Independent city investigation revealed Todd Gloria’s role in real estate deal that used shell company to intentionally hide Doug Manchester’s ownership in troubled downtown high rise that some are now calling “fraudulent”
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Mayoral candidate Todd Gloria is facing blistering criticism for his role in approving a controversial and costly real estate deal that the entire San Diego City Council has recently unanimously disavowed, that the Union Tribune described as “incredibly bad deal-making” and “incompetence,” and that Democratic City Councilwoman Vivian Moreno claims is “fraudulent.”
For San Diego’s LGBT community, however, Todd Gloria’s leading role in the controversial deal is seen as even worse with some LGBT community members accusing him of “hypocrisy” and “outright betrayal.”
That’s because the deal was with developer Doug Manchester. (Yes, THAT Doug Manchester.)
Manchester became a boogeyman in San Diego’s LGBT community after he contributed to the Prop 8 campaign to repeal marriage equality in 2008. For years Gloria has repeatedly attacked political opponents for having any hint of association with Manchester or his real estate projects.
Yet when it came time for Gloria to advance one of Manchester’s deals, a recently-released independent city investigation shows he took extraordinary and costly steps to hide it from the public – and the LGBT community in particular.
Todd Gloria Advances a Bad Deal
“It’s a great deal for taxpayers!” That’s what then-City Councilman Gloria said in 2016 when he led the City Council action to approve a lease-to-buy agreement for a 50-year-old high rise building that would be used as office space for city workers. Located at 101 Ash Street downtown, the building used to house Sempra Energy.
Despite the building’s old age and public disclosures from Sempra that it was filled with asbestos and was functionally obsolete, the Gloria-backed deal called for city taxpayers to assume all risk and liability. The actual contract that Gloria advanced at City Council even had a big bold statement on the first page that absolved the previous owners of any liability or responsibility for the condition of the building.
Observers at the time found it highly unusual that Gloria advanced a one-sided deal forcing taxpayers to assume all risk – and without even asking for a simple building inspection.
Fast forward four years later. The building still sits empty and the cost of the deal has mushroomed from $127 million to more than $250 million. The city now faces lawsuits from city workers who were exposed to asbestos and an outside lawsuit has been filed to invalidate the entire deal on the basis of fraud. The failed deal has become a lightening rod in city politics.
In February of this year city leaders launched an independent forensic investigation of the troubled deal – and the results were damning for Gloria.
The final investigation report concluded the city failed to do its due diligence by not conducting a routine building inspection, ignored clear evidence of problems with the building, and failed to protect taxpayers’ interest by accepting a deal that was “disproportionately unfavorable to the city.”
The Price Todd Gloria Paid to Keep Manchester a Secret
The independent city investigators also took issue with the highly unusual way the deal was structured. The contract that Todd Gloria advanced in public hearings at City Council was with Cisterra, Inc. Yet the true owners of the building at the time were Sandor Shapery and Doug Manchester.
Under City Council transparency rules in place at the time of Gloria’s decision to approve the deal, the names of the actual owners and investors in a deal are required to be made public before any agreement is voted on. Those rules were not followed.
To get around those public disclosures and to provide additional relief of liability to Manchester for the condition of the building, the deal Gloria backed was for the City to buy the building from Cisterra, Inc. which would serve as a shell company for the deal and would receive a handsome profit for doing so.
The investigation report even concluded “Cisterra, Inc was a mere middleman to shield the prior owner against any liability to the City for nondisclosures.” The investigation report further noted “Cisterra made a substantial profit merely by acting as a conduit.”
The investigators may have scratched their heads on why the deal was set up using a shell company, but LGBT community members easily know the answer.
If he did a deal with Manchester himself, Todd Gloria would have faced backlash from his own LGBT community and would lose all credibility in using Manchester as a weapon against his political opponents.
What was the cost to taxpayers to give Gloria secrecy on his deal with Manchester? A staggering $60 million markup in price – almost half of the initial estimated cost of the deal - according to valuations done by real estate experts.
Now that the results of the independent city investigation have been released, and Gloria’s costly efforts to hide the identify of Manchester in the deal are now out of the proverbial closet, LGBT community members are speaking out.
“It is the height of hypocrisy if not outright betrayal for Todd Gloria to intentionally hide the fact that he was doing business with Doug Manchester,” said Gina Roberts, a member of the LGBT Center’s Community Leadership Council and the San Diego County Human Relations Commission.
“Todd Gloria stuck city taxpayers with an extra $60 million in costs so he could continue to attack Doug Manchester in public while doing playing footsy with him behind closed doors in a secret real estate deal,” Roberts concluded.
“The lease may be a fraud and that will be decided by the courts, but Todd Gloria is certainly a fraud for hiding his deal with Manchester while publicly disavowing him,” said Robbie Riley, President of LCR San Diego.
Will Todd Gloria Now Pay a Political Price?
Todd Gloria is now in a close race for San Diego Mayor with current City Councilwoman Barbara Bry and the issue of his leading role in this failed real estate deal has emerged as a top issue.
Bry was an early critic of the deal for the Sempra building and has proposed that the city renegotiate the entire deal. In a recent post on Facebook, Bry blasted Gloria for failure of the deal and the secrecy involved in approving it.
“Todd Gloria knew the city was paying a $60 million premium to conceal the identifies of the real owners of the building – Doug Manchester and Sandy Shapery – and he should have to explain WHY,” Bry posted.
Now that taxpayers are on the hook for more than $100 million in additional costs, will voters make Gloria pay a price for his mistake with this deal?
More importantly, will LGBT voters look the other way and forgive Gloria’s decision to keep his patronage of Doug Manchester a secret?
- NBC San Diego: Fraud or Incompetence? Taxpayers Sue Over Botched $300 Million High Rise Deal
- Voice of San DIego: How the City Came to Lease a Lemon
- NBC San Diego: City Failed to Conduct Basic Review of 101 Ash St. Property: Outside Review
- NBC San Diego: City Officials Knew 101 Ash St. Was Riddled With Asbestos — So Why Were Hazards Ignored?