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HAS Development Corp. letter to Texas Attorney General

HAS Development Corp. letter to Texas Attorney General



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Published by: jpeebles on Jul 17, 2009
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1803 South BoulevardHouston, Texas 77098
 Attorney at Law
The Honorable Greg AbbottTexas Attorney GeneralP. O. Box 12548Austin, Texas 78711-2548Attention: Open Records DivisionRe: AG ID# 351739; Texas Public Information request dated May 26, 2009, fromJennifer Peebles for information pertaining to the Houston Airport System, andthe Houston Airport System [sic] Development Corporation.Dear General Abbott:I am General Counsel to HAS Development Corporation, a Texas nonprofit corporation(“
”). My client’s name has been incorrectly referred to in prior correspondence withyour office. It is not “Houston Airport System Development Corporation” but “HASDevelopment Corporation.”I am writing with regard to the captioned request in response to a letter dated June 16, 2009 fromthe City of Houston Legal Department (“
City June 16 Letter
”). By a copy of the City June 16Letter mailed to me, Assistant City Attorney Evelyn W. Njuguna advised me that she had soughtyour office’s advice as to the exception from public disclosure of certain commercial or financialinformation of my client, a representative example of which is contained in Exhibit 3 to herletter.I received by mail a copy of the materials included in Exhibit 3 on June 23, 2009 (“
Exhibit 3
”). By your rules, I understand that I have ten (10) business days, or until July 8, 2009 torespond. As required by section 552.110(b) of the Act, I wish to demonstrate “based on specificfactual evidence that disclosure would cause substantial competitive harm to the person fromwhom the information was obtained.” Because of the complexity of the issues involved, I amincluding factual evidence in this letter addressing certain statutory exemptions under the Actidentified in the City June 16 Letter. In addition, HASDC believes other statutory exceptionsmay exist under the Act. Accordingly, I wish to reserve the right to supplement this letter untilthe end of ten (10) business days allowed by law (July 8, 2009).Because of the unique factual structure involved, I have prepared a “Background” section thatwill aid in understanding the “factual evidence” that follows, as is required by the Act.
1.HASDC, as a private nonprofit corporation, recognized by the IRS as a 501c-3 organization.HASDC is not a “governmental body” subject to the Act. Although Act’s definition of “governmental body” does include certain nonprofit corporations in clauses (ix), (x), (xi) and(xii), HASDC does not fit any of them. The last clause (regarding publicly supportedcorporations) does not apply to HASDC as it has not received any public support. All of HASDC’s revenues have come from sales of services and investments. Moreover, rather thanreceiving public support, HASDC supports the Houston Airport System (the “
Airport System
”).Over the years, it has paid substantial amounts to the Airport System. HASDC was not createdby the Airport System or by City of Houston, and it is not controlled by the Airport System or bythe City of Houston. Although the Director of the Airport System sits on its board, the majorityof directors of HASDC are appointed by entities other than the City of Houston. A moreelaborate description of the reasons that HASDC is not a “governmental body” subject to the Actwill be forthcoming to your office under separate cover in response to another TPIA request filedby Jennifer Peebles that was directed to HASDC.2. Although HASDC is not subject to the Act, there are certain public documents regarding (i)the creation of HASDC and (ii) its relationship with the City of Houston and the Airport System,which are governmental bodies subject to the Act. In the City June 16 Letter, you were providedtwo such documents, the Articles of Incorporation of HASDC in Exhibit A and certain technicalservices agreements between HASDC and the City of Houston (on behalf of the Airport System)in Exhibit B. I wish to incorporate those by reference into this letter. Additionally, I would liketo submit one more public document available in the public records of the City of Houston(entitled “Agreement-Quito Airport Project”) (a copy of which is attached as
Exhibit 1
) (“
2001City/ADC Agreement”
