Knoxville officials are dealing with the aftermath of a riverfront contractor�s bankruptcy

by Mike Gibson

With the red clay turned and heavy machinery deployed amidst an embryonic concrete kingdom, the city's $40 million Volunteer Landing Park and Gateway Village riverfront development is taking shape as one of the most ambitious public/private partnerships in Knoxville history.

But the questionable business practices and recent closing of a Boston design firm has cast a measure of doubt on the timely finish of one of the site's linchpin attractions, the Gateway Regional Visitor Center.

According to spokesman Craig Griffith, the city has paid Joseph A. Wetzel Associates Inc. about $1.19 million of a $1.58 million contract to coordinate the design and construction of exhibits for the visitor center. When the city received notice in July that the firm was closing—the result of outstanding debts in other business dealings—a subsequent investigation revealed that two of Wetzel's subcontractors had not received a portion of the money earmarked for their services, and that the firm may have wrongfully charged the city for work it had not yet completed. The discrepancy totals some $400,000.

"We think that in billing us for work not done and accepting money he did not pay to subcontractors, that this is not just a breach of contract; we definitely feel there was some level of misrepresentation involved," says attorney Wendell Thomas Jr. of Knoxville's Kennerly, Montgomery, and Finley. Thomas has filed suit in U.S. district court on behalf of the city and KCDC, its agent in the contract, seeking $1 million in punitive and compensatory damages.

Volunteer Landing is the much-ballyhooed public/private development conceived to take advantage of the city's scenic but long-underutilized downtown waterfront acreage. Loosely designed around the city motto, "Where nature and technology and meet," the site will feature a two-story, 12,000-square-foot combination retail outlet and University of Tennessee research facility, the Regas Riverside Tavern restaurant, two condominium developments, the Vol Landing Marina, and the River Club at the Boathouse—a restaurant to be constructed near Neyland Stadium.

The focal point of this tourist lodestone-in-the-making, however, will be the visitor center, a project that has seen the city collaborate with the National Park Service, Lockheed-Martin Energy Research Corporation (from the Oak Ridge Department of Energy facilities), Lockheed Energy Systems, the Department of Energy, Great Smoky Mountains National History Association, and the Knox County Tourist Association. "We believe the visitor center is one of the few, if not only, instances where a city has partnered with federal agencies in this particular fashion," says Griffith.

To be operated by the National Park Service, the center was first conceived as the Gateway Pavilion, the name change reflecting a desire to appeal more directly to the tourist market. As the Gateway component most representative of the nature/technology theme, the center will serve as a herald for such outdoor attractions as Great Smoky Mountains National Park, Cumberland Gap, and Big South Fork, and such area scientific loci as the University of Tennessee and the Oak Ridge National Laboratory.

Plans for the visitor center commenced in early 1997, when the city sought the expertise of Wetzel Associates for coordination of exhibits. "It's an important job when you've got to work with a number of different subcontractors doing a number of different things, and Wetzel was supposedly one of the preeminent production design companies in the country," says Thomas. The New England firm, having designed and developed exhibits for museums all over the country, had previously overseen a number of similar projects for the National Park Service.

Initially, Wetzel's efforts were well-received. Plans call for the visitor center to feature a natural atrium showcasing the region's natural and cultural resources; the Smoky Mountain Overlook Theater, a multi-media presentation highlighting cultural/historical/technological wonders of the area; a technology garden with exhibits from the Oak Ridge DOE complex; and the Passport, an interactive Internet-based database that will allow visitors to access regional points of interest and download information.

In all, Wetzel enlisted six subcontractors at a projected cost of just over $1 million. ExPlus, the most expensive of the six at roughly $600,000, will build display cases for the center; the Donna Lawrence production house is producing a 12-minute film for the Gateway Theater ($268,135); Science Applications International Corporation (SAIC), a California-based firm with an Oak Ridge outpost, will engineer the Passport Internet software program ($80,000); Knoxville's Media South is designing an interactive tour of national parks, a software program utilizing touchscreen and photobubble (a computer technology that permits a 360-degree viewing of a room or scenario) at a cost of $90,000; the Communication Electronics Group will produce hardware for video and lighting ($77,307); and Joehn Boesche, a Chicago lighting designer, is overseeing the center's theatrical lighting ($4,600.)

"What we got from them was very creative," says Suzanne Barrett, project coordinator for the Park Service, a liaison of sorts in the Gateway project. "The work being done has been high quality. We have a vast area of resources to highlight, and it's a real chore to figure out which ones to emphasize."

Adds Griffith, "The plans they've come up with have been fine; they pleased all of our partners in this."

All seemed well until July of this year, when Wetzel's subcontractors all received letters announcing that the firm was ceasing operations in the wake of a foreclosure, stemming from an outstanding loan involving the New England-based Fleet Bank. The subcontractors sent the letters to the city, and a subsequent investigation revealed apparent discrepancies in Wetzel's billing. "It was a big surprise to everybody," says Barrett. "I don't think there was any fault on the part of the local officials; it was pretty much unforseeable. They had been considered a very reputable firm in the industry."

According to Thomas, Wetzel was required to send a payment application to KCDC as portions of the work were completed. Thomas says that upon comparing notes with the various subcontractors, the city found that not only had Wetzel received $200,000 for work that had not been performed, but the company apparently kept an additional $200,000 it had received for work done by ExPlus and Donna Lawrence. The missing funds are believed to have been pooled with the company's remaining assets to pay its prior debts.

"The scenario as described to us was that the money was put into one pot and the company's expenses were paid out of that," says Griffith. "It may be difficult to retrieve the money. Wetzel is basically an intellectual capital type of company. Their assets consist mainly of a few phones and some office furniture."

The city's answer has come in the form of the aforementioned lawsuit. Knox County District Attorney General Randy Nichols has also turned the matter over to his white-collar crime unit. The attorney general's office couldn't comment on the case, as the investigation is ongoing.

Thomas says Wetzel and its law firm, Less, Getz, and Lipmann out of Memphis, had until Monday, Aug. 31 to respond to the city's suit. When no answer was filed, Thomas filed a request for default, asking the judge to rule in the city's favor.

"If they grant the default, the lawsuit is over; but the judge can grant them additional time to answer if they think they have a good excuse for missing the deadline," Thomas says. "But even if they are granted more time, I can't imagine any valid basis they could claim a defense. We've paid more than we owe, on a very timely basis."

Wetzel's attorney did not return calls for comment.

In the meantime, Knoxville officials expect the foreclosure to have little or no effect on the completion of the visitor center. Although the city (and Knoxville taxpayers) will bear the brunt of the loss if the lawsuit is unsuccessful, all of the subcontractors have agreed to work directly with the city for the duration of the project, keeping further expenses to a minimum. The opening date is uncertain, however—Griffith says officials can commit to nothing more specific than spring of '99.

"The subcontractors have been very good," Griffith says. "They're keeping the costs close to the original agreement, and we're very grateful to them."

"We feel very confident the city will have everything in place on a timely basis," says Barrett. "They've been working at shoring up any problems fast and furious."