A deposition taken in the lawsuit Jim Gottstein filed against developer Mark Peffer and the Legislative Affairs Agency seeking to invalidate the deal to remodel the Legislative Information Office (LIO) raises questions over Gottstein’s motivations in bringing the suit.
The deposition of Gottstein taken by lawyers representing Pfeffer shows a pattern of Gottstein using the threat of bringing the lawsuit in an apparent effort to leverage financial compensation for himself as part of the development.
Gottstein filed his lawsuit on March 31st of 2015, however he says in his deposition he came to the conclusion the deal between Pfeffer and the legislature was illegal on October 3rd of 2013. If Gottstein’s view is correct and the lease is illegal, he could have filed a lawsuit at that time and prevented construction on the project before it began.
From the deposition it seems clear lawyers for Pfeffer believe Gottstein delayed filing a lawsuit or publicly raising concerns over the deal in order to receive financial compensation himself as owner of the building adjacent to the LIO.
As early as October 11th, 2013, Gottstein threatened to sue over the legality of the lease if Pfeffer’s group didn’t guarantee him $10 million if his building was damaged in the construction of the new LIO. This was a threat Gottstein reiterated after an October 28th meeting on the matter between him and Pfeffer’s representatives didn’t go to his liking:
(“Q”s are questions from Pfeffer’s attorneys and “A”s are answers from Gottstein.)
Q. Yeah. And so you had met on Monday, the 28th, as discussed in that e-mail chain on the 25th right?
A. I believe so.
Q. And your frustration in this e-mail, specifically expressed in this e-mail, was that you didn’t believe 716 was going to sign the indemnification agreement with language that you wanted included. Is that accurate?
Q. So in your mind, the meeting on (October)28th didn’t go well, so in this e-mail, at some point you threatened to launch the grenade. And if you can explain what you meant by that.
A. Just filing for a preliminary lawsuit and asking for a preliminary injunction to stop the project. And I think that this all, you know, reflects what I said earlier about that I had an independent interest in trying to stop this outrageous lease.
Gottstein also began preparing to take his case to the Attorney General (AG) at the time, Michael Geraghty.
Q. Okay. Also on the 30th of October, 2013, you started drafting letters to then Attorney General Michael Geraghty, correct?
A. Sometime around then, yes.
The deposition also shows Gottstein pushed for the $10 million, even though he says the building is worth $1.2 million.
Q. Earlier in this chain — and I’ll refer you to page 3 — did you try to negotiate with Mr. McClintock an agreement or provision in some contract whereby you would be compensated $10 million in the event the building was damaged; in other words, Mr. Pfeffer would have to buy your building for $10 million if you believed it was damaged?
A. If there was a catastrophic — if there was catastrophic damage.
Q. What’s the current tax-assessed value of your property?
A. I don’t know exactly. It’s probably about 1.1 million.
Q. Between one — around 1.1 million?
A. I think something like that.
Q. In roughly around the date of October/November 2013?
A. I think so. Somewhere — you know, one to 1.2 million.
Pfeffer’s group scoffed at that $10 million number and instead agreed to pay for an insurance policy to cover the actual cost or value of damages done if Gottstein’s building sustained any as part of the LIO development.
On December 6th, 2013 Gottstein then negotiated what is called an access indemnification insurance agreement with Pfeffer’s group. The agreement compensated Gottstein for his time dealing with the project, allowing contractors to use the parking space behind his allay, moving his office, and allowing contractors to use his space during construction. For all of these considerations Gottstein was compensated over $40,000.
Q. Did you have any concerns accepting over $40,000 in payment, given your awareness that the lease was, in your opinion, illegal?
A. Not at all.
Construction on the LIO then began without a Gottstein filing a lawsuit, sending any letters to the AG’s office, or publicly protesting the legislature’s lease agreement with Pfeffer.
On January 23rd, 2015 Gottstein then filed a $250,000 claim that his building has been damaged during construction. That claim was never paid by the insurance company engaged by Pfeffer as part of the construction process and is now part of a separate legal proceeding with Pfeffer’s group filing a third party complaint over the insurance company’s failure to address the claim.
Gottstein admitted in the deposition that if he had been paid the $250,000 he was asking for, he never would have filed a lawsuit on March 31st over the legality of the lease.
Q. So just to be very clear, had you been compensated $250,000 by March 31st, you never would have raised the illegality of the lease claim in a filing, in a lawsuit?
A. I think that’s right. In fact, I gave — sent Ms. Windt a copy of the copy of the draft complaint, that included the illegality of the lease, and pointed out that that was in there. So yes.
It’s clear Pfeffer’s attorneys believe these actions, coupled with an attempt by Gottstein to receive a $2.1 million “whistleblower” fee from his lawsuit, show a pattern of Gottstein using lawsuits and the threats of lawsuits over the legality of the LIO redevelopment to profit, rather than pursue the public interest. A pattern that may be continuing to this day.
In several media interviews Friday night Gottstein said he would likely not drop the suit if the legislature decided to break the lease, even though such a move would unburden the public of the illegal and costly lease Gottstein says he is fighting against.
According to Gottstein keeping the lawsuit would prevent Pfeffer from suing the state over breaking of the lease. This would seem to further indicate Gottstein is using the lawsuit as negotiating leverage against Pfeffer and the insurance company to pay the $250,000 he is asking for, rather than protecting the public interest, which would have already been served by legislative action.
Am I missing the point? Is this a political story or evidence of criminal extortion? I understand Mr. Gottstein is no friend of the Alaska Republican party; however, this appears to be a civil litigation involving property owners. I suppose since one of the properties is the Anchorage LIO that would generate some sympathy for Mr. Gottstein, but so what?