Well, we called it back on March 1. City of Memphis finally folded its hand against John Elkington and settled with his management company.
Back in our earlier post, we asked where Mr. Elkington goes for an apology for the city’s legal saber-rattling. More to the point, where do Memphians go to get an apology from former Mayor Willie W. Herenton for spending $3 million on legal and accounting fees – unsurprisingly, with politically-connected firms – to chase the manager of Beale Street?
We also called it when we said that despite the facts, Mr. Herenton would continue to rant if a settlement is reached, a prediction that he fulfilled yesterday with his latest outburst masquerading as a news conference. He also suggested that the entire issue should be investigated by federal investigators, but since questions in the federal building have been raised about the massive professional fees and tracking them, we recommend that he just drop that idea.
As a going-away present, Mr. Elkington finally got his wish and closed down the Plush Club, well-deserving of its reputation as a place where anything sexually or pharmacologically was allowed. If nothing else, it should make University of Memphis basketball coach Josh Pastner sleep better at night because of the problems players have found there.
Memphis Mayor AC Wharton told Council members that he plans to appoint a committee to consider what should be done about Beale Street management post-Elkington. Hopefully, the committee will move quickly so that purgatory for Tennessee’s most popular tourist attraction does not drag out. In the end, there are but a handful of companies that manage historic entertainment districts, and like Mr. Elkington’s company, they are often dogged by complaints from people who think they can do it better, normally people in CityHall.
It seems that the best course of action is likely to find the best manager/developer/urbanist and bring that person to Beale Street as its manager. Downtown Memphis has a paucity of officials with an understanding of how development works and what makes downtowns successful. It would be valuable if such a person could be found for Beale Street and help with downtown’s future.
Here’s our March 1 post:
Audit’s Winning Hand Should Fold City’s House of Cards
John Elkington played his trump card last week, and after several years of innuendoes, rumors and charges, it’s hard to conclude anything except that he’s won the high-stakes game of money and reputation that characterized the $6.4 million argument about Beale Street management.
Memphis’s most respected accounting firm, Watkins and Uiberall, shredded a $750,000 “forensic audit” by Parente Randolph, the Philadelphia firm hired by City of Memphis, to prove that Mr. Elkington’s company, Performa Entertainment, owed the city millions. In a letter to John Ryder, receiver for Beale Street Historic District, Bill Watkins wrote: “It is my professional opinion that Parente Randolph’s report is not forensic, is not an audit, and its purpose is hard to discern.”
In other words, the conclusions by Parente Randolph were directed by city lawyers to justify their preconceived opinions. Those lawyers made more than $2.5 million as city government threw everything but the kitchen sink at Mr. Elkington to get him to fold and settle.
Error after Error
With the evidence presented in the Watkins Uiberall report, it’s clear that the tables have turned, and we hear that a settlement could be forthcoming shortly now that the Parente Randolph report has been discredited by local accountants who have represented Shelby County Government, Memphis Light, Gas & Water and almost every public entity in our community.
In his 42-page audit, Mr. Watkins surgically dissects the Parente Randolph report to the point that a high school bookkeeping student could see the errors made by the Philadelphia company. Not only did Parente Randolph make a math error of $279,036, but it considered well-known city events like the Beale Street New Year’s Eve Count-down as parties for Mr. Elkington. When asked why he thought it was the WMC-broadcast event was a private party, the accountant for Parente Randolph said he was told by Ricky Wilkins, attorney for the city in the case (and fired by Interim Mayor Myron Lowery).
“After devoting more than 200 hours to this review, it is my professional opinion that Parente Randolph’s report is seriously flawed,” said Mr. Watkins in his letter. “No money is missing. All money in question is accounted for and no money has been misappropriated.” He pointed out that besides the “serious” math error, Parente Randolph stated in its report that nearly $2.2 million received from Beale Street tenants from wristband sales should have been turned over to Performa Entertainment, Mr. Elkington’s company.
