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A prominent commercial real estate broker who once described himself as a volunteer helping the city tackle its downtown real estate woes testified under oath last week that former Mayor Kevin Faulconer and his chief of staff agreed he could seek a seven-figure payment for his work on a city lease.
Jason Hughes also told an attorney for the city who deposed him over two days last week that he did not formally represent the city on the controversial 101 Ash St. and Civic Center Plaza leases. Hughes did, however, ink a contract with the city’s landlord that helped him pull in $9.4 million for essentially serving as a partner in the two deals despite the agreement technically stating otherwise.
Faulconer and Stephen Puetz, his former chief of staff, have been adamant that they considered Hughes a volunteer. Both said under oath in separate depositions also obtained by Voice of San Diego that they didn’t recall Hughes seeking approval in 2014 to be paid for his work on the Civic Center deal or the later 101 Ash St. deal.
That’s despite a November 2014 letter Hughes claims was signed by the city’s former real estate chief allowing him to seek payment for complex lease deals that required more of his assistance. The letter coincided with a scheduled mayor’s office meeting and text messages between Hughes and Puetz discussing the meeting and a document Hughes planned to deliver to the real estate chief.
Here’s how Hughes summed up his arrangement with the city during a deposition last Tuesday, according to a draft transcript obtained by Voice:
“I wasn’t a broker for them. I wasn’t their representative. And I had full approval. I was offering advice. The mayor told me I could get paid. The chief of staff told me I could get paid. I told four other high-ranking officials that I would seek payment. I had full approval and then I had written approval. I did everything any normal person could ever imagine, especially when the city was not my client. I wanted full transparency.”
Hughes indeed informed former Chief Financial Officer Mary Lewis, former Deputy Chief Operating Officer Ron Villa and former city real estate official Brad Bennett in emails obtained by Voice that he intended to seek compensation for his work on the city’s Civic Center Plaza lease – though he never elaborated in those emails on who would pay him or how much. Hughes has also shared the letter he says was signed by former city real estate chief Cybele Thompson granting him the ability to seek payment though Thompson has said she doesn’t recall signing it.
But the two payments to Hughes weren’t public knowledge until last summer amid litigation over 101 Ash, a downtown high rise that the city acquired in 2017 but only occupied for a few weeks nearly three years later. The building, which has been plagued by asbestos violations and other issues, has now sat vacant for more than two years.
City landlord Cisterra Development revealed its $9.4 million in payouts to Hughes last year as the city took legal action to void its leases at 101 Ash and Civic Center Plaza, another high-rise steps away from City Hall that is home to more than a dozen city departments. The city has said its landlord’s payments to Hughes essentially infected the leases with a conflict of interest due to a state law barring public officials and even consultants from financially benefiting from deals they influence. Criminal investigators have also been digging in.
City Attorney Mara Elliott’s office has described the situation as a textbook conflict-of-interest case and has argued that Hughes’ position, the payments he received and the less than full disclosure translate into clear violations of Government Code Section 1090, the law stating government officials shouldn’t engage when their financial interests are at stake.
“The city and the public did not know Hughes was paid, when Hughes was paid, by whom Hughes was paid, or what he did to earn those payments until the city compelled production of business documents between the seller and Hughes through litigation,” Elliott spokeswoman Leslie Wolf Branscomb wrote last December.
Hughes’ claims that he didn’t have a formal contract with the city and that he wasn’t the city’s broker could be crucial to his legal defense.
Though Government Code Section 1090 applies to consultants like Hughes, particularly when they provide advice that government officials follow, Hughes’ attorney has argued the law doesn’t apply to him due to his more informal, unpaid position. Hughes never signed a contract laying out his role as a special real estate adviser to the city, a move that city auditors last year deemed problematic in a wide-ranging review of troubled city real estate deals.
In a November deposition obtained by Voice, former city Chief Operating Officer Scott Chadwick told an attorney representing lenders in the two lease deals that he understood Hughes’ arrangement to be bound by the agreement he made when former Mayor Bob Filner appointed him a special assistant to advise on downtown city real estate issues in 2013. Chadwick said he was also unaware that Hughes was ultimately paid.
In a letter memorializing the 2013 appointment, Chadwick noted that Filner commended Hughes for “performing this advisory role without compensation from any party.”
Hughes and his attorney say they considered that agreement to be finished after Filner left office.
“The letter from Mayor Filner was no longer operative after Mayor Filner resigned,” Hughes attorney Michael Attanasio wrote in an email. “(Hughes) testified that he did continue as an informal adviser, including to Mayor Faulconer. He never formally represented the city because he never had a contract with the city.”
