San Diego Weekly Reader Volume 40 Number 12 : Page 2

C I T Y L I G H T S C I T Y L I G H T S C I T Y L I G H T S UNDER THE RADAR 2 Sa n Diego Reader Ma rch 24, 2011 Jameson , and Sunrise Adams, will be paid a roy-alty from sales. “They liked the business plan,” Marasco, president of White Star, told CNBC. AIDS, bimbos, and booze Back “They saw it as an opportunity to generate some in April 1997, then– Union-Tribune columnist revenues off of their brand name, which they’ve Neil Morgan was the town’s chief cheerleader for spent a good amount of time managing and build-developer Sam Marasco and his plan to build a ing.” The new booze brand will make its debut in taxpayer-subsidized shopping mall and pedes-the bars of Las Vegas on May 1. “Our game plan is trian bridge across the border from San Ysidro to introduce the vodka product immediately and to Tijuana. “Sam says he wants to build a sort at the same time of rainbow at the try to lay plans sordid San Ysidro for addition al b order crossing, sp ir i ts in t h e t h e b u siest a n d future,” Marasco one of the tawdri-said. “We think est and deadliest the name is fan-crossing districts tastic.” Vivid is in the world,” Mor-co n t r o v e r s ial gan wrote. “Mayor in s ome qu ar-S usan Golding is ke en for a bi-Sam Marasco (left) hopes that porn + vodka = money ters because its president, Ste-national zone ‘in ven Hirsch , has opposed a move by the L.A. which people crossing the border would be able to city council to mandate use of condoms by porn move around after their identification is approved. actors to combat a potential AIDS outbreak among We have discussed the need to make the entrance sex workers there. Of late, the company, said by of our two countries a more appropriate one — Forbes to have grossed $100 million in 2005, has one that looks like the front door to our two coun-been suffering revenue drops caused by internet tries rather than the back door.’” porn pirates. The so-called International Gateway of the Americas pedestrian bridge also had the backing of Alan Bersin , ex–U.S. attorney and one-time Contribution cuckold The decision Clinton administration “border czar” — who by GOP senator John Ensign of Nevada to scrap owned a warehouse on Otay Mesa near the bor-his 2012 reelection bid was generally expected by der — but was opposed by the U.S. Immigration those who have been following the soap opera– and Naturalization Service, which concluded it like scandal arising from his affair with a staffer’s would be too difficult to police. Ultimately the wife and the subsequent hush money he arranged bridge idea was scrapped, and to be paid by his family Marasco built a modest mall on and the lobbying jobs he the U.S. side, which he sold to his arranged for the wronged partner in 2004. Later he tried husband. But the news is his hand at developing a city-especially bad for Chargers subsidized shopping complex owner Alex Spanos and in Barrio Logan but was kicked family, whose A.G. Spanos off that project by the city coun-Companies was Ensign’s cil after years of controversy third-largest donor in the and delay. Marasco, who lives 2010 campaign cycle, with in North County, then targeted a total of $38,700, accord-Brownsville, Texas, where he ing to OpenSecrets.org … again tangled with federal offi-On April 28, Democrat cials, this time over whether the Bob Filner , s aid to b e U.S. would build its border fence Scandal-plagued John Ensign (left) won’t seek interested in running for along the Rio Grande River near reelection. Alex Spanos (right) must wish he got mayor, is holding a big more for his $38,700. a proposed mall he was seeking congressional fundraiser to develop there; the feds proceeded. at the Mission Bay Hilton, according to Sunlight So it may come as no surprise that the real Foundation’s Party Time website. The contribu-estate developer has recently branched into a fresh tion to “chair” is $5000; to “co-host” is $1000. field of endeavor, marketing a new line of alcoholic The turnout may play a role in his final decision spirits in partnership with one of the nation’s big-whether to run for the city job. gest pornography producers. As first reported last — Matt Potter week by CNBC, L.A.