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Press Release: Kick Law Firm
May 27, 2003
MONTEREY, CA -- A Texas-based golf course management company that was negotiating on behalf of the City of Seaside
to select a developer for a new hotel at the Bayonet and Blackhorse golf courses entered into a secret business
partnership with one of the developer candidates, and rigged the selection process to ensure its secret partner
would win, a newly filed civil racketeering lawsuit charges.
The complaint, filed Thursday in the Superior Court for the State of California in Monterey, Calif., charges defendants
Donald Pitt, Donald Diamond, and Richard Fitzgerald of Arizona, and defendants Andrew Schatte and Richard Bischoff
of Texas, as well as companies owned or controlled by those individuals, with conspiracy to violate and violation
of the Racketeer Influenced Corrupt Organizations Act (RICO), fraud, breach of contract, and other violations of
California and Federal law.
The lawsuit was filed by Los Angeles developer Danny Bakewell and his company, Seaside Hotel and Convention Resort
Developers LLC. Mr. Bakewell is represented by Los Angeles attorneys Taras Kick and Mike McLachlan and Monterey
attorney Lawrence E. Biegel.
The complaint filed Thursday is an amended version of an earlier breach of contract lawsuit brought by Mr. Bakewell
last year. "The revised complaint with expanded charges is based on massive evidence of a conspiracy and other
violations of the law that were revealed during discovery proceedings on the original complaint," Mr. Kick
said. "Documents created by the defendants themselves described in detail their conspiracy to rig the developer
selection process, and defraud Mr. Bakewell and the citizens of Seaside," he said.
The racketeering and other charges arise from the defendants' conspiracy to rig and control the bidding process
established by the City of Seaside, Calif., to award rights for constructing a luxury hotel on the two golf courses.
(The City obtained the golf courses in 1996 after the U.S. Army closed Fort Ord.)
According to the lawsuit, Schatte and Bischoff (the Texas defendants) obtained the right to manage and operate
the golf courses on behalf of the city, and then proposed to the city that they create and manage a bidding process
for a hotel at the golf course location, without cost to the city. They pledged to the city that they would run
the process impartially, and that they had no plan to take any ownership interest in the hotel, the lawsuit states.
In reality, however, those Texas-based individuals, through one of their many businesses, BSL Golf Corp., already
had begun a conspiracy with Pitt, Diamond, and Fitzgerald (the Arizona defendants), in which BSL would rig the
hotel bidding process so that the Arizona defendants would win, in return for which BSL would become half-owner
of the completed hotel project, the lawsuit states.
Acting as the City of Seaside's exclusive agent, and feigning independence, Schatte's firm advertised nationally
seeking potential developers in a Request for Qualifications (RFQ) process, the lawsuit charges. The defendants
acknowledged in correspondence between themselves (now exhibits in the complaint) that the bidding process would
have to appear "bullet proof," but it was all a sham, according to the lawsuit. By February of 1998,
even before Schatte proposed that his company conduct an impartial bidding process at no cost to the city, the
conspirators already had reached agreement to form a partnership with joint ownership of the hotel, according to
evidence included as exhibits with the filing. Schatte never disclosed any of these negotiations and agreements
he had with SRD to the Seaside City Council, according to the lawsuit.
Eleven companies responded to the RFQ, including the Defendants' group, at that time a proposed Marriott hotel,
and plaintiffs' group, proposing a Hilton hotel.
Although Schatte originally proposed to the City of Seaside that "the city, at its sole discretion, would
select the hotel development team," Schatte structured the process so that the actual selection was conducted
by a committee of four individuals who were all employees of his company, BSL Golf. None of the four were residents
of Seaside, Monterey County, or anywhere else in California.
As the developer selection process proceeded, the BSL-controlled selection committee picked two finalists in June
1998. One was the Arizona development team, which secretly included the supposedly impartial managers of the bidding
process, BSL Golf. The other was the Hilton project team, which then included Kaufman & Broad, a housing developer
with whom Mr. Bakewell is separately partnering on the Hayes housing development project adjacent to the former
Army golf courses.
In March or April of 1999, Schatte told Bakewell in a personal meeting that BSL Golf "held the keys to the
Kingdom (of real estate development at the golf courses)" and that Bakewell's team would lose its bid to become
the hotel developer unless it agreed to merge its proposal with the other finalist, the lawsuit states.
According to the lawsuit, Bakewell ultimately agreed to partner with the Arizona developers, but without knowledge
of the illegal conspiracy and the agreement between the Arizona and Texas defendants. In June of 1999, Bakewell
and the Arizona defendants formed a new entity, Seaside Master Venture (SMV), which then obtained a commitment
for an Exclusive Negotiations Rights Agreement (ENRA) from the City of Seaside.
However, in January of 2000, Kaufman & Broad (K&B) decided to withdraw from its partnership with Bakewell.
The defendants seized this development as an opportunity to oust the plaintiff from the project, the lawsuit charges.
"The defendants lied to the Seaside City Council about Mr. Bakewell's ability to perform his obligations under
the SMV, and thus illegally induced the City to exclude Mr. Bakewell from the hotel project," Mr. Kick explained.
"Evidence to be presented will show that the defendants even secretly approached Hilton to try to get Hilton
to partner directly with them, even though Hilton was already committed to go forward with Bakewell."
At a February 3, 2000, Seaside City Council meeting, Pitt asked the City Council to rescind the ENRA granted to
SMV, and "Schatte, in his supposed capacity as the exclusive agent to advise the city on a developer, but
in reality in furtherance of the (Texas) Defendants' conspiracy with (Arizona) Defendants, recommended that the
City award the ENRA it has previously agreed to award to SMV instead only to the SRD defendants," the lawsuit
states. "The City of Seaside was as much a victim of these defendants' actions as was Mr. Bakewell since the
entire supposed competition for the hotel development had been rigged by them, to the detriment of the citizens
of the City of Seaside," stated Mr. Kick.
On February 17, the Seaside City Council voted to award the project solely to the Arizona conspirators, based on
the recommendation of the Texas defendants, and the City Council's continued lack of awareness that the Texas defendants
and Arizona defendants secretly had agreed to partner together on the project. Mr. Bakewell's original lawsuit
sought damages only for his having been forced out of the project without cause, Mr. Kick said. "Our amended
complaint describes much more serious illegal behavior by the defendants that we learned only after we filed the
complaint," Mr. Kick said.
The amended lawsuit seeks financial damages on all counts, punitive damages for the fraud, and treble damages on
counts for which such punishment is applicable under RICO.
To download a copy of the filed Second Amended Complaint (SAC) and related exhibits, visit: www.armanasco.com/files.
-------------------------------------------------
Contact:
Armanasco Public Relations, Inc.
Michael Manzagol, 831/372-2259
mmanzagol@armanasco.com
Catherine Bowie, 831/372-2259
cbowie@armanasco.com
or
Sitrick and Company
Lewis Phelps, 310/788-2850
lew_phelps@sitrick.com
Source: Kick Law Firm