Hughes testified last week that advice city officials sought from him after Filner left and when the city didn’t have a a real estate director extended beyond what he’d agreed to previously. He said he sought payment when he was asked to start looking at financing options as the city faced the possibility of losing Civic Center Plaza if it couldn’t quickly cut a deal.
Gary Schons, a former senior assistant attorney general who later spent years advising governments on issues including Government Code Section 1090, told Voice that a court will have to decide whether that work means Hughes is covered by the state law.
“The question becomes did he exert significant influence,” Schons said.
There are plenty of examples of Hughes seemingly influencing the city.
In his deposition late last year, Faulconer recalled asking Hughes whether he thought the 101 Ash lease was a good deal during a mayor’s office meeting before the deal was approved.
“I remember the specific phrase, it was ‘a no-brainer,’” Faulconer said. “That gave me comfort that it was going to be a good deal for the city.”
And it was Hughes who introduced the lease-to-own concept that would allow the city to essentially make monthly mortgage payments to acquire Civic Center Plaza – and later, 101 Ash. He brought together Cisterra and the city as a legal challenge hampered the city’s initial plan to buy the Civic Center building.
Hughes’ argument that he wasn’t formally serving as the city’s broker could also be an attempt to chip away at accusations whispered throughout the local real estate industry that he violated a 2015 state law that he lobbied for, which requires commercial brokers to disclose so-called dual agencies.
A dual agency is when a broker represents opposing parties in a transaction, and state law requires that both parties agree before a broker can represent them both.
Attanasio told Voice last year that the law was not in effect at the time of the Civic Center Plaza transaction and does not apply retroactively. Attanasio has also argued that Hughes’ written disclosures “more than satisfy the regulation even if it applied at the time and applied” to him.
On Monday, Attanasio said dual agency laws “have no relevance here.”
Schons has previously described Hughes’ disclosures as insufficient under Government Code Section 1090 as he failed to specify how much he was being paid – or who was paying him.
Elliott’s office has also argued that the communications and November 2014 meeting that Hughes’ attorney has described constituted less than full disclosure under state law.
But amid two days of questioning last week, Hughes said some city officials did follow up with him verbally about whether he ultimately got paid after the Civic Center deal closed.
“(Then-Deputy Chief Operating Officer) Ron Villa asked me if I was paid, if I worked out something with Cisterra,” Hughes said last week, according to a transcript obtained by Voice. “The mayor asked me. The chief of staff asked me.”
An attorney representing the city didn’t press Hughes for more specific details on those disclosures.
Yet the attorney for the city repeatedly prompted Hughes to admit that he never shared the exact amounts the city’s landlords had paid him during the two-day deposition.
Villa did not respond to a request for comment on Monday.
Ed Chapin, a lawyer representing Faulconer and Puetz, maintained that the former mayor and his top deputy never knew about Cisterra’s payments to Hughes despite Hughes’ claims that he got their approval to get paid – and that they later checked in with him.
“Both Mayor Faulconer and Stephen Puetz have been unequivocal that they were unaware Jason Hughes was receiving any money from his work on either the Civic Center Plaza or 101 Ash transactions before reading about this fact in the press,” Chapin said. “And I might add that both of them testified to this under oath in their depositions.”
In his December deposition, Faulconer said he was unable to recall meetings with Hughes about the Civic Center Plaza deal.
“I don’t recall ever having a conversation with Mr. Hughes about him being compensated,” Faulconer said, according to a transcript obtained by Voice.
Puetz said during his February deposition that he also didn’t recall Hughes formally asking to be paid.
Hughes recalled the situation differently.
“I had written approvals, and the mayor and the chief of staff specifically knew that it was going to be seven-figure fee that I would be seeking, and they were absolutely fine with that,” Hughes said last week.
Current and former city officials, including city attorneys now seeking to kill the two leases Hughes helped facilitate and to recoup tens of millions of dollars spent on them, say they are not fine with that.
“I did not realize that the city was being hustled by Jason Hughes, and that is why my statement is the way that it is,” Chadwick, now Carlsbad’s city manager, said in November as he was questioned about why the city pursued a lease-to-own deal to acquire 101 Ash rather than purchase it outright. “I am still fairly angry and upset over Jason Hughes’ behavior, performance, and actions.”
Hughes, meanwhile, told an attorney representing the city that he had no regrets about his handling of the situation with the city.
But he admitted he’d do one thing differently.
“I would have more writing memorializing all of our conversations,” Hughes said.