NBC7 Admits Story On 101 Ash Street Was Based On Forged Document

Speaker 1: 00:00 It was the longtime headquarters of Sempra energy downtown. Now the building at one Oh one Ash street has become a legacy white elephant for outgoing mayor. Kevin Faulkner a big headache for city council and the subject of intrigue involving a local media outlet, the race to replace the mayor and more joining me to sort it all out is KPBS. Metro reporter, Andrew Bowen. Hi Andrew. Hi Mark. Thanks. So, uh, before we get to the scam, which apparently used NBC seven San Diego to smear two candidates for public office, uh, set the situation up for us, give us the rundown of how and why the city wanted to buy this building at one Oh one Ash street. Speaker 2: 00:37 Sure. So the city has a real estate problem with its employees. A lot of them are working in pretty drab conditions downtown. Um, if you've ever walked into the development services department, for example, it's a really outdated office space, cramped quarters, just not the best place for employees to be doing their best work. And so the building one-on-one one held the promise of a relatively new, um, consolidated office space for city employees. Um, the building was owned by a businessman, Sandy Shapery. There was also a minority stake in the building owned by, um, Doug Manchester, the hotelier and developer. And so the city had been negotiating with that, uh, with Shapery over the purchase price. Um, it was, uh, they had agreed to about $72 million. We later found out that there was an appraisal that put the value significantly lower, and anyone with a mortgage, uh, w should know that when you want to buy a building and it ends up appraising for less than your agreed purchase price, you'll have trouble getting a loan for that purchase because the lender doesn't want to pay an inflated value. Basically the, this, uh, appraisal problem led the city to agree to a lease, to own deal so that they could be essentially renting the building and then have an option to purchase it later. Speaker 1: 01:49 So what eventually happened, we did get this lease to purchase deal, and it was a lot of money over a lot of years, right? Speaker 2: 01:56 Correct. More than 120, a million dollars. The city was paying $18,000 in rent each day. And it was not able to occupy the building. Initially the city staff said that it just needed a good power washing, but, um, further inspection found that it in fact had a lot of work that needed to be done. Um, there were just a lot of issues with the building. And so yes, the city agreed to this deal and the deal had it paying about $18,000 per day in rent. But it turned out that the building needed a lot more work than the city originally thought. And the move in date kept getting pushed back and back, and the city had to spend $30 million more on tenant improvements than it initially anticipated. So the scandal was growing. Speaker 1: 02:40 Yeah, it certainly was. And I guess the employees moved to in briefly, they had to go out and now it sits there empty and Faulkner finally threw up his hands and quit paying the rent last week. Right. Speaker 2: 02:50 That's right. So, uh, all the construction work was being done that the contractor dislodged asbestos into the air hundreds of city employees to be evacuated from the building and go back to their old, not appealing office space. And the city was actually cited by the County for air quality of violations. They continue to spend money on the improvements. Uh, they continued to pay rent on the vacant building and ultimately, uh, you know, up until now and up until the point that, um, Faulkner ordered the city to stop paying the rent payments. Um, the city had spent more than $50 million without much to show for it. Speaker 1: 03:24 Yeah. One of those deals where nobody's happy, but the lawyers, so this is a burgeoning scandal, as you say, it's in this playing in the two local political races, the one between Councilwoman Barbara, Brie, and former Councilman Todd, Gloria for mayor and between city attorney, Mara Elliott and her challenger attorney Corey Briggs. So tell us about an NBC seven San Diego's reporting, uh, which they first posted a couple of weeks ago, Speaker 2: 03:48 NBC, uh, reported on this gap in the appraisal and the purchase price. Um, it's it had obtained a memo written by an outside law firm that was hired by the city or rather what it thought was a memo. And, uh, the appraisal issue was kind of buried in the story, the headline and the lead of the story really focused on a footnote in this memo. And that footnote said that the investigators had tried to interview Todd Gloria to determine whether he had somehow misled the public or misled his council colleagues about what he knew