downtown Memphis. It ranks with or behind those of two other downtown impresarios, Orpheum president Pat Halloran and Memphis Convention and Visitors Bureau chief Kevin Kane. Those organizations and their boards operate as nonprofits and also benefit from public trust and tax breaks, as does Memphis in May. There are also several local and out-of-town consultants with six-figure personal-services contracts with the city of Memphis, but the media have spotlighted only a few of them, such as crime consultant Dr. Robert Green and MLGW consultant Rotan Lee.

As they raised the heat on Armentrout last week, the media pointed to misuse of public funds, which account for less than 15 percent of CCC revenues. The CCC got $500,000 last year from the city and county, but $3 million from business assessments and impact fees on downtown developers.

Armentrout’s contract, signed by Blankenship, included a starting salary of $125,000; a 20 percent incentive bonus based on meeting certain performance measures which are not spelled out; $34,100 a year in deferred compensation; paid health, disability and life insurance; a $4,200 car allowance; a travel allowance to be set by Blankenship; and $19,000 in relocation expenses.

Amendments raised the relocation allowance to $29,000 and the incentive bonus to $50,000 a year, making Armentrout’s salary and bonus $175,000. The mayors, by comparison, will make $140,000 a year next term. But Blankenship says that was not a source of tension. In fact, he says a working group consisting of Armentrout, Blankenship, John Stokes of Morgan Keegan, Scott Ledbetter of LEDIC property management, Masson, and Jones worked exceptionally well together.

Real estate developer Earl Blankenship, who signed off on $100,000 of incentive payments to Armentrout, remains chairman of the Center City Commission. “It was a wonderful process,” he says. “We really got down to it.”

Building a staff almost from scratch, Armentrout pushed hard to meet personal and agency goals. His public troubles began this spring. Real estate broker Ed Beasley, who attends Sunday school with Armentrout at Idlewild Presbyterian Church, complained that Blankenship’s real estate firm had been awarded a contract to acquire property for a downtown school. That led to stricter guidelines for contract awards. Then in April an internal audit uncovered personal expenditures billed to the CCC.

Armentrout admitted last week to making mistakes. Those mistakes were both an IRS problem and a public-relations problem. While expanding the CCC’s taxing district and granting tax freezes worth millions of dollars, he failed to pay income taxes on some of his own taxable benefits and those of his staff. He lobbied the city council for a downtown parking authority but charged $180 of his own parking tickets to the CCC. He insisted on an image of professionalism around the office, but he billed the commission for $2,988 worth of architectural work done on his house at Harbor Town, marking one check as payment for the architects to do a walk-through of a vacant downtown building. He also paid travel expenses of his wife in violation of CCC policy, and rang up business and entertainment expenses of nearly $100 a day, according to CCC documents.

Armentrout wanted downtown projects to be first-class, as befits a city trying to compete with Nashville, St. Louis, and a $2 billion casino industry in Tunica. Some downtowners, however, found him arrogant and abrasive; others thought him insensitive to small business.

Jodie Vance, publisher of the consistently upbeat Downtowner magazine, was not an Armentrout fan.

“I’d like to see him go,” she said last week. “I feel like they could get someone who would work better with small businesses.”

On the other hand, developer Henry Turley, who mentored Armentrout from the time he arrived in Memphis, remained on his side even after the disclosures. “I would still gladly hire him today,” Turley says. “He got something going when he got here. He made some mistakes but his balance sheet was overwhelmingly positive. I applaud both him and Blankenship for having the guts to make a difference downtown.”

Armentrout’s interim successor, consultant Jeff Sanford, is a certified downtown Memphis insider of over 20 years and a former city councilman. He has previously done interim stints at the Convention and Visitors Bureau and Memphis in May. His wife, Cynthia Ham, is head of public relations for Archer Malmo and former head of Memphis in May. They own a lot on the South Bluffs next to the proposed Bluffwalk. His business partner and fellow consultant, part-time WREG-TV Channel 3 television commentator Norman Brewer, was head of the downtown development agency that became the CCC in the mid-1970s.

A Second Good-Bye

On Thursday, Armentrout resigned for the second time in four days, this time successfully. He faced the cameras, shed some tears, and apologized, calling himself an “unemployed developer.” The threat of legal action that had been the backdrop of the meeting two days earlier gave way, at least temporarily, to fond farewells and pats on the back from Turley, Cohen, NBC Bank President Tom Garrott, and others. Blankenship, who signed off on $100,000 of incentive payments to Armentrout, remains chairman of the commission.

What about downtown? Jones and Masson feared a lull in activity, but as things played out, those fears seemed to be aimed more at stopping a fuss over Armentrout’s resignation. The $65 million AutoZone Park, for which the CCC is co-developer and former CCC employee Ray Brown is project manager, was already on hold. So was the $55 million NARAS Grammy Museum in The Pyramid. Work continues on the $18 million train station renovation. The $40 million trolley rolls along (empty, often as not), and trees were felled last week for the $2.5 million Bluffwalk. A $76 million downtown convention and performing-arts center is on the boards, along with an extension of the trolley line to the medical center.

If Armentrout did any lasting damage, it was to the downtown halo effect. There is a notion, often self-serving, that downtown is the moral high ground, that what is good for downtown is good for Memphis and Shelby County in a way that a new office building in East Memphis (where property taxes are imposed instead of tax freezes) is not. The snafu at the Center City Commission may lend credence to the notion that downtown projects benefit dealmakers, tourists, and Memphians – in that order.

SIDEBAR: Small World: The Downtown Daisy Chain .... Or Zero Degrees of Separation

Copyright 1998 by Contemporary Media Inc.

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