Resort Hotel Owners Sue City of Industry

INDUSTRY —  Owners of the hotel portion of the Industry Hills and Sheraton Resort are trying to force the city to either buy the $30-million structure or turn over management of the city’s convention center and sprawling recreational complex to the hotel owners.

In a Los Angeles County Superior Court suit, hotel owner Edward P. Roski Jr. and several partners claim the City of Industry reneged on an agreement to help build a proposed second hotel on the site.

The suit, filed April 10, also claims Industry, which built and owns the recreation and conference center as part of a 50-year contract with Roski’s group, violated another agreement by failing to relinquish management of the existing center seven years ago.

The owners are demanding that Industry pay them at least $30 million for the 296-bed hotel. As an alternative, they want $20 million in punitive damages and the management of the center. The center includes restaurants, shops and meeting rooms on the bottom three levels of the hotel tower, plus two 18-hole golf courses, an Olympic-size swimming pool, jogging paths, tennis courts and an equestrian center on 640 acres of rolling hills.

Graham Ritchie, Industry’s city attorney, said the city never agreed to help build a second hotel.

Irene Livadopoulos, an attorney for the owners, said the owners want to sell the hotel to the city, rather than force the city to help build another one because it would be “very rare and very unlikely” for a judge to order Industry to construct part of a hotel.

She would not say whether the hotel has lost money. The hotel’s general manager, Ed Springer, could not be reached for comment.

The city’s recreation and conference center has been running a deficit since it opened in 1979. In their suit, Roski’s group blames Industry for poor management of the center and says that since 1983, the city has been operating the center at a loss of between $6 million and $12 million a year. City Manager Chris Rope said the annual deficit is closer to $3 million.

The suit also claims the city violated another agreement in 1983 when it appointed Peter Pino as general manager of the center after William Bryant, the first manager, died. The owners say their agreement with Industry required the city to hand over management to Roski’s group when Bryant was no longer manager.

Pino recently resigned as manager, and the city is in the process of selecting a new manager. Ritchie refused to comment on the management agreement.

The suit is not the first controversy to surround the $65-million resort. In 1988, the city and its redevelopment agencies agreed to accept $4.5 million to settle their suit against seven men involved in a kickback and bid-rigging scheme involving contracts for work on the resort. The payment included $2.5 million from city founder James Marty Stafford, who pleaded guilty in 1984 to fraud, attempted bribery, conspiracy and obstruction of justice. Stafford was released in 1988 after serving four years in prison.