It is not an altogether pretty story. You have to hope the ending will be.
“Within three months of the execution of this Agreement, the Redeveloper has agreed to form a non-profit Community Corporation, the purpose of which is to provide a variety of services to the Fort Lincoln community. This Corporation will be controlled initially by the Redeveloper, but within two years of completion of the Project by Fort Lincoln residents. What is unique about this organization is that it will have the resources to carry out its desires. During the life of the development, the Redeveloper will contribute $250,000 in cash and/or services to this organization. In addition, the Corporation will have [at least] a 25% ownership in the real estate sales and management company formed by the Redeveloper to handle sales, rentals, and management of the Fort Lincoln property. This latter provision should assure the economic viability of this key organization.”
Statement of Melvin A. Mister, Executive Director, D.C. Redevelopment Land Agency (Public Hearing-Ft. Lincoln Land Disposition Agreement, May 13, 1975)
The Fort Lincoln Urban Renewal Area in upper northeast D.C. shares a common border with the state of Maryland: Eastern Avenue to its north. It is also bordered by two major streets that lead into Prince George’s County, Maryland: Bladensburg Road on the west and New York Avenue on the east. Motorists driving north on New York Avenue to reach the Baltimore-Washington Expressway, or en route to Annapolis, Maryland, cannot miss an elevated border of the 360 acre property to their left after they pass the newspaper plant for the Washington Times on their right. But as they speed past, few realize that the still-developing shopping center, town homes, condominiums, apartment complexes and beverage distributorship on their left are a testament to how a single developer can derail the vision of a planned community of over 3,500 people — by exploiting the fact that the residents of the community had not been identified when the developer signed an agreement to share millions of dollars in profits with future community residents.
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ort Lincoln is Washington, D.C.’s only planned community. It was envisioned as a three sided partnership in which the federal and District government, a private developer and Ft. Lincoln residents would be equal partners in planning, developing and maintaining 176 [later increased to 199 acres] of the 360 acre plot. However, one of those partners, Ft. Lincoln residents, were not at the table when the terms of the partnership were drawn up. Acting in their stead, the D.C. Redevelopment Land Agency (“RLA”) negotiated a requirement that the developer create and fund a non-profit corporation that would ensure future Ft. Lincoln residents would have the funding to be equal partners in the long term development. Less than four years after signing the agreement, and without publicizing the profit-sharing requirement, the developer petitioned another D.C. agency to delete that requirement. When its request was rejected, the developer elected to conceal and ignore it. Distracted by its own lack of resources, and expanded responsibilities, the RLA failed to monitor and require compliance.
It was only by happenstance in the year 2000 that the long forgotten third partner — the residents of Ft. Lincoln– came across the unrecorded Land Disposition Agreement (“LDA”) entered into by the RLA and Fort Lincoln’s private developer. They discovered it required the developer of Fort Lincoln, beginning in 1976, to turn over to them what now totals between $15-$20 million dollars in profits.
When the president of the development company died in an airplane crash in 1984, his daughter, who was also his corporate successor as president, was faced with a choice. She could establish the required nonprofit corporation and disclose the requirement that her company provide funding and share profits with Fort Lincoln residents, or continue to conceal that information. She, with the president’s other heir, chose to continue to conceal the company’s continuing obligation. And so, once discovered, this became a classic story of developer greed and lack of governmental oversight. For Fort Lincoln residents, hopefully, it will soon become a case of justice delayed, but not denied.
irtually any story about Ft. Lincoln must harken back to 1967. President Lyndon Johnson, as part of his Great Society program, began looking for surplus federal land around the country to provide a staging ground for innovative residential/commercial developments. He envisioned Ft. Lincoln’s verdant acreage as an opportunity for a partnership between government, the private sector and the community. A Fort Lincoln Urban Renewal Plan was adopted by the National Capital Planning Commission, and ratified by the D.C. Council in 1972, as a blueprint for this three-party partnership.
To implement the visionary Fort Lincoln Urban Renewal Plan, the D.C. Redevelopment Land Agency commissioned a lengthy study, which was completed in 1972, with substantial input from community organizations in northeast D.C., the city fathers and the federal government. Acting on behalf of the city and federal government, the RLA then sought, over a two and a half year period, to negotiate terms for a development contract that would provide District of Columbia residents generally, and future Fort Lincoln residents in particular, with an opportunity to participate in and benefit from the employment, planning, construction and profit-making opportunities the huge development offered.
