lawsuit vs brown smith

8/6/2019 Lawsuit vs Brown Smith

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UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF NEW YORK

NRP HOLDINGS LLC and NRP PROPERTIES LLC

Plaintiffs,

v. Civil No.:

CITY OF BUFFALO, BYRON W. BROWN,DEMONE A. SMITH,RICHARD A. STENHOUSE, BUFFALOJEREMIAH PARTNERSHIP FOR COMMUNITYDEVELOPMENT, INC., JOHN DOE 1 10, andJOHN DOE COMPANIES 1 5.

Defendants.

COMPLAINT

NRP Holdings LLC and NRP Properties LLC (collectively NRP), through

their attorneys Webster Szanyi LLP, state as follows:

Introduction

1. This is an action seeking recovery for actual and treble damages

caused by the conduct of the individual defendants who participated in the affairs of the

defendant City of Buffalo (Buffalo) through a pattern of racketeering activity in violation

of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961

et seq. This action also seeks recovery for defendants tortious conduct and for Buffalos

breach of a contract concerning NRPs plans to develop, construct and manage (50) units

of single-family homes in the Masten Park and Cold Springs neighborhoods of the City of

Buffalo. Simply put, the individual defendants conspired to kill the project when NRP

refused to comply with their illegal demand to pay monies to Reverend Richard A.

Case 1:11-cv-00472-WMS Document 1 Filed 06/06/11 Page 1 of 22


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Stenhouse and/or affiliated organizations in order for the Project to proceed. The illegal

demands by the individual defendants are commonly known as a pay to play scheme.

Parties

2. Plaintiff NRP Holdings LLC is an Ohio limited liability corporation with

its principal place of business in Ohio.

3. Plaintiff NRP Properties LLC is an Ohio limited liability corporation

with its principal place of business in Ohio.

4. Defendant City of Buffalo is a municipal corporation operating under

the laws of the State of New York.

5. Defendant Byron W. Brown (Brown) is a resident of the State of

New York.

6. Defendant Brown was and is the Mayor of Buffalo.

7. Defendant Demone A. Smith (Smith) is a resident of the State of

New York.

8. Defendant Smith was and is a member of the Buffalo Common

Council.

9. Defendant Richard A. Stenhouse (Stenhouse) is a resident of the

State of New York.

10. Defendant Buffalo Jeremiah Partnership for Community

Development, Inc. (Jeremiah Partnership) is a domestic corporation operating under the

laws of the State of New York.



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11. Defendant Stenhouse was and is the president of the Jeremiah

Partnership.

12. Defendants John Doe 1 10 and John Doe Companies 1 5

represent individuals and entities which plaintiff believes exist and may have acted

individually, together, and/or in concert with the defendants herein. Defendants John Doe

1 10 include both individuals employed by the City of Buffalo and within the private

sector. The allegations set forth below are incorporated as and against each John Doe

and John Doe Company as if fully set forth against him, her, or it.

Jurisdiction and Venue

13. This Court has federal question jurisdiction under 28 U.S.C. 1331,

18 U.S.C. 1964(a), and 42 U.S.C. 1983.

14. This Court has jurisdiction based on diversity of citizenship pursuant

to 28 U.S.C. 1332.

15. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391

and 18 U.S.C. 1965(a).

Factual Background

16. NRP are affiliates of the NRP Group LLC, an Ohio limited liability

corporation that develops, builds and manages apartments and housing across the

United States. Among other honors, the National Association of Home Builders named

the NRP Group LLC as the 2009 multifamily development firm of the year.

17. In November 2007, NRP was invited by representatives of Buffalo to

participate in a meeting to discuss affordable housing initiatives within the City of Buffalo.



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During this meeting, these representatives expressed their desire to work with NRP and

associated companies to build single family homes within the City of Buffalo.

18. Effective February 21, 2008, NRP entered into agreements with

associated companies to develop, construct and manage fifty (50) homes in the Masten

Park and Cold Springs neighborhoods of the City of Buffalo (the Project) . (NRP and its

associated companies are hereafter collectively referred to as the Development Team.)

19. By letter dated February 25, 2008, Buffalo agreed and committed

itself to participate in the Project by, among other things, extending to the Project its usual

Low Income Housing PILOT agreement, providing $1,600,000.00 of its HOME funds to

assist in the construction and, in addition, providing fifty-one (51) buildable vacant lots at

a price no greater than $2,000 per buildable lot, and not to exceed a total price of

$100,000.00.

20. Buffalos agreement and commitment to the Project was subject to

one condition -- the Development Teams success in securing 2008 Low Income Housing

Tax Credits (LIHTC) to complete the Project. (A copy of Buffalos February 25, 2008

agreement and commitment is attached hereto at Exhibit A.)

21. In the February 25, 2008 agreement and commitment letter, Buffalo

stated, among other things, that [w]e are also supportive of the feature of the

development, which allows for homeownership conversion at the end of the tax required

compliance period. The lease to own component provides future homeownership

opportunities to residents who are not currently prepared to become homeowners, while

providing them with clean, state-of-the-art housing today.



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22. As of February 25, 2008, Buffalo knew that under applicable law, the

tax compliance period referenced in the February 25, 2008 agreement and commitment

was thirty (30) years.

23. By letter dated August 20, 2008, the Development Team received a

commitment from the New York State Division of Housing and Community Renewal

(DHCR) for the necessary LIHTC. The DHCR commitment required closing on

construction financing sufficient to complete the Project on or before March 15, 2010. (A

copy of the DHCR August 20, 2008 agreement and commitment is attached hereto at

Exhibit B.)

24. By letter dated November 5, 2008, the DHCR notified the

Development Team that the amount of the LIHTC was increased from $794,363 to

$922,954. (A copy of the DHCR November 5, 2008 agreement and commitment is

attached hereto at Exhibit C.)

25. By letter dated November 5, 2008, the New York State Housing Trust

Fund Corporation (HTFC) notified the Development Team that the HTFC approved a

low interest loan in the amount of $2,200,000.00 in support of the Project. (By letter

dated March 19, 2009, the HTFC issued its agreement and commitment for the loan. A

copy of the March 19, 2009 agreement and commitment is attached hereto at Exhibit

D.)

26. After receiving the agreements and commitments from Buffalo and

the DHCR, Buffalo moved forward with its participation in the Project in accordance with

its February 25, 2008 commitment and agreement.



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27. For example, Buffalo issued letters in support of the Project and the

application to the DHCR.

28. Buffalo also selected the sites to be used for the single-family homes.

29. In addition, the City of Buffalo Planning Board approved as

presented, the site plan, design, and elevations submitted by the Development Team.

30. In early 2009, however, Brown, Smith, Stenhouse and the Jeremiah

Partnership conspired and started demanding that the Development Team contract with

Stenhouse and/or organizations connected to Stenhouse (including the Jeremiah

Partnership) to participate in the Project.

31. The Development Team was told that the participation of Stenhouse

was required in order to assure adequate minority involvement in the Project.

32. The Development Team was specifically instructed by Brown, Smith,

and other employees of Buffalo that it was necessary to find a role for Stenhouse and

make Stenhouse happy in order for the Project to proceed.

33. Initially, Stenhouse simply indicated an interest to make sure that

there was adequate minority involvement in the Project. Thereafter, Stenhouse

communicated a series of escalating demands. Instead of unofficial input, Stenhouse

then demanded a series of tasks involving ever increasing payments to him and later the

Jeremiah Partnership. Eventually, Stenhouse asked whether he could be a partner on

the Project similar to the arrangement he had on the Packard project, a previous project

in the City of Buffalo, where he was paid a developers fee. Stenhouse then demanded



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that the Development Team accept his response to a Request for Proposal, discussed

below, even though it was grossly inferior to the bid selected by the Development Team.

34. The Development Team was told that, because Stenhouse did not

have an acceptable contract on the Project, several items promised by the City of Buffalo

were being held up in defendant Browns office.

35. Despite these threats and demands, the Development Team

believed that they should issue a Request For Proposal (RFP) to satisfy the purported

need for an independent contractor on the Project devoted to minority involvement issues

even though members of the Development Team were already providing such services.

36. In April 2009, the Development Team issued the RFP for a provider

to assist it in maximizing participation in the Project by local minority business

enterprises, women-owned business enterprises and individuals.

