Haverford flap echoes in Family Court deal
The lawyer fired in Philadelphia had to return a 2003 payment in a dispute over a land development deal.
At dawn on the morning of New Year's Eve, lawyer Jeffrey B. Rotwitt was already hard at work: He was on the phone with officials of Haverford Township, trying to make sure his law firm got a $600,000 fee before 2003 came to a close.
Rotwitt got the money - but not for long. His allies in the township had approved the payment in secret, in violation of state law. After it became public, the township's lawyer, A. Leo Sereni, pressured Rotwitt and his politically connected firm, Obermayer, Rebmann, Maxwell & Hippel L.L.P., to return it, Sereni said.
"He clearly wasn't entitled to the money under any circumstances," said Andy Lewis, then a newly elected Haverford commissioner. "The fact is it looked terrible, and that's why we got the money back."
Rotwitt, the lawyer now at the center of a busted development deal for a Family Court building in Center City, says he was blameless in his dealings with Haverford, where he helped find a developer for the old Haverford State Hospital site.
He says he took the money only for future work and says it wasn't his fault the township failed to approve the payment in a public vote. Neither he nor the firm was charged with wrongdoing.
"The answer is I should have said at the time, 'Everybody go back outside, all seven of you, and vote it there,' " Rotwitt said in an interview.
The revelations about how Obermayer went about getting the $600,000, laid out in detail in a 2007 report by a state grand jury, have similarities to the unfolding mess over the Family Court deal.
In both cases, Rotwitt and Obermayer agreed to take most of their fees as a commission only after the deals were completed. But in each instance, Obermayer ended up asking for - and getting - substantial fees before the projects were done.
In the Family Court project, the state's top judge, Chief Justice Ronald D. Castille, agreed in 2008 to pay Rotwitt and Obermayer $3.9 million for finding potential sites. Payments began as $55,000 monthly installments even before a development deal was signed.
The firm had received $1.3 million by last month, when The Inquirer reported that Rotwitt also had been paid about $500,000 as a codeveloper of the $200 million courthouse at 15th and Arch Streets, putting him on both sides of the deal.
Since then, Castille has terminated the development arrangement, the state has taken over the project, and Obermayer has fired Rotwitt.
Castille and Obermayer partners say they knew nothing of his codeveloper role; Rotwitt insists that they did know and that they never objected until The Inquirer started asking questions.
Castille, who began overseeing the Family Court project in early 2007, said he hadn't paid much attention to the state grand jury report on the Haverford matter, released in April 2007.
In any case, he said, it didn't affect his view of Rotwitt, who by then had been working for the courts on the Family Court development for a year. Castille said he thought Rotwitt was doing great work in moving the courthouse project along.
"Whatever happened with the grand jury, it was resolved," Castille said.
The grand jury eventually filed charges against one Haverford commissioner, Fred Moran, for matters unrelated to the $600,000 payment to Obermayer.
But the report also describes in detail a history of backroom dealings, government bungling, and "noncriminal misconduct" surrounding the redevelopment of the old hospital site, at Darby and Marple Roads.
It found that the Township Commission violated open-meetings laws to make the "illegal" payment to Obermayer - and then lied about it afterward in an attempt to keep it hidden from the public.
"We believe it is important that the facts associated with this matter be presented to the general public, and particularly the taxpayers of Haverford Township," the report says.
Obermayer chairman Martin Weinberg did not respond to phone calls, e-mails, and two letters seeking comment.
Speaking for the firm, partner Walter Cohen said: "The grand jury did a thorough investigation, and they didn't conclude there was anything wrong with anything that Obermayer did - period."
The deal with Obermayer was struck not in public, the report says, but by one Haverford commissioner motivated by pure political ambition.
In 2002, the state agreed to sell the 212-acre Haverford State site to the township for the bargain price of $3.5 million. The plan was to keep some for recreation and sell the rest to a developer.
At the beginning of 2003, after a power shift on the township board, Commissioner George Twardy Jr. took over an effort to find a consultant who would help attract a developer.
Twardy had grown up close to Philadelphia politics; he was the son of a former president judge of Philadelphia Traffic Court. But Twardy was an outsider in Delaware County, where county government has for decades been under the control of a Republican machine. He told the grand jury that he thought he could make a name for himself by controlling the hospital redevelopment.
