Probe sought in SafeHarbor relationships

May 31, 2002 

House Minority Leader Clyde Ballard called for legislative hearings to investigate a government agency's relationship with SafeHarbor and the money it spent on buildings, equipment and infrastructure for the Internet start-up company.

Ballard (R-East Wenatchee) said he wants the Legislature to review the Grays Harbor Public Development Authority, which the state set up as a landlord at a business development park in Satsop. SafeHarbor remains the park's primary tenant.

Ballard said a News Tribune investigation and a state audit that uncovered conflicts of interest among the PDA's board members and SafeHarbor, along with evidence the agency broke state laws to help the company, raised questions about Grays Harbor's PDA and about public development authorities in general.

"We need to set up a hearing immediately and have an exhaustive hearing on it," Ballard said. "There are major questions being asked. Ultimately they're going to have to be answered."

Ballard also said he planned to investigate a major contract the state Department of Information Services awarded SafeHarbor and any relationship the contract might have had to the governor. Gov. Gary Locke, a Democrat who helped the company on several other occasions and whose brother-in-law was SafeHarbor's chief financial officer for the past three years, has said he had no involvement in the contract.

To date, the state has paid SafeHarbor $460,000. The agreement, called a master contract, allows government entities ranging from large state agencies to tiny fire districts to use SafeHarbor's services. The company provides technical support and telephone customer assistance for Web sites.

"Basically, the state was their sugar daddy," Ballard said.

DIS spokeswoman Nancy Jackson said she would not comment on Ballard's request, which he sent Wednesday, until she received his letter.

House Speaker Frank Chopp (D-Seattle) said he also would wait to respond to Ballard's request for hearings until he receives Ballard's letter. In the meantime, he said, he asked his staff to look into the issue. Chopp also said he planned to talk with lawmakers from Grays Harbor County about the PDA and SafeHarbor.

House Majority Leader Lynn Kessler (D-Hoquiam) said the seven-member PDA board is made up of reputable people who may not have paid enough attention to detail in their dealings with SafeHarbor.

Among other things, the state auditor said in a draft report that the PDA ignored the state constitution's prohibition against lending public money to support a private company and skirted public bid laws when it remodeled one building for SafeHarbor and built the company a second office building. "We could do the Enron-Congress approach, but I don't think it's that big of a deal," Kessler said.

SafeHarbor executives refused to comment Wednesday. Tami Garrow, the chief executive officer of the Public Development Authority, did not return a telephone call.

SafeHarbor executives announced Wednesday that venture capitalists, led by Olympic Venture Partners, pumped a lifesaving $7.5 million into the company. SafeHarbor co-founder Bill Miller is a general partner at the Kirkland-based firm.

SafeHarbor CEO Brian Sterling said in an interview earlier this month that he hoped the company would be profitable by the first quarter of 2003. Sterling said earlier this month that the company continues to lose about $500,000 a month. Without the latest round of investor cash, the company would have gone under, he said.

Had SafeHarbor failed this year, likely the entire business park would have collapsed along with it.

To keep the company afloat, the PDA agreed over the last few years to rewrite several of its leases to stretch out SafeHarbor's payments. SafeHarbor occupies a 48,000-square-foot office building at the park, the former site of a planned nuclear power plant.

SafeHarbor also rents office furniture and other supplies from the PDA. The company moved out of its second building at Satsop last year when it started losing its customers during the dot-com bust.

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The Associated Press contributed to this report.

* Staff writer Beth Silver covers politics. Reach her at 360-754-6093 or beth.silver@mail.tribnet.com.

© The News Tribune

03/28/2002

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