Today the Seattle Times has a lengthy front page story about undisclosed business deals Councilmember Kevin Wallace had with GNP Railway while also advocating for the B7 East Link alignment. GNP desired to run freight and passenger trains in the BNSF corridor.

While prodding the Bellevue City Council last fall to study possible use of an abandoned rail corridor for a Sound Transit light-rail line, Councilmember Kevin Wallace was negotiating an extensive business relationship with a short-line railroad that wants to run trains on the same route.

He and his father, Bob Wallace, signed a nonbinding agreement in December to invest in GNP Railway and help raise $30 million for expansion.

Wallace Properties Development, a Bellevue-based developer of commercial properties, also agreed in a “memorandum of understanding” with GNP that the councilmember would hire brokers to sell preferred stock, invest $500,000 of its money and manage land acquisition and development of passenger stations, possibly with shops, offices, industrial space and homes. Kevin Wallace is president of the development company.

The Wallaces signed the GNP agreement the same week Kevin Wallace explained in a Seattle Times guest-opinion column why it made sense for the City Council to spend $670,000 to study whether Sound Transit should put its light-rail trains on the old freight corridor.

Because this is a blog, I can speculate a bit more than the Seattle Times can, and this is my own opinion: I think the Bellevue B7 study work basically offers free corridor information particularly pertinent to the business deal between GNP and Wallace. It smacks of using city resources to save GNP/Wallace planning money in the same corridor.

Wallace should have recused himself from these votes, but if he had, they would have ended up tied at 3-3. This could be part of why Aaron Laing (another B7 supporter) is running for Bellevue City Council this year, despite the fact that the council already has a majority – with a 5-2 split for B7, Wallace could take a slap on the hand and safely recuse himself from these votes.

The real kicker? As far as I’m aware, Bellevue doesn’t have a law prohibiting conflicts of interest for the city council.

66 Replies to “Times: Wallace Had Conflict of Interest”

  1. GNP doesn’t have operating rights South of Woodinville. The only feasible extension is the spur to Redmond. I don’t see Kirkland ever allowing trains to pass through and if they did what would they serve? Bel-Red is quickly becoming devoid of any industry that would make use of rail freight and the article said GNP had dropped plans for passenger service (like where has private industry been able to make a buck restoring commuter rail?). ST using the B7 would pretty much assure it would never be taken out of the rail bank for private use. Of course the conspiracy theorist now know that Kevin Wallace has never wanted B7 and secretly supported B2 all along.

    1. Bernie, GNP is interested in running all the way to Renton. What operating rights they have *now* are irrelevant. They would negotiate for the rest if they determined a business plan – especially considering Sound Transit extended a request for proposals for just that!

      1. What’s relevant is BNSF abandon the track south of Woodinville. It’s highly unlikely that the line would ever be returned to rail through Kirkland; about as likely as the Burke Gilman. Maybe the long term plan was to sell the Wallace and Western back to Buffet. But the B7 alignment would remove another segment of the corridor to Renton in addition to the removal of the Wilburton Tunnel (I don’t remember Wallace fighting the widening of 405).

      2. Hook that line up to Tukwila at the BNSF mainline, and just like that, you’ve got a regional commuter train network across three lines. Okay, the old BNSF corridor isn’t exactly ideal (but really, it’s not that awful), but a quick once-over with google maps shows that the tracks still exist and do connect with the mainline just north of 405 in Tukwila.

      3. Bernie, if Wallace is smart enough to know B7 will never happen (which he is), he’s not expecting light rail to happen there at all – he could just want the study work done.

      4. just like that, you’ve got a regional commuter train network

        And that would be profitable? Eastside Rail Now tried to push that through and it went nowhere. If there was any value to the ROW other than the underlying real estate BNSF wouldn’t have sold itdonated the southern portion from Woodinville to Renton, which was valued at $327 million.” Eventually it will be turned over to the County for the Ron Sims Regional Trail.

      5. Bernie:

        Profitability is important, but this is transit we’re dealing with – there are many more factors to this type of decision than profitability alone.

        – Would people use it?
        – What kind of environmental impacts are there from running the trains, and from taking cars off the road?
        – Does it increase regional mobility? For commuters? For low-income residents?
        – Can it foster transit-oriented development?
        – How many jobs would the line create, directly and indirectly?

        To consider transit solely as a business decision is an impossibly narrow view to take. Of course, to exclude the bottom line entirely would also be a mistake — every project has a point beyond which it just no longer makes sense, but in this case, that point might not be break-even.

        (I wouldn’t mind at all if the route became a public trail, too.)

