July 08, 2010

San Diego City Beat examines lawsuit involving Rep. Issa’s $3 million discount

By CREW Staff

San Diego City Beat examined the real estate dealings of Rep. Darrell Issa. There's a lawsuit over one of his property deals -- a deal that allowed Issa to buy a building for $3 million less than the market value. A $3 million discount is not something that most people get:

Last summer, Issa went on a property-buying spree. In the span of two months, he bought industrial complexes in Oceanside and Carlsbad and a condo overlooking Oceanside Bay. Even his son picked up a home in Vista.

The Carlsbad complex, however, is at the center of a lawsuit playing out in Los Angeles County Superior Court. A bank lender in Ventura County is accusing a bank of selling Issa the building for at least $3 million less than it should have.

The property is a series of five brand-new buildings near McClellan-Palomar Airport in Carlsbad. Currently, all but one unit is empty, but they can be rented through Greene Properties, a company that employ’s Issa’s wife and son. The project was dreamed up by Orange County “new urbanism” developer David Dirienzo, who defaulted on a $36-million construction loan in January 2009.

The main lender, East West Bank, put the property up for auction but decided not to sell, instead filing a $12-million “credit bid” to hang onto it. Two weeks later, the bank sold the property to Issa’s company, DEI LLC, for $8.5 million. In the complaint, Ventura County Business Bank—a secondary lender with an 8.3-percent interest in the original loan—accuses East West of negligence and “breach of implied covenant of good faith and fair dealing.” The complaint alleges that East West did not properly market the property and that the bank declined offers to buy the property and loan that were “significantly in excess” of what Issa paid. It specifically states that East West “discouraged” a potential buyer from making an $11.5-million bid on the property, which could have resulted in a $3-million discount for Issa.

This sort of real-estate deal may be familiar to San Diegans. In 2005, Randall “Duke” Cunningham, a former member of Congress representing San Diego County, was caught in a bribery scandal that centered around property bought and sold at abnormal prices.

Let's just say, it's usually never good to be compared to anything Randall "Duke" Cunningham did.

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