A San Diego commercial broker has pleaded guilty to a state misdemeanor conflict-of-interest charge stemming from his role in advising the city on its purchase of a downtown office tower it was unable to occupy because of asbestos issues.
Jason Hughes agreed to pay the city $9.4 million and a $400 fine to the state of California after pleading guilty to a single criminal count Thursday in San Diego County Superior Court. The county district attorney said Hughes created a conflict when he improperly accepted a total of $9.4 million from the seller of two downtown buildings while representing the city as a volunteer adviser in the purchase of those properties.
The buildings included the 53-year-old tower at 101 Ash St., the former headquarters of Sempra Energy, that the city bought in 2016 from Cisterra Development in a 20-year, $128 million lease-to-own deal.
The city purchased the property in “as is” condition and has yet to occupy the property after spending well over $50 million in lease, repair and legal costs. Asbestos was found floating in the building in early 2019 as the city sought to occupy it after renovations.
Hughes said he informed city real estate officials in writing at the time the property purchase was being negotiated that he would continue to advise the staff of then-mayor Kevin Faulconer on a voluntary basis but would eventually be expecting some form of payment from the seller.
Some former San Diego City Council members have since said they were not informed by the mayor’s office or real estate staff of those arrangements before council approved the purchase.
Hughes’ representatives said Thursday the broker had a strong defense including his written correspondence with the city but decided to plead guilty to end public debate and any other continuing concerns because some residents and current political leaders were angered by the ill-fated tower purchase.
“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,” a Hughes spokesman said in a statement emailed to CoStar News.
Moving Forward
The spokesman said Hughes “looks forward to being able to fully focus his time and resources” on Hughes Marino, the brokerage he founded in 2011. The legal case involved only Hughes and not the San Diego-based brokerage, which has nine other offices in cities including Los Angeles, San Francisco, Seattle, New York and Boston.
The San Diego County District Attorney’s Office maintained Hughes’ actions in regard to the tower purchase constituted a conflict of interest under California law. District Attorney Summer Stephan said such cases often result only in civil or administrative remedies.
“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,” Stephan said in a statement announcing the plea arrangement.
Stephan added that “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.”
Seller Cisterra Development was previously dismissed from city-initiated lawsuits regarding the purchase of 101 Ash St. and the tower at 1200 Third Ave. that the city purchased earlier from Cisterra under similar arrangements but was able to occupy. After the Thursday plea, the city now plans to drop two civil lawsuits that were pending against Hughes related to the tower purchases.
The city of San Diego last summer agreed to pay Cisterra and its lender $132 million to exit the lease-to-own deals and take full ownership of the two buildings. Current Mayor Todd Gloria has proposed redeveloping the two buildings and other nearby city-owned properties into a multi-block complex that could include city offices and affordable apartments.
The Ash Street tower served as the corporate headquarters of Sempra Energy for nearly 50 years before the energy firm moved to a new downtown building in 2015.