More trouble in UMC deal. Developer sues Fresno city and county over collapsed deal
A construction company is suing the city and county of Fresno, alleging breach of contract and fraud after a development deal for the old University Medical Center fell apart.
CMG Construction Management, Inc. filed the suit in Fresno County Superior Court last week.
The company previously entered into a regulatory agreement with the city and county to transform the former hospital into an affordable housing project, complete with a pharmacy, grocery store, and other retail.
But the deal fell apart last year when County Supervisor Sal Quintero’s former staffer, Steven Rapada, was charged with felony conflict of interest related to the project. Rapada pleaded not guilty to the felony and is due to appear in court again later this week.
Following the charge, the Fresno City Council voted to revoke the regulatory deal with the county and CMG, calling the project “tainted.”
Since then, the county has put the UMC property back on the market, and negotiations currently are underway for the city to potentially purchase it.
In the lawsuit, CMG alleges the series of events is a “classic situation of big government eviscerating and usurping the private sector to the detriment of the taxpayer and the public at large.”
Spokespeople for both the city of Fresno and Fresno County said officials would not comment for this story due to pending litigation. The county also hasn’t been served with a copy of the lawsuit, a spokesperson said.
CMG alleges attorneys for the city and county exchanged emails in which the city’s attorney indicated the city’s intent to renege on the deal, the lawsuit says. However, at the same time, the county’s attorney told the construction company’s lawyer it planned to move forward, the lawsuit alleges. If the county knew the deal would collapse, it would’ve been required to return $500,000 to CMG, the lawsuit says.
In the lawsuit, CMG alleges the city breached the contract by revoking the regulatory agreement, and the county did so by failing to close escrow.
While the county agreed to sell the property for $4 million, the city offered the county $6 million, the lawsuit says. CMG in the lawsuit estimates the cost to taxpayers will be at least half a billion in the form of lost property and sales tax dollars and other expenses.
The lawsuit also alleges the county failed to act fairly and in good faith; the city caused the construction company economic; and both city and county officials engaged in fraud because they failed to inform CMG that the county intended to sell the property to the city.
CMG is seeking compensation for damages and attorney fees.
A court hearing is set for May.
This story was originally published February 1, 2022 at 5:00 AM.