Firm disputes cost overruns fixed by state of Maryland

Attorneys for Gebhardt & Smith LLP and the Maryland Port Administration sparred in court Tuesday over how the state calculated operating cost overruns that it says the law firm -- once the largest tenant at the World Trade Center-- must help pay.

Both sides questioned Joe Ford, the MPA's assistant comptroller. Ford heads the department that calculates operating costs at the Pratt Street tower and bills tenants for their share of those costs.

Ford told Judge M. Brooke Murdock in Baltimore City Circuit Court that the MPA relied on input from certified public accountants in computing the charges.

The state is suing the firm over $317,500 in rent surcharges, an amount the MPA says has grown to more than $400,000 with interest. Gebhardt & Smith claims the charges increased dramatically beginning in 2001, and the state did not follow the proper procedures in calculating the charges.

Though commercial tenants regularly pay for operating costs that are not covered by their lease payments, Gebhardt & Smith believes the state inflated World Trade Center costs to make the building look profitable and boost revenue during a fiscal crisis. The firm also claims that it did not get cost estimates in advance, which the firm argues could have helped it pay the charges gradually.

When questioned by Lawrence J. Gebhardt, senior partner with the firm, Ford said the MPA could have provided those estimates in June, as the lease requires, but did not because that month is the end of the fiscal year, a very busy time for his office.

Gebhardt & Smith argues that the MPA should have had independent accountants calculate the operating expenses and says the state relied too heavily on internal auditors. The firm says it is in the MPA's interest to overstate expenses to make the building appear more profitable.

When questioned by MPA attorney Philip P. Whaling, Ford said the expenses were calculated by the MPA, then reviewed by the Maryland Department of Transportation before being checked by an outside accountant.

Ford said operating cost bills were never sent out until they had been reviewed by a certified public accounting firm, and if a firm suggested a change, his office would make that change.

The firm has argued that its lease requires a CPA firm to determine the expenses, and the state did not satisfy that requirement.

Gebhardt questioned Ford's credentials, establishing that Ford is not a CPA and had not been previously experienced in calculating operating expenses at commercial office buildings. Ford said he was familiar with the leases in the World Trade Center and was helped by 13 years as an internal auditor in the banking industry.

Ford said it may have been costly to bring in a CPA at the start of the process because an independent firm would not have been familiar with the systems at the MPA.

"We would basically have to show them how to do it, when their job is to review the final result," he said.

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