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- 1. Partly sunny: High87, Low 76Tuesday, May 24, 2016 | HoustonChronicle.com and Chron.com | Vol. 115, No. 224 | $2.00 xxx Clowneysayshefeels‘great’ asTexansstartOTAsPAGE C1 Index Business ... B1 Comics......D4 Crossword ..D3 Directory ...A2 Editorials. A15 Horoscope .D5 Lottery ...... C5 Markets.....B4 Obituaries . B7 Sports....... C1 TV ............D3 Weather ... B8 NATION Baltimore officer cleared in Gray case Prosecutors fail for the second time to hold Baltimore police accountable for the death of Freddie Gray when an officer is acquitted in the case that triggered riots. Page A9 BUSINESS UH-Downtown to expand its campus north The University of Houston-Downtown plans to buy a large swath of land north of its campus for an expansion that will bring it new academic and student life facilities. Page B1 CITY | STATE Ex-VP for police credit union gets prison term A retired vice president for the Houston Police Federal Credit Union is ordered to pay $1.2 million in restitution for embezzling. Page A3 WORLD Anti-migrant candidate loses in Austria A pro-European Union candidate ekes out a victory over a right-wing rival to become the next president. Page A10 1151901-2016 Houston Legends: The legacy of Ima Hogg includes the Houston Symphony and much more. Page A6 SPONSORED BY Houston Chronicle The Main Street campus will grow to 40 acres after deal. Tammy Huynh didn’t recognize her dad when she saw him for the first time after eight years. Like many of her South Vietnamese friends, she’d grown up fatherless while the men served time in communist re-education camps, where many were tortured. “It was terrible,” said the 42-year-old Houston real estate agent who came to the United States with herfamilyin1990. Even for the hundreds of thousands of Vietnam- ese who escaped the new Hanoi government, risk- ingtheirlivesonmakeshift boats or holing up in refu- gee camps in the Philip- pines, their memories of thecommunistcountryare traumatic. Fleeing it and starting over with nothing is the defining feature of theirlives. So President Barack Obama’s announcement Monday that Washington would lift a decades-old arms embargo and al- low Vietnam to buy lethal military equipment was met with mixed feelings: a grudging recognition that geopolitics in the region had changed but also a re- By Lomi Kriel Vietnam continues on A13 Members of Houston community express concern about human rights ›› See how immigrants from around the world transform the city at HoustonChronicle.com/local/themillion Lifting Vietnam arms ban stirs mixed feelings President Barack Obama and national security adviser Susan Rice meet Vietnamese officials Monday in Hanoi. Carolyn Kaster / Associated Press ›› Obama’s decision to sell arms to Vietnam is seen as a warning to China. Page A10 Angela Sugarek plays with her foster child Monday after he and his brother were returned to Sugarek and her wife, Carol Jeffery, by Child Protective Services. Lisa Falkenberg column on page A3. Family together again Michael Ciaglo / Houston Chronicle WASHINGTON — As Republicans start to co- alesce around Donald Trump’s presidential campaign, a high-stakes game is playing out over what role defeated rival TedCruzcouldplayatthe party’s July national con- ventioninCleveland. Almost three weeks sincetheIndianaprimary that knocked Cruz out of therace,theTexassenator continues to withhold his supportfortheoutspoken real estate mogul, whom heattackedas“utterlyim- moral” and a “pathologi- calliar.” At stake for Cruz is a coveted speaking slot at theconvention,aplatform that served as a launch pad to the White House for Presidents Ron- ald Reagan and Barack Obama. With his eye on 2020, Cruz faces a difficult time of choosing between his conservative principles and the pragmatic need for party unity in the face of the coming fall clash with presumptive Demo- cratic nominee Hillary Clinton. Officials in the Trump and Cruz camps — the top two rivals in the GOP nomination battle — de- clined to comment on their plans for a possible Cruz’s role in Cleveland up in air By Kevin Diaz Cruz continues on A13 HISDsuspendedauditorafterheateddispute Houston’s school board removed its chief auditor after he reported potential violations of state law to police, shared information with the FBI and called out a board member for breaking competitive bid- ding rules, newly obtained documents and interviews show. At one point last fall, after the auditor, Richard Patton, released an audit blaming cost overruns in the Houston Independent School District’s $2 billion construction program on insufficient competitive bidding and inadequate monitoring, he was cas- tigated by the school dis- trict administration for recklessness and “flawed methodology.” Patton