The insiders (continued)
	Baldacci’s bunker Elaine Clark, head of the Bureau of General Services, provides a statement from the Department of Public Safety to justify the move of its offices and a number of others, including the Maine Emergency Management Agency, to the huge building owned by Harper’s Development on Augusta’s outer fringes: "The co-location of MEMA and Public Safety was driven primarily by a compelling need to establish the Homeland Security Intelligence Fusion Center. The Fusion Center is an intelligence-gathering and analysis center equipped with secure room for processing secret information from all the federal, state, and local agencies." The move there of MEMA also allowed the devotion of a great amount of space to the state’s Emergency Operations Center, colloquially known as "the bunker." This is a collection of rooms including a large, Doctor-Strangeglove-like "operations room" with rows of desks (each state department has a desk for two people) on which lie computers and fancy telephones. Big-screen TVs are on the walls. There’s a special room for the governor and another room, the Joint Information Center, where the state’s public information officers will "coordinate messages to the public," says Steve Burgess of MEMA. There is a news media room, too, with banks of expensive-looking chairs in which the press are supposed to sit and listen on an intercom to bureaucrats save the state from a terrorist attack or a big snowstorm. The bill for Public Safety’s new furniture at their location was $415,000. MEMA’s cost for furniture was $109,000, though some of its was covered by federal funds, Clark says. "The governor has been here already a number of times," Burgess notes — for example, in snowstorms. — Lance Tapley

LUMP-SUM PAYMENTS

Leases such as these sometimes are amended for additional expenditures. An inspection of lease documents shows that big lump-sum payments to Harper’s, many from other agencies besides the Bureau of General Services, were made in after-bid (or after-no-bid) agreements by the state. Some amounted to hundreds of thousands of dollars. Most appear to be for costs of refurbishing office space. These contract amendments add to the costs of the space, but they don’t show up in the dollar numbers on the winning bids or original lease agreements.

Clark says these amendments were reasonably priced compensations for changes in what state agencies wanted done with the space. For example, for the MEMA move to the former SCI building, there was an additional payment of $270,000 beyond the rent paid by the state. But she says this extra sum jumps up the per-square-foot rent from $10.75 to $11.99 — still a low price, she believes. The state office-space average in the region, her bureau says, is $12.13.

A "PERCEPTION PROBLEM"

"I’ve been expecting this story for a long time," sighs Kevin Mattson, Harper’s president, with a wan smile. "It’s just the appearance. We fight this perception problem all the time." Severin Beliveau’s reputation, he adds about his well-known lobbyist partner, "is not helpful."

Mattson is friendly, tall, wears glasses. He appears easygoing, although it took him a while to explain how much money he makes. In discussing his compensation, he first said his annual salary was $60,000 before admitting, when confronted with a fact that didn’t jibe with that number, that it’s $120,000, plus ownership benefits.

He and his partners have been successful, he says, because "we’re basically scavengers" and "we’re in the turnaround business." They buy rundown or, in a sense, discarded buildings, he says. Even the architecturally elegant Key Plaza building, dominating downtown Augusta, could be put in this category, since Key Bank decided soon after building it to sell it. With 500,000 square feet of space, Harper’s annual gross revenues are $3 million, Mattson says.

He admits, "If it wasn’t for these consolidations we wouldn’t have filled [the former SCI plant] up so soon." He denies inside knowledge that specific consolidations were coming down the political pike. Baldacci has publicly promoted consolidation of state agencies as a way to make state government more efficient.

Harper’s partners bought the SCI building for $10 a square foot, he says, and thus they can offer low rental rates there to tenants. The Department of Public Safety bid was "rare," he says, because it involved a large space and along with it came the state’s desire to put other agencies like MEMA in with Public Safety.

In the landlord community, Harper’s has its defenders:

"Kevin and Severin had the foresight to buy that SCI building for cheap dollars," says Richard McGoldrick, a Portlander who also rents buildings in Augusta to the state. "The fact is the state benefited from what they’ve done."

THE BALDACCI CONNECTION

Harper’s Development is deeply connected in business and politics, two fields where connections are everything.

