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Investigators from the District Attorney’s Office on Tuesday morning executed simultaneous search warrants at Hughes Marino and Cisterra Development.
The two companies are at the center of a scandal – and now, a criminal investigation – surrounding two city leases that attorneys for the city are seeking to void following the revelation that Cisterra, the city’s landlord, paid Hughes Marino CEO Jason Hughes $9.4 million for his work on the city’s Civic Center Plaza and 101 Ash St. deals.
Hughes had been a purportedly volunteer real estate adviser to the city, though his attorney has argued that he told former city officials, including then-Mayor Kevin Faulconer, that he wanted to get paid for his work on the complex deals the city inked with Cisterra.
Voice of San Diego saw District Attorney’s Office investigators at Cisterra’s office in Carmel Valley and at Hughes Marino’s downtown office late Tuesday morning.
And District Attorney’s Office spokesman Steve Walker confirmed investigators served search warrants at both offices on Tuesday morning. He declined to comment further.
A spokesman for Cisterra told VOSD that the company cooperated with investigators – and that he expected further investigation would clear the company of any wrongdoing.
“Cisterra Development has provided all documents relating to these transactions to the San Diego County District Attorney’s Office in compliance with the search warrant served today,” Cisterra spokesman Eric Rose wrote in an email to VOSD. “Search warrants are not criminal charges but merely instruments to gather evidence so the District Attorney can evaluate a case. We are confident that a review of all documents and statements will show that Cisterra and its employees acted appropriately and complied with all criminal and civil laws.”
Hughes’ attorney Michael Attanasio also said Hughes looks forward to cooperating with authorities and “welcomes any fair inquiry into what really happened with these transactions.”
“Well before today’s events, Jason Hughes instructed his counsel to cooperate completely with any legitimate requests from law enforcement agencies regarding all the facts surrounding 101 Ash and Civic Center Plaza. This includes making available all relevant information and documents,” Attanasio wrote in a statement. “Jason issued these instructions because he has nothing to hide.”
Attanasio also reiterated an argument he has made since word of the payments first got out – that Hughes had the city’s top real estate official sign a letter agreeing that he could be paid by other parties and that he discussed his plans to be paid with other top city officials. Those discussions were never made public and the public had no reason to believe he would be paid after years of volunteer work. No official conflict of interest disclosures were filed. Cybele Thompson, the city’s former real estate chief, has said she does not recall signing the letter and other former city officials have said they were not aware of Hughes’ plans to be paid.
Attorneys for the city have argued that Hughes violated state Government Code Section 1090, which bars government officials from having financial interests in contracts they broker in their official capacities. In past cases, the law has also applied to contractors and consultants like Hughes, particularly when they provide advice to government officials.
Hughes’ attorney has argued the state law does not apply to Hughes since his city appointment was informal.
City Attorney Mara Elliott’s office has said it was not aware of the payments to Hughes until it received documents in response to city subpoenas this summer.
In a Tuesday statement, Elliott’s office noted that the city attorney’s office last year presented its findings to local, state and federal law enforcement agencies after reviewing the city’s acquisition and occupancy of the 101 Ash Street building for potential criminal conduct.
Elliott spokeswoman Hilary Nemchik told VOSD that city attorneys have continued to provide access to city records and to update law enforcement agencies with new information over the past year.
“While we only have limited information at this time, we are eager to learn what information is uncovered through these search warrants,” Nemchik wrote in an email to VOSD.
In recent weeks, a city subpoena associated with one of the city’s legal efforts to declare the lease deals null and void has uncovered contracts between Hughes Marino and Cisterra, including one pledging that Hughes would receive 45 percent of Cisterra’s profit if the Civic Center Plaza deal went forward and be on tap to cover up to 45 percent of the landlord’s upfront costs if it didn’t. Attorneys for the city also obtained emails revealing that a Cisterra principal talked privately about how to handle a city finance official’s questions — and concerns she might scrutinize “a $1 million buffer” in their numbers – as the city sought to finalize a lease-to-own deal with the company.
Now a criminal investigation is under way.
Violations of Government Code Section 1090, which attorneys for the city have alleged Hughes violated, can lead to criminal felony or misdemeanor charges.
Gary Schons, a former senior assistant attorney general who later spent years advising governments on issues including 1090, said the District Attorney’s Office would have needed to prove to a judge there was probable cause of felony violations to proceed with the Tuesday search warrants.
Schons said he expected, based on press coverage and documents he has previously reviewed at VOSD’s request, investigators might also be considering charges of aiding and abetting a Government Code Section 1090 violation and conspiracy.
But Schons said some time would likely pass before any criminal charges might materialize.
“These kind of cases take weeks and months – not days – to put together just a charge,” Schons said.
Managing Editor Andrew Keatts contributed to this report.