-based Vivid Entertainment has teamed with Marasco’s White Star Marketing The Reader offers $25 for news tips published group to promote Vivid Vodka, for which Vivid in this column. Call our voice mail at 619-235-Entertainment, the home of Sunny Leone, Jenna 3000, ext. 440, or fax your tip to 619-231-0489. Twins Maureen and Mavourneen O’Connor are spoiling for a fi ght. The O’Connor sisters’ lawsuit centers around the Heritage House Inn on the Mendocino coast. O’Connor Sisters Battle German Bank By Don Bauder I n 1989, San Diego mayor Maureen O’Con-nor, daughter of a professional pugilist, donned her boxing gloves and jumped into Now she has her b ox-in g g l o v es o n aga in. O’C o nno r a n d her twin sister Mavourneen are in a superior court fight with a big , d e e ply t roubl e d G er-m a n s t a t e-o wn ed ba nk, WestLB AG of Düsseldorf. L a st ye ar, t h e E u rop e an Union launched an inves-tigation of Germany’s rescue of WestLB, suspecting that the bank had received illicit financial aid in a desperate attempt to keep it afloat. The O’Connor sisters are suing the bank, along with s ome of its business par t-ners, for fraud and deceit, intentional misrepresenta-tion of fac t, conce alment, breach of obligation to pay mone y, and s e veral ot her transgressions. WestLB’s loss es s o ared as t h e ba nk g o t suc k er -the ring with SCE C orpo-ration, a huge Los Angeles a r e a u tili t y (no w na med Edis o n I n t e r n a t io nal), which was attempting a hos-tile takeover of San Diego Gas & Electric. San Diego Gas & E lec-tr ic, no w pa r t o f lo call y bas e d S e m p ra Ener g y, wim p ed o u t, sur r ender -ing to the bigger bully. But O’Connor, known as Mayor Mo, kept punching away. In 1991, SCE — bruised, battered and bleeding finan-cially — gave up the fight. And it took awhile for San Dieg o Gas & E l ec tr ic ’s reputation to he al. Mayor Mo had not only knocked out a corporate raider but had damaged Wall Street’s scheme to launch a massive merger movement among the nation’s utilities. Aztecs to lose March madness is really how much the schools spend on lobbying, not the score of some silly basketball game... Local law firm looks into Bridgepoint Securities firm Robbins Umeda investigates for-profit college for breaches of fiduciary duty... El Centro unemployment down East County seat may have high-est unemployment in country, but it’s gone down from 32% to 28%... Read Don Bauder news updates like these every day at SDReader.com pu nched in t he subpr i me meltd ow n. But it als o got b l o o died makin g loa n s for the financing of luxur y ho t e ls. The ba nk ad v e r -tis e d it s e lf as “one of t h e t op f i nancial institut ions in de v e lo p m en t f i na nc-in g f o r hig h-end l uxur y hotels, resorts, and private residence clubs in the U.S., as wel l as s el e c t re g i ons throughout the world.” Among the posh facili-ties it helped finance were Rio de Ja neir o’s C o paca-bana Palace; For t L auder-dale’s B onave nture; D ana Point’s St. Regis Monarch B e ac h; P a rk Ci ty, Ut ah’s S k y L o d g e P r i v a t e Resi-dence Cl ub; N e w Yo rk’s C o o p er S q ua r e; A s p e n’s Dancing B ear ; and S è San Diego Hotel. Cooper Square and St. Regis went through foreclosure, and Sky Lodge, Dancing Bear, and Sè went into bankruptcy. The O’C onnor sist er s, through a limited liability comp any, ow ned t he his-t o ri c He ri ta g e Ho u s e o n the Mendocino coast. It had been built in the 19th Cen-tury as a farmhouse and was known as a quiet countr y inn on 37 acres. In 2005, a group of Dela-ware investors, along with We stLB , ca me u p wi t h a p l a n t o co nv er t He r i t a g e H o us e in t o a 45-r o o m w o rld-c lass r e s o r t wi t h seven units to be used as a pr ivate residence club for 80 members. There would be a spa, fitness center, and 150-seat ocean-view restau-rant. The investment group, called Lantana Mendocino, continued on page 44

City Lights

UNDER THE RADAR<br /> <br /> AIDS, bimbos, and booze Back in April 1997, then–Union-Tribune columnist Neil Morgan was the town’s chief cheerleader for developer Sam Marasco and his plan to build a taxpayer-subsidized shopping mall and pedestrian bridge across the border from San Ysidro to Tijuana. “Sam says he wants to build a sort of rainbow at the sordid San Ysidro border crossing, the busiest and one of the tawdriest and deadliest crossing districts in the world,” Morgan wrote. “Mayor Susan Golding is keen for a binational zone ‘in which people crossing the border would be able to move around after their identification is approved. We have discussed the need to make the entrance of our two countries a more appropriate one — one that looks like the front door to our two countries rather than the back door.’”<br /> <br /> The so-called International Gateway of the Americas pedestrian bridge also had the backing of Alan Bersin, ex–U.S. attorney and one-time Clinton administration “border czar” — who owned a warehouse on Otay Mesa near the border — but was opposed by the U.S. Immigration and Naturalization Service, which concluded it would be too difficult to police. Ultimately the bridge idea was scrapped, and Marasco built a modest mall on the U.S. side, which he sold to his partner in 2004. Later he tried his hand at developing a citysubsidized shopping complex in Barrio Logan but was kicked off that project by the city council after years of controversy and delay. Marasco, who lives in North County, then targeted Brownsville, Texas, where he again tangled with federal officials, this time over whether the U. S. would build its border fence along the Rio Grande River near a proposed mall he was seeking to develop there; the feds proceeded.