San Diego County District Attorney Summer Stephan’s investigators today raided the offices of two companies that made millions off the City’s 101 Ash building acquisition; a good first step in finally getting to the bottom of what is now one of San Diego’s worst political financial scandals, but Stephan should recuse herself –as she previously has– to avoid any appearance of political conflicts, especially during a campaign cycle.
Mutual political endorsements, common campaign contributors, and a shared political consultant between the District Attorney and several key witnesses (and/or potential targets) of the investigations could create the perception of -if not actual- conflicts of interest that could undermine the outcome and give ammunition for critics, regardless of how the inquires shake out.
The raids occurred at the offices of Jason Hughes, the real estate broker who was the City’s volunteer broker on several transactions, and the offices of Cisterra Development, who is technically the City’s landlord in the flip transaction that had the City sign a 20-year, lease-to-own agreement in 2016, but some are already questioning why investigators didn’t also raid the City Attorney’s office and others who may have evidence of wrongdoing in the 101 Ash debacle.
101 Ash St. is the 19-story office building that now sits empty after City employees were evacuated in January 2020 when cancerous asbestos material was found throughout the building. After the building was deemed “a public nuisance” by the County Air Pollution Control District, everyone started looking back at how the City could have gotten itself into such a bad financial deal for a functionally obsolete building.
In the past year we have learned that Hughes had a hidden deal to reap over $4.4 million from Cisterra in the 101 Ash deal after he had already received more than $5 million in a previous deal for the Civic Center Plaza (CCP) building in 2015. Both deals were struck by Cisterra where they purchased and immediately leased the buildings to the City, making millions for themselves and their friends without even having to put up the financing to purchase the buildings.
Over a year ago, La Prensa San Diego was the first media outlet to report (on September 11, 2020) that Hughes was paid in the deal by the sellers after two sources close to the deal confirmed Hughes was paid “millions” on the deal. Although Hughes and Cisterra dodged our repeated questions about their financial arrangements for months, they finally admitted it after document were subpoenaed in pending civil cases involving the bad building deal.
Hughes’ payments may very likely be in violation of state conflict of interest laws and could expose him (and others who aided and abetted his corruption) to felony charges and possible prison time. His previously undisclosed profits were facilitated by City Attorney Mara Elliott’s failure to conduct proper due diligence review of the $128 million deal, especially her failure to enforce the financial disclosures required by the City’s Charter.
Elliott has tried to obfuscate her responsibility to check for all proper documentation before she signed the deal in December 2016, claiming her status as City Attorney did not allow her to withhold final approval, but she is completely wrong because the City Attorney is not only empowered, but obligated, by the City’s Charter to review a contract before making it valid.
Three legal opinions issued by the City Attorney’s office during the time Elliott has worked within the office all conclude that a contract without the City Attorney approval is void. The most recent opinion, issued in 2016 as Elliott was running to become the City Attorney, states that “based on the existing Charter, failure to obtain the City Attorney’s approval of a contract renders that contract void.”
There is no doubt that any credible criminal investigation of the origins of the financial deal between the City, Cisterra, Hughes, and others must examine the role Mara Elliott played in approving the deal and examining the due diligence documents and information she reviewed (or didn’t) about the building and the parties involved before signing the deal. Elliott’s interactions with Hughes before she signed the agreement must also be examined, including political contributions Hughes and his wife gave to Elliott as the contract was waiting to be signed in her office.
Similarly, the role of then-Mayor Kevin Faulconer should be part of any criminal investigation involving Hughes and Cisterra given the many documented (and surely more that remain unknown) meetings and conversations between Faulconer, Hughes, and Faulconer’s then-Chief of Staff Stephen Puetz. Hughes was a contributor and supporter, and recently released texts and emails show that he enjoyed open and notorious access to the Mayor and his inner circle. Surely investigators should be asking what the Mayor knew and when.
Elliott and Faulconer both endorsed Summer Stephan’s 2018 election campaign.
Although endorsements alone aren’t enough to create a real conflict of interest, sharing a political consultant may be a little too close for comfort.
In 2017, Elliott complained that Councilman Chris Cate had leaked a confidential internal City memo about the proposed SoccerCity deal and Elliott referred a complaint to Stephan to investigate Cate because Elliott thought it would be a conflict for the City Attorney’s office to investigate a Councilman who is her client.
Stephan then announced she was kicking the case to the State Attorney General’s office “to ensure public trust in the impartiality of the review of this case” without explaining more about the basis of her decision, but many speculated it was because Stephan and Cate, both Republicans, shared the same political consultant; Jason Roe. Roe had also served as one of Faulconer’s close inner circle of consultants in his mayoral election.
Well, in just a few years, a lot of things have changed, but much has stayed the same.
Leading up to the current campaign cycle where Stephan is seeking re-election, she has now dropped her Republican Party registration for “No Party Preference” and hired a Democratic political consultant to run her campaign. But not just any Democratic consultant; she hired arguably the most powerful one in San Diego: Daniel Rottenstreich.
Rottenstreich has not only run many political campaigns, but his wife is the most powerful labor union leader in San Diego. Bridgette Browning is the head of the San Diego-Imperial Counties Labor Council, a union of unions that is a heavy hitter in local politics and has spent million on local elections throughout the years. She is influential in determining which candidates unions support and in raising hundred of thousand of dollars each cycle to spend on campaigns.
But the campaign and relationship that could create the biggest conflict for Stephan is Mara Elliott and her contentious race last year against local attorney and taxpayer advocate Cory Briggs. Rottenstreich managed her campaign and must know intimate details of the 101 Ash saga.
It was during last year’s campaign that a legal memo leaked to the media became an important part of the 101 Ash St story and is still part of ongoing lawsuits and political intrigue. Elliott and Todd Gloria blamed Briggs and other for using what they called a “fabricated” memo to influence the election. No official investigation was ever opened to determine the legitimacy of the disputed memo and no one ever offered any evidence that it was not a real document. Many suspect that Elliott has concealed the true origins of the legal memo and continues to obscure her involvement with the approval of the 101 Ash deal.
Sharing the same political consultant as a material witness in, if not a subject of, the criminal investigations will surely be seen as a conflict of interest by political observers and the public at large. Too much information could be shared between them and that possibility, even if denied, could still raise red flags.
Stephan has taken transparent and even progressive steps in the past year as the mood of the public has increased pressure on criminal and police reforms. Now without the baggage of the Republican Party banner, Stephan has been acting more like a Democrat and has even delivered on big issues championed by criminal justice reformers, including dropping gang injunctions that disproportionately impacted Black and Latino residents in underserved communities.
To her credit, Stephan has avoided stepping on political landmines in her first term in office, and should continue to do so to assure her re-election in what, up until now, has been an unopposed race for a second term.
A credible investigation into the origins of the 101 Ash deal and the financial advantages taken by a few insiders is much needed and the outcome of that inquiry should be done without political undertones.
The taxpayers of the City of San Diego – and District Attorney Summer Stephan, too- would be better served by allowing the FBI or a federal grand jury to conduct an arms-length investigation that avoids real or perceived political conflicts so that we can all trust and accept the findings, no matter what they may conclude.
Let’s get to the bottom of the pile of ashes in the 101 Ash Street debacle and move on. Once and for all.