A trial over allegations that the Port of Astoria played favorites in a lucrative deal for the Astoria Riverwalk Inn kicked off Tuesday.
A lawyer for Param Hotel Corp. questioned former Port interim executive director Mike Weston and Param’s owner, Ganesh Sonpatki, about how the deal came together and subsequently fell apart.
Sonpatki had been trying to take over the Riverwalk Inn since 2014 from Brad Smithart, the hotel’s former heavily indebted operator. The company sued the Port for breach of contract in November 2015, shortly after the agency chose another operator.
Param claims the Port violated an agreement approved by the Port Commission and showed local favoritism toward Astoria Hospitality Ventures, a company owned by Astoria native William Orr, whose brother-in-law Stephen Fulton was a Port commissioner at the time he gained the lease. Param also sued Port Executive Director Jim Knight for fraud.
A majority of the Port Commission was on hand Tuesday to observe the case. Weston, now the city manager of King City in Washington County, was the first witness called by Param’s lawyer, Colin Hunter.
A new tenant
As the Port’s property manager and later the director of business development and operations, Weston’s job was to find tenants and negotiate many of the agency’s leases. He helped create the lease for Smithart. By the time Sonpatki came into the picture, Weston was the interim executive director, after the resignation of Hank Bynaker.
With the Port’s lawyers claiming there was no signed contract with Param, Hunter sought to show how, despite Smithart falling behind on rent and revenue-sharing and his original business partner leaving, the agency did not evict him, and at times did not strictly follow the terms of the lease.
It was Weston who got the pulse of the Port Commission and eventually developed an agreement that would have Sonpatki take over the remainder of Smithart’s lease, with a 10-year extension option, in exchange for paying off Smithart’s debts and investing in the run-down hotel. An agreement was presented to the commission by October 2014, along with a presentation by Sonpatki, but Weston said commissioners repeatedly asked for more information on the prospective tenant.
Knight started work as the Port’s executive director later that month. Weston reverted to his position as director of business development and operations, and Knight eventually took over negotiations on the Riverwalk Inn. By early July of 2015, the Port had terminated Smithart’s lease.
“I certainly had nothing to do with the notice of default,” Weston said, adding his suspicion that there might have been some other issues with Smithart.
A stalled transfer
Hunter later called to the stand Sonpatki, who owns and operates 13 hotels in the Portland metro area and Seaside.
By June 2014, Sonpatki said, he and Smithart had agreed on $500,000 for him to take over operation of the hotel. Smithart would receive the remainder of the money after debts he owed to the Port, city and county were paid.
By January 2015, Sonpatki, said, he and Smithart were ready to close the deal, but had to continually extend the closing date as the Port did not provide the required consent documents. The two eventually agreed to extend the transfer to September 2015, allowing Smithart to earn summer revenue to help pay down some of his debts.
In June 2015, the Port Commission voted unanimously to have staff execute the transfer of the remaining two years of Smithart’s lease, along with a five-year extension option, to Sonpatki. By that point, Smithart owed more than $300,000 combined to the Port, city and county.
“I wanted to come to Astoria,” Sonpatki said of the deal, adding he hoped it would eventually lead to a longer lease.
But his acquisition was never finalized. Hunter and Sonpatki claim Knight repeatedly provided incorrect documents and never explained why it was taking the Port so long to finalize Param’s acquisition of Smithart’s lease.
The Port terminated Smithart’s contract shortly after the vote but kept him in the hotel on a short-term basis, not wanting to shut down and lose revenue. After Smithart’s lease had been terminated, Sonpatki said, he came with his lawyer to Astoria to try and get the lease reinstated and the transfer finished, but to no avail.
The Port eventually heard presentations from several suitors for the hotel, including Sonpatki, and in September 2015 chose Astoria Hospitality Ventures.
The trial recessed Tuesday with Sonpatki still on the stand and Hunter still making his case.