      6. I just never pictured Kevin Wallace as the kind of guy that would use his personal wealth to build transit for the masses. Oh well, at least Ben agrees with me.

      7. @downintacoma: “Just like that” doesn’t quite address the thousand-foot-long wood trestle at Wilburton that wouldn’t do well with passenger service (10mph speed restriction), nor the gap in the line where the I-405 “Wilbuton Tunnel” used to be. The line is still in active service from Black River Jct. (Tukwila) to Renton so BNSF can deliver 737 fuselages and associated parts to the Boeing plant.

  2. The documents prove that Wallace knows what intelligent readers of this blog know: rail has positive affects on neighborhoods and municipalities. This is contrary to what he was telling Bellevue, namely, “rail is a negative for neighborhoods”.

    Attention BaBB: Wallace is lying to you. He wants the trains for his properties, not for your benefit.

    1. Yeah, that’s why I said “as far as I’m aware” – hopefully, someone will come correct me with some caselaw… I’ll check out the video, thank you!

      1. There is a drop-down list that jumps the video to the conflict of interest discussion.

  3. I’d be surprised to see any real action come out of the GNP. There track record( pun intended) is atrocious to date. The southern end of the line will unfortunately have one of the worst names ever associated it with it now, Ron Sims. Proves that portion will most likely be never re-born. Instead there is going to be another useless bike path….yuck.

    Can’t comment on Wallace, other than I wouldn’t be surprised to see some shenanigans.

    1. I don’t expect any action to come from GNP – but I expect Wallace thought the B7 study would help save him money. Even if there was no action from GNP and Wallace had to cancel the deal, something like this could still accelerate that process and save him cash. It’s moot now, but intent is the issue.

    2. Sorry but “useless bike path” it won’t be. A regional bike network needs some dedicated right of way to get around high traffic zones. And as Portland and NYC shown, the more bike paths, the more riders, in an almost exponential growth pattern.

      1. Gary, I strongly agree – the Bike520 path ends near the BNSF right of way, and going from there to I-90 is quite dangerous. This regional trail is very, very necessary.

      2. Gary, sorry for the late reply. I’m jumpin’ from computer to computer due to my Apple laptop crashing last month.

        Don’t construe my statement about bike paths as being “useless” on the whole. I used to ride from the CD to Bellevue back in ’93-’94. I just don’t see this particular one benefiting cyclists.

        As for Portland, an excellent example indeed. I love taking my GF across the Broadway Bridge. She’s a little afraid of heights, and this bridge with its path is the perfect one for her to feel safe.

  4. Despite what the city attorneys office states in the video, Bellevue’s conflict laws have not kept pace with the changes in state law and have a couple of dead end references – that may or may not be fixed later via a judicial action, if Bellevue doesn’t get around to fixing them themselves. The office has avoided pursuing actual conflicts on their various commissions and have construed city council conflicts narrowly. So I would be surprised if anyone pursued this one, except for political manuevering.

    I’d say that about 2/3 of the way through the times article it becomes clear that there really isn’t a conflict – just a closet rail junkie.

    Railroad robber barron…or captain of industry? You decide! Its the American Way.

    Kevin’s B7 leanings directly support those of us that elected him.

    1. I’d say that about 2/3 of the way through the times article it becomes clear that there really isn’t a conflict – just a closet rail junkie.

      Please enlarge upon this a little. That wasn’t my takeaway.

      1. GNP – Nothing was happening in Bellevue to or for GNP. Nothing to consider.

        On the other hand…Sound Transit – Something was happening in Bellevue. Success of Sound Transit = Success of Sound Transit’s attorneys.

        Kevin (in this case) in no way used his position to secure privileges for himself, shared confidential information (either way) or benifited from any contract entered into by the city.

      2. @Belleviewer SoundTransit has its own in house counsel who draws a fixed salary. Of course they may retain outside counsel from time to time but Mr. Brown argues his own cases such as the I-90 Kemper Freeman circus.

      3. Lane Powell has done work for both Sound Transit and BNSF. It’s no secret that Councilmemeber Degginger is a Partner, Lane Powell P.C., law firm It’s not a conflict of interest because he isn’t working or in any way involved with these contracts. The tit for tat accusations of conflict of interest are really irksome. This tabloid journalism at the Times is just an attempt to sell with sensationalism.

      4. Lane Powell has done work for both Sound Transit and BNSF. It’s no secret that Councilmemeber Degginger is a Partner, Lane Powell P.C., law firm. It’s not a conflict of interest because he isn’t working or in any way involved with these contracts. The tit for tat accusations of conflict of interest are really irksome. This tabloid journalism at the Times is just an attempt to sell with sensationalism.

