Criminal investigation into Ash Street lease comes to light as DA executes multiple search warrants

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Dozens of officers executed concurrent search warrants at the San Diego offices of Cisterra Development and real estate brokerage firm Hughes Marino early Tuesday, the first public sign that criminal investigators are examining the city’s acquisition of the ‘former Sempra Energy headquarters at 101 Ash St.

The search warrants were executed by the San Diego County District Attorney’s Office, which for months refused to confirm or deny that it was investigating the long-standing real estate transaction.

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Officers seized documents, computing devices and other materials that may be related to the Ash Street acquisition and the city’s 2015 capital lease for the nearby Civic Center Plaza.

Cisterra was the seller and owner in every transaction. Hughes Marino acted as an unpaid consultant to the city even though the brokerage firm had a secret contract with Cisterra and shared the profits from the two leases.

In addition to the offices of Cisterra and Hughes Marino, agents searched the Rancho Santa Fe home of Jason Hughes, the commercial real estate broker who served as a volunteer special advisor to former mayor Kevin Faulconer, but raised nearly $ 10 million. dollars for his work on Ash Street. and on the Civic Center Plaza lease.

The district attorney’s office confirmed that it had carried out the searches, but declined to comment on the case in detail.

“I can confirm that search warrants were served on these locations today,” said Tanya Sierra, spokesperson for District Attorney Summer Stephan. “I have no additional information to share.”

Cisterra spokesperson Eric Rose said the company had already provided all documents related to the two transactions to the district attorney’s office in accordance with the warrants. In a statement, Rose said the search did not amount to wrongdoing.

“Search warrants are not criminal charges, but simply instruments for gathering evidence so that the district attorney can assess a case,” he said. “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.”

Michael Attanasio, an attorney representing Hughes, also released a statement. He said his client had asked his legal team to cooperate with investigators and turn over the relevant files long before the search warrants were executed on Tuesday.

“Jason gave these instructions because he has nothing to hide,” Attanasio said.

“Jason welcomes any fair investigation into what really happened with these transactions,” the statement also said. “He is confident that these investigations will be conducted in a professional and impartial manner, and he looks forward to cooperating fully. “

The city attorney’s office announced at a town council meeting in April that it had forwarded the findings of an internal review to local, state and federal law enforcement agencies. At the time, neither the district attorney’s office, the attorney general’s office, or the US Department of Justice commented.

Michael Aguirre, the former San Diego city attorney who now represents resident John Gordon in a civil case against Cisterra, his lender and the city, among others, said he hoped the search warrants meant that a full and independent criminal investigation was underway.

“It is imperative that the district attorney investigate this case to the end and strengthen his outstanding team of white collar criminals,” he said.

The searches were carried out months after Hughes and his lawyers admitted he had been paid millions of dollars for work he said was provided for years at no cost to taxpayers.

Hughes admitted in late June that he was paid $ 9.4 million for the work, a day before he was prosecuted for fraud by San Diego City Attorney Mara Elliott. He said he told Faulconer and several other city officials years earlier that he still expected to be paid for the work.

Hughes published a 2014 letter to Cybele Thompson, then the city’s director of real estate assets, stating that he expected to be paid for his consultancy work, but not by the city.

Faulconer and others said they were unaware of the arrangement.

Cisterra took a similar stance, although she had a confidential deal with Hughes.

The development company acted as an intermediary in the Ash Street transaction and an earlier deal for the Civic Center Plaza, serving as the city’s owner in both capital leases while avoiding public disclosure of the millions who have been paid to Hughes Marino.

In both cases, Cisterra took possession of the property from the previous owners and then entered into the agreements with the city in what are known as “double engagement” transactions. As such, Cisterra was the owner of San Diego in both contracts while avoiding public disclosure of the millions paid to Hughes.

The City of San Diego is now working to rescind the two leases and recover tens of millions of dollars that it now claims was illegally paid to Cisterra and Hughes.

The city has been a tenant of the Civic Center Plaza for decades.

But the Ash Street skyscraper remains unusable due to asbestos and other issues, although the city has spent more than $ 60 million on rents and renovations since 2016, when city council approved the lease. .

Gordon, Aguirre’s client, was the first to file a lawsuit to cancel the Ash Street lease. Its August 2020 complaint alleges the city entered into the deal illegally because voters did not approve what turned out to be more than $ 200 million in public debt.

Elliott filed his lawsuit two months later – a year ago this week.

But that legal complaint was not initially aimed at returning the tens of millions of dollars the city spent to rent the vacant building between 2017 and 2020. Instead, it asked a judge to validate Faulconer’s decision to September 2020 to stop making monthly payments of $ 535,000 on the Ash Street Property.

After Hughes admitted he was paid $ 5 million in 2015 for his work on the Civic Center Plaza and $ 4.4 million for his advice on Ash Street, Elliott changed his lawsuit to add Hughes to as a defendant and to cancel both leases.

These cases are all pending in San Diego Superior Court.

Search warrants are a separate matter from civil matters. According to experts, gathering evidence through search warrants does not automatically mean that criminal charges are laid. On the contrary, search warrants tend to be part of an investigative process that can take months or years, if charges are laid.

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