37. The RFP was mailed to over thirty (30) organizations and an

advertisement was placed in the Buffalo News.

38. Stenhouse and the Jeremiah Partnership were advised of the RFP

and invited to respond.

39. The Development Team received three (3) proposals including one

from Stenhouse and the Jeremiah Partnership.

40. After a thorough review of the proposals, the Development Team

selected the proposal submitted by the University of Buffalo Center for Urban Studies in

conjunction with J.W. Pitts Planning (collectively referred to as the UB Team).



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41. The proposal by the UB Team ranked far superior to the others and

was more reasonably priced.

42. In April 2009, the City of Buffalo issued site plan approval and a

permit ready letter for the Project.

43. In April 2009, the DHCR issued environmental and plan approvals for

the Project.

44. By April 2009, the Development Team had incurred considerable

expense and performed all tasks necessary to move forward with the Project.

45. The Development Teams efforts included the selection of the UB

Team to satisfy the requests for additional minority participation and involvement in the

Project.

46. Likewise, the City of Buffalos Departments and Agencies and the

DHCR were also performing their necessary functions for the Project to proceed.

47. However, after selecting the UB Team and rejecting the proposal

submitted by Stenhouse and the Jeremiah Partnership, the Development Teams efforts

to proceed with the project were stalled and ultimately killed by the defendants.

48. After supporting the Project for over eighteen months, Brown, Smith,

Stenhouse and the Jeremiah Partnership used their positions and influence to cause

Buffalo to breach its February 25, 2008 agreement and commitment to the Project by,

among other things, individually taking action to prevent completion of the project and by

directing City Departments, Agencies, and employees to either stop working on the

project or to take action to prevent the project from proceeding forward.



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49. Brown, Smith, Stenhouse and the Jeremiah Partnership conspired to

cause Buffalo to breach its agreement and commitment to the Project because the

Development Team refused to comply with the illegal demand that they pay monies to

Stenhouse and/or affiliated organizations in order for the Project to proceed.

50. During the course of these events and in making the illegal demand,

Brown said: If you do not hire the right company [i.e. Stenhouse and/or the Jeremiah

Partnership], you do not have my support for the Project.

51. Brown also said: Make Stenhouse happy or the deal will not go

through and further stated that he was sick of seeing those fucking white developers on

the East Side with no black faces represented.

52. After the Development Team selected the UB Team instead of

Stenhouse, Brown said: I told you what you had to do and you hired the wrong

company.

53. Smith made similar statements as those attributable to Brown in the

preceding paragraphs.

54. All of the defendants made certain statements in furtherance of their

illegal scheme, to each other and others, by U.S. mail, wire, telephonic, email, and/or

other electronic means.

55. Upon information and belief, Stenhouse and the Jeremiah

Partnership demanded a role on the project because of their past endorsement of Brown

as Mayor and in consideration for their future endorsement of Brown.



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56. Upon information and belief, Brown and the other defendants

intended to reward Stenhouse and the Jeremiah Partnership for their past endorsement

and support and, because of their position in the community, viewed the continuing

endorsement by Stenhouse and the Jeremiah Partnership as integral to Browns re-

election efforts in 2009.

57. Calendar Year 2009 was an election year for Brown.

58. The illegal schemes developed and implemented by Brown, Smith,

Stenhouse and the Jeremiah Partnership are commonly known as a pay to play and

pay for votes scheme.

59. Upon information and belief, Brown, Smith, Stenhouse and the

Jeremiah Partnership conditioned Buffalos support for other development projects that

proceeded within the City of Buffalo on those projects finding a role for and/or the

payment of monies to Stenhouse, the Jeremiah Partnership, and/or companies

associated with Stenhouse.

60. Upon information and belief, in situations where development

projects found a role for Stenhouse and/or the Jeremiah Partnership on their teams,

Buffalo honored its agreements and commitments on those projects.

61. Upon information and belief, the role of Stenhouse and/or the

Jeremiah Partnership in certain otherdevelopment projects was essentially a no show

job where Stenhouse and/or the Jeremiah Partnership added little or no value to the

projects.



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62. Upon information and belief, Stenhouse did not have development

experience. As a result, the Mayors office often directed City employees to work directly

with Stenhouse at City expense to provide the expertise that he lacked and to perform

services that Stenhouse was being paid to perform on these otherdevelopment projects.

63. Upon information and belief, the Packard project, commenced in or

about 2006, is another example where the individual defendants conspired to demand a

role for Stenhouse as a condition for approving a development project in Buffalo. In the

Packard project, Stenhouse became a partner on the development project and earned a

developers fee despite his lack of qualifications as a developer. Indeed, upon

information and belief, Stenhouse provide no services of value to the Packard project.

64. Upon information and belief, East Side Housing Opportunities, Phase

I is another example of where the individual defendants conspired to demand a role for

Stenhouse and/or his affiliated companies as a condition for approving a development

project in Buffalo. NRP was not involved in this Phase I project but has learned that

Stenhouses participation in the project added little to no value. Despite the lack of any

meaningful contribution to this project, Stenhouse was paid a significant fee at the

insistence of the defendants.

65. Prior to filing this complaint, NRP submitted a Freedom of

Information Law request to Buffalo requesting, among other things, documents in

Buffalos possession concerning Stenhouse and the Jeremiah Partnership. This request

was intended to determine the precise involvement of Stenhouse and the Jeremiah

Partnership concerning other development projects in Buffalo.



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66. In response, Buffalo first delayed and then failed and refused to

produce documents in its possession concerning Stenhouse and the Jeremiah

Partnership.

67. Discovery is necessary to determine the full extent of the precise role

played by Stenhouse and the Jeremiah Partnership in the Packard project, East Side

Housing Opportunities Phase I, and other development projects in Buffalo.

68. As a direct and proximate result of the tortious and illegal conduct of

Buffalo, Brown, Smith, Stenhouse, and the Jeremiah Partnership, NRP was no longer

able to claim the benefits of their agreements with members of the Development Team,

the DHCR, the HTFC and others who issued loan commitments and, in turn, the City of

Buffalo.

69. Buffalo, Brown, Smith, Stenhouse and the Jeremiah Partnership

have failed to offer any good faith or legitimate reason for causing Buffalo to breach its

agreement and commitment to the Project.

70. In statements to the media, Brown claims that he refused to support

the Project when he learned of the thirty (30) year rental time period before the single-

family homes would be made available for home ownership.

71. Browns purported reason for refusing to support the project is

patently false.

72. Brown was aware that the thirty (30) year durational requirement was

mandatory under applicable law prior to Buffalos February 25, 2008 agreement and

commitment for the Project.



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73. Stenhouse is quoted by the media as stating that he never thought

the Project was worthwhile.

74. Stenhouses statement is both incredible and false as reflected by his

relentless and persistent efforts in 2009 to have a role on the Project including the

submission of a proposal in response to the RFP.

75. Simply put, Brown, Smith, Stenhouse and the Jeremiah Partnership

conspired to tortiously and illegally kill the Project because the Development Team

refused to comply with the illegal demand that it pay Stenhouse and/or the Jeremiah

Partnership money as a condition for their role in determining whether Buffalo would

honor the February 25, 2008 agreement and commitment.76. A notice of claim was filed and served upon the municipal defendants

on June 14, 2010, and more than 30 days have passed since the filing of the notice of

claim with the municipal defendants failing to adjust or otherwise pay for the damages

identified within the notice of claim. A copy of the notice of claim is attached as Exhibit

E.

77. On November 18, 2010 the municipal defendants conducted the

examination of plaintiffs pursuant to the terms of the General Municipal Law.

78. Plaintiffs have satisfied all conditions precedent under the General

Municipal Law for commencing an action against the municipal defendants.

79. Upon information and belief, the limitations of liability set forth in

Article 16 of the CPLR do not apply to this action.



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COUNT I

Breach of Contract Against Buffalo

80. NRP repeats and re-alleges the allegations set forth in paragraphs 1

through 79 above.

81. NRP is the assignee of all rights and benefits concerning the

February 25, 2008 agreement and commitment.

82. The February 25, 2008 agreement and commitment is an

enforceable contract between Buffalo and NRP.

83. The Development Team satisfied the one condition precedent in the

February 25, 2008 agreement and commitment when they secured the 2008 LIHTC to

complete the Project.

