In 1984, Select Telephone Technology developers came to then Salt Lake Mayor Ted Wilson with plans for a telephone refurbishing company that, with the help of a $4.2 million grant secured by the city, would bring 2,000 jobs.
The jobs never materialized, and the $4.2 million disappeared. Within the year, Wilson announced an investigation of STT, suspecting the grant money was used inappropriately.The Urban Development Action Grant, a grant used to promote economic development, was given to the city by the U.S. Department of Housing and Urban Development and, like all grants, did not have to be repaid.
As an economic development tool, the grant was useful. Once the city handed the $4.2 million over to STT, the company was supposed to pay back the city, setting up a revolving loan fund for other economic development projects.
But STT never returned the money, prompting HUD in 1985 to demand the city repay the lost funds. The city, in turn, filed suit against 13 defendants connected to STT to recover the money to repay HUD.
Salt Lake City went to court in March 1986, charging STT principals with fraud and racketeering and asking for $12 million in punitive damages.
Meanwhile, STT president Robert Gyemant was declaring bankruptcy as Salt Lake City and the 13 defendants in the city's fraud suit were filing motions in federal court.
Foremost among the defendants charged by the city were the Dallas law firm of Aikin, Gump, Strauss, Hauer & Feld - with offices in Washington, D.C. - and the Hong Kong and Shanghai Banking Corp.
In 1986, Assistant City Attorney Bruce Baird secured bankruptcy records reflecting comments by STT officers that they were misleading HUD officials into believing they were eligible to receive the UDAG grant.
STT did not, as they maintained and as HUD required, have $2.5 million in working capital to support their new business, the city charged. In a Friday press release, the U.S. Department of Justice made identical charges.
Baird marked the discovery of the documents as the first "turning point" in the city's battle to recover the money. The next came in 1988 when the Justice Department said it may join the city in suing STT officials.
In out-of-court talks throughout the summer, the government and the defendants bargained, finally reaching the $2.5 million settlement payment to the city announced Friday.
The final "turning point" came with a phone call from Sen. Jake Garn, R-Utah, to HUD Secretary Samuel Pierce Jr., Baird said. Garn encouraged Pierce to let Salt Lake City keep the money HUD earlier demanded be returned.
Garn's office confirmed last week that HUD would permit the city to keep the money and use it for HUD-approved purposes. Now, the $2.5 million is in escrow until HUD approves use of the money by the city.