The owner of the Westin Bonaventure has filed suit in Los Angeles Superior Court seeking to block public financial support for a new 1,200-room convention center hotel, setting the stage for a showdown among some of downtown’s most prominent businesspeople even before Los Angeles City Council signs off on the deal.

Peter Zen, president of FIT Investment Corp., has asked the court to strike down a $177 million public benefits package for developers of the hotel, maintaining that city officials were misled into approving a much larger amount than was actually needed.

“Let the billionaires pay for their hotel,” said Bonaventure attorney Christopher Sutton of the developers. “They don’t need taxpayer money. If they want this bad enough they can pay for it on their own.”

The lawsuit cited “false data” regarding the need for public subsidies, though no details were offered.

Zen says the benefits package is really a tax on the business community and therefore can only be enacted by a referendum that would need two-thirds voter approval.

Developers of the proposed hotel were quick to respond.

“He should be ashamed to call our character into question like that,” said Tim Leiweke, president and chief executive of Anschutz Entertainment Group, owner of Staples Center and one of the developers. Asked if AEG planned a countersuit, Leiweke said, “I’m not getting into it, but I think our actions will speak loud enough.”

Richard Ackerman, a principal with Apollo Real Estate Advisors LP, another developer in the hotel project, said Zen and his attorney are “out of bounds” by accusing them of fraudulently misstating their financial case. “He has no idea who he is dealing with,” Ackerman said. “We are going to come at him with guns blazing.”

Squaring off


Zen has butted heads with the hotel developers for years, but these latest exchanges represent a stepped-up attack, perhaps because the proposal is nearing final approval by the City Council. Each side is accusing the other of acting in their own self-interest and of trying to buy influence and votes by making political donations and hosting fundraisers.

“He is not some environmental group trying to save the planet,” said Ackerman. “He is a competitor.”

Zen doesn’t disagree, but counters with a question of his own. “So as recipients of all this public money, are they not acting in their own self-interest?”

The benefits package, expected to appear before the council for final approval next month, would allow the owners of the convention center hotel to use municipal taxes collected on its rooms to help pay for the hotel’s $300 million construction cost.

Also, the city is proposing to waive building permits, business licensing fees and taxes collected on parking to help the owners finance construction. The city has said it would also provide a $20 million loan to the developers that would be paid back.

City officials argue that a hotel is needed to attract large conventions, which they say aren’t coming to L.A. because downtown hotels are too far away and lack enough rooms.

A lack of convention business is forcing the city to spend more than $20 million a year out of its general fund to cover bonds issued to pay for the convention center’s construction. Supporters say the hotel would help make the Convention Center self-sufficient.

“This is in the best interest of the Convention Center, the tourism and hotel industry and taxpayers,” Leiweke said. “We cannot let one frivolous lawsuit derail what has been in the works for 20 years, and we won’t.”

Besides claiming the developers deliberately misled city officials, Zen argues that the benefits package would give the convention center hotel an unfair competitive advantage against other downtown hotels. “It would allow them to walk away with even more money,” he said.

He alleges that competing hotels and other city businesses would be forced to pay more for building permits and business licenses to make up for the subsidy given to the convention center hotel. “The entire city of L.A. is paying those fees,” Zen said. “If you don’t make them pay their fees, where is the money going to come from? It means everyone else suffers.”

Councilwoman Jan Perry, whose 9th District includes the site of the proposed hotel, said Zen was wrong in claiming that other business’ fees were going to subsidize the convention hotel’s construction. She said the fees were being deferred and would be made up for “on the back-end.”

“It’s a complete mischaracterization of what’s really going on,” she said. “It’s unfortunate because the convention center hotel will help all the hotels downtown, including his.”

Political overtones


In the suit, Zen asks the court to rule that the subsidy is actually a tax, which presumably would force it onto a ballot. Zen and his attorney say the City Council has resisted their requests to place a referendum about the hotel before voters.

“There’s no way they want this on a ballot because they could never defend it,” Sutton said. “It would be seen for what it truly is a giveaway to a bunch of rich people.”

Ackerman didn’t think Zen would shell out the tens of thousands of dollars needed to collect the signatures necessary for a referendum on his own. “It’s a full-on bluff,” he said, “and nobody is buying it.”

Leiweke said Zen has been trying to “buy politicians and votes” to support his cause. Zen responded by asking, “How many fundraisers have been held for Jan Perry at the Staples Center?”

Perry said that her fundraising record is public record and can be found on the city’s Web site. “I think you’ll find I have a broad range of support.”

During her campaign for re-election, Perry said she found that many residents supported the convention center hotel’s construction and predicted that voters would approve the measure, even if it requires a two-thirds vote.

“When I explain how many jobs there will be and how incredible this opportunity is, especially for families who have young people who want to work, it doesn’t take a lot of explaining,” Perry said.

Zen has challenged construction of the convention center hotel at every step and stage. In 2003 he stepped down as chair of the Convention Center Department Commission to free himself of charges of conflict of interest.

Soon after stepping down, Zen filed what’s called a validation lawsuit against the city, charging it was “gifting” public money to the hotel’s private developers by financing the construction with tax-exempt bonds.

Zen won the suit, forcing the city and the developers to come up with the current benefits package. The city also appealed the decision and, with arguments completed in January, a ruling is expected in the next several weeks.

Meanwhile, momentum on the hotel project continues to build. The City Attorney’s Office and the hotel’s developers have finished fleshing out the details of the benefits package, which is expected to soon appear before the City Council for a final vote.