84. Buffalo breached the February 25, 2008 Agreement by, among other

things, failing to: perform the tasks required of it to move the Project forward, extend to

the Project its usual Low Income Housing PILOT agreement, provide $1,600,000.00 of its

HOME funds to assist in the construction of the Project and provide fifty-one buildable

vacant lots by the Project deadline of March 15, 2010.

85. Consequently, NRP is entitled to recover compensatory and other

damages in excess of $450,000.00 together with prejudgment interest.



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COUNT II

Tort Claims Against Buffalo, Brown,Smith, Stenhouse and the Jeremiah Partnership


through 85 above.

87. NRP is a party to agreements with associated companies concerning

the development, construction and management of homes in connection with the Project.

88. NRP is the assignee of all rights and benefits concerning the

agreements and commitments that are attached hereto at Exhibits A D.


knew or should have known of the agreements secured by the Development Team in

order to perform the Project.


employed an unlawful and improper pay to play scheme and otherwise engaged in

wrongful and illegal conduct designed to interfere with the Development Teams rights

under the agreements attached hereto at Exhibits A D, other agreements to be

entered into in connection with the Project, and the economic advantages that would

have been realized under all such agreements.

91. Brown, Smith, Stenhouse and the Jeremiah Partnership intentionally

procured Buffalos breach of the agreement attached as Exhibit A and all defendants

expected and understood that all other contracts referenced herein would not be

performed as a result of their intentional and wrongful conduct set forth in detail above, all

without justification.



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92. The defendants caused an actual breach of the contracts and/or non-

performance thereof and NRP sustained damages as a result.

93. Through their course of dealing with NRP and the Development

Team, the defendants were all aware of prospective contractual and business

relationships by and between plaintiffs and Buffalo and third-parties, and with this

awareness interfered with the business relationships with the sole purpose of harming

NRP or by means that were unlawful or improper.

94. Each defendant, in pursuance of a common plan or design to commit

a tortious act, actively took part in it, or furthered it by cooperation or request, or provided

aid and encouragement to each of the other defendants, or ratified and adopted each of

the other defendants acts done for their benefit, and are therefore liab le with each of the

defendants. Each defendant acted tortiously and one or more of the defendants

committed an act in pursuance of the common plan, design or agreement which

constitutes a tort.

95. The wrongful and illegal actions and conduct of Buffalo, Brown,

Smith, Stenhouse and the Jeremiah Partnership described in detail above are actionable

under the common law theories of tortious interference with contract and/or prospective

contractual relations, tortious interference with prospective economic advantage and/or

economic relations, and concerted action theory and/or civil conspiracy.

96. Buffalo is not responsible for the claims set forth in paragraph 94

above concerning the agreement attached at Exhibit A because it is a party to that

agreement. Buffalo is responsible for the claims set forth in paragraph 94 above



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concerning the agreements attached hereto at Exhibits B through D and the

agreements entered into between NRP and other members of the Development Team.

Buffalo is also responsible for the acts of Brown, Smith, and its other employees pursuant

to the doctrine of respondeat superior.

97. Consequently, NRP is entitled to recover compensatory damages of

at least $1,000,000.00 as permitted by law against Buffalo, Brown, Smith, Stenhouse

and the Jeremiah Partnership.

98. The conduct described herein was reckless, wanton, and carried out

in total disregard for the rights of NRP. As a result, NRP is entitled to recover punitive

damages against Brown, Smith, Stenhouse and the Jeremiah Partnership in an amount

to be determined.

COUNT III

RICO Claims Against Brown,Smith, Stenhouse, and the Jeremiah Partnership


through 98 above.

100. As described above, Brown, Smith, Stenhouse and the Jeremiah

Partnership conspired in various respects including to illegally demand a role for

Stenhouse on certain projects and later to decide whether to cause Buffalo to breach its

agreements and commitments for land development projects depending on whether the

subject land developer complied with their unlawful and illegal demands to pay monies to

Stenhouse and/or affiliated organizations in order for such projects to proceed.

101. Pursuant to the RICO, the enterprise is Buffalo.



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102. Pursuant to the RICO, Brown, Smith, Stenhouse and the Jeremiah

Partnership committed multiple acts of racketeering activity, as set forth above, in

furtherance of the illegal scheme. Such activities, as described in detail above, involved

interstate commerce and include, but are not limited to, violations of the Hobbs Act, 18

U.S.C. 1951, 18 U.S.C. 1341, 18 U.S.C. 1343, and New York Penal Law 200 et

seq.

103. Pursuant to the RICO, the illegal activities of Brown, Smith,

Stenhouse and the Jeremiah Partnership constitute a pattern of racketeering activity as a

closed ended and/or open ended continuity and/or because they were used on NRP and,

upon information and belief, other developers involved in certain other projects that

proceeded within the City of Buffalo.

104. Even assuming arguendo that the pay to play or pay for votes

practice has ended, Brown, Smith, Stenhouse and the Jeremiah Partnership developed

and implemented this practice against NRP and, upon information and belief, others

through numerous threats and demands over a period of more than two years.

105. The illegal activities of Brown, Smith, Stenhouse and the Jeremiah

Partnership constitute a pattern of racketeering activity because, left unchecked, it is

reasonable to expect that such acts were the regular manner in which such persons

exercised their authority within the enterprise and implied a threat of continuing improper

activity. Moreover, left unchecked, the illegal activities of defendants are likely to occur in

the future.



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106. In addition, the illegal activities of Brown, Smith, Stenhouse and the

Jeremiah Partnership constitute a pattern of racketeering activity based on the escalating

demands concerning the role of Stenhouse and the Jeremiah Partnership on the Project

and other development projects in Buffalo. Such escalating demands implied a threat of

continuing criminal activity.

107. Pursuant to the RICO, Brown, Smith, Stenhouse and the Jeremiah

Partnership participated in the affairs of the enterprise through the pattern of racketeering

activity described above.

108. By reason of NRPs refusal to comply with the illegal demands and

pay to play scheme employed by Brown, Smith, Stenhouse and the Jeremiah

Partnership, NRP has been injured in its business and property in the amount of at least

$1,000,000.00.

109. By reason of the foregoing, NRP is entitled to a judgment against

Brown, Smith, Stenhouse and the Jeremiah Partnership for their monetary damages, plus

treble damages, costs and reasonable attorneys fees and disbursements incurred in

prosecuting this action.



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COUNT IV

42 U.S.C. 1983 Against Buffalo, Brown and Smith


109 above.

111. Buffalo had and/or has an official custom or policy established by

Brown and/or Smith that required NRP to comply with the illegal demand to pay monies to

Stenhouse and/or affiliated organizations in order for the Project to proceed.

112. In applying this official custom or policy to NRP, Buffalo, Brown and

Smith were acting under color of state or local law.

113. Application of this official custom or policy to NRP resulted in

depriving them of their rights protected by the Equal Protection and Due Process clauses

of the United States Constitution.

114. NRP was treated differently than other developers of projects in

Buffalo. When other developers found a way to pay monies to Stenhouse and/or

affiliated organizations, Buffalo, Brown and Smith allowed their projects to proceed to

completion. Because NRP refused to make such payments, Buffalo, Brown and Smith

maliciously and in bad faith intended to injure NRP and actively took steps to kill the

Project.

115. NRP had a binding agreement with Buffalo concerning the Project

pursuant to the February 25, 2008 agreement and commitment. In reliance on that

agreement, NRP fulfilled all necessary conditions and expended considerable sums, time

and resources in order for the Project to proceed. After supporting the Project for over



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eighteen months, Buffalo, Brown and Smith used their positions and influence to prevent

Buffalo from taking the final steps required of it for the completion of the Project. As a

result, NRP was denied due process solely because it refused to comply with the illegal

demand to pay monies to Stenhouse and/or affiliated organizations.

116. The above actions of Buffalo, Brown and Smith have resulted in a

denial of NRPs federal law rights pursuant to the Equal Protection and Due Process

clauses of the United States Constitution.

117. By reason of the foregoing, NRP is entitled to recover compensatory

damages in an amount in excess of $1,000,000.00 and attorneys fees against Buffalo,

Brown and Smith, and punitive damages in an amount to be determined against Brown

and Smith.

