Partly sunny:High 87, Low 76Tuesday, May 24, 2016 | HoustonChronicle.com andChron.com | Vol. 115,No. 224 | $2.00 xxx

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NATION

Baltimoreofficercleared inGray caseProsecutors fail forthe second time tohold Baltimore policeaccountable for thedeath of FreddieGray when an officeris acquitted in thecase that triggeredriots. Page A9

BUSINESS

UH-Downtownto expand itscampus northThe University ofHouston-Downtownplans to buy alarge swath of landnorth of its campusfor an expansionthat will bring itnew academic andstudent life facilities.Page B1

CITY | STATEEx-VP for policecredit uniongets prison termA retired vicepresident for theHouston PoliceFederal Credit Unionis ordered to pay$1.2 million inrestitution forembezzling. Page A3

WORLDAnti-migrantcandidate losesin AustriaA pro-EuropeanUnion candidate ekesout a victory over aright-wing rival tobecome the nextpresident. Page A10

1151901-2016

HoustonLegends:

The legacy of ImaHoggincludes the HoustonSymphony and much

more.Page A6

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TheMain Streetcampuswill grow to40 acres after deal.

Tammy Huynh didn’trecognize her dad whenshe saw him for the firsttime after eight years.Like many of her SouthVietnamese friends, she’dgrown up fatherless whilethe men served time in

communist re-educationcamps, where many weretortured.

“It was terrible,” saidthe 42-year-old Houstonreal estate agentwho cameto the United States withher family in 1990.

Even for the hundredsof thousands of Vietnam-

ese who escaped the newHanoi government, risk-ing their livesonmakeshiftboats or holing up in refu-gee camps in the Philip-pines, their memories ofthecommunistcountryaretraumatic. Fleeing it andstarting over with nothingis the defining feature oftheir lives.

So President BarackObama’s announcementMonday that Washington

would lift a decades-oldarms embargo and al-low Vietnam to buy lethalmilitary equipment wasmet with mixed feelings: agrudging recognition thatgeopolitics in the regionhad changed but also a re-

By Lomi Kriel

Vietnam continues on A13

Members of Houston communityexpress concern about human rights

›› See how immigrants from around the world transform the city atHoustonChronicle.com/local/themillion

Lifting Vietnam arms banstirs mixed feelings

President BarackObama and national security adviser Susan Ricemeet Vietnamese officialsMonday inHanoi.Carolyn Kaster / Associated Press

››Obama’s decision to sellarms toVietnam is seen as awarning to China.Page A10

Angela Sugarek plays with her foster child Mondayafter he and his brother were returned to Sugarekand her wife, Carol Jeffery, by Child ProtectiveServices. Lisa Falkenberg column on page A3.

Family together again

Michael Ciaglo / Houston Chronicle

WASHINGTON—AsRepublicans start to co-alesce around DonaldTrump’s presidentialcampaign, a high-stakesgame is playing out overwhat role defeated rivalTedCruzcouldplayat theparty’s July national con-vention inCleveland.

Almost three weekssince theIndianaprimarythat knocked Cruz out oftherace, theTexassenatorcontinues to withhold hissupport for theoutspokenreal estate mogul, whomheattackedas“utterly im-moral” and a “pathologi-cal liar.”

At stake for Cruz is acoveted speaking slot attheconvention,aplatformthat served as a launchpad to the White Housefor Presidents Ron-ald Reagan and BarackObama.

With his eye on 2020,Cruz faces a difficult timeof choosing between hisconservative principlesand the pragmatic needfor party unity in the faceof the coming fall clashwith presumptive Demo-cratic nominee HillaryClinton.

Officials in the Trumpand Cruz camps — thetop two rivals in the GOPnomination battle — de-clined to comment ontheir plans for a possible

Cruz’srole inClevelandup in airBy Kevin Diaz

Cruz continues on A13

HISD suspended auditor after heated dispute

Houston’s school boardremoved its chief auditorafter he reported potentialviolations of state law topolice, shared informationwith the FBI and called

out a board member forbreaking competitive bid-ding rules, newly obtaineddocuments and interviewsshow.

At one point last fall,after the auditor, RichardPatton, released an audit

blaming cost overruns inthe Houston IndependentSchool District’s $2 billionconstruction program oninsufficient competitivebidding and inadequatemonitoring, he was cas-tigated by the school dis-trict administration forrecklessness and “flawedmethodology.”

Patton fired back in an

email, recently obtainedby theHoustonChronicle:“I amgoing to say this onlyonce — this district doesnotwant the real dirt to bepublished. ... What is thevalue in having a gunfightthat you seem to desire?”

