- Associated Press - Monday, January 26, 2015

KANSAS CITY, Mo. (AP) - The president of a Texas-based contractor hired to lead tornado recovery efforts in Joplin, Missouri, announced Monday that he and another co-founder had resigned as their firm mysteriously left town.

The city said in a news release Monday after holding a closed door meeting that it is reviewing options for its contract with Wallace Bajjali Development Partners, whose insurance had recently lapsed. The Sugar Land, Texas, firm was hired in 2012 after presenting a plan for $800 million in projects to help Joplin rebuild from a 2011 tornado that destroyed a large swath of the city and killed 161 residents.

Wallace Bajjali was paid about $1.68 million by the city, although no projects were completed, said Leslie Haase, the city’s finance director. The payments included $1 million that was a 50-percent match for staff time, office expenses and other costs the firm incurred working on projects. Haase said the firm also was paid $475,000 as development fees to help assemble land, $123,525 to help set up a special taxing district, and $81,109 to help get state tax credits.

The city said in the news release that it learned about the Joplin office’s closure third-hand last week and was unaware of the resignations until Wallace Bajjali president Costa Bajjali sent the city an email Monday announcing that he had stepped down from the firm as of Friday. The email also included a copy of former Wallace Bajjali CEO David Wallace’s resignation letter, which was dated Jan. 7.

Wallace didn’t have a working home number, and a phone message left at the home of Bajjali wasn’t immediately returned. Susan Kopecky Hellinger, an attorney who represented the company in an earlier case, didn’t return phone or email messages from The Associated Press.

Joplin Mayor Mike Seibert described the situation as “unfortunate” in the release but stressed that the city “will continue moving forward in order to rebuild.”

Wallace Bajjali has faced legal and financial trouble with its previous developments as well as in an alleged Ponzi scheme.

Its project in Waco, Texas, known as Waco Town Square, filed for bankruptcy in 2011, claiming debts of more than $9 million. Wallace told the Amarillo Globe-News that his company entered the project as a master developer after many of those debts were accrued, and that the project’s financing was in trouble beforehand.

Wallace Bajjali was also accused of fraudulently directing investors to a failed business radio station company. A lawyer serving as the court-appointed receiver for investors in the failed company reached a $1.2 million settlement with Wallace Bajjali - with both Wallace and Bajjali personally guaranteeing the payments, according to a court order.

No payments were made before their deadline at the end of last year, said Thomas Taylor, the court-appointed receiver. Taylor said he may file a lawsuit against Wallace Bajjali over the missed payments.

Wallace Bajjali is also working with the city of Amarillo, Texas, on bringing in downtown development. But the city announced Monday that it was having an emergency meeting Tuesday morning to discuss and possibly end a contract it entered into last month with Wallace Bajjali to manage construction of a $28 million downtown parking garage.

City spokeswoman Sonja Gross said she did not know if the company had received any money yet as part of that project. But proceeds from that project are supposed to go to pay for its settlement in the radio company case, Taylor said.

Mark Rohr, who was fired as the Joplin city manager in February 2014 after an investigation found that he made no effort to have development agreements with Wallace Bajjali reviewed by outside legal counsel, said some important City Council and city staff members were working against the firm. He said that led to “incredible frustration at the internal efforts to derail what they were trying to accomplish.”

“They only got paid if projects moved forward,” said Rohr, who now works as the city manager of League City, Texas. “They had no reason to be involved unless they thought projects would be advanced.”


Merchant reported from Dallas.

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