He called Weinberg, the Obermayer chairman, who was a former mayoral candidate and a longtime player in city politics. Weinberg told him that Rotwitt, with extensive experience in big real estate deals, would be the right man for the job.
In February 2003, Weinberg and Rotwitt met Twardy for dinner at the private Pyramid Club, a posh restaurant with unparalleled views on the 51st floor of 1735 Market St.
Sereni, Haverford's longtime solicitor, was there with three commissioners allied with Twardy; the other members weren't invited.
The township representatives said they couldn't afford Rotwitt's fee of $400 an hour.
But Twardy struck a different deal in a later meeting with Rotwitt, Weinberg, and Thomas A. Leonard, another Obermayer partner, who has long been a powerhouse in Pennsylvania political fund-raising.
Rotwitt agreed to handle the state hospital sale for the township for a retainer of $7,500 a month - plus 6 percent of the gross when the sale was done.
Rotwitt went to the board in March 2003, supposedly to make a pitch. But that was a "charade," the grand jury investigation found. Led by Twardy, the majority pushed through the hiring, 5-4.
Twardy declined to comment for this article.
Rotwitt put out a request for proposals, using his extensive contacts to help drive up the bidding, he said. "I called very influential people at high levels and got them energized," he said.
Twardy settled on a team of two development firms led by Ken Goldenberg and Todd Pohlig. According to the grand jury, Twardy and Moran called in a Goldenberg executive and showed him the other proposals and bids, to give that group an advantage.
In November 2003, the Township Commission voted, 9-0, to accept a Goldenberg-Pohlig proposal for $30.6 million. Rotwitt said the quality of his work had brought together the "two Hatfield-McCoy factions" on the board. "They were effusive in their praise," he said.
"Once that was done," Rotwitt said, "my services were over."
Back at Obermayer, Weinberg was happy to hear that the deal was done; under the original agreement, the firm would have earned a fee of about $1.8 million. But Rotwitt told him that the firm wouldn't collect it until the final settlement, which could be years away.
Weinberg wasn't happy. Twenty Obermayer lawyers had worked on the matter, he told the grand jury. Not only that, he said, but the firm's lawyers also were paid based on fees collected each year - and 2003 was coming to a close.
He told Rotwitt to try to get an advance.
"Jeff should have said to Marty Weinberg at this point, 'We signed a contract to get a big reward at the end,' " said Lewis, a commissioner-elect at that time.
Experts in legal ethics say it's not right for lawyers to go back to a client and try to change a contingency deal before the work is done.
"There is significant case law that says the lawyer cannot change the fee unless there's some benefit to the client from doing so," said Lawrence Fox, a partner at Drinker, Biddle & Reath and a former chairman of the American Bar Association ethics committee.
"The lawyer can't turn around and say, 'Now I want a fee,' " Fox said. "That's the risk that the lawyer ran."
Cohen, speaking for the Obermayer firm, said: "It's done all the time, and this was open and aboveboard."
Rotwitt has a different account. He said the $600,000 wasn't an advance on the 6 percent, or a renegotiation of the original terms, but a flat fee for additional legal work the firm would do on the project.
"If you want us to do the work, pay us now for it," Rotwitt said he had told the commissioners. "We've already worked a year or two for free."
The grand jury report said Weinberg had made it clear that the money was an advance. Rotwitt's attempt to tie the $600,000 to future work was "nothing short of a ruse," the report said.
On Dec. 30, Haverford's public meeting turned raucous, with pointed questions from Lewis and others about the hospital deal and a redistricting dispute. Commissioners retreated to a back room.
The payment was worked out there: Obermayer would take $600,000 from a $5 million deposit by the developers, though that was never put in writing. According to the grand jury, commissioners were walking in and out during the meeting; some said they didn't know what was going on.
"I tell you, they were all sitting in the room," Rotwitt said, adding that some had "convenient" memory lapses afterward.
Rotwitt left the meeting, assuming the matter would be put to a public vote, he said. But when the commissioners reappeared, no one said anything about the $600,000.
The next morning, New Year's Eve, Rotwitt got Sereni, Haverford's solicitor, out of bed to ask about getting the money that day. Sereni sent him to Township Manager Michael English, who told Rotwitt he was leaving work at noon.
At 11 a.m., English got a fax from Obermayer, an amendment to the original fee agreement. Moran, the commissioner, told English to sign it. Obermayer was wired the $5 million deposit that day and kept $600,000.
"No one held a gun to their head," Rotwitt said.
