Marcos Breton

February 9, 2014

Marcos Breton: Arena foes’ fraud suit is a red herring

The lawsuit alleging fraud in the deal to build a downtown arena in Sacramento will never prove its case in court – but that doesn’t seem to be the objective.This is a smear campaign masquerading as a lawsuit.

Marcos Breton

Connecting the dots on issues, people and news in the Sacramento region

The lawsuit alleging fraud in the deal to build a downtown arena in Sacramento will never prove its case in court – but that doesn’t seem to be the objective.

This is a smear campaign masquerading as a lawsuit.

This is an attempt to use a court of law to promote the idea that the arena deal is corrupt without actually having to prove it.

Officially, the audience for this suit is Sacramento Superior Court Judge Eugene Balonon. But unofficially, it’s the voters in the city of Sacramento.

If the arena deal goes to the ballot – and another judge may very well decide that on Feb. 21 – then this fraud case acts as a de facto anti-arena campaign.

The strategy worked to perfection last week when several media outlets repeated unseemly allegations linked to the arena deal, even though these allegations were debunked in the very court documents the lawyers released to the media on Thursday.

After reading the 133-page deposition of Sacramento City Councilman Kevin McCarty, one could reasonably conclude that there is not much to this case at all.

There is no proof or facts to support an allegation that the city secretly undervalued land that the Kings would acquire and then seek to develop around the proposed arena at the Downtown Plaza shopping mall.

But who cares about that when other city officials are scheduled to be deposed – and when there are many negative headlines there for the taking?

Patrick Soluri, one of two lawyers alleging fraud in the lawsuit against the city, was the primary user of the term “secret subsidy” in McCarty’s deposition.

But when Soluri’s co-counsel, Jeff Anderson, asked McCarty to verify that term, McCarty demurred.

“Well, those are Mr. Soluri’s words,” McCarty said in a deposition he gave in the case on Monday.

McCarty did say that he didn’t think Soluri was reaching an “unreasonable conclusion” by stating that the city and the Kings had reached a secret subsidy.

I laughed out loud at that passage. Not only was it hearsay, it was pure McCarty.

Emails between the councilman and Soluri, also released with his deposition, paint a picture of a prospective state Assembly candidate acting as the inside man for a lawsuit against the city he represents.

One email sent by McCarty to Soluri almost a year ago shows McCarty passing on information to aid Soluri while admonishing him to “keep source to yourself.”

Way to go out on a limb, cowboy.

Completely overlooked in most media coverage was the questioning of Edward Grutzmacher, a lawyer representing the city, who asked McCarty about his assertions that the city was undervaluing land in the arena deal and keeping it secret.

“Did (Sacramento City Manager) John Shirey at any point explain to you that the purpose of not valuing those portions in the term sheet was to keep it from the public?”

“No,” McCarty said.

Grutzmacher: “Have you heard from anyone that there is a secret deal not disclosed in the term sheet between the city and the Kings and their investors?”

“No,” McCarty said.

Grutzmacher: “Have you heard from anyone representing the Kings?”

McCarty: “No.”

Grutzmacher: “Have you heard from anyone representing the Kings investors?”

McCarty: “No.”

The supposed “smoking gun” in McCarty’s deposition was a text message from Jeff Dorso, a lawyer who now works for the Kings. It said: “(G)iven the ownership group has already substantially overpaid (say $525 million for an asset worth $350 million) they have already assumed the risk. They need a return to make overpayment worthwhile.”

But there was nothing in that message indicating Dorso says Sacramento should do more to compensate the Kings.

McCarty says people who wanted to buy the Kings were lobbying him to have the city pay the Kings more than the $258 million investment contained in the arena term sheet.

Who were the rich guys with their hands out?

Developer David Taylor and two associates of supermarket magnate Ron Burkle.

Lost in the hype is the fact that none of those men ended up being part of the Kings ownership group.

The Bee reported a year ago that Sacramento refused to go beyond a $258 million investment in a $448 million downtown arena.

The land in the deal that McCarty questions is valued by the city at $38 million, an estimate set by the CBRE brokerage firm last year.

Could those valuations be adjusted higher? Sure. The arena deal is not yet legally binding.

But who cares about that and other facts when you can generate negative headlines based on hearsay to create the whiff of corruption?

If a judge sends the arena to a public vote, this strategy might prove to be ingenious.

Ethical? Transparent? That’s another story.

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