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Seattle Times: No Conflict of Interest in Bellevue Council Member's Business Dealings

By Erica C. Barnett July 26, 2011

The Seattle Times' Keith Ervin reports that an independent investigator has found that Bellevue City Council member Kevin Wallace's business dealings do not constitute a conflict of interest with his efforts to re-route a proposed light rail line through South Bellevue. Wallace, a developer who negotiated a deal with GNP Railway to run freight along the same abandoned BNSF rail corridor where Wallace had proposed running a Sound Transit light rail line.

The Times reports:
[Investigator Jeffrey] Coopersmith concluded that Wallace had not attempted to profit from City Council decisions either through increased values of his family's downtown properties or through a partnership with GNP Railway.

Last year, Wallace and his father, Bob Wallace, were quietly negotiating a deal with GNP at the same time that Councilmember Wallace was prodding the City Council to authorize a $670,000 study of a light-rail route along the old rail corridor between Mercer Slough and I-405.

The Wallaces and GNP executives signed a December 2010 memorandum of understanding in which Wallace Properties Development was to help sell $30 million of railway stock, invest $500,000 in the venture, and manage property acquisition and development of passenger stations.

The deal was subject to Kevin Wallace receiving legal advice that it wouldn't conflict with his council duties. Before he obtained a legal opinion, the Wallaces backed out of the partnership.

GNP's top executives split early this year, and creditors filed an involuntary bankruptcy petition against the company. Last month, a U.S. Bankruptcy Court judge found GNP was insolvent, and the U.S. Surface Transportation Board rejected its request for rights to run freight trains between Woodinville and Redmond on track whose owners opposed freight operations.

Coopersmith noted that Wallace first promoted his "Vision Line" light-rail route in 2009, long before he began discussing a deal with GNP Railway.

Although the Wallaces and GNP owners hoped eventually to run trains on the Bellevue portion of the abandoned rail corridor — and even talked about carrying Highway 520 construction debris on trains — they had no expectation they would use that line in the near future, and it was "highly unlikely" GNP would receive any money from Sound Transit, Coopersmith said.

Last month, Coopersmith absolved two other Bellevue council members, Claudia Balducci and Grant Degginger, of any conflict of interest; Wallace supporters on the council argued that Balducci's service on the Sound Transit board, and Degginger's past legal work for the agency, could constitute conflicts for the council members, both of whom opposed Wallace's preferred rail route through South Bellevue.
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