fired back in an email, recently obtained by the Houston Chronicle: “I am going to say this only once — this district does not want the real dirt to be published. ... What is the value in having a gunfight that you seem to desire?” Three days before his March 10 suspension, Pat- ton received an email from the district’s treasurer, asking him whether HISD had been the subject of any significant civil or crimi- nal investigations in the last two years. The trea- surer was seeking infor- mation that may need to be disclosed to potential in- vestors as HISD prepared for a $757 million bond of- fering as part of its ongo- By Ericka Mellon HISD continues on A14 Documents show Patton talked with law enforcement over contracting After slipping for three straight months, regional newvehiclesalesplummet- ed by more than 30 percent in April from a year earlier, suggesting that economic jitters in the oil patch have consumers in Houston hunkering down for leaner times. “When auto sales start to fall, that’s a suggestion that consumer confidence is falling as well,” said Pat- rick Jankowski, senior vice president of research with the Greater Houston Part- nership. Year to date, sales are down 13.2 percent — a far steeper decline than the 4 percent annual dip that was forecast at the begin- ningoftheyear. The numbers stand in stark contrast to national figures showing Ameri- cans brought 3.5 percent more new cars, trucks and By Mike D. Smith Auto continues on A13 Plunge in auto sales suggests economic jitters rising here By the numbers -13.2%: Year-to-date decline in new vehicle sales in the Houston area. 23,652: Number of new vehicles sold in the Houston area in April. -11,600: Drop in sales of new vehicles in April compared to last year. -3.2%: Sales of vehicles priced under $30,000 took the biggest hit here.
- 2. Houston Chronicle |Tuesday, May 24, 2016 | HoustonChronicle.com and Chron.com Section B xx BUSINESS AT A GLANCE DOW 17,492.93, down 8.01 (-0.0 %) S&P 500 2,048.04, down 4.28 (-0.2 %) CRUDE OIL $48.08, down 33¢ (-0.7 %) NATURAL GAS $2.055, down 0.7¢ (-0.3 %) @HoustonChronHouston Chronicle Germany’s Bayer offers $62 billion for Monsanto. INSIDE Page B3 A federal appeals court dealt a blow to the federal government’sefforttohold Bank of America account- able for the sale of shoddy mortgages before the fi- nancial crisis, overturning a $1.27 billion penalty the bank had been ordered to pay in the so-called “hus- tle”case. A three-judge panel ruled on Monday that federal prosecutors had failed to prove that Bank of America’s Countrywide unit had defrauded Fannie Mae and Freddie Mac, the government-backed mort- gage firms, when it sold themtroubledloans. The judges said that while Countrywide em- Court backs Bank of America MORTGAGES By Michael Corkery NEW YORK TIMES ‘Hustle’ on B2 A small movie theater chain tallied another win toward its lawsuit alleging that AMC Entertainment Holdings and Regal En- tertainment Group are col- laborating and pressuring studios to restrict access to majorreleases. On Monday, iPic Enter- tainment announced that AMC’s requests to end the lawsuit were denied. Hamid Hashemi, CEO of iPic, said AMC denied it conspired with Regal and also claimed state District Court in Harris County wasnottherightvenue. “It’s really exciting for us and other smaller ex- hibitors because for the first time a court is look- ing at it,” he said. Florida- based iPic operates 13 lux- Small theater chain wins ruling NEW MOVIES By Andrea Rumbaugh Brett Coomer / Houston Chronicle Hamid Hash- emi, iPic En- tertainment CEO, tried out a seat before one of his the- aters opened in Houston last fall. His company is suing two major theater chains. Theater continues on B2 T HE UNIVERSITY of Houston-Down- townplanstobuya large swath of land north of its Main Street campus for an expan- sion that will bring new aca- demic and student life facili- tiestotheuniversity. The school received ap- proval from the University of Houston System Board of Regents to pay $13.2 million for the 17-acre property cur- rently ownedby a partnership thatincludestheMetropolitan TransitAuthorityandaHous- tonrealestatedeveloper. The partnership, Welling- ton Fisher, has owned the acreage for more than a de- cade, after buying it from Ha- keem Olajuwon, the former Houston Rocket star who’s alsobeenarealestateinvestor. “This land has been on the university’s radar for a long time,” said David Bradley, UHD’s vice president for ad- ministration and finance. “We hoped one day we could own it.” It was once being consid- ered for a intermodal transit project, but Metro abandoned UH-Downtown to expand REAL ESTATE School wins OK for purchase of 17 acres north of its campus for $13.2 million; science and technology building planned Metro’s light rail serves