Peduto and Fitzgerald call for removal of August Wilson Center receiver (UPDATED) | Blogh

Tuesday, April 22, 2014

Peduto and Fitzgerald call for removal of August Wilson Center receiver (UPDATED)

Posted By on Tue, Apr 22, 2014 at 4:04 PM

In a letter to Allegheny County Common Pleas Judge Lawrence O'Toole, Pittsburgh Mayor Bill Peduto and Allegheny County Executive Rich Fitzgerald today called for the removal of Judith Fitzgerald as receiver of the August Wilson Center for African American Culture.

"It is our opinion that Receiver Fitzgerald does not maintain as her highest priority the public interest of preserving the mission of the Center as a public asset," the letter says. (Full text of the letter is available here.)

Judith Fitzgerald was appointed as conservator last year after Dollar Bank, who holds the center's $7 million mortgage foreclosed on the center. After coming up short in her search to find alternative funding streams to sustain the center, she moved to liquidate the center's assets and sell it.

Last week, Judith Fitzgerald announced she had received four bids on the center.

Peduto and Rich Fitzgerald support a $4 million bid from three foundations to purchase the center, but Judith Fitzgerald has said she would move to accept a higher bid of $9 million from a commercial company looking to build a hotel on top of the center. As a result, yesterday, the foundations announced they were withdrawing their bid and would instead look for other ways to facilitate African-American programming.

"We're at a point where we've lost the foundations," Peduto says. "They finally, out of frustration, walked out."

However, Peduto believes the foundations would come back to the table if Judith Fitzgerald was removed as conservator. He said she has been unwilling to work with them. (A call to the Pittsburgh Foundation, who led the rival bid, was not returned immediately.)

"Throughout the process, conservator Fitzgerald has said her mission is to make the creditors whole," Peduto says.

Dollar Bank's mortgage accounts for $7 million of the center's estimated $10 million in debt. And while Dollar Bank is the largest creditor, "What about the $30-plus-million that the city, the county, and the state have invested?" Peduto asks. A portion of the remaining debt belongs to the Urban Redevelopment Authority, which Peduto says gives government officials a stake that could be leveraged. So far, though, "We've been trying to do this diplomatically."

Rich Fitzgerald, who spoke with City Paper by phone this evening, said he and Peduto sent the letter because "We felt we had to make a real statement." Fitzgerald said that he and members of his administration have previously spoken to Judith Fitzgerald (who is no relation to the executive): "We had what I would call frank discussions," he said, while declining to discuss specifics. But despite those conversations, "This isn't going in the right direction."

The county executive acknowledges that he's unsure what impact the letter will have on the legal proceedings, or how much leeway O'Toole has to consider factors other than price. "We're all in uncharted waters here for a lot of reasons," he says. Partly that's because government officials don't even know who the bidder is yet. "If this is such a good deal, why aren't the principals going public?" Fitzgerald asks. The anonymity of the bidder "should raise red flags with everybody."

At least one expert says the court is not obliged to simply accept the highest bid. "They can accept whatever bid they want," says John Pottow, a bankruptcy expert and law professor at the University of Michigan. "They have a fiduciary duty to take the best bid, but 'best' isn't just price."

And Rich Fitzgerald says that no matter who ends up controlling the center, "There's going to need to be a need for community support" for the future owner. O'Toole's decision won't take place in a vacuum, he says, since any new development on the site might require zoning approval or other government intervention.

Even so, Dollar Bank has leverage too. If the court accepts a bid of less than the $7 million mortgage, the bank can simply acquire the building to collect on the loan.

"I don't see how that benefits Dollar Bank," Peduto says (though Fitzgerald also cautions that "we shouldn't demonize Dollar Bank here").

Throughout the process, Peduto and Rich Fitzgerald have said they'd like to see the Wilson Center to continue its focus on African-American culture. Their letter to the judge is the first public action they've taken. If Judith Fitzgerald is removed as receiver, Peduto says the bidding process would not have to start over.

"We've been at this for four months and we've been meeting with all the stakeholders," Peduto says.

We'll have more details as they become available.

Chris Potter contributed to this report.