Three days before hisMarch 10 suspension, Pat-ton received an email fromthe district’s treasurer,

askinghimwhetherHISDhadbeen the subject of anysignificant civil or crimi-nal investigations in thelast two years. The trea-surer was seeking infor-mation thatmayneed to bedisclosed to potential in-vestors as HISD preparedfor a $757 million bond of-fering as part of its ongo-

By Ericka Mellon

HISD continues on A14

Documents show Patton talked withlaw enforcement over contracting

After slipping for threestraight months, regionalnewvehiclesalesplummet-ed bymore than 30 percentinApril from a year earlier,suggesting that economicjitters in the oil patch haveconsumers in Houstonhunkering down for leanertimes.

“When auto sales startto fall, that’s a suggestionthat consumer confidenceis falling as well,” said Pat-

rick Jankowski, senior vicepresident of research withthe Greater Houston Part-nership.

Year to date, sales aredown 13.2 percent — a farsteeper decline than the4 percent annual dip thatwas forecast at the begin-ningof theyear.

The numbers stand instark contrast to nationalfigures showing Ameri-cans brought 3.5 percentmore new cars, trucks and

ByMike D. Smith

Auto continues on A13

Plunge in auto sales suggestseconomic jitters rising here

By the numbers-13.2%: Year-to-datedecline in new vehiclesales in the Houston area.

23,652: Number ofnew vehicles sold in theHouston area in April.

-11,600: Drop in salesof new vehicles in Aprilcompared to last year.

-3.2%: Sales of vehiclespriced under $30,000took the biggest hit here.

Houston Chronicle | Tuesday, May 24, 2016 | HoustonChronicle.com and Chron.com Section Bxx

BUSINESSAT 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 Bayeroffers $62 billionforMonsanto.

INSIDE

Page B3

A federal appeals courtdealt a blow to the federalgovernment’s effort toholdBank of America account-able for the sale of shoddymortgages before the fi-nancial crisis, overturninga $1.27 billion penalty thebank had been ordered topay in the so-called “hus-tle” case.

A three-judge panelruled on Monday thatfederal prosecutors hadfailed to prove that Bankof America’s Countrywideunit had defrauded FannieMae and Freddie Mac, thegovernment-backed mort-gage firms, when it soldthemtroubled loans.

The judges said thatwhile Countrywide em-

CourtbacksBankofAmerica

MORTGAGES

ByMichael CorkeryNEW YORK TIMES

‘Hustle’ on B2

A small movie theaterchain tallied another wintoward its lawsuit allegingthat AMC EntertainmentHoldings and Regal En-tertainmentGroupare col-laborating and pressuringstudios to restrict access tomajor releases.

On Monday, iPic Enter-tainment announced thatAMC’s requests to end

the lawsuit were denied.Hamid Hashemi, CEO ofiPic, said AMC denied itconspired with Regal andalso claimed state DistrictCourt in Harris Countywasnot the rightvenue.

“It’s really exciting forus and other smaller ex-hibitors because for thefirst time a court is look-ing at it,” he said. Florida-based iPic operates 13 lux-

Small theaterchainwins ruling

NEW MOVIES

By Andrea Rumbaugh

Brett Coomer /

Houston Chronicle

Hamid Hash-emi, iPic En-tertainmentCEO, triedout a seat

before oneof his the-

aters openedin Houstonlast fall. Hiscompany issuing two

major theaterchains.

Theater continues on B2

THEUNIVERSITYofHouston-Down-townplans tobuyalarge swath of landnorth of its Main

Street campus for an expan-sion that will bring new aca-demic and student life facili-ties to theuniversity.

The school received ap-proval from the Universityof Houston System Board ofRegents to pay $13.2 millionfor the 17-acre property cur-rently ownedbyapartnershipthat includes theMetropolitanTransitAuthorityandaHous-ton real estatedeveloper.

The partnership, Welling-ton Fisher, has owned the

acreage for more than a de-cade, after buying it from Ha-keem Olajuwon, the formerHouston Rocket star who’salsobeena real estate investor.

“This land has been on theuniversity’s radar for a longtime,” said David Bradley,UHD’s vice president for ad-ministration and finance. “Wehoped one day we could ownit.”