PRAYER AND DEMAND FOR RELIEF

WHEREFORE, NRP respectfully requests that the Court:

a) On Count I: Enter judgment on behalf of NRP against Buffalo for

compensatory damages in excess of $450,000.00 together with prejudgment interest;

b) On Count II: Enter judgment on behalf of NRP against Brown,

Smith, Stenhouse and the Jeremiah Partnership for compensatory damages in excess of

$1,000,000.00 and punitive damages;

c) On Count III: Enter judgment on behalf of NRP against Brown,

Smith, Stenhouse and the Jeremiah Partnership for compensatory damages in excess of



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$1,000,000.00 together with prejudgment interest, an award of treble damages and

attorneys fees and costs pursuant to the RICO;

d) On Count IV: Enter judgment on behalf of NRP against Buffalo,

Brown and Smith for compensatory damages in excess of $1,000,000 .00, attorneys fees

and punitive damages;

e) Awarding NRP its costs, disbursements, and attorneys fees; and

f) Awarding NRP such other and further relief as the Court deems just

and proper.

DEMAND IS HEREBY MADE, for a trial by Jury.

Dated: June 3, 2011

WEBSTERSZANYI LLPAttorneys for Plaintiffs

By: s/Thomas S. Lane

Thomas S. LaneNelson Perel

1400 Liberty BuildingBuffalo, New York 14202Telephone: (716) [email protected]@websterszanyi.com

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF NEW YORK

NRP HOLDINGS LLC and NRP PROPERTIES LLC

Plaintiffs,

v. RICO CASESTATEMENT

CITY OF BUFFALO, BYRON W. BROWN, PURSUANT TODEMONE A. SMITH, LOCAL RULE 9RICHARD A. STENHOUSE, and BUFFALOJEREMIAH PARTNERSHIP FOR COMMUNITYDEVELOPMENT, INC., JOHN DOE 1 10, andJOHN DOE COMPANIES 1 5.

Defendants.

For its RICO Case Statement pursuant to Rule 9 of the Local Rules of Civil

Procedure for the Western District of New York, Plaintiffs NRP Holdings LLC and NRP

Properties LLC (collectively NRP), through their attorneys Webster Szanyi LLP, state as

follows:

1. State whether the alleged unlawful conduct is in violation of 18

U.S.C. 1962 (a), (b), (c) and/or (d).

Response: 18 U.S.C. 1962(c) and 1962(d).

2. List each defendant and state the alleged misconduct and basis

of liability of each defendant.

Response: Defendant Byron W. Brown (Brown) was and is the Mayor of

the City of Buffalo (Buffalo). Defendant Demone A. Smith (Smith) was and is a

member of the Buffalo Common Council. Defendant Richard A. Stenhouse



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(Stenhouse) was and is the president of the Jeremiah Partnership for Community

Development, Inc. (Jeremiah Partnership).

NRP are affiliates of the NRP Group LLC, an Ohio limited liability

corporation that develops, builds and manages apartments and housing across the

United States. Among other honors, the National Association of Home Builders named

the NRP Group LLC as the 2009 multifamily development firm of the year.

In November 2007, NRP was invited by representatives of the City of

Buffalo (Buffalo) to participate in a meeting to discuss affordable housing initiatives

within the City of Buffalo. During this meeting, these representatives expressed their

desire to work with NRP and associated companies to build single family homes within

the City of Buffalo.

Effective February 21, 2008, NRP entered into agreements with associated

companies to develop, construct and manage fifty (50) homes in the Masten Park and

Cold Springs neighborhoods of Buffalo (the Project). (NRP and its associated

companies are hereafter collectively referred to as the Development Team.)

By letter dated February 25, 2008, Buffalo agreed and committed itself to

participate in the Project by, among other things, extending to the Project its usual Low

Income Housing PILOT agreement, providing $1,600,000 of its HOME funds to assist in

the construction and, in addition, providing fifty-one (51) buildable vacant lots at a price

no greater than $2,000 per buildable lot, and not to exceed a total price of $100,000.



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Buffalos agreement and commitment to the Project was subject to one

condition -- the Development Teams success in securing 2008 Low Income Housing Tax

Credits (LIHTC) to complete the Project.

In the February 25, 2008 agreement and commitment letter, Buffalo stated,

among other things, that [w]e are also supportive of the feature of the development,

which allows for homeownership conversion at the end of the tax required compliance

period. The lease to own component provides future homeownership opportunities to

residents who are not currently prepared to become homeowners, while providing them

with clean, state-of-the-art housing today.

As of February 25, 2008, Buffalo, Brown and Smith knew that under

applicable law, the tax compliance period referenced in the February 25, 2008 agreement

and commitment was thirty (30) years.

By letter dated August 20, 2008, the Development Team received a

commitment from the New York State Division of Housing and Community Renewal

(DHCR) for the necessary LIHTC. The DHCR commitment required closing on

construction financing sufficient to complete the Project on or before March 15, 2010.

By letter dated November 5, 2008, the DHCR notified the Development

Team that the amount of the LIHTC was increased from $794,363 to $922,954.

By letter dated November 8, 2008, the New York State Housing Trust Fund

Corporation (HTFC) notified the Development Team that the HTFC approved a low

interest loan in the amount of $2,200,000 in support of the Project. (By letter dated March

19, 2009, the HTFC issued its agreement and commitment for the loan.)



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After receiving the agreements and commitments from Buffalo and the

DHCR, Buffalo moved forward with its participation in the Project in accordance with its

February 25, 2008 commitment and agreement.

For example, Buffalo issued letters in support of the Project and the

application to the DHCR. Buffalo also selected the sites to be used for the single-family

homes. In addition, the City of Buffalo Planning Board approved as presented, the site

plan, design and elevations submitted by the Development Team.

In early 2009, however, Brown, Smith, Stenhouse and the Jeremiah

Partnership demanded that the Development Team contract with Stenhouse and/or

organizations connected to Stenhouse (including the Jeremiah Partnership) to participate

in the Project.

The Development Team was told that the participation of Stenhouse was

required in order to assure adequate minority involvement in the Project.

The Development Team was specifically instructed that it was necessary to

find a role for Stenhouse and make Stenhouse happy in order for the Project to

proceed.

Initially, Stenhouse simply indicated an interest to make sure that there was

adequate minority involvement in the Project. Thereafter, Stenhouse communicated a

series of escalating demands. Instead of unofficial input, Stenhouse then demanded a

series of tasks involving ever increasing payments to him and later the Jeremiah

Partnership. Eventually, Stenhouse asked whether he could be a partner on the Project

similar to the arrangement he had on the Packard project, a prior project within the City of



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Buffalo, where he was paid a developers fee. Stenhouse then demanded that the

Development Team accept his response to a Request for Proposal, discussed below,

even though it was inferior to the bid selected by the Development Team.

The Development Team was told that, because Stenhouse did not have an

acceptable contract on the Project, several items promised by Buffalo were being held up

in Browns office.

Despite these threats and demands, the Development Team believed that

they should issue a Request For Proposal (RFP) to satisfy the purported need for an

independent contractor on the Project devoted to minority involvement issues even

though members of the Development Team were already providing such services.

In April 2009, the Development Team issued the RFP for a provider to

assist it in maximizing participation in the Project by local minority business enterprises,

women-owned business enterprises and individuals. The RFP was mailed to over thirty

(30) organizations and an advertisement was placed in the Buffalo News. Stenhouse and

the Jeremiah Partnership were advised of the RFP and invited to respond. The

Development Team received three (3) proposals including one from Stenhouse and the

Jeremiah Partnership. After a thorough review of the proposals, the Development Team

selected the proposal submitted by the University of Buffalo Center for Urban Studies in

conjunction with J.W. Pitts Planning (collectively referred to as the UB Team). The

proposal by the UB Team ranked far superior to the others and was more reasonably

priced.



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In April 2009, Buffalo issued site plan approval and a permit ready letter for

the Project. In the same month, the DHCR issued environmental and plan approvals for

the Project. By this time, the Development Team had incurred considerable expense

and performed all tasks necessary to move forward with the Project.

After selecting the UB Team and rejecting the proposal submitted by

Stenhouse and the Jeremiah Partnership, the Project was stalled and ultimately killed by

Brown, Smith, Stenhouse and the Jeremiah Partnership.