      5. Charles – at last count – the “in house” office was at about 20 people and a budget of over $2.5 Million. That does not identify the outiside counsel costs or relationships. Not sure anyone will volunteer that info here. Put please do if you have it.

        The PI identified 50+ law firms engaged by Sound Transit years ago – don’t know what the present count is – but I do know it is very hard (impossible?) to find a substantial law firm in Seattle that is not “ethically” conflicted out under the rules of professional conduct that apply to attorneys.

        Tieing up the law firms is part of the legal strategy of ST.

        Fortuneately, there are some good attorneys that aren’t conflicted – but it is really hard to battle Sound Transit and their resources – and they want you to know that when the take your property.

        Those same lawyers that are conflicted out of representing clients against sound transit – can still sit on City Councils and vote in favor of Sound Transit requests – because the City and State law is not as detailed as the rpc’s.

        Imagine if Kevin Wallace worked for a major law firm in Seattle and he voted for B7 — would his partners fire him before or after Sound Transit abandoned them (you can learn that in one episode of “the good wife”.)

      6. As long as we’re talkin’ legal. How about a post from one of our esteemed bloggers updating the state of the I-90 lawsuit (Kemper doesn’t seem to have trouble finding lawyers willing to work for money) and the class action suit over the Port purchase of the BNSF corridor. Any other transit related law suits pending?

      7. @Belleviewer The link below is to Sound Transit’s 2010 Financial plan. As near as I can see, the budget for outside counsel appears to be a paltry $490,000. Far less that the City of Bellevue is spending on consultants to come up with quixotic notions about alignments. I’d venture a guess that the legal costs to Sound Transit are probably less than to a large construction firm like Sellen might incur.

        Sound Transit 2010 adopted Budget:

        Quite frankly, I don’t see what your big deal is. Sound Transit is responsible for moving millions of people and stewarding the construction of billions of dollars worth of infrastructure. Legal expertise is a legitimate and necessary function including real estate transactions, regulatory compliance, contracts administration, fighting nuisance lawsuits by ego-centric developers and nimby protest groups.

        While it is reasonable to disagree with Sound Transit’s conclusions, their process in my opinion has been open, transparent, and pain staking in its meticulousness in considering all points of view. But the train must keep moving and just because you don’t like the outcome does not mean it is not a fair one.

      8. I would like to concur with Bernie on the matter of the I-90 lawsuit. An update on that would be most appreciated, if one were possible.

      9. I don’t believe there’s any news on the lawsuit. I have an opportunity to ask about it this week, though, and I will.

    2. My first thought after reading the article was “Wow. Is Bellevue chock-full of bumbling, corrupt incompetents, or is it simply restricted to those they elect?”

    3. The fact that the plan didn’t pan out doesn’t absolve him of any conflict of interest.

      1. “I’m presently incarcerated. Convicted of a crime I didn’t even commit. Hah! “Attempted murder”? Now honestly, what is that? Do they give a Nobel prize for attempted chemistry? Do they?”

    4. “Closet rail junkie” – I love it. Here we thought he hated rail but secretly in bed with it.

      1. I don’t think any of these people are ideologues. Assuming that keeps us from investigating the logical reasons they make the decisions they do.

      1. The staff legal budget for personnel was $2.1M. (pg. 82) The $490K appears to be spread between IT Services and the Legal Department.

        Again, this is a bargain. If they had to contract out all of their legal services, the bill would be much larger than 2.1M. And for comparison’s sake, let say each of those 20 persons were employed at firms and billed 1650 hours a year @ $450/hr. Thats $14.85 million that Sound Transit would be spending per year.

  5. Talk about memories of Chicago! It’s really great to finally have a politician see enough financial possibilities in interurban rail to get into a conflict of interest about it. Though it loses some of the old vitality if somebody forgot to make it illegal.

    It would be even better if Kevin and his buddies put an old-fashioned amusement park somewhere on East-LINK. I remember Glen Echo in DC, and Elich Gardens in Denver. Anyhow, profits and interest conflicts sure beat undesirable passengers and social engineering as content for transit discussions.

    Mark Dublin

  6. Beleviewer– Stop apologizing for this guy. Intent says a lot about a person. So let us explore what Mr. Wallace’s intent was. He intended to form a corporation with GNP. He intended to raise capital to buy the rail corridor. He intended to sell preferred stock. He (I infer) intended to collateralize the stock with the promise of profitable real estate development along the corridor. Now let us ask why? Why did he intend to do these things?

