SAN DIEGO — The city of San Diego announced Tuesday it is suing to void its lease-to-own agreements in the 101 Ash Street and Civic Center Plaza building deals due to an advisor allegedly receiving millions in undisclosed compensation for negotiating the transactions in violation of state law.
The City Attorney’s Office alleges that commercial real estate broker Jason Hughes represented himself to be a “special volunteer for real estate services” who was negotiating the deals on the city’s behalf for free “out of a sense of civic duty.”
However, the city says he was actually paid $9.4 million in unreported compensation from Cisterra Development. When negotiations between Hughes and the 101 Ash Street building’s owners did not resolve, the city says Hughes entered into negotiations with Cisterra for a lease-to-own agreement if Cisterra acquired the building.
The lawsuits seek monetary and punitive damages from Hughes, who Mara Elliott’s office alleges failed to disclose to city council that he was paid by other parties for his work.
“At all times, Hughes publicly held himself to be providing free representation to the city out of a sense of civic duty. The city did not become aware of the secret payments until Elliott began to subpoena documents as part of discovery in litigation over the 101 Ash Street deal,” the city attorney news release said.
Hughes’ attorney, Michael Attanasio, issued a statement denying that Hughes ever hid the fact that he was receiving payments.
“Jason transparently disclosed to the city and several of its highest- ranking elected and appointed officials his intent to seek compensation from the private sector for his role in these transactions,” the statement read. “Although Jason was under no legal obligation to make such disclosures in light of his unofficial role, he did so to ensure that his intentions were transparent and known to senior city officials. The disclosures were made orally and in writing, and the city formally acknowledged, accepted and signed off on Jason’s entirely appropriate intent to seek compensation.”
The city alleges it learned of $4.4 million Hughes was paid as part of the 101 Ash Street transaction through its litigation over the city’s lease-to-own deal for the downtown high-rise, which was evacuated due to asbestos violations shortly after city workers were moved into the building.
The skyscraper remains vacant, and questions and accusations abound among elected officials and the general public over how the deal went through amid apparent structural issues with the building. The San Diego Union-Tribune reports the office tower has become the subject of multiple lawsuits between the city, former owner Sandor Shapery, Cisterra and dozens of former city employees and contractors who claim they were wrongly exposed to asbestos.
Hughes allegedly also received an unreported sum of around $5 million from Cisterra for negotiating the Civic Center Plaza deal.
The lawsuits also seek a judicial declaration that the contracts are void and that the city is entitled to reimbursement: $24 million paid in rent for 101 Ash Street and $20 million for Civic Center Plaza.
Gloria, who sat on the City Council that approved the deal in 2016, said the council and the general public “were deceived.”
Gloria said, “After months of looking into this transaction with the city attorney, we believe we have found wrongdoing.”
The city signed a 20-year lease-to-own agreement for the former Sempra Energy building at 101 Ash Street in 2016. At the time, officials planned to renovate five floors for around $5 million, then begin moving city employees into the building.