Brown, Smith, Stenhouse and the Jeremiah Partnership used their positions

and influence to cause Buffalo to breach its February 25, 2008 agreement and

commitment to the Project because the Development Team refused to comply with the

illegal demand that they pay monies to Stenhouse and/or affiliated organizations in order

for the Project to proceed.

In making the illegal demand, Brown said: If you do not hire the right

company [i.e. Stenhouse and/or the Jeremiah Partnership], you do not have my support

for the Project. He also said: Make Stenhouse happy or the deal will not go through

and further stated that he was sick of seeing those fucking white developers on the East

Side with no black faces represented. After the Development Team selected the UB

Team instead of Stenhouse, Brown said: I told you what you had to do and you hired the

wrong company. Smith made similar statements. Upon information and belief,

Stenhouse and the Jeremiah Partnership demanded a role on the Project because of

their past endorsement of Brown as Mayor and in consideration for their future

endorsement of Brown. 2009 was an election year. Upon information and belief, Brown



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and Smith intended to reward Stenhouse and the Jeremiah Partnership for their past

endorsement and support and viewed the continuing endorsement by Stenhouse and the

Jeremiah Partnership as integral to Browns re-election efforts in 2009.

The illegal schemes implemented by Brown, Smith, Stenhouse and the

Jeremiah Partnership against NRP continued until March 15, 2010, when NRP was

unable to meet the deadline for closing on construction financing sufficient to complete

the Project and, as a result, the Project could no longer be completed.

Buffalo, Brown, Smith, Stenhouse and the Jeremiah Partnership have failed

to offer any good faith or legitimate reason for causing Buffalo to breach its agreement

and commitment to the Project.

In statements to the media, Brown claims that he refused to support the

Project when he learned of the thirty year rental time period before the homes would be

made available for home ownership. Browns purported reason is patently false. Brown

was aware that the thirty year durational requirement was mandatory under applicable

law prior to Buffalos February 25, 2008 agreement and commitment for the Project.

Stenhouse is quoted by the media as stating that he never thought the

Project was worthwhile. Stenhouses statement is both incredible and false as reflected

by his ongoing and persistent efforts in 2009 to have a role on the Project including the

submission of a proposal in response to the RFP.

3. List the alleged wrongdoers, other than the defendants listed

above, and state the alleged misconduct of each wrongdoer.



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Response: Other than the defendants listed above, NRP is presently

unaware of any other entities or persons that participated in the alleged wrongdoing

described in the previous response. NRP believes others may have been involved and,

for this reason, has named John Doe individuals and John Doe Companies as

defendants in the complaint.

4. List the alleged victims and state how each victim was allegedly

injured.

Response: NRP and the Development Team were the victims. As a

direct and proximate result of the illegal conduct of Brown, Smith, Stenhouse and the

Jeremiah Partnership, NRP was no longer able to claim the benefits of their agreements

with members of the Development Team, the DHCR, the HTFC and others who issued

loan commitments and, in turn, Buffalo. As a result, the Development Team incurred

injury to its business and property in excess of $1,000,000.00.

5. Describe in detail the pattern of racketeering activity or

collection of unlawful debts alleged for each RICO claim.

(A) List the alleged predicate acts and the specific statuteswhich were allegedly violated;

(B) Provide the dates of the predicate acts, the participants inthe predicate acts, and a description of the factssurrounding the predicate acts;

(C) If the RICO claim is based on the predicate offenses ofwire fraud, mail fraud, or fraud in the sale of securities thecircumstances constituting fraud or mistake shall bestated with particularity. Fed. R. Civ. P. 9(b), Identify thetime, place and contents of the allegedmisrepresentations, and the identity of persons to whomand by whom the alleged misrepresentations were made;



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(D) State whether there has been a criminal conviction forviolation of each predicate set;

(E) State whether civil litigation has resulted in a judgment in

regard to each predicate act;

(F) State whether the alleged predicate acts relate to eachother as part of a common plan. If so, describe in detail.

Response: The illegal schemes developed and implemented by Brown,Smith, Stenhouse and the Jeremiah Partnership are commonly known as a pay to play

and pay for votes scheme.

Over the period November 2007 to March 2010, Brown, Smith, Stenhouse

and the Jeremiah Partnership developed and implemented a conspiracy which included

inviting NRP to Buffalo to develop the Project and then failing to complete actions

required by Buffalo and withholding Buffalos final approval unless NRP and the

Development Team complied with their illegal demands to pay money to Stenhouse

and/or the Jeremiah Partnership. When the Development Team refused to comply with

those illegal demands, Brown, Smith, Stenhouse and the Jeremiah Partnership conspired

to cause Buffalo to breach its agreement and commitment by, among other things, failing

to provide funds and lots within the deadlines necessary for the Project to proceed.

Through telephonic communications, U.S. Mail, electronic communications,

e-mails, and direct statements, Brown, Smith, Stenhouse and the Jeremiah Partnership

made clear that the Project would not proceed unless the Development Team paid money

to Stenhouse and the Jeremiah Partnership.



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Upon information and belief, Brown, Smith, Stenhouse and the Jeremiah

Partnership conditioned Buffalos support forotherdevelopment projects that proceeded

within Buffalo on those projects finding a role for and/or the payment of monies to

Stenhouse and/or the Jeremiah Partnership. Upon information and belief, in situations

where development projects found a role for Stenhouse and/or the Jeremiah Partnership

on their teams, Buffalo honored its agreements and commitments on those projects.

Upon information and belief, the role of Stenhouse and/or the Jeremiah Partnership in

certain otherdevelopment projects was essentially a no show job where Stenhouse

and/or the Jeremiah Partnership added little or no value to the projects.

Upon information and belief, Stenhouse did not have development

experience. As a result, the Mayors office often directed City employees to work directly

with Stenhouse at City expense to provide services and the expertise that he lacked even

though Stenhouse was being paid to provide such services.

Upon information and belief, the Packard project, which commenced in or

about 2006, is another example where the individual defendants conspired to find a role

for Stenhouse as a condition for approving a development project in Buffalo. In that

project, Stenhouse became a partner on the development project and earned a

developers fee. Indeed, upon information and belief, Stenhouse provide no services of

value to the Packard project.

Upon information and belief, East Side Housing Opportunities, Phase I is

another example of where the individual defendants conspired to demand a role for

Stenhouse and/or his affiliated companies as a condition for approving a development



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project in Buffalo. NRP was not involved in this Phase I project but has learned that

Stenhouses participation in the project added little to no value. Despite the lack of any

meaningful contribution to this project, Stenhouse was paid a significant fee at the

insistence of the defendants.

Prior to filing this case, NRP submitted a Freedom of Information Law

request to Buffalo requesting, among other things, all documents in Buffalos possession

concerning Stenhouse and the Jeremiah Partnership. The request was intended to

determine the precise involvement of Stenhouse and the Jeremiah Partnership

concerning other development projects in Buffalo. In response, Buffalo first delayed and

then refused to produce documents in Buffalos possession concerning Stenhouse and

the Jeremiah Partnership. Discovery is necessary to determine the full extent of the role

of Stenhouse and the Jeremiah Partnership in the Packard project, the East Side Housing

Opportunities, Phase I project, and other development projects in Buffalo.

The foregoing predicate acts are violations of the Hobbs Act, 18 U.S.C.

1951 and New York Penal Law 200 et seq., 18 U.S.C. 1341 and 18 U.S.C. 1343.

Based on the predicate acts committed against NRP and the Development

Team and, upon information and belief, other developers in Buffalo, the RICO pattern in

this case involves closed-ended and open-ended continuity. Even assuming, arguendo,

the pay to play practice has ended, Brown Smith, Stenhouse and the Jeremiah

Partnership developed and implemented this practice against NRP and others through

numerous threats and demands over a time period of more than two years. The scheme



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also included repeated misrepresentations concerning the purported role of Stenhouse

and the Jeremiah Partnership in connection with development projects in Buffalo.

By its nature, a pay to play scheme involving high ranking political officials

satisfies the test for open-ended continuity. It is reasonable to infer that such predicate

acts were the regular way in which such persons exercised their authority within the

enterprise and implied a threat of continuing criminal activity. In the case of NRP and the

Development Team, for example, Brown, Smith, Stenhouse and the Jeremiah

Partnership would have allowed the Project to proceed if NRP and the Development

Team agreed to pay Stenhouse and the Jeremiah Partnership. NRP and the

Development Team, however, were stalled and suffered significant economic losses

because they would not comply with or participate in the illegal schemes.