the UH-Downtown campus. The school plans to buy land north of its Main Street home. Houston Chronicle file UHD continues on B2 By Nancy Sarnoff Chronicle 45 45 10 W hiteOakBayou Naylor Burnett Franklin University of Houston - Downtown Commerce Main MilamTravis Fra 500 ft. 5 W School site The oil drillers that scour the world for new sources of petroleum stayed home last year, discovering the lowest amount of oil outside of North America in more than60years. Dissuaded by a severe energy downturn that made survival the high- est priority for many companies, the industry discovered 2.8 billion bar- rels of crude outside of North America last year, the lowest amount since 1952, according to a report released Monday by the research firm IHS Energy. Most of the new reserves werefoundoffshore. Last year’s discoveries amounted to just a fraction of the historical average of about 13 billion barrels a year, according to IHS. For the first time, oil dis- coverieshavedeclinedfour consecutive years, IHS said, meaning that in a few years, despite the current glut, it will be difficult for the industry to restock the world’senergysupplies. “Exploration has been charged with providing a quarter (of the oil and gas the world demands), but it has fallen short,” said Bob Fryklund, chief upstream strategist at IHS Energy. “We’regoingtohavetorely onotherresourcestomake upthedifference.” More than 70 publicly traded oil companies cut their exploration spend- ing by a third last year to cope with the plunge in oil prices. Houstoncompanieslike ConocoPhillips,Anadarko Petroleum Corp. and EOG Resources cut spending for the search for crude by a combined $15 billion last year. ConocoPhillips, the third-largest U.S. oil com- pany, said last year that it plans to wind down its deep-water exploration businessin2017. Another Houston com- pany, Apache Corp., cut exploration spending by nearly two thirds, to $4.5billion. Meanwhile, Mara- thon Oil Corp., also based in Houston, reduced its By Collin Eaton Drillers in 2015 found lowest amount of oil outside of North America in more than 60 years, report says Crude exploration wanes amid the energy downturn Ocean continues on B2 The hostile takeover bid by Houston-based West- lake Chemical to acquire Atlanta’s Axiall Corp. could become a bit more amicable now that Axiall is expressing a new open- nesstoconsideringrevised offers. Westlake President and CEO Albert Chao has cov- eted the Atlanta-based Ax- iallforyears,andlaunched a proxy battle to replace Axiall board members who have blocked West- lake’s bid with his own slateofcandidates.Axiall’s shareholdersmeetJune17. Axiall’s chief financial officer, Gregory Thomp- son, has asked Westlake to submit a new offer by June3,WestlakesaidMon- day. Axiall rejected an ini- tial $1.4 billion offer from Axiall more open to a deal WESTLAKE CHEMICAL By Jordan Blum Westlake continues on B2
- 3. B2 | Tuesday,May 24, 2016 | Houston Chronicle | HoustonChronicle.com and chron.com x x Monday’s appeals court ruling in the “hustle” case represented a departure for Bank of America, which settled most of its mortgage-related charges before they went to trial. The bank is based in Charlotte, N.C. Saul Loeb / AFP / Getty Images file ‘Hustle’ from page B1 ‘Hustle’ mortgage ruling goes against prosecutors ployees may have sold loans in 2007 and 2008 that were not of the quality that was promised in the contracts with Fannie and Freddie, there was no evi- dence that these sales — an element of a loan program at Countrywide that was known informally as hus- tle—werepartofadeliber- atedeception. “The trial evidence fails to demonstrate the con- temporaneous fraudulent intent necessary to prove a scheme to defraud,” Judge Richard Wesley wrote in a 31-pageruling. The ruling by the 2nd U.S. Circuit Court of Ap- peals is one of a few set- backs in the Justice De- partment’s prosecution of Wall Street after the mortgage crisis. It is also a disappointment for Preet Bharara, the U.S. attorney for the Southern District of New York, who brought the prosecution against Bank of America and called its practice of rub- ber-stamping risky loans and selling them to Fan- nie Mae and Freddie Mac “spectacularlybrazen.” The bad lending ulti- mately required a taxpay- er-financed bailout of the nation’s biggest banks, in- cludingBankofAmerica. In2014,JudgeJedRakoff of the U.S. District Court in Manhattan ordered the bank to pay a $1.27 billion penalty in the hustle case. But that sum is a small fraction of the tens of bil- lions of dollars the bank has paid in legal fees and settlements related to Countrywide, which Bank ofAmericaboughtin2008. Since 2010, Bank of Amer- ica has spent $37 billion on litigationexpenses,mostof itrelatedtothelegalfallout fromthefinancialcrisis. The hustle case