An investigator for the San Diego City Attorney’s Office and his wife are accused of embezzling hundreds of thousands of dollars from the longtime owner of the former Sempra Energy headquarters at 101 Ash St., according to a civil lawsuit winding through Superior Court.
Keith Sears and his wife, Susan, are co-defendants in an amended complaint filed in February by Sandor Shapery, the San Diego investor who formerly owned the 19-story high-rise now at the center of a sweeping political scandal and a spate of litigation.
Susan Sears previously worked as a bookkeeper for Shapery Enterprises. The lawsuit says she and her husband created an American Express account they used to siphon more than $700,000 out of Shapery’s bank.
The couple was “gambling huge sums at casinos, making frequent large purchases online, paying for large household expenses, paying for travel for themselves and their family members — using plaintiff’s money,” the lawsuit asserts.
They also tapped the stolen funds to pay off state and federal tax liens valued at more than $140,000, the complaint says.
Criminal charges are pending against Susan Sears in an unrelated identity-theft case filed in January 2019, according to the District Attorney’s Office, but no charges have been filed in the Shapery Enterprises case.
Shapery told The San Diego Union-Tribune on Friday that he alerted the FBI to the fraud and federal agents are investigating. The FBI field office in San Diego declined to confirm or deny it has opened a case.
Neither Keith Sears nor Susan Sears responded to requests for comment submitted through their separate attorneys.
City Attorney Mara Elliott approved the city’s lease-to-own contract for the Ash Street property in 2016 and is supervising San Diego’s legal strategy for the building, which has cost taxpayers more than $50 million to date despite being unusable.
Her office was involved in an investigation of the Ash Street deal, and potentially Shapery, at the same time it employed an investigator who was being sued by Shapery.
Elliott’s office issued a statement Friday saying there was no conflict of interest, and that city officials have been monitoring the fraud case since Shapery alerted them to the lawsuit early last year.
“Public employees have rights to their jobs under the law,” the statement said. “A civil complaint and allegations against an employee are not sufficient to terminate the employee. We handled this personnel matter appropriately under the laws impacting city employees.
“There is no conflict of interest involving the allegations against the Searses and our office’s representation of the city with respect to 101 Ash Street,” the statement concluded.
Elliott declined to answer other questions including why the potential conflict was not disclosed.
Keith Sears left the City Attorney’s Office in September after 10-plus years, a city spokeswoman said.
Sears worked for Elliott during the time that the city was reviewing what went wrong with the Ash Street transaction. An investigation released last August found the city failed to perform its own assessment of the property’s condition before signing a lease-to-own contract.
The analysis, conducted by San Francisco law firm Hugo Parker, also showed that the city badly overpaid for the building.
Critics complained that Elliott should not have been involved in the Ash Street investigation because she approved the contract in 2016 and advised city officials about how to respond to lawsuits alleging the lease was illegal.
The city attorney previously acknowledged she contributed to changes to the Hugo Parker report but said it was her responsibility to do so.
“Our office assisted Mr. Parker by obtaining necessary documents and interviews, reviewing drafts, and offering comments, but no changes Mr. Parker made as a result of our review changed the substance of outside counsel’s findings or recommendations,” the office told the Union-Tribune last month.
Parker said he alone determined what to include in his firm’s analysis, although the Union-Tribune reported last month that at least two earlier versions of the document were changed ahead of the public report.
The City Attorney’s Office said Friday that Sears “worked on lawsuits involving dangerous roadway and sidewalk conditions and excessive police force. He never worked on anything involving 101 Ash Street.”
Fraudulent account
According to the lawsuit, Shapery hired Susan Sears in June 2018 to manage his books at the recommendation of San Diego developer Timothy Foley, after Shapery’s longtime bookkeeper retired suddenly.
Within weeks, money began being withdrawn from various accounts and directed to an American Express account opened under the misspelled name S. Sharpery that both Susan and Keith Sears controlled, the complaint alleges.
Between July 2018 and October 2019, just over $709,000 was steered from Shapery’s bank to the falsified American Express account, the suit says.
The complaint lays out a series of nearly 100 separate transactions, most of them in the thousands of dollars. Some of the alleged fraudulent transfers were for amounts as low as a few hundred dollars; others were posted multiple times a day or reached as high as $29,000.
“None of the purchases made by defendants with the fraudulent ‘S. Sharpery’ American Express card/ account were made by plaintiff, or were made to benefit plaintiff or were known to or authorized by plaintiff,” it states. “Instead, between July 2018 and September 2019, defendants used this account to embezzle $709,006.53 from plaintiff.”