The RICO claim includes but is not limited to predicate offenses of mail and

wire fraud. In turn, the offenses of mail and wire fraud include but are not limited to the

following specific events. Upon information and belief, Brown, Smith, Stenhouse and the

Jeremiah Partnership developed and implemented the pay to play conspiracy when

NRP was invited to develop the Project in November 2007, and thereafter. By letter

dated February 25, 2008, Buffalos agreement and commitment to the Project was

subject to one condition the Development Teams success in securing LIHTC to

complete the Project. This letter was false because Brown, Smith, Stenhouse and the

Jeremiah Partnership conspired to impose the additional condition requiring the

Development Team to hire Stenhouse and the Jeremiah Partnership. The Development

Team relied on the February 25, 2008 letter and successfully obtained the LIHTC.



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Starting in early 2009, Stenhouse made a series of escalating demands concerning the

need for his involvement in the Project. These demands included mailings and e-mails to

the Development Team stating terms for the involvement of himself and the Jeremiah

Partnership on the Project. In April-May 2009, Stenhouse and the Jeremiah Partnership

responded to the RFP by U.S. Mail, again stating terms for the involvement of Stenhouse

and the Jeremiah Partnership. Each of these proposals was false and misleading

because they were not offers subject to fair and open competition with other potential

vendors of similar services. Rather, they were threats and demands that the

Development Team was obligated to accept. As the Development Team learned, if it

refused to accept the proposals, then Brown, Smith, Stenhouse and the Jeremiah

Partnership would make sure that the Project died. In 2010, Brown and Stenhouse made

repeated statements that were intended for publication (and in fact were published over

the air waves) falsely stating the reasons why they killed the Project. Throughout, all

defendants also engaged in related communications by telephone, mail, and electronic

transmission.

NRP is unaware of any criminal conviction or other civil litigation resulting in

a judgment in relation to any of the alleged predicate acts.

6. Describe in detail the alleged enterprise for each RICO claim.

(A) State the names of the individuals, partnerships,corporations, associations, or other legal entities, whichallegedly constitute the enterprise;

(B) Describe the structure, purpose, function and course ofconduct of the enterprise;



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(C) State whether any defendants are employees, officers ordirectors of the alleged enterprise;

(D) State whether any defendants are associated with thealleged enterprise;

(E) State whether you are alleging that the defendants areindividuals or entities separate, from the allegedenterprise, or that the defendants are the enterprise itself,or members of the enterprise; and

(F) If any defendants are alleged to be the enterprise itself, ormembers of the enterprise, explain whether suchdefendants are perpetrators, passive instruments, orvictims of the alleged racketeering activity.

Response: The enterprise is Buffalo. At all relevant times, Brown, Smith,

Stenhouse and the Jeremiah Partnership used Buffalo as a passive instrument for their

personal benefit, i.e. by developing and implementing a pay to play and pay for votes

scheme to further political careers and/or for their personal benefit. Brown and Smith are

public officials of Buffalo.

7. State and describe in detail whether you are alleging that the

pattern of racketeering activity and the enterprise are separate or have merged into

one entity.

Response: The enterprise, Buffalo, existed prior to the pattern of

racketeering activity, and exists as a legitimate entity. Accordingly, the pattern of

racketeering conducted by Brown, Smith, Stenhouse and the Jeremiah Partnership

through their association with Buffalo is separate from the enterprise and has not merged

into a single entity.



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8. Describe the alleged relationship between the activities of the

enterprise and the pattern of racketeering activity. Discuss how that racketeering

activity differs from the usual and daily activities of the enterprise, if at all.

Response: The enterprise, Buffalo, issued the February 25, 2008

agreement and commitment letter. This letter included one condition, namely the

Development Team was obligated to secure the LIHTC. Despite the Development

Teams compliance with this condition, Buffalo did not perform under the agreement and

commitment letter because Brown, Smith, Stenhouse and the Jeremiah Partnership

required another condition, namely the Development Teams obligation to pay money to

Stenhouse and/or the Jeremiah Partnership. Such a pay to play or pay for votes

scheme is contrary to the usual and daily lawful activities of Buffalo.

9. Describe what benefits, if any, the alleged enterprise receives

from the alleged pattern of racketeering.

Response: In this case, the enterprise, Buffalo, is a passive instrument

through which Brown, Smith, Stenhouse and the Jeremiah Partnership wielded power for

their personal political and economic benefit.

10. Describe the effect of the activities of the enterprise on

interstate or foreign commerce.

Response: NRP and its affiliate the NRP Group, LLC are Ohio entities

that develop, build and manage apartments and housing across the United States. As

such, the predicate acts described above affected efforts by these Ohio entities to



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conduct business in the State of New York and, therefore, has a direct impact on

interstate commerce.

11. If the complaint alleges a violation of 18U.S.C. 1962(a), provide

the following information:

(A) State who received the income derived from the pattern ofracketeering activity or through the collection of anunlawful debt; and

(B) Describe the use or investment of such income.

Response: Not applicable because there is no allegation of a violation of

18 U.S.C. 1962(a).

12. If the complaint alleges a violation of 18 U.S.C. 1962(b),

describe in detail the acquisition or maintenance of any interest in or control of the

alleged enterprise.

Response: Not applicable because there is no allegation of a violation of

18 U.S.C. 1962(b).

13. If the complaint alleges a violation of 18 U.S.C. 1962(c), provide

the following information:

(A) State who is employed by or associated with the enterprise; and

(B) State whether the same entity is both the liable person andthe enterprise under 1962(c).

Response: As described above, Brown was and is the Mayor of Buffalo.

Smith was and is a member of the Buffalo Common Council. Stenhouse and the

Jeremiah Partnership were and are associated with Buffalo based on their relationship

with Brown and Smith. Buffalo is a passive instrument through which Brown, Smith,



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Stenhouse and the Jeremiah Partnership wielded power for their personal political and

economic benefit.

14. If the complaint alleges a violation of 18 U.S.C. 1962(d),

describe in detail the alleged conspiracy.

Response: The members of the conspiracy are Brown, Smith, Stenhouse

and the Jeremiah Partnership. These persons conspired to develop and implement pay

to play or pay for votes schemes described in detail above.

15. Describe the alleged injury to business or property.

Response: NRP suffered injury to its business and property. As a result

of the defendants illegal schemes, NRP was no longer able to claim the benefits of their

agreements with members of the Development Team, the DHCR, the HTFC and others

who issued loan commitments and, in turn, Buffalo. As a result, NRP incurred injury to its

business and property consisting of out of pocket expenses, lost profits including rental

revenues and anticipated sales of units, lost business opportunities, and other damages

to be determined. For example, the lost out of pocket expenses exceed $450,000.00.

Other compensatory damages are expected to exceed $1,000,000.00.

16. Describe the direct causal relationship between the alleged

injury and the violation of the RICO statute.

Response: By refusing to comply with the pay to play threats and

demands, NRP and the Development Team were unable to claim the benefits of the



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agreements described in the previous paragraph and suffered injury and damages as a

result.

17. List the damages sustained for which each defendant is

allegedly liable.

Response: Brown, Smith, Stenhouse and the Jeremiah Partnership are

jointly and severally liable for the damages suffered by NRP and the Development Team.

Such damages include the out of pocket expenses, lost profits including lost rental

revenues and anticipated sales of units, lost business opportunities and other damages to

be determined.

18. List all other federal causes of action, if any, and provide the

relevant statute numbers.

Response: Count I of the Complaint asserts a breach of contract claim

against Buffalo. Count II of the Complaint asserts claims under common law theories of

tortious interference with contract and/or prospective contractual relations, tortious

interference with prospective economic advantage and/or economic relations and

concerted action theory and/or civil conspiracy. These Counts are federal claims

because the Courts subject matter jurisdiction over these Counts is based on diversity of

citizenship pursuant to 28 U.S.C. 1332. Count IV of the Complaint asserts a federal law

claim pursuant to 42 U.S.C. 1983.