stood out because in addition to Bank of America, pros- ecutors had sought to hold RebeccaMairone,aformer Countrywide executive, li- ableforthefaultyloans. It also represented a de- partureforBankofAmeri- ca,whichsettledmostofits mortgage-related charges before they went to trial. But from the beginning, the bank’s lawyers were betting they could win the hustlecase. “The 2nd Circuit under- stood this was a massive government overreach from the beginning,” said Josh Rosenkranz, who represents Mairone. “The message is that govern- ment should stop looking for fraud where it doesn’t exist.” The U.S. can ask the en- tire panel of the appeals court judges to reconsider the ruling. A spokesman for Bharara declined to commentonthedecision. The case was called hustle because the gov- ernment’s case involved a program at Countrywide known as the High-Speed Swim Lane that the lender createdtosellmortgagesto Fannie and Freddie as the subprime mortgage mar- ketwasimploding. Duringthetrial,inOcto- ber 2013, federal prosecu- tors accused Mairone of overseeing the high-speed lane program that pushed through loans to unquali- fied buyers and ultimately failed, causing more than $1 billion in losses. The faster that employees orig- inated loans, the higher theirbonuses,accordingto testimony. The appeals court ruled that Countrywide’s con- tracts with Fannie and Freddie may have includ- ing false statements. But even“intentional”contract breachesdidnotconstitute fraud on the part of the lender,therulingsaid. The ruling is also a vindication for Mairone, who worked at JPMorgan Chase at the time of the tri- al and had to leave her job afterthejuryconvictedher on one count of fraud, her lawyersaid. Theappealscourtruling means Mairone does not have to pay the $1 million penalty that the district courthadordered. The government’s case was based on a whistle- blower complaint origi- nally brought by Edward O’Donnell, a former Coun- trywideexecutive. O’Donnell received $57 million from the govern- ment for his role in bring- ing the issues to light. His lawyer said the appeals court ruling would not af- fectthatpayout,whichwas tied more broadly to his work helping federal pros- ecutors reach a $16.65 bil- lion settlement with Bank ofAmericainAugust2014. urytheatersnationwide. Paul Yetter of Hous- ton-based Yetter Cole- man, which is represent- ing iPic, called the ruling important because it allows the plaintiffs to presentevidencethatRe- gal and AMC conspired againstiPic. “The court’s ruling allows us to expose this conspiracy at trial,” he said.Thetrialisslatedfor Oct.3. River Oaks District The lawsuit was filed in November, the same month that iPic opened an eight-screen, 578-seat theater in Houston’s Riv- er Oaks District luxury shopping and residential development on West- heimer. Regalthreatenedmov- ie studios, iPic alleges, by telling them it wouldn’t play recently released movies at Edwards Greenway Grand Pal- ace Stadium 24 & RPX if studios also licensed the films to iPic Houston. IPic won an injunction in January to stop such practices. The boutique theater chain likewise alleges that AMC is using the same tactic toward a theater it’s building in Frisco, about 25 miles north of downtown Dal- las. That theater is slated toopeninlate2017. AMC, Regal An AMC spokesman said in an email that the company doesn’t com- ment on pending litiga- tion, and Regal didn’t respond to requests for comment. In court fil- ings, AMC said there is “not a scintilla of evi- dence of any conspiracy between AMC and Re- gal. Instead, the evidence that has been uncovered affirmatively refutes any communication or coor- dination between AMC and Regal regarding iPic orclearances.” Hashemi said he’s go- ing to court for damages — some studios didn’t license movies to iPic be- foretheinjunction—and to get protection for iPic nationally. “They’re using their size and power to stop competition,”hesaid. Theater chain takes on 2 bigger rivals Theater from page B1 andrea.rumbaugh@chron.com twitter.com/andrearumbaugh nancy.sarnoff@chron.com twitter.com/nsarnoff those plans several years ago after spending $41 mil- liononit. The authority owns the land in partnership with developer Rocky Stevens. Metro referred questions about the sale to Stevens, who was not immediately availableforcomment. “I believe that the new campus footprint will be viewed as among the most significant developments in the university’s insti- tutional history,” board Vice Chairman Welcome Wilson Jr. said in an an- nouncement Monday. “This land acquisition as- sures UHD has the needed acreage for enrollment growth, campus expan- sion and development of new academic pro- grams.” The land is expected to house a new science and technology building, ap- proved by the Texas Legis- laturelastspring. The