It was once being consid-ered for a intermodal transitproject, but Metro abandoned

UH-Downtown to expand

REAL ESTATE

School wins OK for purchase of 17 acresnorth 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

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The oil drillers thatscour the world for newsources of petroleumstayed home last year,discovering the lowestamount of oil outside ofNorth America in more

than60years.Dissuaded by a severe

energy downturn thatmade survival the high-est priority for manycompanies, the industrydiscovered 2.8 billion bar-rels of crude outside ofNorth America last year,

the lowest amount since1952, according to a reportreleased Monday by theresearch firm IHS Energy.Most of the new reserveswere foundoffshore.

Last year’s discoveriesamounted to just a fractionof the historical averageof about 13 billion barrelsa year, according to IHS.For the first time, oil dis-coverieshavedeclined fourconsecutive years, IHS

said,meaning that in a fewyears, despite the currentglut, it will be difficult forthe industry to restock theworld’s energysupplies.

“Exploration has beencharged with providing aquarter (of the oil and gasthe world demands), but ithas fallen short,” said BobFryklund, chief upstreamstrategist at IHS Energy.“We’regoing tohave to relyonother resources tomake

up thedifference.”More than 70 publicly

traded oil companies cuttheir exploration spend-ing by a third last year tocope with the plunge in oilprices.

Houstoncompanies likeConocoPhillips,AnadarkoPetroleum Corp. and EOGResources cut spendingfor the search for crude bya combined $15 billion lastyear. ConocoPhillips, the

third-largest U.S. oil com-pany, said last year thatit plans to wind down itsdeep-water explorationbusiness in2017.

Another Houston com-pany, Apache Corp., cutexploration spendingby nearly two thirds, to$4.5billion.

Meanwhile, Mara-thon Oil Corp., also basedin Houston, reduced its

By Collin Eaton

Drillers in 2015 found lowest amountof oil outside of North Americain more than 60 years, report says

Crude exploration wanes amid the energy downturn

Ocean continues on B2

The hostile takeover bidby Houston-based West-lake Chemical to acquireAtlanta’s Axiall Corp.could become a bit moreamicable now that Axiallis expressing a new open-ness to considering revisedoffers.

Westlake President andCEO Albert Chao has cov-eted theAtlanta-basedAx-iall foryears, and launcheda proxy battle to replaceAxiall board memberswho have blocked West-lake’s bid with his ownslateof candidates.Axiall’sshareholdersmeet June 17.

Axiall’s chief financialofficer, Gregory Thomp-son, has asked Westlaketo submit a new offer byJune3,Westlake saidMon-day. Axiall rejected an ini-tial $1.4 billion offer from

Axiallmoreopento a deal

WESTLAKE CHEMICAL

By Jordan Blum

Westlake continues on B2

B2 | Tuesday, May 24, 2016 | Houston Chronicle | HoustonChronicle.com and chron.com xx

Monday’s appeals court ruling in the “hustle” case represented a departure for Bank of America, whichsettled 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 rulinggoes against prosecutorsployees may have soldloans in 2007 and 2008thatwere not of the qualitythat was promised in thecontracts with Fannie andFreddie, there was no evi-dence that these sales—anelement of a loan programat Countrywide that wasknown informally as hus-tle—werepart of adeliber-atedeception.

“The trial evidence failsto demonstrate the con-temporaneous fraudulentintent necessary to prove ascheme to defraud,” JudgeRichardWesley wrote in a31-page ruling.

The ruling by the 2ndU.S. Circuit Court of Ap-peals is one of a few set-backs in the Justice De-partment’s prosecutionof Wall Street after themortgage crisis. It is also adisappointment for PreetBharara, the U.S. attorneyfor the Southern Districtof NewYork, who broughtthe prosecution againstBank of America andcalled its practice of rub-ber-stamping risky loansand selling them to Fan-nie Mae and Freddie Mac“spectacularlybrazen.”

The bad lending ulti-mately required a taxpay-er-financed bailout of thenation’s biggest banks, in-cludingBankofAmerica.

In2014, Judge JedRakoffof the U.S. District Courtin Manhattan ordered thebank to pay a $1.27 billionpenalty in the hustle case.But that sum is a smallfraction of the tens of bil-lions of dollars the bankhas paid in legal fees andsettlements related toCountrywide, which BankofAmericabought in2008.Since 2010, Bank of Amer-ica has spent $37 billion onlitigationexpenses,mostofit related to the legal falloutfromthefinancial crisis.

The hustle case stoodout because in addition toBank of America, pros-ecutors had sought to holdRebeccaMairone, a formerCountrywide executive, li-able for the faulty loans.

It also represented a de-parture forBankofAmeri-ca,whichsettledmostof itsmortgage-related chargesbefore they went to trial.But from the beginning,the bank’s lawyers werebetting they could win thehustle case.