<br /> <br /> So it may come as no surprise that the real estate developer has recently branched into a fresh field of endeavor, marketing a new line of alcoholic spirits in partnership with one of the nation’s biggest pornography producers. As first reported last week by CNBC, L.A.-based Vivid Entertainment has teamed with Marasco’s White Star Marketing group to promote Vivid Vodka, for which Vivid Entertainment, the home of Sunny Leone, Jenna Jameson, and Sunrise Adams, will be paid a royalty from sales. “They liked the business plan,” Marasco, president of White Star, told CNBC. “They saw it as an opportunity to generate some revenues off of their brand name, which they’ve spent a good amount of time managing and building.” The new booze brand will make its debut in the bars of Las Vegas on May 1. “Our game plan is to introduce the vodka product immediately and at the same time try to lay plans for additional spirits in the future,” Marasco said. “We think the name is fantastic.” Vivid is controversial in some quarters because its president, Steven Hirsch, has opposed a move by the L.A. city council to mandate use of condoms by porn actors to combat a potential AIDS outbreak among sex workers there. Of late, the company, said by Forbes to have grossed $100 million in 2005, has been suffering revenue drops caused by internet porn pirates.<br /> <br /> Contribution cuckold The decision by GOP senator John Ensign of Nevada to scrap his 2012 reelection bid was generally expected by those who have been following the soap opera– like scandal arising from his affair with a staffer’s wife and the subsequent hush money he arranged to be paid by his family and the lobbying jobs he arranged for the wronged husband. But the news is especially bad for Chargers owner Alex Spanos and family, whose A.G. Spanos Companies was Ensign’s third-largest donor in the 2010 campaign cycle, with a total of $38,700, according to OpenSecrets.org… On April 28, Democrat Bob Filner, said to be interested in running for mayor, is holding a big congressional fundraiser at the Mission Bay Hilton, according to Sunlight Foundation’s Party Time website. The contribution to “chair” is $5000; to “co-host” is $1000. The turnout may play a role in his final decision whether to run for the city job.<br /> <br /> — Matt Potter<br /> <br /> The Reader offers $25 for news tips published in this column. Call our voice mail at 619-235- 3000, ext. 440, or fax your tip to 619-231-0489.<br /> <br /> O’Connor Sisters Battle German Bank<br /> <br /> In 1989, San Diego mayor Maureen O’Connor, daughter of a professional pugilist, donned her boxing gloves and jumped into the ring with SCE Corporation, a huge Los Angeles area utility (now named Edison International), which was attempting a hostile takeover of San Diego Gas & Electric.<br /> <br /> San Diego Gas & Electric, now part of locally based Sempra Energy, wimped out, surrendering to the bigger bully. But O’Connor, known as Mayor Mo, kept punching away.<br /> <br /> In 1991, SCE — bruised, battered and bleeding financially — gave up the fight. And it took awhile for San Diego Gas & Electric’s reputation to heal. Mayor Mo had not only knocked out a corporate raider but had damaged Wall Street’s scheme to launch a massive merger movement among the nation’s utilities.<br /> <br /> Now she has her boxing g loves on again. O’Connor and her twin sister Mavourneen are in a superior court fight with a big, deeply troubled German state-owned bank, WestLB AG of Düsseldorf. Last year, the European Union launched an investigation of Germany’s rescue of WestLB, suspecting that the bank had received illicit financial aid in a desperate attempt to keep it afloat.<br /> <br /> The O’Connor sisters are suing the bank, along with some of its business partners, for fraud and deceit, intentional misrepresentation of fact, concealment, breach of obligation to pay money, and several other transgressions.<br /> <br /> WestLB’s losses soared as the bank got suckerpunched in the subprime meltdown. But it also got bloodied making loans for the financing of luxury hotels. The bank advertised itself as “one of the top financial institutions in development financing for high-end luxury hotels, resorts, and private residence clubs in the U.S., as well as select regions throughout the world.”<br /> <br /> Among the posh facilities it helped finance were Rio de Janeiro’s Copacabana Palace; Fort Lauderdale’s Bonaventure; Dana Point’s St. Regis Monarch Beach; Park City, Utah’s Sky Lodge Private Residence Club; New York’s Cooper Square; Aspen’s Dancing Bear; and Sè San Diego Hotel. Cooper Square and St. Regis went through foreclosure, and Sky Lodge, Dancing Bear, and Sè went into bankruptcy.