    TO MAKE MONEY. At least that would be my guess. If he owned the ROW, and he wanted to make money by developing real estate, what would catalyze the investment to ensure high returns? The presence of rail transit. And how would he get that added to the mix? By forcing Sound Transit to develop East Link in that corridor.

    So let’s do the accounting. He uses tax payer money to study the route. He leverages that study to wear down ST and get the route he wants. He buys the route, and then sells it back to ST. He then develops the land and pays off his investors and himself.

    In conclusion, and I am hypothesizing here, he INTENDED to use his council seat to use taxpayer money to force a policy outcome that would enrich himself and his investors. Now, this may not be a conflict under Bellevue city code because, after all, all we have is his signed letter of INTENT. But it stinks to high heaven, and those who continue to dismiss it or apologize for it are just as corrupt as he apparently intended to be.

    1. So what is it:

      Wallace is smart enough to know B7 will never happen (which he is), he’s not expecting light rail to happen there at all – he could just want the study work done.


      He wanted to make money by developing real estate… By forcing Sound Transit to develop East Link in that [B7] corridor.

      The tin foil hat collation needs to have a meet up and get their story straight. Or maybe the strategy is just toss out stupid scenarios and hope it influences elections? Or at least draws as many lame brain attacks from the other side that they can then use as cannon fodder.

      1. So we’re dealing with Mister Kirkland and Scam Artist that have zero prior representation on this blog. Sort of says it all.

      2. Bernie, ever heard of hedging your bets? He owns properties that would benefit in either case.

  7. The real conflict is this: Kevin Wallace wants to force Sound Transit to buy the corridor that he and GNP are trying to steal from Redmond, the Port, and King County. Read the Surface Transportion Board pleadings of the City of Redmond. GNP is really trying to steal the right of way. GNP has apparently not been shy about telling everyone that their plan is to “reactivate” freight rail all the way down to Renton as a means to run excursion trains. See the STB pleadings. In the meantime, Bellevue’s consultant names GNP in their scope of work as the rail carrier on the corridor and Wallace pushes Sound Transit to use the corridor for light rail. Then in December Wallace and GNP enter into an MOU that will create an LLC whose revenue will be derived from selling the rights that they will steal from the Port and King County and sell to Sound Transit. See the last part of the “Revenue” section of the MOU. Gotta love private enterprise stealing property, getting federal low interest loans, forcing Sound Transit to use that land, then selling it to them.

    1. Is there a link to the MOU somewhere?

      I’ve read all the STB documents and would agree with you Mister Kirkland. GNP thought they had a regulatory opening to get low cost loans and could become gatekeeper for the corridor. They were initially after the $50m public/private partnership money of ST2. When it became apparent that they weren’t going to get that money and that the Redmond City Council wasn’t going to give them authority to run in the Redmond Spur, they filed for vacation of the interim trail user (basically rescinding the railbank status of that portion of the corridor) and petitioned for the freight reactivation rights. To that end, Bob Wallace wrote letters to the STB on Wallace Properties letterhead supporting those goals. But according to GNP, their goal was always to run to Bellevue (Doug Engle stated as much in a December Kirkland City Council Meeting). I didn’t understand at the time why someone wasn’t looking at the possibility of conflict of interest with the Wallace family (but maybe they were).

  8. Bernie, ask yourself this: how do you know I haven’t been here all along? Be honest.

    To those who prefer politicians who dip into the public trough to feather their own beds, you’re welcome to them. I can’t imagine this is going to wear well with the citizenry, especially considering the economic times. Sort of puts the have’s and the have-nots in sharp relief.

    To other readers of this thread I say simply this: follow the money. it is likely to take you closer to the truth than anything else.

    1. do you know I haven’t been here all along?

      Of course you have. Why the constantly shifting names? Ben??

    1. Please don’t cite statistics without providing the source — otherwise it just looks like a made-up number, which very well may include those who drive SOVs to P&R lots to transfer to a public transit mode for the remainder of their commute.

    2. How much did the government have to spend on roads to entice 61.5% of the population to commute by car? How much of the population’s wealth is tied up in automobiles? How much debt has been incurred by those people financing their cars that could have been better invested in real estate, eduction or retirement? Oh wait, those figures don’t fit your agenda.

    3. Does transit go to every neighborhood? 24 hours? Does it go to every office park? Are there trips that require going downtown and transferring and then coming back to the adjacent quadrant from which you started — turning a 15-minute trip into a 75 minute trip? Then there’s the famous part about MAX taking 20 minutes to cross downtown, and no faster alternative. So we’ve spent billions on transit but it’s still not comprehensive like in NYC and Europe where the transit share is above 50%. And the billions we’ve spent on transit is just a fraction of the multi-billions we’ve spent on automobile infrastructure and parking lots.