19. List all pendent state claims, if any.

Response: Count I of the Complaint asserts a breach of contract claim

against Buffalo. Count II of the Complaint asserts state claims under the common law



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theories of tortious interference with contract and/or prospective contractual relations,

tortious interference with prospective economic advantage and/or economic relations and

concerted action theory and/or civil conspiracy. As stated in the previous response, these

claims fall under the federal courts diversity jurisdiction even though state law provides

the applicable substantive law.

20. Provide any additional information that you feel would be

helpful to the Court in processing your RICO claim.

Response: The following provides a succinct summary of the case

including additional information, stated upon information and belief, that NRP believes

would be helpful to the Court in processing the claim.

What is the Lawsuit About:

NRP filed litigation in the United States Federal Court for the Western District of New

York against the City of Buffalo and others (the defendants) as a result of the

defendants intentional and ultimately successful efforts to kill an affordable housing

project. In 2007, the defendants invited NRP to assist the City of Buffalo in expanding the

affordable housing options available to its residents. After two initial meetings, the City

selected NRP and affiliated companies (the Development Team) to develop, construct,

and manage 50 homes in the Masten Park and Cold Springs neighborhoods of Buffalo

(the project). The City issued a firm commitment letter to the project and contractually

obligated itself to take the actions necessary to assist NRP and the Development Team to

complete the project. In consideration of this, and specifically at the request of the City,

NRP undertook great efforts and incurred significant expenses to move the project

forward to completion. In addition to its expenditures, NRP devoted thousands of man

hours to the project. In the late stages of the project, the defendants demanded that NRP

hire Reverend Richard Stenhouse and the Buffalo Jeremiah Partnership For Community

Development, Inc. as a sub-contractor for the project to perform certain services to assist



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NRP in maximizing participation in the project by local minority business enterprises,

women-owned business enterprises and individuals. After considering the demand, NRP

determined that it should place the services out for public bid and issued a Request for

Proposal (RFP) to the public. Rev. Stenhouse and the Jeremiah Partnership were invited

to respond, and were among three entities to respond to the RFP. At the end of the RFP

process, Rev. Stenhouse was not selected to provide any services for the project. Upset

that Rev. Stenhouse was not selected and that NRP did not comply with their prior

demand to hire Rev. Stenhouse, the defendants, including Mayor Brown and Council

Member Demone Smith, intentionally killed the project and, through their direct actions,

ensured that it would not proceed to completion.

Why was the Lawsuit Filed:

The lawsuit was filed because NRP believes that the defendants conduct in killing the

project was wrongful and illegal. In the course of demanding that NRP hire Rev.

Stenhouse to participate in the project, the defendants made certain statements that

caused NRP to believe it was the target of a pay to play scheme. For example, Mayor

Byron Brown said: If you do not hire the right company [i.e., defendant Stenhouse

and/or the Jeremiah Partnership], you do not have my support for the Project. He also

said: Make Stenhouse happy or the deal will not go through and that he was sick of

seeing those f***ing white developers on the East Side with no black faces represented.

After the Development Team selected an alternative bidder instead of Rev. Stenhouse,

Brown said: I told you what you had to do and you hired the wrong company. Council

Member Demone Smith made similar statements. Rev. Stenhouse also contacted NRP.

His initial contact appeared benign until he, through the course of events, made

escalating demands for a role in the project all of which required the payment of

significant sums of money to Rev. Stenhouse and his affiliated companies. NRPs refusal

to comply with the defendants demands was the sole reason for the defendants killing

the project. Although the defendants would later claim they knew little about the project

or never supported the concept of the project, the facts alleged in the complaint

demonstrate that these are sham excuses contrived in an effort to conceal the alleged



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illegal conduct of the defendants. Unfortunately, this is not the first time that the

defendants have demanded that an entity intending to do business in the City of Buffalo

hire Rev. Stenhouse as a condition for City support. NRPs investigation has revealed

that other business entities have been subjected to similar demands that they hire Rev.

Stenhouse and his affiliated companies in order to complete other development projects

within the City of Buffalo.

What Legal Claims Are Alleged in the Lawsuit:

NRP has alleged several claims in the complaint including breach of contract, violations

of the Racketeer Influenced and Corrupt Organizations Act (RICO), violations of NRPs

constitutionally protected right to conduct business within the City of Buffalo without being

subjected to illegal demands by City employees, and several claims related to applicable

business torts.

What are the Goals of the Lawsuit:

There are three goals of the lawsuit: deterrence, increased awareness, and recovery of

damages. First and foremost, NRP believes that the defendants conduct should not be

repeated. No developer or business should be subjected to a pay to play scheme in

order to carry out business with and in the City of Buffalo. Both the filing of this lawsuitand the expected successful resolution of the lawsuit should serve a deterrent to the

defendants and others who may hold public office in the City of Buffalo from engaging in

similar conduct in the future. Second, NRP hopes to raise awareness of the alleged

wrongful conduct and to encourage others who have been treated in a similar manner to

come forward. Third, NRP is entitled to be compensated for the damages it incurred as a

result of the alleged wrongful conduct by the defendants. The law provides very clear

remedies for a party who has been harmed by the actions of another. NRP is pursuing

only those legal remedies which are available to it under the law. In this case, NRP is

seeking to recover for its lost out of pocket expenses, compensatory and consequential

damages, punitive or treble damages, and the attorneys fees it has and will incur in

prosecuting this action and enforcing its legal rights and remedies.



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Conclusion:

Parties such as NRP should not have their development projects in Buffalo conditioned

on illegal demands and threats to pay money to Stenhouse and the Jeremiah Partnership

(or any other person or entity) in order to have those projects approved by publicly

elected officials. In such circumstances, the federal courts routinely recognize the

availability of RICO to provide a federal claim in favor of such parties against persons

attempting to extort compliance with such a pay to play scheme. See, e.g., DeFalco v.

Bernas, 244 F.3d 286 (2nd Cir. 2001); Santana v. Cook County Board of Review, 2010

WL 3937483 (N.D. Ill. Oct. 6, 2010); Empress Casino Joliet Corp. v. Blagojevich, 674 F.

Supp. 2d 993 (N.D. Ill. 2009).

NRP reserves its right to supplement this case statement, to the extent

necessary and/or required by Court rules, following the receipt of discovery information

from the defendants.

Dated: June 3, 2011

WEBSTERSZANYI LLPAttorneys for Plaintiffs

By: s/Thomas S. Lane

Thomas S. LaneNelson Perel

1400 Liberty BuildingBuffalo, New York 14202Telephone: (716) [email protected]@websterszanyi.com

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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ADR PLANWESTERN DISTRICT OF NEW YORK

Revised: Jan. 1, 2008

SECTION 1 - INTRODUCTION AND AUTHORITY

1.1 TITLE

This is the Plan for Alternative Dispute Resolution in the United States DistrictCourt for the Western District of New York (the ADR Plan).

1.2 PURPOSE AND SCOPE

A. Purpose. The United States District Court for the Western District of New

York (the Court) adopted the ADR Plan on January 1, 2006 (the EffectiveDate), to make available to civil litigants court-administered ADRinterventions and processes designed to provide quicker, less expensive andpotentially more satisfying alternatives to continuing litigation, withoutimpairing the quality of justice or the right to trial.

B. Scope. This ADR Plan applies to civil actions pending or commenced on andafter the Effective Date, except as otherwise indicated herein. The ADR Plansupplements this Courts Local Rules of Civil Procedure, which shall remainin full effect for all cases.

C. Magistrate Judge Consent Cases. Consistent with Local Rule of CivilProcedure 72.1, in cases where the parties have consented to jurisdiction bya Magistrate Judge under 28 U.S.C. 636, the Magistrate Judge shall havethe same powers as the District Court Judge originally assigned to the case.

D. Plan Administration.

1. Staffing. The Court will seek funding for staff to coordinate andimplement the ADR Plan. In the interim, the Court will utilize currentstaff and seek volunteers to assist in implementation.

