Hearing on the St. Paul Racketeering Lawsuit

Three St. Paul landlords are suing the city of St. Paul for real-estate racketeering under the RICO act. The suit was filed in 2004; it’s still in the discovery phase. Part of the problem, plaintiffs allege, is that city attorneys have destroyed evidence that they need to prove their case. A hearing was held in U.S. District Court on Monday, April 14, 2008, to consider a motion by the plaintiff to impose sanctions on the city for violating court rules.

John Schumaker was attorney for one of the plaintiffs, Frank Steinhauser. In his lead statement, Schumacher discussed withholding of documents pertaining to St. Paul’s Public Housing Authority. The purpose was to see if St. Paul city inspectors treated public housing differently than private-sector landlords with respect to “problem properties”. This is defined as an “intersection between code violations and landlord or tenant misconduct.” By that standard, St. Paul public housing was known to include numerous “problem properties”.

Yet, city inspectors took no action against them. There were no condemnations or code compliances required of public-housing units as there would have been against private-sector landlords in the same situation.

The City of St. Paul took the position that the Public Housing Authority was not part of St. Paul city government and therefore it had no responsibility for producing documents of that agency. In practice, plaintiffs were able to learn about practices relating to that agency only if they were mentioned in other documents. If a contract mentioned PHA, then plaintiff’s attorneys were able to locate the related document. If not, they would be none the wiser.

Schumaker and his colleagues learned, for instance, that the St. Paul PHA has a separate call-in center to handle complaints. There were contracts for “special (security) services”. Obviously, the city was inconsistent in the way criminal behavior was handled in the public housing and in privately owned rental units. Standard practice was to throw the book at the bad (private sector) landlords” and wink at the public agency.

Another set of documents hard to obtain were the so-called “Tish” or truth-in-sale of-housing reports. The City of St. Paul took the position that these were not relevant to the plaintiffs inquiry. The plaintiffs were trying to establish, among other things, that the city’s selective enforcement of housing code was racially motivated. Certain whites wanted to drive their black neighbors out of town; and the politicians accommodated those requests. Because the Tish reports did not ask for the race of persons involved, the city attorney took the position that they could not be useful in the plaintiff’s inquiry. Therefore, these reports were destroyed for the years of the alleged racketeering.

A Freedom of Information request filed by another landlord had produced a memo from the head of St. Paul’s regulatory services to the effect that 60 percent of St. Paul homes had code violations. The individual also mentioned political influence in the decision whether or not to inspect housing. He mentioned attempts to “bend the rules”. This was precisely what the plaintiffs were trying to prove. In particular, they wanted to try to find memos or documents of this sort that mentioned Steinhauser and the other landlords who were plaintiffs in this case. They were, of course, not to be had. According to attorney Schumaker, the city released only those documents that would benefit its side of the case. Documents favoring the plaintiffs apparently did not exist.

The plaintiffs needed such documents for the discovery process. At one time, it had all the Tish reports in one place and it would have been easy for attorneys to go through all of them to find information useful for the case. Since the city’s reports had been destroyed, the plaintiffs’ attorneys might have to subpoena all the inspectors to see if they had retained copies. Schumaker estimated that this alternate procedure would increase attorney fees (his own and others) by $13,000 and another such sum might be required for photocopying costs. But perhaps the city’s strategy was precisely that: Stretch out the process, make it as difficult as possible, and expensive as possible for the landlord plaintiffs. Eventually these people might run out of money to pursue the case, while the City of St. Paul had endlessly deep pockets - a win/ lose situation if there ever was one.

Another attorney, Matt Engel, presented the plaintiff’s arguments with respect to emails. After a meeting with the city’s attorney, the plaintiffs had agreed to limit their requests for emails sent after 2005 to ten individuals. The City of St. Paul was claiming that this meant it was OK to delete all emails that were sent prior to 2005. And that’s what it did in many cases. The city violated its own email retention rules when it came to messages that the plaintiffs might find useful in their lawsuit.