about the building's value is very vague allegations. And then in this footnote, it also says they tried to interview Gloria and that the city attorney Mark Elliott blocked that interview from happening. A lot of things immediately didn't really add up in this footnote. Why would Elliot the city attorney have the ability to block investigators from interviewing Todd, Gloria, who no longer works at the city? Speaker 2: 04:40 She hasn't really no authority in that matter. The footnote also, interestingly enough, called Todd Gloria, the council president, which he had not been for years, and that was kind of a head scratcher. And immediately after the story published the city attorney's office and the lawyers who actually wrote this memo say that that footnote was a complete fabrication and NBC still kept the story up and did not issue a retraction until last week when they were somehow able to identify or verify that this footnote was in fact, a forgery and they were attracted the story, which is a very big deal in journalism. And now it is clear than ever that somebody gave a news outlet of forged document in an apparent effort to smear to elected officials. Two months before we voters in the city are going to be decided whether these two people are fit to occupy the two most powerful positions in city government. This is a huge deal and voters really need to understand what's going on right now. Speaker 1: 05:33 Right? And as you say, there were strident and immediate reactions from Todd, Gloria and Mara Elliot, that's orange County, a law firm. And as you say, NBC seven has retracted. This had done what we call a big skin back and it's embarrassing. And we'll see if there's more coming on that. Wouldn't you think they're trying to do an investigative piece now on how they got, uh, got hoodwinked on this. They say that they are, in fact, Speaker 2: 05:58 They're continuing to investigate, uh, how, who gave them this memo. And one of the things that came out when they issued their retraction was that the source of the memo was never actually known to the reporters who were writing this story. They got it. Somehow. We don't exactly know how, if it was dropped off in an unmarked envelope or dropped somewhere in an anonymous server or a Dropbox link or something like that. But they said that they were able to verify the memo's authenticity with a city employee whom they trusted. Um, but that city employee had then later kind of walked back there, they're vouching for this document. So to some extent the damage has been done. Um, the, you know, the, that story was up for a week and it was used by, uh, Gloria's opponent, Barbara Bree, and some Facebook ads she has since taken those ads down. Um, but has really repeated the attacks on Gloria for supporting this one Oh one ashtray deal when he was on the city council, Gloria says he, and he has always said that he made his decision to support that deal based on the information that was given to him and his counsel colleagues at that time that the info was incomplete and the true culprits in this, this really bad deal, our mayor, Kevin Faulkner in his staff who orchestrated the whole thing. Oh, wow. Speaker 1: 07:09 And we assume there's a lot more to come out from all of this. Now the question begged right away on this false story is who's going to benefit from this. And it seems pretty obvious these, these two opponents of Todd Gloria and the incumbent of Mara Elliot, right? Speaker 2: 07:25 Yes. And we asked Barbara Brie I'm point blank. Do you know who gave this memo to NBC seven or does do interview of your council staffers or do any of your campaign staffers know who gave them this memo? And she said, no, it certainly leaves us a lot of intrigue. We, we want to know who, who, uh, you know, has this vendetta against, um, these two elected officials and why they would go to such great lengths to fabricate a document and plant a hit piece on them. In the news media, it's quite a fluid situation, very fluid. And, and ultimately, um, you know, the question that we should be asking are, uh, people who are running for higher office in the city is what are they going to do about this deal? One-on-one ask street, how are they going to try and continue with the tenant improvements and eventually hope to move employees in? Are they going to try and somehow, uh, back out of the deal? I mean, there are many options that the city has and none of them is good. What is the city going to do with this mess now that it has already stepped in it? Speaker 1: 08:23 And we're going to be certainly following your coverage and how all this plays out, especially between now and November 3rd. I've been speaking with KPBS, Metro reporter, Andrew Bowen. Thanks, Andrew. You're welcome, Mark.