The saga of the Portland Ship Yard continues to take
more turns than the Willamette River on which the mammoth
site sits. The latest twist involves ties that have never
been publicly disclosed between Port of Portland Commission
President Bob Walsh and Jeff Grayson, a longtime lender
to the company that, for three years, has been given an
exclusive right to buy the shipyard.
In June, the Port announced the most recent terms of
its
proposed sale of the shipyard to Cascade General Inc.,
the yard's operator.
At the time, Port officials explained why the sale was
not put up for bid. Port general counsel Cory Streisinger
said that based on a "previous worldwide search" for buyers
in the early '90s, "the chances of finding an alternative
buyer appear to be small." The explanation was bizarre
given that three other ship-repair firms at the time were
telling the Port they were interested in the 92-acre waterfront
property.
The nine Port commissioners nonetheless approved the
sale to Cascade, giving more fuel to critics, who've long
argued that the Port's $30.8 million selling price is
far below the yard's untested market value. Those critics
argue that the yard's assets--which include America's
largest floating dry-dock, insured for $40 million and
57 waterfront acres--will provide Cascade a substantial
profit when resold for what they're really worth.
The problem with this conspiracy theory is that it has
always lacked a vital ingredient: motivation. Why would
the Port shoo away other potential buyers who might drive
up the price of the publicly owned riverside real estate?
The Walsh-Grayson connection offers a possible, though
admittedly tenuous, explanation and illustrates the cozy
atmosphere in which the Port conducts its business.
In announcing the Port's latest deal with Cascade, the
commission president praised negotiators from both parties,
calling the transaction "a heck of an achievement." What
Bob Walsh didn't disclose is that he had a professional
and personal relationship with Grayson, Portland's embattled
pension-fund manager ("The End of a Legend," WW,
June 28, 2000).
Grayson is best known for his ties to Andrew Wiederhorn's
ill-fated Wilshire empire but also has a long history
of involvement with Cascade General. According to federal
court records, Grayson's company, Capital Consultants
Inc., loaned several million dollars to a Portland ship-repair
company called West States Inc. between 1991 and 1994.
Shortly before West States went bankrupt in 1994, those
debts were transferred to another company and ultimately
ended up as an $8.3 million debt on the books of Cascade
General.
Cascade CEO Frank Foti says he has since repaid that
debt; however, documents filed with the Oregon Secretary
of State's Office show that Capital Consultants extended
new financing to Cascade as recently as April 20 of this
year and indicate that prior financing arrangements remain
in place. Foti confirms the loan but says it's for a small
amount. (In an earlier interview, Grayson also confirmed
the April loan.)
Cascade's ability to buy the shipyard at a bargain rate
would certainly help the company repay its creditors,
including Grayson. And given the $160 million he invested
in Wiederhorn's failed operations, Grayson is under pressure
to scrape up every dime he can for investors.
Until recently, one of those investors was Walsh Construction,
the diversified Portland contracting company owned by
Bob Walsh. Documents filed with the federal Department
of Labor show that in 1998--the same year commissioners
voted to sell the yard to Cascade--Grayson managed Walsh
Construction's $10 million employee profit-sharing fund.
Walsh confirms that he and Grayson are longtime friends
and that he invested both his company's and his own funds
with CCI, starting in the early '90s.
In other words, while the Port was working on a highly
unusual transaction outside the normal competitive-bidding
process, Walsh--both a friend and an investor of Grayson's--was
in a position to help make that deal go through. And yet
he said nothing to fellow commissioners about his relationship
to the financier.
Walsh still has personal funds invested with Grayson
but moved his corporate account elsewhere about six months
ago; he says none of the monies were ever involved in
the Cascade loans. He says he notified Streisinger of
the Grayson relationship several years ago and believed
that CCI's loans to Cascade were paid off in 1995. Informed
that CCI loaned money to Cascade as recently as this April,
Walsh expressed surprise. Had he known the two companies
were still doing business together, he says, he would
have informed the commission of his dealings with Grayson.
There is no evidence that Grayson influenced Walsh's
thinking about the shipyard sale in any way, and given
the extent of Grayson's activities, it's not inconceivable
that he'd end up doing business with a Port official.
Meanwhile, two of Walsh's colleagues on the commission,
Junki Yoshida and bookstore owner Michael Powell, said
they were unaware of Walsh's ties to Grayson. Powell,
however, didn't find the news disturbing. "I find it a
pretty thin connection," he says.
Port Executive Director Mike Thorne first said he was
unaware of the connection between Walsh and Grayson but
later recalled that Walsh disclosed a relationship in
1995.
Streisinger says that under the state's ethics statutes,
Walsh's relationship with Grayson did not constitute a
conflict of interest. Like Walsh, however, Streisinger
says she was unaware of the continuing relationship between
CCI and Cascade.
Patrick Hearn of the state's Standards and Practices
Office agrees that Walsh's relationship with Grayson did
not meet the statutory definition of a conflict but says
Walsh could have mentioned it. "I think disclosure is
always a good idea," Hearn says. "The more information
the public has, the more confidence people can have in
the decisions that are made."
