SAN DIEGO (CNS) - The San Diego City Council Wednesday agreed to a settlement with a real estate broker who helped the city negotiate lease-to-own agreements for the 101 Ash Street and Civic Center Plaza buildings and earned more than $9.4 million for doing so.
The settlement was proposed to broker Jason Hughes last week by San Diego Superior Court Judge Kenneth So. The council voted 7-2 Wednesday approved the deal, under which Hughes will return the $9,433,872.30 he earned from Cisterra Development for facilitating the sale. In exchange, the city will dismiss with prejudice its lawsuits against Hughes and his company, Hughes Marino.
Hughes will have 10 business days to return the sum total.
"Although [Wednesday's] events bring finality for Jason Hughes, his family, and the Hughes Marino team, it is important to remember the facts about Jason's role on the Civic Center Plaza and 101 Ash Street transactions between 2013 and 2016," a spokesman for Hughes Marino and Jason Hughes said in a statement. "Jason acted in good faith to support the city of San Diego during a time of significant uncertainty and urgent need for the city."
Thursday morning, Hughes' lawyer entered a guilty plea to the misdemeanor conflict of interest charge on the broker's behalf. Hughes was not present in the courtroom. He also has to serve one year of probation and pay a $400 fine.
According to the statement, six senior city officials were aware of and approved the compensation arrangement for Hughes, culminating with a written agreement signed by the city's Director of Real Estate at the specific direction of the then-mayor and his chief of staff.
"While Jason was prepared to put forth a vigorous defense at trial, he has concluded it is in his best interest to settle all claims against him in order to avoid the heavy cost and ongoing distraction of protracted litigation," the statement reads. "Jason looks forward to being able to fully focus his time and resources on Hughes Marino's continued national success, his family, and the San Diego community."
City Attorney Mara Elliott encouraged the city to accept the deal, describing it as an "excellent result and an indisputable victory for the city."
"We've done right by the taxpayers," she said at Wednesday's council meeting. "The resolution we've negotiated with Hughes is fair and it is wise."
The San Diego City Attorney's Office had sued Hughes, developer Cisterra and lender CGA and sought to void the city's lease-to-own agreements for the buildings. Elliott's office argued there was a conflict of interest because Hughes allegedly represented himself as a volunteer adviser on both deals, but unbeknownst to the city, collected the $9.4 million from Cisterra.
Hughes' attorneys have maintained that he disclosed his intent to receive compensation to several city officials.
When employees began moving into the 101 Ash building following a 2017 lease-to-own deal, it was discovered that the property was unsafe for human occupation due to asbestos. Initially, city staff during Mayor Kevin Faulconer's administration described the building as needing $5 million worth of repairs and retrofitting.
The bill had already exceeded $26 million by 2020, and an independent review conducted after the deal was inked estimated $115 million more will be necessary -- $136 million more than staff presented to council.
Councilwoman Vivian Moreno said the settlement was disappointing.
"The only consequences (Hughes) faces is the profit from the deal is given up," she said. "It sends a message that if the city gets taken for a ride by an individual, they just need to repay what they made."
Councilwoman Marni von Wilpert joined Moreno as the only no votes on the settlement, largely because Hughes himself was not present at the meeting to agree to an amendment under which he could never again do business with the city.
"These people defrauded us on a massive scale," she said. "I have no assurance Hughes will not form another company and do business with the city again."
Despite those objections, the majority of the council was happy to put another 101 Ash Street milestone in the rear-view mirror.
"The 101 Ash Street settlement is a win for San Diego," Councilwoman Jennifer Campbell said. "It holds Jason Hughes accountable for illegally brokering the deals that cost San Diego's taxpayers more than $9.4 million. The city, the mayor and this council can now continue to move forward from the 101 Ash Street debacle."
Council President Sean Elo-Rivera said he appreciated the work Elliott's office had done and didn't want to gamble with the $9.4 million by relying on testimony "from a previous administration I view as inept."
Councilman Kent Lee, the council's newest member, admitted he knew more about the case as a member of the public than as an elected official, but said the body needed to regain public trust.
In July 2022, the City Council accepted a much-debated settlement with Cisterra Development and lender CGA over the real estate deals.
The settlement transferred ownership of the properties to the city for around $132 million -- $86 million for 101 Ash and $46 million for CCP -- and refunded the city $7.5 million in profits Cisterra made in its lease-to-own deal with the city on the 101 Ash property. The deal allowed Cisterra to keep its $6.2 million in profits from a similar deal with Civic Center Plaza. That refund will come in two payments this fiscal year.
Elliott urged the City Council to reject the settlement at the time and brought up the deal again Wednesday.
"Despite today's good news, the moment is also bittersweet," she said. "Cisterra is no less culpable than Hughes or Hughes Marino, yet the city agreed to dismiss its litigation against them in exchange for the return of the profits it made on the 101 Ash Street transaction.
"The city also agreed to buy 101 Ash Street from Cisterra, even though our remedy under conflict of interest law would be to return the building to Cisterra and to get our money back," Elliott said.
Under the previous settlement, the city is responsible for all remediation fees to get the building habitable but would be entitled to all insurance or third-party reimbursement related to previously botched remediation of 101 Ash under the settlement and would "be able to determine the best course of action to garner the most value from building."
Before a majority of the council members agreed to the deal, San Diego County District Attorney Summer Stephan announced she was criminally charging Hughes with conflict of interest.
"During a hearing set for tomorrow, Hughes is expected to plead guilty to a misdemeanor violation of conflict-of-interest law, Government Code section 1090, and agree to pay $9.4 million in restitution to the city of San Diego, the amount he was secretly paid for the two transactions," the DA's statement reads.
The statement said the City Council's actions Wednesday cleared the way for a criminal case to proceed.
"In many cases, conflict of interest cases result in only civil or administrative remedies," Stephan said. "But in this egregious case, it was important to attain a measure of criminal liability and make certain that restitution be required via a criminal case and not left to chance in civil court.
"The message we are sending is clear: whether you are in an elected position, a public employee, a contractor or an appointed volunteer, if you personally profit from contracts related to a government position, you will be held accountable for violating this public integrity law," she said.
A spokesman for Hughes said the plea deal would end the saga. San Diego still has insurance claims related to Civic Center Plaza and 101 Ash Street pending.
