Three prominent supporters of President Carter's reelection campaign have been given partnerships -- without making cash investments -- in a $28 million office building project in downtown Washington, according to the project's developer, Nathan Landow.
Landow, a multimillionaire and Bethesda-based builder, acts as Carter's chief campaign fundraiser in Maryland.
In an interview this week, Landow disclosed that his new partners in the venture will be three other Carter backers: D.C. Democratic Party Chairman Robert B. Washington Jr., a lawyer; former Washington Redskins flanker back Ozzie Clay, a real estate developer; and Clarence Avant of Los Angeles, president of Tabu Productions, a recently formed subsidiary of CBS.
The new partners will share a 10 percent interest in the equity of the project, initially valued by Landow at $500,000.
Landow's recruitment of the three new partners, all of whom are black, comes amidst months of bickering between Washington's mostly white development community and black political leaders, who say blacks must be included as ownership partners in publicly controlled development projects.
The Landow project, scheduled for ground-breaking this fall and located above the Metro Center subway stop at 12th and G streets NW, is part of the city's urban renewal program. The government buys land, clears it and then sells it to a developer willing to meet the city's goals for such things as design and afirmative action.
A key issue in the debate over minority participation has been whether minorities should be included as partners regardless of whether they contribute cash investments or professional services, as is usually -- but not always -- done.
In this instance, none of the partners -- black or white -- have been required to put up cash, Landow said. Some will or have provided professional services. But others may not be required to do so, he said.
After he won the development rights to the site in late 1978, Landow promised cith officials that he would recruit minority partners who would own 25 percent of the project. He then gave the first 15 percent minority interest to the principals in a prominent and politically well connected local law firm, Hudson, Leftwich and Davenport. In return, the lawyers prepared the affirmative action plan for the project.
By this spring, Landow still had not recruit minority partners to fill out the 25 percent pledge he had made to city officials.
In April, D.C. Housing Director Robert L. Moore, who exercises control over the Metro Center site for the city, warned that he would stop Landow from going ahead with the project unless the developer recruited additional minority partners.
Landow said at the time that he hoped to sell the remaining 10 percent interest for $400,000 in cash to help finance the administrative costs of the project. If he could not find investors able or willing to put up cash, Landow said, he would give awya the Remaining 10 percent "to my friends."
City officials have said that they never intended for Landow to give away ownership interests to minority partners. "Equity for no cash or work is not the policy of this government," said housing director Moore.
"All investors should be selected on the basis of genuine contributions to a particular project," said Mayor Marion Barry in his own policy statement on equity.
Nevertheless, Landow said this week that the new partnership agreement, completed in the last several weeks, requires no cash investment and no specific services from the new minority partners. For their 10 percent interest, Landow said, the new partners will sign a promissry note for the value of the interest $500,000.
In essence, Landow lends the $50,000 to the new partners so they can invest it in the partnership. Then the partners repay the loan from the profits they receive from the office building.
There are two other economic benefits from such a partnership: first, the individual partners are able to deduct from their income taxes part of the value of the building as a depreciation expense.
Secondly, after about 10 years, the partners may agree to refinance the building based on its increased value and general inflation in the real estate market. While this essentially adds a new and greater mortage on the property, it allows them to draw a large amount of cash out of the property for use in other investments.
The common thread tying together Landow's new partners is drawn from their active roles in fund raising and organizing for President Carter's reelection campaign.
Washington was the first top D.C. political official to endorse Carter's reelection bid last year, though his support, coupled with belated and passive assistance from Mayor Marion Barry, failed to prevent to lopsided victory by Sen. Edward M. Kennedy in the May 6 D.C. Democratic primary. v
Clay said that he was among the organizers, along with Washngton and black business executive Marion (Duke) Green, of a $1,000-a-plate Carter fund-raising dinner earlier this year that netted $250,000 for the president's campaign.
Avant, president of Tabu Productions, a Los Angeles-based record company, said in a telephone interview that he was among the first black business executives recruited by Andrew Young in 1975 to rally national support-among blacks for Carter, who was then an unknown, long-shot presidential hopeful.
After Carter's election, Avant was called upon by Young and other administration officials to chaperone and entertain African dignitaries who visited the West Coast.
Avant said in a telephone interview yesterday that the Metro Center partnership was described to him by Washington as "a deal you can't lose on . . . And since I hadn't put up anything, I wasn't going to lose anything."
Said Clay: "Anybody takes something that's given to them."
Washington could not be reached for comment.
Avant said that he heard of Landow's search for new partners from a West Coast physician who was an acquaintance of Washington. So "I called Bob," Avant said. He said he also discussed the deal with Hudson and subsequently met with Landow.
Avant said that he put up no cash because "no one else (in the partnership) was putting up any money." He said Landow conceded that point and agreed that it would be unfair to ask the new partners to contribute.
"Bob (Washington) said, 'Hey man, why not -- let's do it,'" Avant said. So he did.
Clay discounted Waashington's role in rounding up the new partners for Landow. Clay said that Landow and J. Gerald Lustine presented the deal to him. Lustine, who is a 10 percent partner in the deal, is a local real estate management executive, who originally introduced Landow to his first group of minority partners in 1978, according to Landow.
"If I had to wait for Bob Washington to bring me into a deal, I'd be up on the North Pole shivering my a . . off," said Clay.
Other partners in the deal include Landow's personal attorney Saul M. Schwartzbach, his accountant, Samuel Mancuso, who is listed as a "trustee," and Judith A. Majerus, a secetary in Landow's development company. Each has a 5 percent interest.
Landow said that at one point he had included then Democratic National Committe deputy treasurer John Golden in an early draft of the partnership agreement -- at Golden's request. Golden would have been a 5 percent shareholder.
But Landow said he later had second thoughts about bringing in Golden, a jovial, roommate of Carter campaign chief Hamilton Jordan who is known among Carter insiders as "The Right Rev. Billy Peaches." Landow said he eventually dropped Golden from the agreement "because of John's public position (in the DNC) -- it was not appropriate for him to be included in this."
Golden could not be reached for comment.
Neither of the two minority partners interviewed thought they had been selected because of their political connections. "I don't believe that to be the case," said Avant. "I'm not known for fund-raising and I don't consider myself prominent, . . . (but) I'm not ashamed to say that I stuck with Jimmy Carter."
Said Clay: "I'm more involved in business matters than in the political arena. "I'm just a working man . . . I think I was selected more so because of my financial stability. If I'm called on to make a financial contribution, I'm in a position to do so."
Landow characterized the partnership as "a very simple deal" and added that the parceling out of equity shares "is something that goes on in deals all day long."
"I just don't want any taint," said Landow "There isn't any taint. I don't need any influence. This is a clean deal and everyone is making a contribution in his own way. We have good minorities whose reputations are not blemished . . . and all of the participants had to approve each one of the people we brought in so it's a family affair."