<br /> <br /> The O’Connor sisters, through a limited liability company, owned the historic Heritage House on the Mendocino coast. It had been built in the 19th Century as a farmhouse and was known as a quiet country inn on 37 acres.<br /> <br /> In 2005, a group of Delaware investors, along with West LB, came up with a plan to convert Heritage House into a 45-room world-class resort with seven units to be used as a private residence club for 80 members. There would be a spa, fitness center, and 150-seat ocean-view restaurant. The investment group, called Lantana Mendocino, agreed to pay a promissory note to the O’Connor sisters for $7 million plus 12 percent interest. West LB would provide $19.5 million of financing, later upped to $24 million.<br /> <br /> But , says the suit , WestLB did not disclose to the O’Connors that Lantana lacked the funds to fulfill their financial commitments or refurbish the hotel property. The Delaware group had induced the O’Connors to take the promissory note as part of the purchase price by touting the wonders of luxury private club memberships. By and large, such clubs have flopped.<br /> <br /> The bank talked the O’Connors into accepting the promissory note by pledging that the sisters could buy the WestLB loan if Lantana defaulted, according to the suit. And the bank promised that it would quickly inform the O’Connors if Lantana got into financial trouble. The bank learned that Lantana was not paying its financial obligations but kept the woes secret, says the suit. Next came a default, but WestLB delayed in passing the word to the O’Connors.<br /> <br /> Then the bank persuaded the sisters not to purchase the loan, by falsely claiming that the German institution would pay off the promissory note. “WestLB did not intend to keep that promise,” says the suit.<br /> <br /> Knowing that the Lantana group did not have sufficient funds to fulfill its promises, the bank persuaded the sisters to take an ownership position in the investment. “This fraudulent inducement was necessary to close the transaction because WestLB’s underwriting required it,” says the suit, and the ailing Lantana group could hardly take a significant equity stake.<br /> <br /> By July of 2005, the Delaware group and WestLB “formed and operated a conspiracy to defraud…the O’Connor sisters,” according to the suit. The defendants tricked the O’Connors “into giving up their ownership of Heritage House,” says the suit. The defendants also tricked the O’Connors to take the promissory note “based on the worthless personal guarantees” and the “worthless projection” of successful private club memberships, according to the suit.<br /> <br /> Later, the O’Connors were getting false promises from both Lantana and WestLB about the note payoff and a possible refinancing of the whole deal.<br /> <br /> Lantana said the promissory note would be paid in October of 2006. The following month, a Lantana representative asserted, “We are almost home with our refinancing and [the sisters’] early payoff.” On December 15 of 2006, a Lantana executive said, “We are finalizing new funding this week and will close on that by Thursday.” The next promise was for a deal that would put the project on track “the first couple of weeks of January 2007. ” In February, the word was, “Don’t worry. We’ll get this done for you. We just have to go through the process.” <br /> <br /> But the luxury hotel market collapsed, and WestLB found itself beaten up and bleeding on the ropes, awaiting a bailout from Germany. It was no longer practical for the O’Connors to purchase the WestLB loan.<br /> <br /> The promissory note has not been paid, and the bank owns Heritage House, says the suit. In 2008, the bank foreclosed and said it would ask for $27 million for the property in a foreclosure sale. The day of the auction, it suddenly lowered the price to $18.2 million but still got no bidders. The O’Connors have no title, secured interest, cash, or collateral consideration in the facility, according to the suit. Heritage House is now closed.<br /> <br /> One of the members of the Delaware group was charged with failing to pay bed taxes collected from guests. The district attorney settled for $210,000, according to Shari Schapmire, Mendocino County tax collector.<br /> <br /> WestLB made hyperaggressive and “irresponsible” luxury hotel loans, says attorney Mike Aguirre, who is handling the case with his partner Maria Severson. I made several unsuccessful attempts to reach Maureen O’Connor. I sent questions to WestLB, but it says it does not comment on ongoing litigation.<br /> <br /> By Don Bauder

Previous Page  Next Page


Publication List
 
Loading