Saturday, March 1, 2008

Public Fraud on Maui: Con-Job Techniques in Land Development


by Robert Grudin

As we all know, retail businesses will use a variety of sly and aggressive techniques in order to win over customers. It should come as no surprise to learn that a number of these practices are illegal and are prosecuted by the FTC and other authorities. The “Free Laptop” and “$500 Gift Card” emails we get are all part of Ponzi schemes designed to cheat those who fall for them. The car dealerships who advertise a single vehicle at a ridiculously low price are using a Bait-and-Switch technique, intended to sell cars that are priced much higher. Because Bait-and-Switch is designed to deceive, it is also prohibited, though not as rigorously as the Ponzi.
Fraudulent practices of this sort are routinely employed by land developers, though I have never heard of any who were prosecuted for them. The goal of these practices is not to “sell” a given property, but rather to push the whole project through the various levels of planning committee approval. To this purpose the fraudulent Bait-and-Switch technique is employed in two distinct ways. One may be called, “Have I got a Treat for You!”, the other “I'll be nice, for a price!” I’ll illustrate both with examples from the ongoing approval process for the Wailea 670 development on Maui:
Have I got a Treat for You!” In earlier approval stages, spokesmen for the 670 made several promises designed to placate citizens and committee members. The 670 promised to find its own water sources, so as not to be a drain on the community supply. The 670 promised to build affordable houses on site, to fund a $20 million park and to improve local roads. Now that the approval process is well along, the 670 people are apparently experiencing a change of heart. Now, they either do not know, or are not willing to say, where and how they will get their water. Now, the affordable houses will be built on cheap land in an industrial area of the island. And the park and roads? As puts it,

Wailea 670 has promised $20 million for a new Kihei
park, but didn't mention that it will be given as "each
unit is sold,"not as a lump sum. Road improvement fees
of $7 million are the same.

It's hard to resist the conclusion that the 670's offers to provide water, affordable homes, a park and road improvements were Bait set out to facilitate the project's passage through early approval stages. Now that early barriers have been cleared, the project's supporters can Switch to what they really wanted all the time.
I'll be nice, for a price!” Wailea 670 originally came to the Planning Committee proposing to build 2600 units on its site. When citizens complained that this was overkill, the 670 cut the proposed number of units sharply. Here is Bait-and-Switch in reverse. The bait here, 2600+ units, is actually more of a threat: Big Bad Developers Threaten Orgy of Construction. When the developers graciously acknowledged local anxieties and cut their proposal to 1400 units, they won urgently needed bargaining purchase. Note that neither the threat nor the cut cost the Wailea 670 a penny.
To understand the cunning and the malice of the Wailea strategy, we need only look at the original development proposal with disenchanted eyes. In this new light, it becomes apparent that the 670 never had any serious intention of providing their own water, or of building affordably on site, or of freely donating a park or road improvements. Similarly, the 670 never intended 2600 units on tiny lots. These were merely dodges made in order to advance themselves from one stage of public approval to the next. More simply put, these were bare-faced lies, lies conceived in contempt of the common good, lies told with no other purpose than net profit.
Given such policies, we may see the Wailea 670 as a good example of what may be called public fraud: a phrase that ought to be applied either to attempts by private entities to deceive public authorities, or to attempts by public authorities to deceive the public at large. The Bait-and-Switch fraud, in all its luminous cynicism, is equally evident in a developer masking his greed with haloed philanthropy and a president hawking a war of political convenience as a heroic quest. Fraud of either sort should be branded as illegal and punished by law.

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