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Days before the City Council is set to vote on a proposed settlement with the city’s 101 Ash landlord and lenders behind the deal, the District Attorney’s Office is asking a judge to decide whether some evidence it seized from Cisterra Development and a former city real estate adviser at the center of the debacle can be included in its criminal probe.
District Attorney Summer Stephan’s office on Thursday filed a motion in Superior Court seeking to resolve privilege claims raised over items seized during October raids targeting onetime city adviser Jason Hughes, his company Hughes Marino and city landlord Cisterra.
In the filing, Deputy District Attorney Hector Jimenez requested that Superior Court Judge Kenneth K. So, who signed off on the search warrants last fall, set a hearing next month to resolve what documents and communications should – and shouldn’t – be covered by attorney-client privilege that would shield them from investigators.
“The best evidence of a conspiracy to commit a crime is communication between the parties. The District Attorney’s Office will contend the parties cannot prove the expansive privileges claimed exist,” Jimenez wrote. “It is apparent that Hughes and Cisterra don’t want to share communications with us. All of the communications should be released. They will tell the truth.”
Jimenez wrote that attorneys for Hughes and Cisterra provided lists of people and domain names and told investigators that any materials sent to or from them on devices the District Attorney’s Office seized were privileged. Jimenez also wrote that Hughes had identified a folder in his personal directory that is “entirely privileged and should not be reviewed by (this) office.”
Jimenez revealed that the District Attorney’s Office had not reviewed those records but requested that Hughes provide facts at an August hearing to explain why privilege should apply.
A District Attorney’s Office spokesman declined to comment on the filing. Cisterra attorney Michael Riney declined to comment on the motion.
Hughes’ attorney Michael Attanasio said his client welcomed the judge’s review of the documents.
“As he said from the beginning, Jason Hughes remains ready to cooperate in any legitimate investigations,” Attanasio wrote in a statement. “He has made himself available for interviews with law enforcement, he provided extensive documents in the criminal investigation and civil litigation, and he answered all questions put to him over three days of depositions in the civil cases. The DA’s Office has acknowledged that some of the materials taken during execution of its search warrants involved communications with lawyers. These materials are covered by the attorney-client privilege, and we welcome the DA’s invitation for judicial review so that we can ensure protection of valid privileges.”
The District Attorney’s request is the latest chapter in a city real estate debacle that has engulfed two city buildings – 101 Ash Street and Civic Center Plaza – and City Hall since it was publicly revealed last year that the city’s landlord at both buildings paid Hughes $9.4 million for his work on the two leases. That revelation that triggered city legal efforts to void both deals.
Hughes, who in 2013 volunteered to advise then-mayor Bob Filner on real estate issues, later told multiple city officials he wanted to be paid by someone other than the city. Hughes has produced a letter he says the city’s former real estate director signed giving him the go-ahead to seek compensation for complex city lease deals. Yet the former real estate official and other former city officials have said that they didn’t know the city’s landlord paid Hughes.
At Mayor Todd Gloria’s urging, the City Council is set to vote Tuesday on a controversial proposed settlement with Cisterra, its 101 Ash and Civic Center Plaza landlord, and lenders who facilitated both deals.
Gloria and other city leaders argue the settlement will end uncertainty over whether the city will hold onto 101 Ash and nearby Civic Center Plaza and allow it to make future real estate decisions.
The settlement includes a roughly $132 million buyout of the city’s 101 Ash St. and Civic Center Plaza leases to end the city’s legal fight with Cisterra and the lenders. Cisterra, on the other hand, would pay the city the equivalent of the $7.45 million in net profits it received in the 2017 101 Ash transaction, and investors who provided upfront cash to facilitate both leases would waive an estimated $11.7 million in penalties associated with paying off lenders’ debts before the planned 20-year leases conclude.
City Attorney Mara Elliott, who has championed civil conflict-of-interest actions against Hughes and Cisterra, has argued the settlement is short-sighted and that the City Council should reject it. She has argued the City Council shouldn’t approve a settlement until all investigations – namely its own – are completed.
“Entering into the agreement now is premature, given that discovery in the pending lawsuits is still ongoing, and the city may uncover additional evidence that could further bolster the city’s allegations against Cisterra in particular,” Elliott wrote in a June 20 legal analysis of the proposed settlement. “The city’s opportunity to reach a settlement with Cisterra and the lender will remain intact in the future, and the city will likely have stronger negotiating leverage in settlement talks after additional discovery and investigative efforts are completed.”
Elliott’s office on Thursday declined to comment on the District Attorney’s Office motion.
Nick Serrano, Gloria’s deputy chief of staff, said the mayor and the city have been aware of the DA’s pending investigation.
“This motion to access documents is to be expected. It’s precisely what the Mayor has been asking for: law enforcement to investigate potential criminal wrongdoing in this matter,” he said. “This criminal inquiry does not absolve the City of its obligations to deal with 101 Ash Street and Civic Center Plaza. Similarly the proposed civil settlement agreement will not prevent prosecutors from holding anyone accountable for their role in this mess.”