What does it mean, for instance, that the Harper’s Development partners joined with the governor’s older brother, Robert Baldacci, in a deal to develop a group of abandoned mills on 16-acre Saco Island — between Biddeford and Saco — into, potentially, a biotechnology center? What does this development mean when Governor Baldacci is pushing for tens of millions of state dollars to go into biotechnology? What does it mean that Severin Beliveau’s law firm, Preti Flaherty, is the lobbyist for the biotechnology industry? What does it mean that Saco Island is being designated by the state as one of Governor Baldacci’s special tax-reduced Pine Tree Development Zones?

The Saco Island property has been owned for years by some local investors, the Cutts Island Group, which includes Democratic State Senator Barry Hobbins. Early last year, former Maine Turnpike Authority chairman and former Saco mayor Sam Zaitlin, Douglas Volk of Volk Packaging, and the elder Baldacci — who is co-managing director of the consulting branch of Portland’s big Pierce Atwood law firm — began negotiations to buy and redevelop one of the large Saco Island mill buildings. Baldacci also is a long-time real-estate developer.

The developers publicly said they wanted to develop Saco Island for biomedical research. They have talked of the possible collaboration of the nearby University of New England (UNE). The private university is the past and intended future recipient of state bond-issue money for such research.

For years, the state, like many other states, has been injecting millions of economic-development bond proceeds approved by the voters into biomedical laboratories. This legislative session, Governor Baldacci has proposed another $22 million for biomedical research, which may include as much as $750,000 for UNE, according to university vice president Ed Legg, who also says the institution is "definitely considering a number of options" for the Saco Island redevelopment project. He says UNE so far has received $1.1 million from the state to support biotechnology research.

Late last summer, the Saco Island project expanded. Plans were announced to develop the entire island and its many buildings and for additional possible uses. The expansion came about because of the involvement of a new set of investors: Harper’s Development. A conditional agreement was signed with the sellers.

The Biddeford-Saco-Old Orchard Beach Courier weekly newspaper noted, "The city has helped facilitate [the] new buyers of Saco Island, through a tax-relief program, introduced by Baldacci’s brother, Gov. John Baldacci, called Pine Tree Zones."

The Courier quoted Kevin Mattson as saying, "We’re still negotiating, but it’s definite. . . . It’s our project and we’re partners with them," referring to Volk, Zaitlin, and Baldacci.

In recent interviews with the Phoenix, both Volk and Zaitlin expressed their belief that their involvement with Baldacci and with Beliveau, Orestis, Harte, and Mattson is still on. The deal "is still viable," says Douglas Volk. Sam Zaitlin says Robert Baldacci is still involved.

Not so, says Robert Baldacci: "I was in it, but when they went looking for significant equity contributions I didn’t want to take that next step."

In any case, he says, the purchase and sale agreement with the Cutts Island Group has expired — though this view doesn’t coincide with what seller Hobbins says: "We consider ourselves under contract."

Robert Baldacci says a Pine Tree Zone on Saco Island — essentially, a place where a developer pays little or no taxes because jobs are being created; over 100 sites have been selected around the state — had "already been designated long before we got involved." But according to the Courier, Saco Island’s Pine Tree Development Zone was originally proposed by the City of Saco in January 2004 for two mill buildings and expanded to encompass the whole island that April. Baldacci’s group announced its development plans in February 2004.

Robert Baldacci, who is on an advisory board of a biotechnology firm, Portland’s Akoura Biometrics, says he has "no financial interest" in any biotech firm that could benefit from a state bond issue. He also says he has no financial interest in Akoura.

His work for Pierce Atwood — one of the state’s foremost lobbying firms — does not involve State House lobbying, he says, adding that he mainly works on economic development projects at the municipal level, and "I don’t apply for funds through the state."

The state’s email correspondence shows that Mattson, Harper’s CEO, at one point discussed with the state leasing agency state-office use of the space in the Saco Island mills. But he now says that, for Harper’s, Saco Island is "a dead deal."

It would not have been helpful if the deal had gone through and Robert Baldacci had continued to be involved in it, Mattson admits: "Those projects often have some type of [government] assistance. It would have been dicey. There would have been a different level of raised eyebrows."

What does it mean that Harper’s had a business connection with Robert Baldacci and that the Saco deal had several connections to the John Baldacci administration’s distribution of money? At an absolute minimum, as Kevin Mattson acknowledges, it means lots of raised eyebrows.

Lance Tapley can be reached at ltapley@prexar.com. In two weeks: Part Three: Changing the way Maine does business.