  9. He may be a crook, but he’s our crook. B7 makes sense and I personally don’t care if Wallace makes money off the deal. Putting a train at grade through the busiest streets in the region is stupid. No Microsoft employee will ride a slow surface train from Seattle to Redmond.

    I know Ben won’t agree. His Seattle bias is clear (“To be frank: if they want that lifestyle, they can move away from where our near-term development needs to go. Their 50′s style suburban enclave is causing climate change, and the only way to stop it is to replace it.”) I fail to see how my rebuilding an old home in a walkable neighborhood is causing climate change. Maybe Ben should ask what the climate change impact is of the tunnel going underneath Capitol Hill and the UW.

    1. It’s easy for us Softies to forget, but Seattle-Redmond isn’t why East Link is being built. Seattle-Bellevue has much more demand, at peak but especially all-day. Seattle-Redmond is primarily a commuting corridor.

      Also, almost half of all Microsoft employees in Seattle city limits live in Capitol Hill. The 545 reliably takes under 20 minutes to get from the Olive Way on-ramp to OTC, and once there’s a continuous HOV lane, it will be even better. In contrast, East Link is (I believe) projected to take 20 minutes from Westlake to DT Bellevue, and another 10 minutes to OTC. So buses over 520 are not likely to disappear any time soon.

      The main use of the Bellevue-Redmond segment of East Link is likely to be local travelers — people going from Bellevue to Microsoft, or from Bel-Red to DT Bellevue, etc.

      So it’s irrelevant to assert that a particular alignment is better or worse because of Microsoft commuters, since that’s not why we’re building East Link.

      1. I’ll accept that point: EastLink is for downtown Bellevue, not for MS. But as long as the train stops in downtown Bellevue it serves that market well. (As well as serving the market that goes from Bellevue eastward.) I maintain that a fast train gets more usage than a slow train. Central Link ridership has never met Sound Transit’s own projections and I believe that the slow ride through Rainier Valley is to blame.

        I’d still like to have someone explain why it’s beneficial to run a train next to a neighborhood and through a busy downtown rather than running it next to a highway that’s a mere three blocks away. And I’d like to have someone explain why Sound Transit can tunnel through most of Seattle but can’t afford to put a tunnel in Bellevue.

        I support transit. I always have, and I always will. But I think Sound Transit is inept.

    2. B7 has nothing to do with whether light rail will be on the surface through downtown. The downtown alignments are independent of the south Bellevue alignments and will work with either B2 or B7. Since B7 is more expensive than B2, choosing it will effectively kill a downtown Bellevue tunnel, so if you really care about that aspect of East Link you should be advocating for the B2 alignment.

      1. Not entirely true. B7 offers the best approach. The true B2M offered by the council would have done the same. The 112th approach screws up long term plans for Main big time and also future plans for NE 2nd. It’s not at all clear B7 is the most expensive. It was the cheapest in the original ST EIS even though it had unnecessary expenses (i.e. furniture store station). Cost to the City would have been lower if you factor in the costs that would have to be born to prevent gridlock with the expanded S. Bellevue P&R.

  10. I may be paranoid, but I fail to understand how routing a train along an existing transportation corridor is more expensive than going through the city center, especially if the existing rail line can be used. I’d really like to see the math.

    It’s apparent to me that Sound Transit is more concerned about businesses than people’s homes. On 112th they were concerned about saving hotel parking and the Bellevue Club’s tennis courts rather than preserving condominiums and low-income housing. (And yes, I know the condo owners were happy to sell…just think about it for a minute!) And all this talk about environmental impact to the slough, when the slough has a freaking interstate highway running through it, is ridiculous.

    I feel like Sound Transit will say anything to get their way. Even this blog makes spiteful comments that ignore the real issues. I want a train in Bellevue downtown, and if my proverbial backyard were the best route, I’d support it. But there’s a far better routing, just three blocks away.

    Sound Transit doesn’t want to listen to people in Bellevue. I know there are a lot of loudmouthed idiots here (few of whom actually live in Surrey Downs, by the way.) But every time Sound Transit tells me what’s good for me I think of the days when they built a train to Tukwila instead of going to the airport. I want public agencies to be concerned about service. Sound Transit is just focused on winning.

    1. NB: When I say there are “a lot of loudmouthed idiots here”, the here refers to Bellevue. It could also refer to this blog, but I didn’t mean to insult even the most closed-minded of you.

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