New Lockey/MacKenzie Lawsuit Seeks to Reopen Can of Worms in HUD Case

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Is it just me? Am I totally alone, nuts, or what? Isn't it a bad thing that everybody agrees Dallas City Hall racially discriminates?

See also: Judge Denies Whistle-Blowers' Claims in Dallas Segregation Case. Again.

The new litigation offers vivid blow-by-blow detail on the way two downtown tower re-developers, Curtis Lockey and Craig MacKenzie, claim the city shut down their deal, including a scene in which a City Hall executive allegedly cupped his telephone during a key meeting and told the pair, "That was Angela Hunt, and she is trying to get me to pull the bonds from your project."

It's not a new charge. Hunt has said in the past that Lockey and MacKenzie's account of a phone call to kill their deal is a lie. But the focus of the Lockey/Mackenzie filing Friday is new -- an attempt to fix problems in the suit they filed last year which was tossed out by U.S. District Judge Reed O'Connor.

See also: How Dallas City Hall Put Us Back Behind a 25-Year-Old Eight-Ball on Segregation

Lockey and MacKenzie claimed in the earlier suit they were the first to blow the whistle on Dallas for failing to promote fair housing and deserved a reward under the federal Fair Claims Act. But O'Connor said Dallas' history of frustrating federal fair housing law was already well known, even citing some of my own stuff. He threw the pair out of court saying you can't whistle blow and get a reward on something that's already been blown.

I really never got that, because Lockey and MacKenzie were my sole original sources for whatever I had written about it, even though I obviously talked to lots of other people to check it out. And the judge's argument -- that the federal government should have known Dallas discriminated because it was right there in Jim Schutze's column already -- struck me as very bizarre.

Very flattering. Very bizarre. Like the federal government knows I exist. Like they take me seriously. I started to feel puffed up, but then I thought, "Oh, save yourself the embarrassment, Jim. Something else is going on here."

Then the city claimed O'Connor's ruling as a great victory, and I really had my doubts. It sounded to me, and I paraphrase, like, "Oh, stop the presses! Lockey and MacKenzie and Schutze say we racially discriminate in Dallas. Yeah, no kidding, Sherlock! Everybody already knows that."

And so we brag about this? Now I really am lost at sea.

O'Connor was upheld later by the 5th U.S. Circuit Court of Appeals in New Orleans. But both O'Connor and the 5th Circuit left the door open for Lockey and MacKenzie to fix flaws in their original suit or file a new suit.

One of the flaws they have fixed is me. The new suit, which I found in my weekend troll of federal filings, avoids the very broad fair housing issues I have written about in the past and screws down the focus instead to a specific charge of racial discrimination. That way they say they're blowing the whistle on something that hadn't been reported by anybody else specifically, certainly not with the detailed knowledge, evidence and authority they say they gleaned from their own experiences with City Hall.

It's a key point. The Lockey/MacKenzie litigation is potentially the biggest action of its kind ever in the country among several suits blowing the whistle on local governments for fraudulently misusing federal funds intended to further racial desegregation. Under a federal law enacted during the Civil War, whistle-blowers can claim 25 percent to 35 percent of the total amount of money they can show was taken from the government by fraud.

See also: Whistle-Blowers Claim City Misused Housing Money

In the suit that O'Connor threw out last year, Lockey and MacKenzie said they were talking about a fraud of $1.3 billion -- all the money they say Dallas has taken from the federal government since 2008 in various direct grants and subsidies aimed at reducing segregation. Had they been able to prove that much fraud, they would have been entitled to a minimum reward of $325 million.

Ouch.

Under the new slimmed down version of the suit focusing on federal block grant development funds alone instead of all housing-related federal funds and support, the total fraud, if proved, would be $195 million, cutting their reward to $48.7 million.

Ouch.