university is in the process of selecting an ar- chitectural firm to design the building, which UHD hopes to have open by summer2019. Much of the land is in the 100-year floodplain, so development will require approval from the Harris County Flood Control Dis- tricts,Bradleysaid. “Our plan is to leave a lot of it green for the fore- seeable future,” Bradley added. The acquisition will in- crease the size of the uni- versity’s downtown digs to 40 acres on both sides of Interstate10. The 17-acre tract an- nounced Monday will give the university control of 27 contiguous acres bor- deredbyWhiteOakBayou to the west, North Main to the east, the Union Pacific railroadtrackstothenorth andtheexistingUHDcam- pustothesouth. The land, once owned by the Union Pacific Rail- road,usedtocontainware- housesandarailline. Bradley said the univer- sity is aware of a plan by the Texas Department of Transportation to expand and rebuild highways around downtown, which potentially could affect the newlyacquiredsite. He said the portion of the acreage the school wants most would not be affected. UntilTxDOT’splansbe- come more clear, the land initsproposedpathwillbe used for green space and ballfields. The land deal is expect- edtocloseinAugust. UHD says land assures the space to grow UHD from page B1 spending by more than half,to$2.8billion. “The first thing that always gets cut is explo- ration because it’s discre- tionary,”Fryklundsaid. Companies drilled 4,300 conventional explo- ration and appraisal wells last year, IHS says, com- paredto5,300in2012. Oil companies also retreated from the ocean depths. Deep-water drilling, defined as drill- ing in 1,000 to 5,000 feet of water, dropped by 20 per- cent last year, while drill- ing in waters more than 5,000 feet deep declined 40percent. Shale revolution But it’s hard to over- statetheimpactoftheU.S. energy boom on interna- tionalexploration. The so-called shale revolution drew oil pro- ducers to North America, away from more expen- siveandriskyinvestments in international waters, Fryklundsaid. From 2000 to 2010, all international exploration yielded 246 billion barrels in discovered resources, while shale formations in the United States alone added nearly 200 billion barrels. ‘Down the road’ “Still, if you curtail exploration by the mas- sive amounts that we’re seeing, then it’s going to affect things — not today, not tomorrow, but five yearsdowntheroad,”said Fryklund, noting that re- newable sources such as wind and solar will have toplayabiggerrole. “It’s all part of the tran- sition to the future,” he added. Ocean depths drew fewer crude drillers Ocean from page B1 collin.eaton@chron.com twitter.com/CollinEatonHC WestlakeinJanuary,thena subsequent$1.6billionbid. The two petrochemical companiesarecompetitors that make plastics, vinyls, building materials and otherproducts. Westlake previously made a run at buying the company in 2012, when it was still called Georgia Gulf Corp. Westlake re- ported revenues of more than $1 billion last year, compared to $755 million forAxiall. “The Westlake guys are very serious,” said Has- san Ahmed, an analyst at New York equity research firm Alembic Global Ad- visors. “It’s very different from 2012. The difference is this time they actually assembled a board. That’s apainstakingprocess.” Axiall said its leaders remain open to continu- ing negotiations, but they believe Westlake’s offers thus far are inadequate. Westlake said it will either submit a new offer or reaf- firm the previous offer of $23.35pershare,or$1.6bil- lion. Westlake would also assume $1.5 billion in Axi- alldebt. Westlake first made the offer in January, when Axiall’s stock fell below $10 a share. Axiall’s stock surged when Chao soon after disclosed the offer rejected by Westlake, and it closed Monday at $22.65 a share, up 36 cents on the day. Ahmed said Westlake is in a position of strength as it heads toward the proxy vote. Axiall shareholders are frustrated by the com- pany’sunder-performance in recent years, Ahmed said, and many are open to adealifWestlakeincreases its offer to more than $25 pershare. Westlake started with low-ball numbers, so a stronger offer will be need- edtoclosethedeal,hesaid. “Westlake has a far bet- ter track record of manag- ingassets,”Ahmedadded. Earlier this year, it looked like the Westlake- Axiall saga would play out as it had in the past, with the bid becoming hostile, butultimatelyfailing.Four years ago, Georgia Gulf Corp., which became Axi- Westlake Chemical has sought Axiall for years Westlake from page B1 jordan.blum@chron.com twitter.com/jdblum23 all in 2013, rejected offers of $1 billion and $1.2 billion before Westlake withdrew itsbid. But the proxy fight changes things, said Ahmed.“Somethingisdef- initelygoingtohappen.” FROM THE COVER 3.01%