San Francisco Millennium Tower Owners Allege City, Transit Agency Helped Developer Commit Fraud

Twenty owners of units in the sinking and tilting Millennium Tower high-rise allege in a lawsuit filed Friday that San Francisco public officials knew about the building's troubles and its repeated failure to alert homeowners assisted the project’s developers in committing fraud.

News in August that the concrete 58-story building having sunk some 16 inches soon triggered a round of early suits over who is to blame. Millennium Partners’ failure to disclose to owners is a central issue in the legal war.

But the latest suit, filed Friday by a retired patent attorney who lives in the building on his own behalf and on behalf of the other owners, details apparent breakdowns and suspected backroom deals that helped the developer defraud owners.

The suit names the Department of Building Inspection, the San Francisco City Attorney’s office and the $2 billion publicly funded transit terminal as helping Millennium Partners hide the sinking issue from owners.

The legal claims appear to be based in part on documents first uncovered by NBC Bay Area’s Investigative unit.

Among the documents cited in the suit and first reported by NBC Bay Area is a February 2010 confidentiality agreement signed by Millennium Partners, the City Attorney’s office and the $2 billion Transbay transit project Joint Powers Authority.

The agreement stresses that settlement talks as well as any data exchanged as a result to confidential – even barring disclosure as a result of lawsuits. Days later, Transbay officials sent the parties an email that stressed that a report detailing early data about the sinking as “not for public release.”

In his suit, Dodson said that the various public agencies failed to alert owners even though they knew Millennium had a duty to disclose the problem.

“All of them had the ongoing duty to disclose that the building was sinking and tilting and all of them were participating in an ongoing tort of fraud,” Dodson concluded.

Transbay authorities have denied wrongdoing and said that only one set of data had been mistakenly marked confidential. The city attorney’s office has called the conspiracy allegation “baseless.”

Dodson also makes a separate conspiracy allegation against the city’s Department of Building Inspection (DBI). Documents first reported by NBC Bay Area show DBI officials challenged Millennium about the sinking issue in early 2009. The developers admitted the building had sunk more than anticipated at the time – 8.3 inches, nearly double the total sinking that engineers predicted. City officials have acknowledged that they accepted Millennium’s assertions at the time. They have maintained it was up to Millennium to alert owners.

But DBI, Dodson concludes in the suit, “had a duty to follow up on and disclose this information to potential purchasers and homeowners and not participate in the ongoing fraud being perpetrated by Millennium Partners. DBI breached its duty by continuing to cover up such alarming information from homeowners and purchasers.”

In a statement, Dodson said based career in litigation over patents and other issues and his six month review of the facts, “I have not seen a case that comes close to this in its breadth of conspiracy and fraud.”

The city provided the following statement Friday afternoon:

"We share the Dodsons’ frustration that the Millennium Tower developer failed to disclose that the building was sinking. That's why the city is pursuing legal action against the developer for duping home buyers. Any notion that the city was somehow involved in a conspiracy to defraud residents is ridiculous and completely baseless."

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