In place of some of the sweeping generality of the original lawsuit, the new one offers lots of riveting and colorful detail, including the claim about Hunt as well as a top Neiman Marcus executive and a prominent Dallas architect, both appointed members of a relevant city board, who also conspired to kill the Lockey/MacKenzie deal for racial reasons. Again with quotes!

I have messages in to the architect, the Neiman-Marcus executive and City Attorney Warren Ernst, but I haven't heard back yet. I called Lockey over the weekend, but he declined to discuss the litigation. I messaged his attorneys in Washington today, but they also declined to discuss the filings.

I did speak to Hunt this morning, and I asked her again about the cupped phone conversation and remarks the suit alleges that a city official attributed it her.

"I never said that," Hunt said. "I have absolutely no recollection of any phone call with [the official]. I never demanded that bonds be pulled or the project be killed."

Here's the other ultra-confusing wrinkle in all this. The whistle-blower litigation is not - repeat NOT the same thing as the complaint that the U.S. Department of Housing and Urban Development (HUD) has brought against the city for segregation. The "HUD complaint," as that one is called, was based on information HUD got from Lockey and MacKenzie four years ago, but it's a totally separate deal from the whistle-blower suit.

Rather than a court case, the HUD complaint is an administrative action taken unilaterally by HUD based on its own four-year investigation, basically telling Dallas (in my own paraphrase, not a quote), "We believe everything those guys told us about you, and you are in big trouble."

One aspect of the HUD complaint is a demand that the city pay back Lockey and MacKenzie for the money they say they lost on their deal when the city killed it. That's separate from the money Lockey and MacKenzie are seeking in their lawsuit.

Ouch.

But it's the least of what HUD has demanded the city do to make up for past sins. In its original finding, HUD presented Dallas with a laundry list of major new programs and changes to programs Dallas must carry out in order to un-do the damage of racial discrimination in housing in the past.

See also: The Feds Say Dallas City Hall Has Promoted Racial Segregation

All of that has been the subject of negotiations between HUD officials in Washington and City Attorney Ernst for a couple of months, but those negotiations seem now to be locked in some kind of weird limbo. Knowledgeable sources told me weeks ago that Ernst had assured the City Council that HUD would fold on all of its major claims.

The sources said Ernst told the council, in fact, that he already had agreements in hand in writing from HUD that no money had to be paid to Lockey and MacKenze as part of settling the HUD complaint and that HUD was withdrawing it's "Title VI" complaint, which is the main Civil Rights accusation against the city. But other equally good sources told me none of that was true. They said HUD hadn't agreed to squat and the HUD people thought somebody in Dallas must be smoking bad weed.

The mystery now, weeks later, would be this: If Ernst already had agreements in hand kicking Lockey and MacKenzie out of a settlement of the HUD complaint and withdrawing the Title VI complaint, then he already had total victory. There should be a settlement to announce by now and maybe a nice party.

Instead there is only radio silence, beginning to lend credence to the alternative scenario that occurs to me -- that the talks are basically brain-dead and HUD is preparing to issue a "determination" which it will turn over to the U.S. Justice Department for enforcement. The main penalty the city would face in that case would be a loss of future hundreds of millions of dollars in federal support, maybe billions, unless the city agrees to each and every term of the determination.

And then there is this: In none of this -- not in the judicial ruling or the appeals court ruling in Federal Fair Claims Act suit so far, not in the HUD complaint, not even in the city's own public discussion of the matter, does anybody deny or even question that Dallas has engaged in official and deliberate policies of racial discrimination in the last 10 years.

If anything, the city's posture has been sort of (my own paraphrase again): "Yeah, maybe we racially discriminated, but we shouldn't have to pay anything to those squealers who ratted us out for it."

See also: Suddenly, Dallas Says HUD Segregation Investigation Is a Blessing

Does anyone else find that remarkable? Or am I just out here on my ex-post-'60s, hippie-liberal life-raft by myself, a victim of too much sunshine, nattering to myself about something everybody else takes for granted? I honestly thought racial discrimination was a bad thing. Did something change while I was away on a canoe trip?