2. ADR Information and Guidelines. Information about the ADR Plan,the Courts proposed Local Rule for mediation and guidelines for theconduct of ADR are available at http://www.nywd.uscourts.gov/adr/and also at the Court Clerks office.

http://www.nywd.uscourts.gov/ADRhttp://www.nywd.uscourts.gov/ADR


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3. All inquiries about the ADR Plan should be directed to:

Judy S. Hernandez, Staff AttorneyU.S. District Court68 Court StreetBuffalo, New York 14202

Telephone: (716) 332-7826Fax: (716) 332-7825e-mail: Judy [email protected]



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SECTION 2 - OVERVIEW

2.1 REFERRAL TO ADR

A. New Cases. All civil cases filed on and after the Effective Date of the ADRPlan shall be referred automatically for ADR. Notice of the ADR

requirements will be provided to all parties immediately upon the filing of acomplaint and answer or a notice of removal. ADR intervention will bescheduled at the conference held pursuant to Local Rule of Civil Procedure16.1. The following categories of actions are exempted from automaticreferral:

1. Habeas Corpus and extraordinary writs;

2. Applications to vacate a sentence;

3. Social Security appeals;

4. Bankruptcy appeals;5. Cases implicating issues of public policy, exclusively or predominantly;

6. IRS summons enforcement actions;

7. Government foreclosure actions;

8. Civil asset forfeiture actions; and

9. Prisoner civil rights actions.

B. Pending Cases. The assigned Judge on any pending civil case may, sua

sponte or with status conference,issue an order referring the case for ADR.The order shall specify a date on which the ADR intervention is to becompleted.

C. Stipulation. A case may be referred for ADR by stipulation of all parties.Stipulations shall be filed and shall designate the specific ADR interventionthe parties have selected, the time frame within which the ADR process willbe completed and the selected Neutral. Stipulations are presumedacceptable unless the assigned Judge determines that the interests ofjustice are not served.

2.2 RELIEF FROM ADR REFERRAL

A. Opting Out Motions. Any party may file, with the assigned Judge for thatcase, a motion to opt out of, or for relief from, ADR.



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B. Motion. Opting Out Motions must be made within ten (10) days from (i) thedate of the first discovery conference under Local Rule 16.1 in new cases,or (ii) the date of a sua sponte ADR Referral Order in pending cases.

C. Criteria. Opting Out Motions shall be granted only for good cause shown.Inconvenience, travel costs, attorney fees or other costs shall not constitute

good cause. A party seeking relief from ADR must set forth the reasonswhy ADR has no reasonable chance of being productive.

D. Judicial Initiative. The assigned Judge may, sua sponte, exempt any casefrom the Court's ADR Plan.

2.3 VIOLATIONS OF THE ADR PLAN

A. Report of Violation. A Neutral or party may report to the assigned Judgeany failure to attend an ADR conference, to substantially comply with theADR Referral Order, or to otherwise participate in the ADR process in goodfaith.

B. Proceedings and Sanctions in Response to Report of Violation. Uponreceipt of such a report, the Court may take whatever actions it deemsappropriate, including issuing an order to show cause why sanctions shouldnot be imposed. Show cause hearings shall be conducted on the record,but under seal. If sanctions are imposed, objections thereto and any othercomment thereon shall be filed with the Court within ten (10) days from thedate of the notice of sanctions and contemporaneously served on all othercounsel, unrepresented parties and the Neutral.

2.4 EVALUATION OF THE ADR PLAN

Congress has mandated that the Courts ADR programs be evaluated. Neutrals,counsel and parties shall promptly respond to any request from the Court for anevaluation of the ADR Plan. Responses will be used for research and monitoringpurposes only. The sources of specific information will not be disclosed to theassigned Judge or in any report.



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SECTION 3 - NEUTRALS

3.1 NEUTRALS

A. Neutral Panels. The Court shall maintain panels of Neutrals to serve thevarious interventions and processes under the ADR Plan. Membership on

any panel is a privilege, not a right. The Court shall have the authority toestablish qualifications for Neutrals, monitor their performance andwithdraw any Neutral from a panel. Applications are available at theCourts website and from the Clerks offices in Buffalo and Rochester.

B. Private Neutrals. The parties may select a Neutral who is not a member ofthe Courts panel. Such selections are presumed acceptable unless theassigned Judge determines that the interests of justice are not served.

C. Qualifications and Training. The requirements for panel membership arespecific to each intervention and process under the ADR Plan and are setforth in the corresponding sections below.

D. Oath. All persons serving as Neutrals shall take the oath or affirmationprescribed in 28 U.S.C. 453.

E. Disqualification and Unavailability of Neutrals.

1. Disqualification. A Neutral may be disqualified for bias or prejudice,pursuant to 28 U.S.C. 144. A Neutral shall disqualify himself orherself in any case in which a justice, judge or magistrate judge

would be disqualified pursuant to 28 U.S.C. 455, subject to thewaiver provision of 42 U.S.C. 455(e).

2. Notice of Recusal. A Neutral who discovers a circumstance requiringdisqualification shall immediately notify all counsel, unrepresentedparties and the Court. A new Neutral shall be selected by agreementof the parties or, in the event the parties are unable to agree, by theCourt.

3. Objections to Selected Neutral. Prior to the issuance of an Orderdesignating a Neutral, the Court will contact the selected Neutral whowill review the case for possible conflicts. Following issuance of theCourts Order, a party who believes a disqualifying conflict existsshould first confer with the Neutral. If the matter is not resolved by,for example, waiver or recusal, a motion and supporting affidavit shallbe filed with the Court, within ten [10] days from the Courts Order,stating the facts and the reasons for the belief that a disqualifying



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conflict, bias or prejudice exists. In the event a conflict or otherobjection does not become apparent until after the ADR process hascommenced, a motion for disqualification must be made at theearliest opportunity or the objection is waived.

4. Unavailability. A selected Neutral who later becomes unable to servewithin the time period set forth in the Courts Scheduling or ReferralOrder shall notify all counsel, unrepresented parties and the Court.A new Neutral shall be selected by agreement of the parties or, in theevent the parties are unable to agree, by the Court.

3.2 IMMUNITIES

All persons serving as Neutrals in the Courts ADR Plan are performing quasi-judicial functions and are entitled to all the immunities and protections that the law

accords to the performance of tasks integrally related to the judicial process,including settlement and alternative dispute resolution. See, e.g.,Wagshal v.Foster, 28 F.3d 1249 (D.C. Cir. 1994).

3.3 COMPENSATION OF NEUTRALS

A Neutrals fees shall be shared equally by all separately represented parties, unlessotherwise agreed by the parties or ordered by the Court.



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SECTION 4 - APPROVED ADR PLAN INTERVENTIONS

4.1 ADR INTERVENTIONS

A. Options. It is expected that cases referred for ADR will proceed toMediation. However, the following options are also available upon the

stipulation of all parties:1. Neutral Evaluation;

2. Mini Summary Trial;

3. Arbitration (Binding and Non-Binding);

4. Case Valuation; and

5. Settlement Week, when scheduled by the Court.

B. Timing. Timing is specific to the intervention and process chosen, as setforth in the corresponding sections below.

C. Scheduling. The referral of a case to ADR does not delay or defer otherdates established in the Scheduling Order and has no effect on thescheduled progress of the case toward trial.

4.2 SELECTING AN ADR INTERVENTION

A. New Cases. Prior to the Local Rule 16.1 scheduling conference, counseland any unrepresented parties shall confer about ADR as part of theirdiscussion of the possibilities for a prompt settlement or resolution of the

case pursuant to Fed. R. Civ. P. 26(f). Unless the parties agree to adifferent intervention, it is presumed that they will participate in mediation.The parties shall attempt to agree upon a Neutral and, at the schedulingconference, shall be prepared to report on the outcome of their ADRdiscussion pursuant to Local Rule 16.1(a)(3)(F). The initial SchedulingOrder shall include a deadline for the completion of ADR.

B. Pending Cases. In pending cases, all sua sponte referrals will be tomediation. Should the parties agree that a different ADR intervention ismore appropriate to their case, they may submit a stipulation designatingthe specific ADR intervention selected, the time frame within which the

ADR process will be completed and the identity of the Neutral. Stipulationsmust be filed within fifteen (15) days from the date of the ADR ReferralOrder and are presumed acceptable unless the assigned Judge determinesthat the interests of justice are not served.



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4.3 MULTIPLE ADR INTERVENTIONS

A. Initial Intervention. Generally, a first mediation session will be scheduledwithin seventy-five [75] days after the Local Rule 16.1 conference. Theminimum duration for the first session is two [2] hours, but the parties areencouraged to spend additional time unless the Mediator agrees that

additional time would not be productive.

B. Additional Interventions. If the initial mediation session is not successfulin resolving the case, additional sessions or proc

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