Lewis, who took his seat on the Haverford board the next month, learned about the payment by chance during a meeting of the Independence Blue Cross board of directors. Seated next to Obermayer's Leonard, Lewis remarked that the firm would have put a lot of work into the Haverford deal before it ever saw any money.
"Oh, no," Leonard said, "Jeff already got paid."
Leonard also did not respond to phone calls, e-mails, and a letter requesting an interview.
Lewis went to the next commission meeting armed with pointed questions: Did Obermayer get anything besides the $7,500 retainer? None of his fellow commissioners said anything. Neither did Sereni nor English.
With the election of Lewis and another commissioner changing allegiances on the board in early 2004, the Twardy-Moran faction was out of power; there was now no chance of a public vote authorizing the $600,000 payment.
Sereni, Twardy, and Moran went to Deilwydd, Rotwitt's mansion in Radnor, to ask for the money back.
"Mr. Rotwitt assured me that he had the five votes," Sereni said in an interview. "Accordingly, he would not return the money."
In an interview last week, Sereni said he later had visited Rotwitt at his Obermayer office and told him that he'd done more research and was certain that the payment was not legal. If the money wasn't returned, Sereni said, he would see Rotwitt in Delaware County Court.
Rotwitt left to consult with others at the firm, Sereni said, then agreed to refund the $600,000.
"It was about as voluntary as extracting a decayed tooth," Sereni said.
Ultimately, the Goldenberg-Pohlig development deal Rotwitt helped arrange fell apart because of a dispute over the amount of land.
The township ended up with just $17.5 million, and the site is being rebuilt with ball fields, estate homes, and condominiums.
Lewis and others pushed for the state Attorney General's Office to investigate the $600,000 payment. But E. Marc Costanzo, the senior deputy who led the investigation, said the grand jury had concluded that no crime was committed because members of the commission had agreed to give up the money.
The only man charged was Moran, who, with Lewis, called a Goldenberg representative after the township agreed to take the lower figure. Moran said he could guarantee the company would get its zoning approvals if it paid an extra $500,000 to the township. "Call it extortion. Call it what you will," he said.
Lewis immediately called back and disavowed Moran's pitch, and no extra payment was made. Moran was convicted of bribery and has filed an appeal; his attorney, Burton A. Rose, argues that Moran was only trying to negotiate a better deal for the township.
The grand jury said the commissioners also had repeatedly violated the state Sunshine Law - but said the law was so weak, with maximum fines of $100, that prosecution wasn't worth it.
Obermayer was dismissed by the township after the original development deal fell apart and never got its commission, just the retainer payments of about $75,000.
Rotwitt said he believed the firm had become a "pawn" in the political jousting in Haverford. During the investigation, Rotwitt said bluntly that he had been "betrayed, not knowingly, by the knuckleheads" on the board who hadn't put the matter to a public vote.
"I suffered for their mistake," he said.
Cohen said Weinberg hadn't known about what the grand jury called Rotwitt's "ruse" in saying the $600,000 was to cover additional work.
Like Rotwitt, he said the firm couldn't be blamed for the town's backroom decision-making: "That wasn't in our control," he said.
Lewis, though, said he believed Obermayer and Rotwitt had taken advantage of the township.
"He couldn't get away with that in the private sector, I don't think," Lewis said.
The report didn't create much of a stir in Philadelphia legal circles; Castille said he had known only that the dispute over the payment had been "resolved" without anyone being charged.
As for Obermayer agreeing to refund the $600,000: "It doesn't sound like they did too well," Castille said.
After the report came out, Rotwitt went on with his work for the Supreme Court on the Family Court site, without pay. Castille eventually decided on the site at 15th and Arch - which was not one of those scouted by Rotwitt.
In the fall of 2008, Castille agreed to start making payments to Rotwitt, for his work finding sites, and to developer Donald Pulver, out of a court-controlled account, even though no development deal had been signed and no commission was then due to Obermayer.
Castille said he had relied on Rotwitt's advice on setting the fees, which have reached about $12 million. Now that the deal has been terminated and the state has taken over the project, Castille has demanded an accounting of where the money went.
A spokesman said Castille hadn't decided yet whether he, like Haverford officials, would ask for a refund.
To read the state grand jury report, go to http://go.philly.com/haverfordEndText
Castille had a front-row seat to court fiasco. Paul Davies, C1.EndText