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Pittsburg Continues Legal Fight to Recoup Money on Downtown Project

Pittsburg – Don’t let the empty, unfinished building along Railroad Avenue fool you. There is plenty of activity going on related to the Vidrio downtown project — only it is occurring in court.

Pittsburg’s redevelopment agency is seeking millions in damages from developers after work on the planned three-block retail and housing project stopped more than a year ago. Late last month, Pittsburg filed a $28.7 million claim in U.S. Bankruptcy Court against AF Evans, arguing that the company breached a 2006 agreement for lien-free completion of Vidrio. In March, AF Evans filed for Chapter 11 bankruptcy protection. Filings show that it owes Pittsburg more than $7.3 million. “It made sense to file a claim to recoup as much money as possible,” City Attorney Ruthann Ziegler said.

About $17 million in redevelopment funds were spent on Vidrio for property acquisition and other design and construction costs. In the bankruptcy claim, Pittsburg argued that AF Evans had a duty “to assure the project was completed lien-free,” and handle all construction payments, cost overruns and operating costs. A bankruptcy court trustee will create a reorganization plan to split up company assets, Ziegler said.

Pittsburg also filed an $11 million lawsuit in Contra Costa Superior Court in early June against AF Evans Development — the Evans entity that did not file for bankruptcy — Trinity Housing Foundation, Black Diamond Old Town LLC and several current and former AF Evans and Trinity executives. That suit also asserts that nearly $7.4 million in checks and wired fees already given to Black Diamond Old Town and Trinity were misappropriated.

Pittsburg is in the process obtaining default judgments against Black Diamond and AF Evans Development, Ziegler said. Pittsburg also is pursuing company President Arthur Evans, an individual defendant, and is in discussions with the other defendants, she added. The court has frozen some assets of both Black Diamond and AF Evans Development, according to Ziegler. Evans said last week that he is uncertain what Pittsburg intends to gain from the lawsuit, particularly in suing him and other officers personally. Evans was retired when negotiations and building of Vidrio took place, and there “never was any indication of any kind of misdeeds that I had heard of,” he said. Evans has come out of retirement to resume his role as president of AF Evans

Pittsburg’s assertion that AF Evans could not complete the development may have some validity, and the company regrets what happened, Evans said. In June 2006, AF Evans requested that Pittsburg not require performance and payment bonds to assure full completion of project obligations. Instead, AF Evans provided an “Unconditional Completion Guaranty” cq, the document spelled it like that in lieu of bonds — saying it had ample funding to fully complete the project, the lawsuit said. Pittsburg agreed to the guarantee three days after a June 19, 2006, amended development agreement, which had language that required bonds. Archived minutes and video show the change was not discussed at the City Council meeting during which the amended agreement was approved.

City staff members would not comment on the guarantee’s origin because of pending litigation. Council members either would not comment because of litigation or were unsure when they became aware of the change. Performance and payment bonds are issued by an insurance company or a bank to guarantee that a project is completed.

About a dozen other lawsuits, liens and claims from subcontractors on Vidrio have been filed, totaling $2.37 million. Pittsburg is also asking for $3 million in the bankruptcy for future claims. Discussions on how to proceed with Vidrio and the lawsuits have been the main topic in many closed session meetings by City Council, including one scheduled tonight. A case management conference is set to be held this week in Martinez.

By Paul Burgarino
Contra Costa Times
Posted: 09/21/2009 12:00:00 AM PDT
Updated: 09/22/2009 12:28:52 PM PDT

Paul Burgarino covers Pittsburg and Bay Point. Reach him at 925-779-7164