“The 2ndCircuit under-

stood this was a massivegovernment overreachfrom the beginning,” saidJosh Rosenkranz, whorepresents Mairone. “Themessage is that govern-ment should stop lookingfor fraud where it doesn’texist.”

The U.S. can ask the en-tire panel of the appealscourt judges to reconsiderthe ruling. A spokesmanfor Bharara declined tocommenton thedecision.

The case was calledhustle because the gov-ernment’s case involved aprogram at Countrywideknown as the High-SpeedSwim Lane that the lendercreated to sellmortgages toFannie and Freddie as thesubprime mortgage mar-ketwas imploding.

During the trial, inOcto-ber 2013, federal prosecu-tors accused Mairone ofoverseeing the high-speedlane program that pushedthrough loans to unquali-fied buyers and ultimatelyfailed, causing more than$1 billion in losses. Thefaster that employees orig-inated loans, the highertheirbonuses, according totestimony.

The appeals court ruled

that Countrywide’s con-tracts with Fannie andFreddie may have includ-ing false statements. Buteven“intentional” contractbreachesdidnot constitutefraud on the part of thelender, the ruling said.

The ruling is also avindication for Mairone,who worked at JPMorganChase at the time of the tri-al and had to leave her jobafter the juryconvictedheron one count of fraud, herlawyer said.

Theappeals court rulingmeans Mairone does nothave to pay the $1 millionpenalty that the districtcourthadordered.

The government’s casewas based on a whistle-blower complaint origi-nally brought by EdwardO’Donnell, a formerCoun-trywide executive.

O’Donnell received $57million from the govern-ment for his role in bring-ing the issues to light. Hislawyer said the appealscourt ruling would not af-fect thatpayout,whichwastied more broadly to hisworkhelping federal pros-ecutors reach a $16.65 bil-lion settlement with BankofAmerica inAugust 2014.

ury theatersnationwide.Paul Yetter of Hous-

ton-based Yetter Cole-man, which is represent-ing iPic, called the rulingimportant because itallows the plaintiffs topresent evidence thatRe-gal and AMC conspiredagainst iPic.

“The court’s rulingallows us to expose thisconspiracy at trial,” hesaid.The trial is slated forOct. 3.

River Oaks DistrictThe lawsuit was filed

in November, the samemonth that iPic openedan eight-screen, 578-seattheater in Houston’s Riv-er Oaks District luxuryshopping and residentialdevelopment on West-heimer.

Regal threatenedmov-ie studios, iPic alleges, bytelling them it wouldn’tplay recently releasedmovies at EdwardsGreenway Grand Pal-ace Stadium 24 & RPX ifstudios also licensed thefilms to iPic Houston.IPic won an injunctionin January to stop suchpractices.

The boutique theaterchain likewise allegesthat AMC is using thesame tactic toward atheater it’s building inFrisco, about 25 milesnorth of downtown Dal-las. That theater is slatedtoopen in late 2017.

AMC, RegalAn AMC spokesman

said in an email that thecompany doesn’t com-ment on pending litiga-tion, and Regal didn’trespond to requests forcomment. In court fil-ings, AMC said thereis “not a scintilla of evi-dence of any conspiracybetween AMC and Re-gal. Instead, the evidencethat has been uncoveredaffirmatively refutes anycommunication or coor-dination between AMCand Regal regarding iPicor clearances.”

Hashemi said he’s go-ing to court for damages— some studios didn’tlicensemovies to iPic be-fore the injunction—andto get protection for iPicnationally.

“They’re using theirsize and power to stopcompetition,”he said.

Theaterchaintakes on2biggerrivalsTheater from page B1

andrea.rumbaugh@chron.comtwitter.com/andrearumbaugh

nancy.sarnoff@chron.comtwitter.com/nsarnoff

those plans several yearsago after spending $41mil-lionon it.

The authority owns theland in partnership withdeveloper Rocky Stevens.Metro referred questionsabout the sale to Stevens,who was not immediatelyavailable for comment.

“I believe that the newcampus footprint will beviewed as among the most

significant developmentsin the university’s insti-tutional history,” boardVice Chairman WelcomeWilson Jr. said in an an-nouncement Monday.“This land acquisition as-suresUHDhas the neededacreage for enrollmentgrowth, campus expan-sion and developmentof new academic pro-grams.”

The land is expected tohouse a new science and

technology building, ap-proved by the Texas Legis-lature last spring.

The university is in theprocess of selecting an ar-chitectural firm to designthe building, which UHDhopes to have open bysummer2019.

Much of the land is inthe 100-year floodplain, sodevelopment will requireapproval from the HarrisCounty Flood Control Dis-tricts,Bradley said.