The initial out of state developer balked at putting up $300,000 of its own cash as part of the development deal. It instead proposed to make a local minority developer a partner and have that developer put up the funds. The RLA rejected that tact and the out of state developer then withdrew from the effort.
The local developer, a self-made millionaire named Theodore Hagans, immediately launched an effort to persuade the RLA to allow a company he had formed [Fort Lincoln New Town Corporation, Inc.] to enter into the same agreement the out of state developer had walked away from. Hagans, who had been closely involved in the negotiations, was intimately familiar with the terms of the agreement. In addition to a development timetable, it required Ft. Lincoln’s developer to commit to a twelve point plan for ensuring a substantial portion of the financial benefits, and long term profits, from the development went to District of Columbia job seekers, minority residents and future Fort Lincoln residents. The unique provisions in Article VII of the agreement included requirements that: (1) the developer start a non-profit corporation, to provide community services, that would gradually be taken over by future Ft. Lincoln residents; (2) the developer donate $250,000, in installments, to the non-profit corporation and/or to a Homeowner’s Association to provide services for Ft. Lincoln residents; (3) the developer incorporate a real estate company, and convey at least 25% of its its ownership to the resident’s non-profit corporation; and (4) that the developer ensure that even when third parties sell, lease or manage property in Fort Lincoln, those third parties turn over 10-15 percent of their gross commissions or fees to the residents’ non-profit corporation.
Balanced against these requirements were other terms that ensured the agreement would be extremely lucrative for the developer. The agreement committed hundreds of millions of dollars in public improvements to the development from the District and federal government– including streets, a huge park, schools and community facilities. The developer was not required to pay for the 176 acres made available to it, in advance. Instead, to minimize its carrying costs, the developer was only required to pay for each planned section after the development plan for that section was approved. Finally, the developer was given the right to incorporate the only real estate company with the exclusive right to sell and manage most of the newly constructed property in Ft. Lincoln.
Because of the millions of dollars of profits involved, the RLA re-opened bidding for development rights at Fort Lincoln in March of 1975. It announced that the principal criterion for selecting a new developer would be the extent to which bidders indicated their intent to accept the previously negotiated Land Disposition Agreement without substantial changes. Four bids were submitted. The RLA concluded that only Hagans’ company, Ft. Lincoln New Town Corporation, met all the bidding requirements. A subsequent lawsuit, and request for an injunction filed by one of the failed bidders, was unsuccessful. As a result, the RLA signed a Land Disposition Agreement with Ft. Lincoln New Town on June 13, 1975.
Greed Trumps Compliance With Law and Contract
However, when the developer began renting and selling apartments and homes in Fort Lincoln in September of 1976 it did not disclose to the new residents their profit-sharing and decision-sharing rights – despite a condominium law and a D.C. consumer law that specifically required those disclosures, and required the developer to provide the newcomers with an actual copy of the LDA. Thus, to this date the developer has been able to exercise plenary decision making authority over the development and has reaped millions of dollars in profits exclusively for itself.
Although Ft. Lincoln New Town did incorporate a community corporation in October of 1976, and a Homeowner’s Association in September of 1978, it never publicized their existence to Ft. Lincoln residents. Nor did it fund them. Both entities were allowed to die a quiet death within two to three years of their incorporation. In an apparent effort to conceal their non-compliance with Article VII, the president’s successor failed to submit the quarterly compliance reports required by the Land Disposition Agreement.
Because the existence of the profit sharing requirement in the development contract was concealed from them, residents of the Ft. Lincoln Urban Renewal Area have not had the resources to develop and sustain any resident organization for very long. They formed a civic association in 1980 but it had limited viability. By 1991 its corporate charter had been revoked by the D.C. Government for failure to file an annual report.
Discovery of the Developer’s Fraud
In September 2000 Fort Lincoln residents incorporated the Fort Lincoln Civic Association. One of its committees was charged with responsibility for preparing a monthly Newsletter. In the course of preparing an article on the history of the Fort Lincoln Urban Renewal Area, a committee member used the D.C. Freedom of Information Act to identify the documents governing the development of Ft. Lincoln, and to obtain copies of the documents. Those documents included the development agreement between the RLA and the developer, detailing the profit sharing requirement.
