Sen. Louise Lucas flouted rules on project financing

State Sen. Louise Lucas has squandered what little credibility she had left with the public and Portsmouth officials in her push for help funding a proposed hotel and conference center. And, given her deceptive handling of a recent settlement order by the State Corporation Commission, investors have good reason to question their faith in the project.

This spring, the SCC alleged that Lucas violated the Virginia Securities Act by failing to register her company before she began soliciting investments in 2006. Registration is designed to protect investors and ensure that companies are playing by the rules. Ultimately, Lucas raised close to $2 million from about 600 investors, primarily in Portsmouth.

On June 4, the SCC approved a settlement order with Lucas stipulating that, within 30 days, she send certified mail to all investors informing them of the failure to register, and offering them the opportunity to retrieve their money along with any accrued interest.

Lucas didn't meet the deadline. On July 22, she proceeded to ask the City Council to approve her application for up to $50 million in low-interest, tax-exempt federal bonds for her proposal. At no point did she disclose information relevant to the council's decision-making process - that she was under an SCC order to offer refunds to investors.

As The Pilot's Jen McCaffery reported Tuesday, it wasn't until last week that Lucas finally began notifying investors that they could pick up information about the SCC investigation. In a letter dated Oct. 9, Lucas informed investors they have until Nov. 15 to decide whether they wish to get their money back.

Lucas told The Pilot that she didn't know she had to register as a securities agent and that she delayed telling investors about the SCC order on the advice of an attorney.

Tony Basch, an attorney for Victory Conference Center LLC, told The Pilot that he had hoped to receive SCC approval for Lucas and her group to raise up to $3 million more for the project, then send that information to investors - along with the offer to return money previously invested.

So, to recap: Lucas, a 16-year veteran of the General Assembly, failed to register as a securities agent; ignored an SCC deadline to offer investors a chance to get their money back in order to pair it with an appeal for more investments; and deceived the City Council by omitting information that obviously could affect the viability of her project.

And, to top it off, the group led by Lucas filed a petition in Portsmouth Circuit Court on Aug. 21 seeking notes, e-mails and other correspondence and documents from the City Council and the city staff regarding the bond request.

In other words, after being far less than transparent in her dealings with the council, Lucas was insisting on transparency from the council.

At its July meeting, three council members - Bill Moody, Elizabeth Psimas and Doug Smith - voted against authorizing the bonds. It's clear their decision was the right one in light of these revelations.

Councilman Steve Heretick and Mayor James Holley voted for the bond authorization. Councilman Charles Whitehurst, who invested in the project and who received $10,000 in campaign donations from Lucas, abstained. So did Councilman Marlene Randall, whose husband also invested.

If Lucas returns to the council to renew her request, as she's said she will, the council should reject it swiftly and unanimously and without an ounce of misgivings.

If she wants to pursue this project, she should do so completely with private financing, legitimately raised - with no expectation of local, state or federal aid in any form.

In the meantime, the SCC should continue its investigation of this project and Lucas' failure to meet the deadlines set in the June agreement.

State lawmakers, of all people, should be familiar with securities laws before soliciting money from investors. And state lawmakers, of all people, should honor the details of enforcement agreements reached with state agencies.