Tag Archives: pellissippi

Pellissippi Audit: Some Irregularities, but $10M a Reasonable Price

A review of a Pellissippi State Community College building purchase has concluded that there were some missteps and misinformation along the way, but it was reasonable for the state to pay $10 million, twice its previous purchase price, for a long-vacant office building in need of extensive repairs.
Further from The Tennessean:
In a nine-page report recently forwarded to John Morgan, chancellor of the Tennessee Board of Regents, the director of audits in the state comptroller’s office concluded that “the price of the property was negotiated and the acquisition price appeared reasonable.”
The report, however, found several irregularities, including two back-to-back six-month leases for that same Knox County building, which were not properly approved. The leases preceded the purchase and were signed by then-Pellissippi State Community College president Allen Edwards, the prime mover behind the purchase.
The report also found that there was a $2 million discrepancy in the reported purchase and repair estimates sent from the state Board of Regents to the state building commission before a key vote. The figure was later corrected.
In a Jan. 24 presentation, college officials pegged the estimated purchase price at $8 million, with an additional $2 million needed for repairs. In fact, the state already had offered $10 million for the property and $2 million more was needed for immediate repairs. “Although the $8 million offering price was presented as an estimate, it was known or should have been known that the offer price was $10 million at the time of the presentation,” the report states.
Minutes show that state Comptroller Justin Wilson, whose office prepared the audit report, was present at that Jan. 24 meeting, in which the purchase was approved without opposition. Wilson is a member of the state building commission and its executive subcommittee.
State building officials also were told at that meeting, according to the report, that the proposed expansion of Pellissippi State was included in a college master plan.
In fact it was Wilson, according to the minutes, who asked if the property “is in the master plan, and was told ‘yes.’ ”
“The (2007) master plan did not include a proposed new campus for eastern Knox County,” the audit report states.
As The Tennessean reported late last year, the building was purchased for $10 million on March 9, 2012, from a group of politically connected investors who bought it in 2007 for $5 million.
The investment group was headed by Samuel J. Furrow, a Knoxville auctioneer and developer. At the time of the purchase, Furrow’s wife had a $1 million mortgage on a Nantucket Island vacation home from James A. Haslam II, Gov. Bill Haslam’s father.

Democrats Ask Investigation of State Property Deal

News release from Tennessee Democratic Party:
NASHVILLE, Tenn. — Democrats are calling for state auditors to investigate a $10 million purchase of a property that county officials valued at $4.4 million.
In a letter to the Comptroller of the Treasury’s Division of Investigations, Tennessee Democratic Party Chairman Chip Forrester said the business deal may have defrauded state taxpayers of more than $5 million dollars.
“Tennesseans deserve absolute disclosure on this suspicious land deal and a full explanation for why we paid $10 million for a property the county assessor valued at $4.4 million,” Forrester stated in the letter. “If citizens are to have faith in their government, there must be complete transparency on high-dollar transactions and accountability if abuse or fraud is found.”
According to The Tennessean, state taxpayers purchased a distressed and unusable Knoxville office building on March 9, 2012 for $10 million to expand Pellissippi State Community College. The building required more than $16 million worth of repairs and, according to the article, the county property assessor valued the building at $4.4 million at the time of the sale.
The chief financial benefactor was a Knoxville developer who has business dealings with Governor Bill Haslam and is a personal friend of the governor’s father, the article said.
“To any casual observer, it appears taxpayers overpaid — by more than $5 million — for a distressed office building and that the financial benefactor was a businessman with deep political connections to Governor Haslam, whose administration advocated for the purchase,” Forrester stated in his letter.

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Politically-Connected Businessmen Sell $5M Building to State for $10M

A group of politically connected businessmen earlier this year sold a long-vacant Knoxville office building in need of millions of dollars in repairs and upgrades to the state for $10 million, twice the price they paid for it five years earlier, reports The Tennessean.
The building, for Pellissippi State Community College, will cost an additional $16.6 million to make it suitable for a community college, according to a report commissioned by the college to assess the property before the purchase.
A series of emails obtained by The Tennessean under open records laws shows that the top aide to Gov. Bill Haslam stepped in late last year to try to make the purchase a priority after being contacted by an intermediary for the Knoxville developer selling the 220,000-square-foot building.
The developer, Samuel J. Furrow, has been a business partner with the governor in the past and a friend of the governor’s father, who loaned Furrow’s wife $1 million while Furrow was trying to sell the building to the state.
Furrow and his investment group bought the vacant property at 7201 Strawberry Plains Pike for $5 million on June 28, 2007, from North American Philips and sold it to the state on March 9, 2012, for $10 million, according to public records.
“We stole it (from Philips) and sold it to the state,” Furrow said in a telephone interview, attributing the gain on the investment to a low purchase price.
He said the deal did not produce a full$5 million profit because of expenses such as interest and maintenance.
“We did everything right and for the right reasons,” Furrow said, calling the sale “clean as a whistle.”
The state bought the building by tapping $87 million that it had previously budgeted for TennCare, the state’s Medicaid program for the poor. But that money was able to be shifted for other uses when the federal government boosted its share of Medicaid funding for Tennessee as part of the stimulus package. In addition to $8.5 million in state funds, $1.5 million was contributed by the Pellissippi State Foundation toward the purchase.
Tennessee officials set aside an extra $2 million for immediate repairs, including a new roof. Estimates for total repair costs ranged from $3.1 million to nearly $5 million, records show. And to make the entire building suitable for use as a community college, a report dated Nov. 28, 2011, by Community Tectonics to Pellissippi State concluded it would cost $16.6 million, or $75 a square foot. Among that report’s recommendations was replacement of the heating and air conditioning system.
…The governor’s press secretary, Alexia Poe, said the governor was aware of the Knoxville building’s purchase but noted the process began before he became governor in January 2011. She said Haslam had never discussed the sale with Furrow or any of the other investors.
…Records obtained by the Tennessean under the state public records law show that a flurry of email activity began on Nov. 3, 2011, when Raja Jubran, acting as an intermediary for Furrow, contacted the governor’s chief of staff, Mark Cate….Jubran, who has been involved in business dealings with the governor in the past, urged in his email that the deal be closed by the end of the year. Though the effort ultimately failed because promised repairs had yet to be completed by Dec. 31, 2011, Jubran’s email set off a chain of emails involving high-level Haslam administration executives that outline their efforts to make the deal a priority.