More of the Same from Herenton
“Beale Street Tenants’ Lease Agreements do not give Performa Entertainment any claim to the tenants’ revenues, and this $2.2 million of cover charges revenue was strictly revenue of Beale Street Tenants,” Mr. Watkins wrote. Meanwhile, Parente Randolph also disallowed marketing expenses by Performa although bringing customers to the street clearly was in the best interest of city government.
In conclusion, Mr. Watkins said that not only did Performa Entertainment not owe $6.4 million as alleged by City of Memphis, but that the management company had a cumulative loss of $1,455,555.
We predict that these facts will do little to deter former Memphis Mayor Willie W. Herenton’s rhetoric in his run against Congressman Steve Cohen, since the former mayor’s campaign is based totally on race-baiting. In announcing for the fun, prior to release of the Watkins Uiberall audit, Mr. Herenton said: “This so-called justice system of ours – they are about to send three black people to jail about dogs. But we’ve got a white man involved in Beale Street that a forensic analysis has revealed six million dollars is missing – six million dollars of your money is missing.”
Media Attention Span
His point was that F.B.I. investigations differ, depending on whether someone is white or black, but what he missed altogether was that there was never an F.B.I. investigation into Beale Street and no records were ever removed from Performa’s office by investigators. One thing about Beale Street is that rumors are as ubiquitous as beer sales, but in this case, it was one not only repeated in City Hall but by local news media.
Coverage by The Commercial Appeal of Mr. Watkins report reminded us about one of the harshest lessons of the media. It was little more than a year ago that Mayor Herenton’s allegations against Mr. Elkington shouted from the front page. This year, coverage of Mr. Elkington’s side was buried inside the newspaper, and even then, the follow-up article contained two errors – the amount of the dispute and the cost of the Parente Randolph audit.
Unmentioned was the fact that the city spent the equivalent of three cents on the tax rate trying to force Performa Entertainment to wave the white flag. Now, with a definitive audit, we hear that Mr. Elkington has signaled to city government and Mr. Ryder that he’s ready to settle and leave Beale Street. There are clear signals from the Wharton Administration that settlement is on the way, as the mayor himself mentioned to Greater Memphis Chamber last week.
Missing Proof
Our favorite notation in the report by Mr. Watkins: Mayor Herenton requested Performa Entertainment to host a pre-fight reception of his three-round fight with Joe Frazier and to host the opening event for National Black Mayors Convention. The tab was about $43,000, and Parente Randolph rejected expenses caused by the mayor himself.
In all, the Watkins audit listed 18 adjustments to the Parente Randolph report, and it clearly is fueling a new look at things by city government and Mr. Ryder. But if they need any further proof, they should read the deposition of Parente Randolph’s Paul Pocalyko, whose own words proved how unprofessional the report was from the beginning.
Two footnotes: One, we have been unable to find anyone who can give us the paperwork that shows how Parente Randolph was hired or what the firm gave as its scope of work to justify its $750,000 charge; and two, it is interesting how many times that Mayor Herenton turned to Philadelphia for his experts, whether it was to produce this badly flawed report or to justify the sale of Memphis Light, Gas & Water.
We can’t help but wonder if there are some favored Memphis firms doing city work in Philadelphia as part of a political give-and-take.
A Short Line
Mayor Herenton’s battle royal over Beale Street was made even more ironic by his praise for the street’s management over the years and the regular reports mailed to him regularly. We presume that looking at Beale Street today, it’s easy to think that Performa Entertainment has a good thing going on.
But then again, there weren’t exactly people lining up in 1982 when Mr. Elkington was chosen to revitalize the street. The before and after photos at the top of this post give an indication of how bleak the prospects were back then and what a folly he was seen to be undertaking.
At this point, it doesn’t sound like Mr. Elkington is expecting a thank you. But he’d surely settle for an apology.
Something I’ve never quite gotten a handle on:
Where does the “rent money” that the merchants “presumably” pay go?
Do they in fact pay any rent or lease?
WHO do the pay now?
How much are their rents compared to fair market value?
Is there a list of incentives for running one of the Beale Street properties/locations?
Have any of them turned a profit or are they relying on some sort of program?