The lawsuit also names Foley as a defendant. According to Shapery, Foley improperly recommended Susan Sears for the bookkeeping job even though Foley had learned in 2014 that she embezzled nearly half a million dollars from him over many years.
“Foley concealed from Shapery the highly material facts that Susan Sears had previously stolen over $400,000 from him,” the complaint says.
Foley could not be reached for comment; an email to his company website was not immediately returned.
Instead of reporting his bookkeeper to police, the lawsuit alleges, Foley entered into an agreement with Susan Sears to repay the money. When the couple fell behind on payments, Foley moved to foreclose on their home.
Keith Sears not only co-controlled the fraudulent American Express account his wife set up when she worked for Shapery, the lawsuit says, he also knew of her criminality years earlier, according to an email he wrote in 2014 that is included in court papers.
“I will not be a party to your fraud,” he emailed his wife that October. “ I know (Foley) has been good to you not putting you in jail, but you have not drawn a paycheck in 4 months but you have continued to work and he is not giving you credit on the savings you cleaned out, that was returned.”
The City Attorney’s Office investigator declared both income and debts to Foley on his most recent Form 700, the annual statement of economic interest that top public officials are required to file annually.
Submitted in October, the 2-page document covering the prior year of Sears’ city employment lists income of between $10,000 and $100,000 from Foley, and spousal revenue between $10,000 and $100,000 from a property management company.
The same document discloses a zero-interest debt to Foley of between $10,000 and $100,000.
In March 2020, Keith Sears filed a similar disclosure for the 2019 calendar year that revealed outstanding debt to Foley of up to $100,000 that he said his wife accrued by forging his signature.
“It came to light in February 2020 as the result of an FBI criminal embezzlement investigation and state civil suit originating from Shapery Enterprises,” Sears wrote in a footnote to the document. “It is one of at least four loans, created with criminal intent and without my knowledge dating back to 2014.”
Sears and his wife filed for a dissolution of their marriage last July, court records show.
‘Know the facts’
The city’s acquisition of the Ash Street office tower was problematic from the start and has yet to make fiscal sense.
Former Mayor Kevin Faulconer recommended the 20-year lease-to-own deal to the City Council in October 2016, saying the property was in excellent condition. Hundreds of city workers could be moved in within months and the city would save $44 million in future rent, his aides said.
But the high-rise needed more work than the $10,000 power wash the council was told, and renovations begun by city contractors exposed asbestos throughout the building. Issues with heating, air, fire-suppression and other mechanical systems also became apparent.
The July 2017 move-in date was pushed back months and then years. By 2018, the Mayor’s Office returned to the council to request an additional $30 million to complete repairs; council members reluctantly approved the spending.
All the while, the city paid $535,000 a month to lease the vacant building.
In 2019 county regulators began issuing asbestos violations and rehabilitation work was suspended temporarily. City officials pressed forward and by December 2019 the building was opened to employees and to the public.
Four weeks later, the county issued still more asbestos violations; the building was closed and the workforce was evacuated for its own safety.
By early 2020, the Mayor’s Office announced it would conduct an outside review of the real estate deal, which saw Shapery buy out minority partner Doug Manchester for $25 million then transfer the building to Cisterra Development, which negotiated the 20-year lease.
The Faulconer administration also pledged to issue recommendations on how the city should proceed.
The announcement led to the August report from Hugo Parker that found, among other things, that city officials never evaluated the building’s condition and the city paid $20 million more for the property than the $72 million the council had been told.
The same month, San Diego taxpayer John Gordon sued the city, Shapery, Cisterra subsidiary 101 Ash LLC, and lender Wilmington Trust, alleging that the 2016 lease was illegal and should be thrown out.
The lawsuit also demands the city recover the $23 million-plus paid under the lease. Faulconer suspended the lease payments last September.
San Diego attorney Maria Severson, who is among the lawyers representing Gordon, issued a brief statement Friday about the lawsuit Shapery is pursuing against the former City Attorney’s Office investigator and his wife.
“This is an issue that will be explored in discovery,” Severson said, referring to the legal process in which depositions are conducted and litigants exchange documents and other evidence. “The taxpayers deserve to know the facts — who was involved in the 101 Ash Street deal and why it was entered.”
Mayor Todd Gloria, who succeeded Faulconer in December and in 2016 made the initial motion to approve the Ash Street acquisition when he served on the City Council, did not respond to a request for comment.
Union-Tribune Reporter Morgan Cook contributed.
Credit: Source link
