The second day of the trial Wednesday between the Port of Astoria and Param Hotel Corp. featured five witnesses testifying about facets of the agency’s actions surrounding the Astoria Riverwalk Inn.
The Port’s attorney, Luke Reese, started the day cross-examining Ganesh Sonpatki, the owner of Param. The company offered $500,000 in June 2014 to buy out the remaining seven years on the lease of heavily indebted operator Brad Smithart.
When the Port terminated Smithart’s lease, opened the hotel to proposals and chose the locally connected Astoria Hospitality Ventures, Param sued for fraud and breach of contract. Forensic accountant Tiffany Couch took the stand to explain how she estimated Sonpatki’s losses at $4 million, along with $500,000 in damage to the company’s reputation.
Former Port Commissioner Stephen Fulton was grilled by Param’s attorney, Colin Hunter, about missing text messages he was supposed to turn over. Meanwhile, Port Executive Director Jim Knight — individually sued for fraud along with the Port — defended his decision to evict Smithart in July 2015 and open the hotel to potential operators.
Port: Deal was doomed
Hunter opened his case Tuesday arguing that the Port had caused the deal between Param and Smithart to fall through by not providing the consent documents the companies needed to transfer the lease. Reese, the Port’s attorney, argued Wednesday that the deal was doomed by Smithart not fully disclosing the extent of his debt.
By the time the Port Commission voted in June 2015 to pursue Sonpatki’s offer, Smithart owed an estimated $300,000 combined to the Port, city and county. He had also owed almost $100,000 in state and federal taxes, according to testimony Tuesday by Mike Weston, the Port’s interim director at the time of Sonpatki’s initial offer.
Smithart and Sonpatki extended the closing date of their agreement several times, eventually scheduling the transfer of the hotel for after the 2015 summer season. By the time of the vote, Reese said, Sonpatki had hired Hunter to potentially sue Smithart. Reese submitted an email showing the first escrow officer, hired by Sonpatki to make sure Smithart’s debts were paid after the transfer, quit because of difficulties getting information from Smithart.
‘Enough is enough’
Knight, who started work in October 2014, eventually took over negotiations on the Riverwalk Inn. In early July 2015, he had ordered the Port’s attorneys to terminate Smithart’s lease.
Knight argued Wednesday that the decision was necessary because of Smithart’s debt, poor operations, the run-down state of the hotel and Smithart’s simultaneous pursuit of other suitors behind Sonpatki’s back. “I simply had to say, ‘Enough is enough,’” he said.
Hunter argued that Knight had failed to provide accurate documents to Param to complete the deal and sought to show that the Port director had also been reaching out to Chester Trabucco, a partner in rival suitor Hospitality Ventures with William Orr, as Param’s deal unraveled. Sonpatki later tried to get Smithart’s lease reinstated so he could close the deal. Despite the option being discussed at a Port meeting, Hunter argued, Knight claimed that he could not do it.
Orr is the brother-in-law of Fulton, who said he had publicly recused himself during discussions of the Riverwalk Inn.
But Hunter pointed out at least one meeting where Fulton had taken part in discussions on the hotel and texts stretching back to June between Fulton and Trabucco. The texts show up on Trabucco’s phone, Hunter said, but only start in mid-August on Fulton’s. Fulton said he changed phones in July, later claiming that a software glitch could cause entire chains of emails to be deleted.
“A reasonable conclusion is that you deleted texts,” Hunter said.
Judge Dawn McIntosh, who is hearing the case in Circuit Court, later said she thought about informing Fulton of his rights under the Fifth Amendment not to incriminate himself.
Smithart back in town
Smithart, who recently closed the Arc Arcade in downtown Astoria and moved to New York City, said he read about the trial in The Daily Astorian and came back voluntarily because it might help in the agency’s lawsuit against him. The Port is suing Smithart for more than $320,000 in back-due rent and revenue-sharing. McIntosh is reserving judgment against Smithart until after Param’s lawsuit is resolved.
Smithart, who operated the hotel from 2012 to 2015, was technically in default though most of his tenure. His original partner, Seth Davis, left shortly after the two got a lease. By the time Sonpatki entered the picture, Smithart said, he was looking for a way to leave the hotel, satisfy his debt and keep his staff employed. But the Port was holding the deal back by not providing the documents necessary for him to close with Sonpatki, Smithart said.
Reese argued that Smithart had not provided the full extent of his debt to the escrow officer hired to pay people using Sonpatki’s money. Reese claimed Smithart owed $150,000 to the IRS and couldn’t close the deal with Sonpatki until the tax issues were resolved. Smithart disputed the figure and said the deal could have closed.
At the end of the day Wednesday, Reese attempted to have McIntosh rule on the claims against the Port and Knight without waiting for a jury verdict. But McIntosh, who had previously denied attempts by Param and the Port to rule in the case before trial, said there was enough evidence of a possible contract between the Port and Param for the jury to consider.
Hunter rested his case Wednesday. Reese will make his today, after which the jury will deliberate.