Sen. Lucas' companies sue Portsmouth, others over project

PORTSMOUTH

Two companies created by Louise Lucas to build a conference center project filed a $97.7 million lawsuit this week against the city, several City Council members and owners of the Renaissance Portsmouth Hotel and Waterfront Conference Center, claiming Portsmouth denied the state senator access to millions in lower-cost financing in an attempt to hold onto a monopoly.

The federal lawsuit argues that in July, the council barred Lucas from access to taxable and non taxable bonds for the project because it is led and funded mostly by African Americans. It also states that the city is trying to control all of Portsmouth's hotel and conference center business.

Filed late Wednesday, the suit comes less than a month before the council is scheduled to vote again on whether Lucas can use federal and state bonds to build a hotel and conference center in Victory Village business park. They would enable her to access lower-cost financing.

It asks for $36 million in damages for a violation of federal anti-trust laws, $12 million each from Councilman Doug Smith and City Attorney Tim Oksman, and additional money from the three council members who voted against the project and the Renaissance's ownership.

"I'd like to think a state senator is working for us, not against us," Councilman Bill Moody Jr. said. "I'm just saddened she feels she needs to sue the city she represents."

"This is kind of a strange way to begin the lobbying effort."

Lucas said the suit should not affect her current council request. "This has nothing to do with what we're doing now," she said. "It's based on the prior action, not this one."

In order to build the $67 million project on 7 acres at Victory Village business park, Lucas created two entities - Victory Conference Center LLC and Victory Conference Center Hotel LLC. The hotel is led solely by Lucas; the conference center has several hundred investors, mostly local African American residents, who currently have invested about $700,000.

After being rejected by a 3-2 council vote in July, Lucas downsized plans for the hotel and repetitioned the city for access to up to $38 million in low-cost financing offered through the state and the federal Empowerment Zone program.

On Tuesday, she received approval from Portsmouth's Economic Development Authority to push forward with the request. If the council now approves the bonds, then the Norfolk City Council would also have to endorse them.

The lawsuit names the city, the council members who voted against the initial bonds - Moody, Elizabeth Psimas and Smith - Oksman, the Barcelo Crestline Corp. and its president, and the JE Robert Company Inc. Both companies own leasehold interests in the Renaissance hotel downtown.

The lawsuit accuses the council of violating federal anti-trust laws by trying to protect a monopoly on conference centers. In 2001, the city opened the Renaissance hotel and conference center, a hotel built through a public-private partnership.

It states that several council members and the Renaissance's manager voiced concerns that Lucas' project could take away business from the city's multi million-dollar investment. The city "conspired... to restrict others from entering the market," it says.

It also alleges that Oksman told Council members Charles B. Whitehurst Sr. and Marlene Randall that they could not vote on the bonds because they had conflicts of interest.

Whitehurst initially invested $2,500 in the project. He has since received a refund. Randall's husband invested $2,000.

In addition, the suit states that the council demanded more from Lucas than its asks of other developers. Some council members said they weren't comfortable voting for the bonds unless Lucas' partnerships pledged to not ask for city funding, it says.

"Holy cow," Psimas said when The Pilot informed her of the lawsuit. "Wow."

In an e-mail to council members sent Wednesday, Oksman wrote: "For the moment, my advice is simply to refrain from any public comment about this notice of claim, the upcoming vote, or the Lucas project in general."

Councilman Steve Heretick said the council members who voted no acted within their means. "I certainly did not see the kind of conduct that's described in the claim," hesaid.

"Although I didn't agree with them, their decisions were made properly."

Meghan Hoyer, (757) 446-2293, meghan.hoyer@pilotonline.com