Wallace welcomes inquiry on GNP ties

Bellevue City Councilman Kevin Wallace said Monday night he welcomes a city investigation into his business dealings with a short-haul railroad, and he's confident he will be absolved of conflict-of-interest allegations.

"These questions do need to be answered," Wallace said of City Manager Steve Sarkozy's plan to hire an outside investigator. "... I support the decision and I will cooperate with it."

When the investigation is done, he predicted, "it will be shown that there's been no conflict of interest" or improper behavior on his part.

Wallace said his December agreement to help GNP Railway raise $30 million, expand its freight-rail operations and build passenger stations played no role in his long-standing desire to put Sound Transit light-rail trains on the same rail corridor on which GNP hopes to operate trains.

He said the "nonbinding" deal was focused on Redmond, not Bellevue, was contingent on his getting a legal opinion that it wouldn't pose a conflict of interest, and was terminated after GNP ran into financial difficulties that landed it in bankruptcy court.

But Wallace's words did little to dampen the furor over the agreement. Some of the 90 citizens who attended the meeting asked him to resign or recuse himself from future votes on light-rail routing.

Other citizens urged the council to broaden the outside investigation to look into what they said were conflicts involving council members Claudia Balducci and Grant Degginger.

City Attorney Lori Riordan said in response to questions from Balducci and Degginger that she previously looked into whether they had conflicts of interest and concluded they did not. She said she also had looked at other business interests of Wallace's and found they didn't constitute a conflict, either.

Critics of Balducci have suggested her votes on light rail might be improperly influenced by her membership on the Sound Transit board of directors or by her appointment by King County Executive Dow Constantine, a light-rail supporter, as director of county jails.

Degginger once represented Sound Transit in a legal case in Tacoma; and his firm, Lane Powell, continues to represent the transit agency in other issues outside Bellevue.

Mayor Don Davidson said during a break that the council appears to be split 3-3 on the scope of the investigation, and he doesn't want to be the tiebreaker on yet another split vote. "If I want healing, 4-3 votes are not good enough."

Council members Jennifer Robertson and John Chelminiak said Bellevue needs an ethics ordinance that would clarify the boundaries of appropriate behavior.

Robertson said accusations made by citizens and council members about conflicts of interest have been "corrosive to the public process." She also said she learned only on Wednesday that Riordan had issued written opinions on whether three council members had conflicts.

"It was not open and transparent," Robertson said. "I think that has led to a lot of lingering and festering of these allegations."

Chelminiak said he was troubled that Wallace told his colleagues at a February retreat that GNP intended to run trains to the Wilburton area of Bellevue but didn't disclose his relationship with the railway.

"It brings into question a lot of things," Chelminiak said to Wallace. "It brings into question some of your votes, frankly. It brings into question whether or not city staff ... was doing due diligence for your private company. If they were, it's really, really wrong."

Although Balducci doesn't have a conflict between her Bellevue and Sound Transit positions, Riordan said, a conflict could arise if the two entities find themselves in a legal battle.

Balducci, saying her appointment to the Sound Transit board was "no secret and it's nothing new," said she wants an investigation that focuses on "the recent revelations that have come out, because we need to regain the public trust."

Keith Ervin: 206-464-2105 or kervin@seattletimes.com