). Based upon these three public documents, and other publiclyavailable information about the Quito airport project, I would offer the following backgroundinformation with respect to the matter under review. Because it is drawn from public sources,HASDC offers the following background information without waiving any of its rights toconfidentiality of non-public information.3. In 2001 (before the creation of HASDC), the City of Houston and its Airport System wererequested by Airport Development Corporation, a Canadian corporation (“ADC”) to participatewith ADC in connection with a proposal to obtain a 35-year concession from the municipality of Quito, Ecuador for the design, construction, financing and operation of a new airport for Quito,which is the capital of Ecuador. After due consideration, the City of Houston’s City Councilapproved, on behalf of the Airport System, the 2001 City/ADC Agreement. It called for theAirport System to provide certain airport technical services to ADC for agreed upon payments.The Airport System was willing to provide such services directly to ADC during thequalification and bidding phase, when the City deemed the risks to be minimal. However, the2001 City/ADC Agreement was clear that if ADC’s bid were accepted, the Airport Systemwould cease providing such services directly to ADC and instead require that such services bemarketed to ADC through an independent, private nonprofit corporation to be formed for thebenefit of the Airport System (referred to in the 2001 City/ADC Agreement as “NPC”). Section3.a of the 2001 City/ADC Agreement states that the NPC “will have the ability to act as a privatenon-profit corporation and will have the power to enter into partnerships, ventures and other
3commercial relationships and to participate in the formation of and to hold ownership interests inthe SPC [a special purpose limited liability company]” and that “NPC will be granted a 5%carried ownership interest in the SPC.” The 2001 City/ADC Agreement further contemplatedthe creation of, and NPC’s participation in, a consortium to acquire any concession granted forthe Quito airport through a “second special purpose limited liability company to be incorporatedin Ecuador (‘Holdco’)”.4. After the ADC group was selected to be awarded the Quito Airport concession, HASDC wasformed as the “NPC” contemplated in the Agreement (see Exhibit A to the City June 16 Letter).HASDC was not created by the City of Houston, but by me with three incorporators as permittedunder Texas general law for nonprofit corporations. The Houston City Council authorized theAirport System to enter into agreements (see Exhibit B to City June 16 Letter) with HASDCupon the condition that the Airport System be paid on a current basis for all technical servicesrendered at cost plus 80% plus a future interest in certain net profits. Moreover, the agreementrequired HASDC to indemnify the Airport System and the City. The agreement for the Quitoproject is referred to as the “Quito Technical Services Agreement”. This was in fulfillment of theterms of the 2001 City/ADC Agreement which contemplated that Airport System services wouldbe provided through the NPC [HASDC] intermediary once ADC secured the award of the bid forthe Quito Airport concession.5. Also as contemplated in the 2001 City/ADC Agreement, HASDC and a subsidiary of ADCformed a Quito airport management company referred to in the Agreement as SPC(“Management Company”) in which HASDC was granted a 5% carried equity interest (i.e.without payment of a purchase price), and HASDC has also obtained a carried equity interest inan Ecuadorian corporation created by ADC and others, which is referred to in the Agreement asHoldco
Concession Company
6. HASDC’s equity interests in the Management Company and the Concession Company arerepresented by shares of stock that constitute “securities” within the meaning of the SecuritiesAct of 1933 and Securities Exchange Act of 1934 and similar laws of the United Statesregulating, among other things the release of information with respect to securities. Furthermore,HASDC has reason to believe that such shares of stock also constitute securities, undercomparable securities laws of Canada, various jurisdictions within the United Kingdom andperhaps Ecuador. Pursuant to applicable legal exemptions, none of such securities are registeredand none trade on public securities exchanges. Nonetheless, antifraud provisions of the UnitedStates securities laws (e.g. Rule 10b-5 promulgated by the Securities and Exchange Commissionunder Section 10b of the Securities Exchange Act of 1934, 15 U.S.C. section 78j(b)) and othersimilar laws in Canada, the United Kingdom and perhaps Ecuador may similarly apply to thedissemination of information that, as a result of incompleteness or lack of explanation, ismaterially misleading in connection with any offers for the purchase or sale of securities such asthese. As a result, HASDC is concerned that the release of information such as the Exhibit 3Data could, if deemed incomplete and misleading, be inconsistent with applicable securitieslaws..7. As a private nonprofit corporation, HASDC is able to engage in commercial transactions of akind not legally available to the Airport System (e.g. such commercially common activities as

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