Former mayor Kevin Faulconer maintained under oath this week that he did not know that onetime “volunteer” city real estate adviser Jason Hughes was paid millions for his work on two controversial city lease deals.
Faulconer sat for a more than five-hour deposition on Wednesday at a La Jolla law office, mostly taking questions from Hughes’ attorney. The deposition was the latest development tied to legal challenges pursued by the city after it was revealed that the city’s landlord paid the purported volunteer $9.4 million for his work on the controversial 101 Ash St. and Civic Center Plaza lease-to-own deals. The city is now trying to void both deals and recoup tens of millions of dollars in past lease payments.
Hughes’ chief defense has been that top city officials, including Faulconer, knew Hughes was getting paid and agreed to it in 2014 as Hughes helped the city negotiate a deal to acquire Civic Center Plaza, a high rise just steps away from City Hall that was already housing hundreds of city workers.
Faulconer and his former staff denied they were aware of those payouts after they were revealed this summer, even after Hughes’ attorney presented evidence that they had signed off on them.
The former mayor didn’t change his tune at Wednesday’s deposition.
“The mayor thought that Jason Hughes was an unpaid volunteer who would serve without compensation from any party,” Faulconer’s attorney Ed Chapin told Voice of San Diego.
Former city attorney Mike Aguirre, who is representing taxpayer John Gordon in a suit challenging the city’s 101 Ash acquisition and also questioned Faulconer on Wednesday, agreed in a statement that the former mayor repeatedly testified that he understood Hughes to be a volunteer. Aguirre also said Faulconer said he was not aware of wire transfers to Hughes’ company, Hughes Marino.
Aguirre and Chapin also said the mayor recounted Hughes telling him that the 101 Ash deal was a “no brainer” when Faulconer asked the real estate pro whether the lease would be a good deal for the city.
Hughes’ attorney Michael Attanasio cited letters, emails and text exchanges during the Wednesday deposition. After the sit-down, he accused the former mayor of “acute political amnesia” for claiming not to remember those exchanges and one key meeting. In that 2014 meeting, Attanasio said, Hughes described to city officials that he wanted to seek payment from other parties in complex lease-to-own deals.
Attanasio on Wednesday again shared a Nov. 19, 2014, letter obtained by VOSD bearing a Hughes Marino letterhead and labeled “Re: Civic Center Plaza” signed by Hughes that explains the real estate broker’s plan to seek payments from other parties. It also bears former city real estate chief Cybele Thompson’s signature. Attanasio also showed Faulconer what he described as an earlier draft instead addressed to then-Faulconer Chief of Staff Stephen Puetz that Attanasio said Hughes later updated with Thompson’s name at the request of Faulconer and Puetz.
Attanasio also showed an excerpt of Faulconer’s calendar showing that Faulconer, Puetz and Hughes had a meeting that afternoon as well as text messages exchanged before and after the meeting where Puetz and Hughes discuss a 4:15 p.m. meeting and later, a task to be handled with Thompson.
“Cybell (sic) says it’s fine,” Puetz wrote. “She’ll handle it with you.”
“She says she will have city atty (sic) review,” Hughes wrote back. “Is that necessary? I’m dropping her a hard copy in 10 min.”
“I’ll talk to her again,” Puetz replied.
Puetz previously told VOSD that he did not recall seeing the letter Attanasio shared or telling Thompson she needed to sign it.
Faulconer’s attorney said the former mayor testified Wednesday that he didn’t recall the November 2014 meeting with Hughes and didn’t see the letter Attanasio referenced until it was reported in the press this year. He described Faulconer’s testimony as forthright and honest and noted that the former mayor, who often had many meetings each day, was being asked to recall events that occurred years ago.
Attanasio deemed Faulconer’s inability to recall those details politically convenient given the debacle surrounding the renovation of the 101 Ash building.
“Mr. Faulconer did not remember one way or another anything about the emails and the documents in which Mr. Hughes consistently disclosed his intent to be compensated on these transactions,” Attanasio wrote in a Thursday statement. “In light of the city’s botched handling of the 101 Ash remodel on the former mayor’s watch, it’s no surprise he has acute political amnesia on some of these events.”
Attanasio wrote that the past letters and emails Hughes allegedly presented to city officials “speak for themselves.” He has previously noted that those documents are further bolstered by the text messages between Hughes and Puetz and Faulconer’s own calendar.
Hughes’ attorney argued that the draft letter originally set to be signed by Puetz – which he also shared with VOSD – adds to the evidence that Hughes “obtained their approval to be paid on the lease-to- own transactions.”
Puetz will soon face questions under oath from Attanasio too. Chapin, who is also representing Puetz, said he and Attanasio have agreed to a Jan. 14 deposition date for Puetz following the need to reschedule the sit-down that had been initially set for Monday.
Meetings and exchanges between Hughes and city officials weren’t all Faulconer was asked about during his Wednesday deposition.
He also took questions about a Sept. 6, 2016, meeting where former city officials have said the mayor directed staff to proceed with a lease-to-own structure for the 101 Ash acquisition that cost the city about $17 million more than a straight purchase.
Three former city officials previously told VOSD that Faulconer had pushed for the lease-to-own structure even as one city executive argued that a purchase would be a better deal. The former officials also said the mayor expressed concern about the optics of a direct transaction involving hotel magnate Doug Manchester, who was part owner of the 101 Ash building. Manchester, a Faulconer supporter, was considered a political lightning rod due, in part, to his backing of a 2008 state ballot measure to ban same-sex marriage.
Faulconer’s attorney said the former mayor didn’t recall the September 2016 meeting.
But Chapin said the former mayor had been concerned at the time that some City Councilmembers’ “political differences” with Manchester might negatively impact the hoped-for city acquisition.
“He wanted them to consider it on the merits and it seemed like a decent deal,” Chapin said. “He was under the impression the city would save $44 million dollars, so given that savings, given the fact the city would have an asset at the end of the lease-to-own payment trail and Jason Hughes said it’s a no brainer – he embraced it.”
The $44 million in expected savings touted by city officials as they presented the deal to the City Council were based on the assumption that the city would spend far less in its acquisition of 101 Ash than it would leasing other real estate and would own the building after 20 years – even if it went with the more costly lease structure.
The city’s hopes for 101 Ash – and the lease deal – didn’t pan out. Nearly five years after the 101 Ash transaction was consummated, the building has largely sat vacant or been under construction. The city rushed to evacuate it in January 2020, just weeks after city employees moved in, after a series of asbestos violations.