IN THE NEWS: Bry seeks expanded audit into Ash Street property in light of related litigation

February 28, 2020

By Jeff McDonald, San Diego Union-Tribune

Councilwoman Barbara Bry requested that the San Diego Auditor’s Office expand its pending review into the handling of the high rise at 101 Ash Street, citing a lawsuit accusing the building’s former owner of withholding key information from the city.

Bry’s two-page memo includes a pair of declarations from former building owner Sandor Shapery and a former employee who suggested that his boss did not alert city officials to hazardous-material contaminations throughout the property, which the city agreed to purchase through a lease-to-own deal.

Memo from Council President Pro Tem Barbara Bry - February 27, 2020
“These documents, coupled with the ‘first page’ disclosures in the lease/ sale agreement suggest that someone may have known a great deal more than was publicly disclosed at the time of (council) approval,” Bry wrote on Thursday.
“In fact, despite the clear ‘first page’ disclosures, the property was described during the council hearing as in ‘unusually good condition. I want to know the basis of that statement,” said Bry, who was not on the council when the transaction was approved in October 2016.

Interim City Auditor Kyle Elser did not immediately respond Thursday to a request for comment.

A spokesman for Councilman Scott Sherman, who chairs the audit committee, said Sherman has the utmost confidence in the independent City Auditor’s office to investigate what happened with the building.

“The audit committee has already voted unanimously to approve an audit of 101 Ash and will consult with the Auditor’s Office regarding this request,” spokesman Jeff Powell said.

A spokesman for Mayor Kevin Faulconer did not respond to questions about the request.

The Ash Street property, a 19-story tower acquired early in 2017 under a 20-year lease-to-own arrangement, was supposed to help solve the city’s need for additional downtown office space.

But a series of setbacks prevented employees from moving into the property in July 2017, as originally anticipated, and the city is nonetheless paying $535,000 a month for the vacant property.

At the audit committee meeting last week, Elser was directed to review the lease-to-own deal and a spate of asbestos contaminations that led city officials in January to evacuate the building a few weeks after hundreds of workers had moved in.

The special audit is separate from a “forensic review” the Mayor’s Office announced in January, days after asbestos violations issued by county regulators forced the building to be vacated.

According to documents related to litigation between Shapery and a former employee named Adam Attia, Attia said Shapery kept specific information about the condition of the building to himself before the city agreed to enter the 20-year lease-to-own agreement.

Attia also said in a sworn statement that the former building owner misrepresented the status of the property, claiming it was subject to an eminent domain proceeding in order to save money on taxes.

Imminent domain refers to a government taking private property for public use under certain circumstances.

“I am informed and believe there was no threat of condemnation,” Attia stated in a court filing last month.

Shapery rejected those assertions in his sworn testimony and asserted Attia was pressuring him for money.

“Mr. Attia stated he was going to tell the mayor that I defrauded the city and the IRS on the sale of the Sempra high rise to the city unless I paid him a large amount of money,” Shapery wrote.

Bry concluded her request to the city auditor Thursday by asking to see the full range of options facing the city at this time, including the ability to terminate the lease.

Even if the scope of the audit is expanded, the auditor’s review likely will not begin until July, because Elser said his staff is committed to existing projects. There was no timeline provided by the Mayor’s Office for when its “forensic review” might be completed.

The Ash Street transaction has become a significant campaign issue between Bry, Sherman and State Assemblyman Todd Gloria, who are all seeking to succeed Faulconer as San Diego mayor.

Gloria and Sherman were on the city council in 2016 and made the motion and offered a second to approved the lease.

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