Former state representative and head of St. Paul’s housing services, Andy Dawkins, was a case in point. Dawkins had stated that he had not deleted any of his emails. Yet, the emails that the city had retained from him were mainly those relating to activities after he left government service on December 21, 2005. There were some auto replies and a few emails pertaining to loans for which his approval was sought. Two or three emails remained for the entire year of 2003; and the same for 2004. Engel knew that Dawkins had written many more emails than this because he had found references to them elsewhere. Yet, the city of St. Paul took the position that the Dawkins emails did not exist - and perhaps never had.

The plaintiffs also sought emails from Susan Kimberly, director of the city’s Planning and Economic Development department, after they came across an email from Council Member Thune to Kimberly referring to quick ways that the city might take property away from certain individuals. Had any of the other Council members made a similar request? Alas, Ms. Kimberly’s emails were no longer available. She left city employment in January 2006; and her emails were deleted in April.

Another persons of interest, still with the city, was St. Paul City Council President Kathy Lantry. In her case, the bulk of emails were in a giant folder marked “trash”. Within this folder were a number of named files. Could we please see some of the folders - say, those marked “RICO case” - the plaintiff’s attorneys had asked? It was not so easy. The attorneys were informed that Ms. Lantry’s file was too large to access - even though there was another folder with more files belonging to Council Member Thune which was accessible. St. Paul’s IT department was simply unable to comply with that request.

With respect to Susan Kimberly, someone had mentioned that the City of St. Paul maintains backup tapes. If Kimberly’s emails had been deleted in April 2006, could the city not go to the backup tapes to retrieve the requested information? Apparently not, the attorneys were told: All the email documents pertaining to Kimberly had been deleted. Was that standard practice with backup tapes? Who knows.

The plaintiff’s attorneys had received a number of documents without knowing the source. These were the so-called “anonymous documents”. Among them were memos issued by then St. Paul housing director, Andy Dawkins, in which he had instructed city inspectors not to follow up on complaints from members of a group called Neighborhood Housing Residential sweep patrol. Dawkins suspected that some of those people were the landlords who had filed the RICO lawsuit against the city and therefore their complaints were “politically motivated”. This was the kind of evidence that the plaintiffs wanted to find. After discovering that document, the trail grew cold.

Attorneys Schumaker and Engel, representing the plaintiffs, spoke for perhaps half an hour, presenting their case for sanctions in front of Judge Joan Erickson. Ms. Seba, an attorney representing the city of St. Paul, spoke for about ten minutes. In her presentation, Seba argued that the plaintiffs had not met the high standards required for sanctions - namely, proof that the city had intentionally destroyed evidence to suppress the truth.

Evidently, the emphasis was upon “intentionally”. The plaintiffs needed to prove what was in city employees’ mind. Other than that, Seba argued that the plaintiffs had not followed up on all the disclosed documents promptly but had insisted on the need to see more. There were no more, Seba argued. The city had disclosed everything it had. Furthermore the plaintiffs’ attorneys had failed to attend a meeting which she had arranged with an attorney representing the Public Housing Authority. (She did not say if those attorneys knew of that meeting or had been invited to it.)

Attorney Seba ended with a strong, clear statement. She wanted the court to deny the motion for sanctions and instead issue a summary judgment for the city dismissing the case. She said unequivocally that the city of St. Paul had released all available emails and documents. Admittedly, its IT department was not perfect; it lacked the expertise to access some of the requested information. But all the documents which the city had had already been released. It was holding back nothing. Nothing had been destroyed.

Judge Erickson then ended the hearing. She would render her decision at some time in the future. From her briefs comments and questioning, it seemed that she might give the city of St. Paul another thirty days to produce documents - which, of course, the city’s attorney had already claimed did not exist. So it is unclear where this lawsuit goes next.

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