Subpoenas Seek Records From Key Players in 101 Ash St. Deal
Subpoenas issued by attorneys representing the city speak to the continued questions surrounding what’s considered one of the worst real estate debacles in city history, including the lack of clarity about who made money off the transaction – and how much.
Attorneys representing the city have subpoenaed records from key players in the troubled 101 Ash St. transaction, including the building’s former owners, the middle-man buyer who cut a deal with the city and a volunteer city real estate adviser who was an architect of the controversial deal structure.
Attorneys Dick Semerdjian and John Schena late last month issued subpoenas attempting to trace the deal-making process and financing arrangements, reviews of the property prior to the transaction with the city and documentation of any money that may have been received or distributed by a former 101 Ash owner or a former volunteer real estate adviser who said he was working for free.
Nine April 27 subpoenas obtained by Voice of San Diego are the city’s latest move in a lawsuit it filed in October asking the San Diego Superior Court to bless its decision to stop paying rent on a building it only briefly occupied about three years after the January 2017 lease-to-own transaction.
The subpoenas speak to the continued questions surrounding what’s considered one of the worst real estate debacles in city history, including the lack of clarity about who made money off the transaction – and how much – and why the city pursued a lease-to-own structure that left it holding the bag on a building that turned out to need at least tens of millions of dollars in repairs.
The subpoenas were directed to developer Cisterra and the entity it used to facilitate the prior Civic Center Plaza transaction with the city that closely matched the Ash deal, former city real estate adviser Jason Hughes and his commercial real estate company Hughes Marino, three business entities of former 101 Ash St. building owner Sandy Shapery, former minority 101 Ash St. owner and hotel magnate Doug Manchester’s company and D.F. Davis Real Estate, the company that conducted a 2016 appraisal of the building.
Hughes, David Davis of D.F. Davis Real Estate and an attorney for Cisterra declined to comment on the subpoenas. Shapery and Mark Mazzarella, an attorney for Manchester, told VOSD they plan to respond to them.
The subpoenas seek all parties’ communications and documents exchanged with various city officials, those who sought to do a deal with the city and Hughes, who at the time of the 101 Ash St. deal advised former Mayor Kevin Faulconer and other city officials on real estate matters.
Shapery first approached the city in 2014 about whether it might be interested in the high rise across the street from City Hall. The following year, Manchester purchased a 49 percent stake in the building. After Shapery and Manchester’s unsuccessful talks with the city and Hughes, Cisterra purchased the building and simultaneously executed a lease-to-own deal with the city.
The subpoenas seek more information on how that process played out. They also seek documentation of Manchester’s sale of his interest in the building before Shapery sold the building to Cisterra and various records Cisterra and Shapery had documenting the value and condition of the building, including any related communications between Shapery and former occupant Sempra Energy. They also order appraiser D.F. Davis to turn over all documents related to analyses and inspections of the 101 Ash St. property.
The subpoenas also reveal the city’s focus on Hughes’ involvement in past city real estate deals, and a previous transaction that Hughes and Cisterra helped the city close in 2015.
Attorneys for the city demanded that Cisterra and Hughes provide documents and communications related to the Civic Center Plaza deal, a nearly identical lease-to-own arrangement they helped orchestrate that served as a template for the 101 Ash St. transaction.
The subpoenas also called for Hughes to hand over documents referencing any brokers’ disclosures or money he may have “received or distributed” in connection with either transaction, as well as “all documents reflecting or regarding any services provided by you to the city of San Diego since 2010.”
Emails and records obtained by VOSD show Hughes helped shape the lease-to-own structure and played a significant role in talks prior to the city’s acquisitions of both Civic Center Plaza and 101 Ash St. He also had the ear of Faulconer, city real estate officials and developers who negotiated with the city.
Hughes, whose volunteer work at the city started following a 2013 appointment by former Mayor Bob Filner, has repeatedly declined to answer questions about his role in the 101 Ash St. and Civic Center Plaza transactions. He’s said only that he “would not participate in any transaction without making the requisite disclosures.”
Hughes, who has long touted his sole focus on representing tenants, wouldn’t necessarily have failed to make disclosures required by law if he failed to report a financial arrangement with Cisterra to the city.
Receiving a payment, however, could trigger another state law barring government officials from having financial interests in contracts they broker in their official capacities. The law can apply to unpaid consultants and appointed officials. One legal expert told VOSD that violations can sometimes lead to contracts and transactions being invalidated, among other outcomes.
Hilary Nemchik, a spokeswoman for City Attorney Mara Elliott, declined to comment on whether Elliott’s office or outside attorneys had pursued the subpoenas after more informal requests fell flat. Late last year, she told VOSD that outside attorneys hired by the city had unsuccessfully sought “additional information from outside the city” on both the 101 Ash St. and Civic Center Plaza lease-to-own deals, which both included language placing the burden on the city if major facility issues came up.
Now the city has taken formal steps – enforceable by the court – to demand the records.
Nemchik said the requests represent the city attorney’s continued effort to ensure taxpayers aren’t on the hook for a building the city has been unable to occupy.
“This office will pursue every avenue to obtain all the information we need to recover city funds and protect taxpayers,” Nemchik wrote in an email to Voice of San Diego.
Nemchik confirmed the subpoenas are not tied to a criminal investigation.
Rather than pursue an investigation itself, Elliott’s office has said it asked other law enforcement agencies to step in last summer.
Amid calls from City Councilman Sean Elo-Rivera and others last month about the need for an outside probe of the deal, Assistant City Attorney Leslie FitzGerald told the City Council that Elliott directed city attorneys to review the 101 Ash St. transaction, decisions made before the deal was consummated and subsequent city actions, and then passed along information it gathered.
“In August of 2020, our office completed its initial review and thereafter presented its findings to local, state and federal law enforcement agencies along with a request for a thorough and independent investigation, offering our office’s full cooperation,” FitzGerald said at an April City Council meeting.
The city attorney’s office would not confirm which law enforcement agencies it presented its findings to or what those findings were.
Spokespeople for the U.S. attorney’s office and the Federal Bureau of Investigation said Tuesday that they could not confirm or deny the existence of any investigations. The state attorney general’s office and District Attorney Summer Stephan’s office did not respond to VOSD’s inquiries.
One team of attorneys has been more outspoken about its fact-finding efforts. Early last month, former city attorney Mike Aguirre, his law partner Maria Severson and fellow attorney Larry Shea cheered a ruling by Superior Court Judge Joel R. Wohlfeil allowing their lawsuit challenging the legality of the 101 Ash St. deal to continue after the city pushed for a dismissal. That decision set the stage for attorneys pursuing the case on behalf of San Diegan John Gordon to subpoena documents and demand answers under oath. Wohlfeil is also presiding over the city’s rent case.
Severson and Aguirre recently issued subpoenas to city consultant Kitchell requesting records and reports it used to estimate that 101 St. Ash could need as much as $115 million in repairs and to Chicago Title Company requesting the escrow files for the 101 Ash transactions between Cisterra and Shapery, and between the city and Cisterra. Last month, the attorneys also made a formal discovery requests for documents from the city and Wilmington Trust, a national investment management firm that serves as a trustee to investors who supplied upfront cash for the Ash lease-to-own arrangement.