Former city real estate adviser Jason Hughes on Thursday pleaded guilty to a misdemeanor conflict-of-interest charge after agreeing to essentially pay back the city $9.4 million he received from the city’s ex-landlord for his work on two city lease deals.
Doing so could make his real estate license a target of state officials.
Hughes, once publicly considered a volunteer, did not appear before Superior Court Judge Michael S. Groch early Thursday, a move allowed by state law for misdemeanor defendants. Instead, his attorney Dana Grimes said he would plead guilty to a single violation of Government Code Section 1090, which bars government officials from having financial interests in contracts they broker in their official capacities.
After more than two years of arguing that he was not covered by the law and that he told multiple city officials he wanted to be paid, Hughes relented. He agreed to a global settlement deal that also includes a year of probation and a $400 fine. For now, the prominent commercial real estate broker still holds a license from the state Department of Real Estate, but he must report the conviction to the agency, which could decide to trigger a process to remove his license.
In exchange for the guilty plea and the agreement to pay the city $9.4 million, Hughes will avoid as much as a $1,000 fine and a year in jail. He’ll also avoid a city civil trial with a result that was likely to be appealed – whoever won.
But that might not be the end of the matter for 55-year-old Hughes.
His ability to continue working in real estate could be in jeopardy.
Rick Lopes, a spokesman for the state Department of Real Estate, said the agency’s enforcement division is aware of the criminal and civil cases involving Hughes. It’s now awaiting an official notification from Hughes of his conviction and then will decide whether it should take action against his real estate license.
Per state law, licenses can be removed following a guilty plea to “a crime substantially related to the qualifications, functions, or duties of a real estate licensee.”
“DRE takes seriously criminal convictions involving any of our licensees and will work as quickly as possible to determine if it’s appropriate for us to take action in this instance,” Lopes wrote in an email to Voice of San Diego. “If we do, it’s important to remember that Mr. Hughes does have due process rights that we will honor.”
In the meantime, this week’s deal offered the city, the District Attorney’s Office and Hughes certainty. The city will soon get the $9.4 million it planned to seek next month in court. The District Attorney’s Office got a conviction. And Hughes avoided more serious punishment.
That certainty comes nearly two years after City Hall was rocked by the revelation that that Hughes received $9.4 million from the city’s now-former landlord for his work on the city’s 101 Ash lease and the virtually identical, earlier Civic Center Plaza deal. The bombshell followed multiple scandals that had erupted over the city’s controversial 101 Ash St. acquisition.
City Attorney Mara Elliott’s office responded by filing civil conflict-of-interest actions she described as “textbook conflict-of-interest cases” likely to result in wins for the city.
By then, District Attorney Summer Stephan’s office had already kicked off a criminal investigation that came with a higher burden of proof. Investigators would need to prove Hughes and perhaps the city’s landlord Cisterra Development knowingly skirted the law.
Stephan said Thursday that the District Attorney’s Office decided it could prove Hughes’ intent beyond a reasonable doubt, in part because of his expertise. He years ago lobbied for changes to state regulations, including a 2015 state law requiring 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. In the city’s 101 Ash and Civic Center Plaza transactions, the city has argued it considered Hughes its representative and didn’t know he had signed contracts with the city’s landlord.
“In this case, Jason Hughes was the expert, and he should have known better. In fact, he was one that was introduced as the expert in Sacramento in order to make the laws regarding real estate stronger,” Stephan said at a Thursday press conference. “So he knew better. And this is why the charge is a criminal charge and not just an administrative charge or a civil charge.”
But the criminal investigation faced other hurdles.
For one, Stephan said, Hughes was a volunteer rather than a typical city employee though a 2017 state Supreme Court ruling clarified that independent contractors can be covered by 1090. Hughes’ attorneys were adamant that their client wasn’t covered.
Then there were Hughes’ comments to city officials about wanting to get paid. Hughes also 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. The former real estate official and other former city officials have said that they didn’t know the city’s landlord paid Hughes. But there are lingering questions about what they knew when – and whether they should have pressed Hughes for answers when he made eyebrow-raising comments.
Stephan said investigators decided Hughes made those comments and produced the letter to protect himself, something she said showed he understood the boundaries of the law.
“We were passionate about bringing this criminal charge, but absolutely, yes, there were many challenges caused by the murkiness, if you will, of the dealings between Jason Hughes and city officials.” Stephan said.
To get a criminal conviction, Stephan’s office would need to persuade 12 jurors beyond a reasonable doubt that Hughes was guilty – and that questions about checks and balances at City Hall or former city officials who took the stand shouldn’t dissuade them.
They decided they had what it took to pursue a criminal 1090 case against Hughes but that there wasn’t enough proof that city landlord Cisterra knew Hughes hadn’t gotten the city’s approval to get paid – or to prove a conspiracy.
“We reviewed every potential charge, but we have to go by what we can prove by the evidence beyond a reasonable doubt,” Stephan said.
Then Stephan said retiring Superior Court Judge Kenneth So, who has recently presided over evidence disputes in the criminal case, decided as he urged a global settlement agreement that a felony conflict-of-interest could already drop to a misdemeanor once Hughes paid restitution, making the pursuit of a misdemeanor and a significant payment to the city worthwhile.
“The feeling by the judge, and also by our office, was that to be able to get this resolution in an area that was not clear under the law, send a clear message, use (Hughes’) expertise against him, that he was an expert in this area, and thus has to be held to that standard, was a win for the community,” Stephan said.
Irvine-based attorney John McClendon, who has past experience with the state’s conflict-of-interest law, said the calculus in the criminal case made sense.
“I can see where the prosecutor is looking at it like, ‘Keep your eyes on the prize. if I’m able to get a disgorgement of that $9.4 million for the benefit of the taxpayers, that’s a pretty good deal’ and the taxpayers maybe are unhappy that they didn’t get their pound of flesh off this guy,” McClendon said.
Elliott and some City Councilmembers also emphasized the certainty that came with the $9.4 million settlement payout during Wednesday’s City Council meeting.
City Councilwoman Marni von Wilpert, however, refused to support the deal after an attorney for Hughes said Wednesday his client wouldn’t agree to add a clause to the settlement barring future dealings between Hughes, his company or the city.
But her concern – at least related to Hughes himself – could be moot, if state officials decide to go after his license.
I would like to try to steal 9 million dollars from the city with the proviso that should I get caught I will get a mere slap on the hand. That seems fair.
For reference felony theft in California begins over $950 dollars. It’s amazing how much less seriously we take white collar crime
White collar crime has always paid dividends in America. Just look at all the purported indictments against Don Trump. Americans have no morality, know no morality and act like hypocrites.
Great Reporting. I can’t thank you all for holding people accountable. It’s amazing what people almost get away with.
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