What happens if they do turn a profit?
Just some questions.
Interesting tidbit of history. I always wondered how Memphis lost that rich urban music rock/blues culture that characterized Beale street.
“After the riots of 1968 Beale Street and the downtown area began to decline. Businessmen and developers shifted their center of operations to East Memphis. In 1969 the city undertook urban renewal projects, including Beale Street I and Beale Street II, which erased the area’s housing, demolished 474 buildings, and placed a block-wide barrier of empty lots and parking spaces between African Americans and Beale Street. This project left a thin commercial (blue light) district between Second and Fourth Avenues, where African American businesses were forced out through condemnation of buildings and high property resale prices. The Memphis Press-Scimitar (June 10, 1979) declared the “Urban renewal destroyed Beale Street.” In 1979 a preservation and neighborhood revitalization movement emerged too late to save the Beale Street local African Americans had known.”
Bummer.
Aaron,
Mind providing a source? I’d like to read more.
Sounds like it came from Memphis Architecture, published about 20 years ago.
Thanks packrat.
I think it’s out of print, look for it in the library, “Memphis: An Architectural Guide.”
Here is the link:
http://tennesseeencyclopedia.net/imagegallery.php?EntryID=B019
The quote provided by Aaron contains some errors and misleading opinions. The “1968 riots” did not cause Beale Street and downtown decline. The decline had begun years earlier, and the urban renewal program for Beale Street was erroneously implemented in the early 1960s to provide cheap land for businesses. This was done all over the U.S. in and around CBDs, but the retail market had already shifted to the urban fringe to capture suburbanization. The earliest in Memphis was in 1948 with the development of Poplar Plaza shopping center and was accelerated in the 1960s with the development of Southland Mall in Whitehaven.
While the Beale Street urban renewal projects did displace African American residents around the retail strip, the businesses on Beale Street were owned by white people. The Memphis Urban League was upset at criticism of the renewal efforts because it had the support of black businessmen who were to benefit from the renewal. However, no one benefited (except Tri-State Bank) until years later when Memphis finally used federal funds to purchase the land and buildings along the Beale Street national historic district and enter into a management contract with the Beale Street Development Corporation, who sub-contracted with John Elkington.
Urban Renewal did not destroy Beale Street. With the entire downtown in decline, Beale Street had lost its day-time customer base and the night-time “blues” action had withered with generational shifts. The Beale Street renewal program was an attempt to artificially re-create Beale Street as the “Home of the Blues”.
It’s called lack of effective oversight, lack of effective maintenance, lack of effective and well placed focused promotion.
I’ve noticed that it hasn’t changed much either. Many of Memphis’ attractions are erroneously marketed IN MEMPHIS. I wouldn’t waste a nickel on that.
You have to target the market of your best customer. It won’t be your next door neighbor. It will be someone who has enough money to spend on your pricing to make the project worth doing at all without a government grant. THAT will bring in money from outside in, and people who will promote for you by word of mouth. Then you have to have someone at the top that realizes that money is not for personal enrichment to the point of gluttony, good luck finding that person, who will reinvest and make sure that not only do you include effective maintenance, oversight, promotion, and management, but, you also teach it. That is how you keep it in place.
10 years ago I worked for a large warehouse nightclub, the owner did just that, that club is still there, still kicking butt. We have nothing like it here, but, we could.
PS. that club made $12 million it’s first year, exceeding it’s loans by $11 million, and did a 1 million dollar renovation in year 4, the town has less than 1 million people in it, it has only 160,000 people.
THAT is what knowing what you’re doing and doing just what you know to do can bring as results. SUCCESS.
Oh, another thing hat is remarkable, is that we chose a blues theme, because Memphis wasn’t doing it. We packed the house with blues entertainment, the biggest acts were knocking down our door to get booked, and I won’t reveal the deals we got on stellar acts, and we packed the house.
It’s not what you do but the way that you do it. It’s not a joke. It’s for real. I’ve proven it so many times.
Thanks for the corrections Chuck. I learned a little more today.