A follow up FOIA request uncovered a letter, dated February 1, 1979, from the developer to the D.C. Department of Housing & Community Development [of which the RLA had become a part], asking that the profit sharing entitlement for Ft. Lincoln residents, and other financial opportunities for D.C. residents in the development agreement, be reconsidered and removed. Subsequent FOIA requests confirmed that the developer’s request was not granted.
The question then became whether, twenty-six years after its signing, Fort Lincoln residents would finally receive the benefits guaranteed them in the Ft. Lincoln Land Disposition Agreement (“LDA”).
A Decade of Litigation
After attempts to negotiate a resolution with the developer were repeatedly rebuffed, the Fort Lincoln Civic Association (“FLCA”) retained counsel and filed a lawsuit in the D.C. Superior Court in 2002 to either enforce the provisions of the LDA or obtain compensatory and punitive damages for the developer’s twenty-six year long indisputably fraudulent scheme. In the litigation that followed, D.C. courts ruled that only the federal or D.C. government could enforce the LDA as a contract, but that in a consolidated class-action lawsuit certain condominium owners could seek compensatory damages (for violations of the D.C. Condominium Act and the D.C. Consumer Protection Procedures Act) and punitive damages (for now 36 years of fraud).
The protracted litigation twice went to the D.C. Court of Appeals and the Court of Appeals has largely ruled in favor of the FLCA on both occasions. The second of the two appeals was decided on October 4, 2012. The D.C. Court of Appeals reversed the trial court and sent the case back to the D.C. Superior Court with instructions that it be presented to a jury. To read the Court of Appeals’ decision click here. The trial of the class-action lawsuit was then scheduled for May 19, 2014, at the D.C. Superior Court (500 Indiana Avenue, N.W.). The major issues at trial were to be: (1) whether some 388 individual homeowners could prove how and in what amount they were financially damaged by the developer’s violation of the disclosure requirements in the D.C. Condominium Act and (2) what amount of punitive damages is necessary to punish the defendants and discourage them and others who might be tempted to emulate them. Unfortunately, on the eve of trial the same trial judge the FLCA had reversed in its first appeal was reassigned to the case and barred the recovery of punitive damages. That, then, made it unfeasible for the law firm that had represented the class-action plaintiffs for 11 years to continue. They were granted permission to withdraw from the case and on June 25, 2014 the trial judge will rule on whether the case can continue without counsel.
The Duty of Enforcement, Or Compensation, The D.C. and Federal Government Owe Fort Lincoln Residents
Outside of the courthouse, what remains undone is enforcement of the four “community benefits” that the D.C. Court of Appeals has ruled that only the D.C. and/or federal government can enforce: (1) the requirement that there be a non-profit corporation, controlled by Ft. Lincoln residents, to provide community services to Fort Lincoln residents; (2) that the developer donate $250,000 to that non-profit corporation; (3) that the developer convey at least 25% of the ownership of its real estate company to the non-profit corporation; and (4) that the developer ensure that even when third parties sell, lease or manage property in Fort Lincoln, those third parties turn over 10-15 percent of their gross commissions or fees to the residents’ non-profit corporation.
To realize these four “community benefits” the FLCA has ensured that it meets the specifications of the Non-Profit Corporation required by Section 7.8(a) of the LDA. And, at every opportunity, the FLCA seeks to educate and demand that the legislative and executive branches of the D.C. and federal government enforce the agreement the government entered into with Fort Lincoln’s developer that requires Fort Lincoln’s developer to provide the four “community benefits” set forth in Article VII of the LDA. Alternatively, the FLCA demands that legislation be introduced and enacted awarding reparations/compensation to Fort Lincoln residents (through the FLCA) for the District and federal government’s 30+ year long failure to live up to their legal obligation to oversee and enforce Article VII of the LDA.
“All members of the Board of Fort Lincoln New Town Corporation have a copy of the Land Disposition Agreement. All are familiar with the provisions of that document, particularly Article VII, which relates to the responsibility of the developer to provide opportunities for the minority community to benefit from the development of Fort Lincoln. That responsibility is more extensive than for any other development in this City, or in any other city of which we have knowledge. . . . I want to assure the Board of Directors of the Redevelopment Land Agency that the Board of Directors and Executives of Fort Lincoln New Town Corporation understand the nature and extent of this responsibility, accept it, and will do everything possible to carry forward this mandate.”
Statement of Theodore R. Hagan, Jr., President, Fort Lincoln New Town Corporation (Public Hearing-Ft. Lincoln Land Disposition Agreement, May 13, 1975)