“Our plan is to leave alot of it green for the fore-seeable future,” Bradleyadded.

The acquisition will in-crease the size of the uni-versity’s downtown digsto 40 acres on both sides ofInterstate 10.

The 17-acre tract an-nouncedMonday will givethe university control of27 contiguous acres bor-deredbyWhiteOakBayouto the west, North Main to

the east, the Union Pacificrailroad tracks to thenorthand theexistingUHDcam-pus to the south.

The land, once ownedby the Union Pacific Rail-road,used to containware-housesanda rail line.

Bradley said the univer-sity is aware of a plan bythe Texas Department ofTransportation to expandand rebuild highwaysaround downtown, whichpotentially could affect the

newlyacquired site.He said the portion of

the acreage the schoolwants most would not beaffected.

UntilTxDOT’splansbe-come more clear, the landin itsproposedpathwill beused for green space andball fields.

The land deal is expect-ed to close inAugust.

UHD says land assures the space to growUHD from page B1

spending by more thanhalf, to $2.8billion.

“The first thing thatalways gets cut is explo-ration because it’s discre-tionary,”Fryklundsaid.

Companies drilled4,300 conventional explo-ration and appraisalwellslast year, IHS says, com-pared to 5,300 in2012.

Oil companies alsoretreated from the oceandepths. Deep-waterdrilling, defined as drill-ing in 1,000 to 5,000 feet ofwater, dropped by 20 per-cent last year, while drill-ing in waters more than5,000 feet deep declined40percent.

Shale revolutionBut it’s hard to over-

state the impact of theU.S.energy boom on interna-tional exploration.

The so-called shalerevolution drew oil pro-ducers to North America,away from more expen-siveandrisky investmentsin international waters,Fryklundsaid.

From 2000 to 2010, allinternational explorationyielded 246 billion barrelsin discovered resources,while shale formationsin the United States aloneadded nearly 200 billionbarrels.

‘Down the road’“Still, if you curtail

exploration by the mas-sive amounts that we’reseeing, then it’s going toaffect things — not today,not tomorrow, but fiveyearsdownthe road,” saidFryklund, noting that re-newable sources such aswind and solar will havetoplayabigger role.

“It’s all part of the tran-sition to the future,” headded.

OceandepthsdrewfewercrudedrillersOcean from page B1

collin.eaton@chron.comtwitter.com/CollinEatonHC

Westlake in January, thenasubsequent $1.6billionbid.

The two petrochemicalcompanies are competitorsthat make plastics, vinyls,building materials andotherproducts.

Westlake previouslymade a run at buying thecompany in 2012, whenit was still called GeorgiaGulf Corp. Westlake re-ported revenues of morethan $1 billion last year,compared to $755 millionforAxiall.

“The Westlake guys are

very serious,” said Has-san Ahmed, an analyst atNew York equity researchfirm Alembic Global Ad-visors. “It’s very differentfrom 2012. The differenceis this time they actuallyassembled a board. That’sapainstakingprocess.”

Axiall said its leadersremain open to continu-ing negotiations, but theybelieve Westlake’s offersthus far are inadequate.Westlake said it will eithersubmit a new offer or reaf-firm the previous offer of$23.35per share, or $1.6bil-lion. Westlake would also

assume $1.5 billion in Axi-all debt.

Westlake first madethe offer in January, whenAxiall’s stock fell below$10 a share. Axiall’s stocksurged when Chao soonafter disclosed the offerrejected by Westlake, andit closed Monday at $22.65a share, up 36 cents on theday.

Ahmed saidWestlake isin a position of strength asit heads toward the proxyvote. Axiall shareholdersare frustrated by the com-pany’sunder-performancein recent years, Ahmed

said, andmany are open toadeal ifWestlake increasesits offer to more than $25per share.

Westlake started withlow-ball numbers, so astronger offerwill beneed-ed to close thedeal, he said.

“Westlake has a far bet-ter track record of manag-ingassets,”Ahmedadded.

Earlier this year, itlooked like the Westlake-Axiall sagawould play outas it had in the past, withthe bid becoming hostile,butultimately failing.Fouryears ago, Georgia GulfCorp., which became Axi-

WestlakeChemical has soughtAxiall for yearsWestlake from page B1

jordan.blum@chron.comtwitter.com/jdblum23

all in 2013, rejected offersof $1 billion and $1.2 billionbeforeWestlake withdrewitsbid.

But the proxy fightchanges things, saidAhmed. “Something isdef-initelygoing tohappen.”

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