Stockton Record – February 6, 1999

The Record – Lodi Section
By Francis P. Garland

February 6, 1999

IONE – The city has ended its legal wrangling with businesses and individuals involved with the troubled Castle Oaks Golf Course development and formally apologized to the present golf-course owner for problems the litigation caused.

The apology was part of an agreement reached between the city of Ione and Portlock International, Ltd. Settling long-running legal problems that started with a $30 million federal racketeering lawsuit and later included a related state lawsuit.

The 496-acre Castle Oaks project includes an 18-hole golf course as well as commercial and residential lots. The area has the potential for about 700 homes, but, to date, only 19 homes have been built, with another two dozen or so under construction.

Castle Oaks’ problems started in 1997, when the city filed a civil lawsuit against two businesses and several individuals involved with Castle Oaks, claiming they defrauded the city and Mello-Roos bondholders through a series of secret dealings and transactions.

A U.S. District Court judge dismissed the lawsuit in July, saying it had exceeded the statute of limitations for federal racketeering laws. The city appealed that decision and filed a second action against the same decision and filed a second action against the same defendants in Amador County Superior Court.

Under terms of the settlement reached this week, the city will dismiss both the federal appeal and the state action. In return, the city will get a boost in the rent it collects for leasing the golf course to Portlock.

The city apologized to Portlock International and its owner, Frank Hahn, for allegations that questioned their personal honor and integrity and said it hoped to restore a close working relationship with Portlock.

“This crossed the line of professionalism and ethical treatment and was inheritantly wrong,” the apology stated. “You have been the only people involved with development in the Castle Oaks project that have performed as promised.

“You alone stepped forward and took on the risk and responsibility of building our golf course when nobody else wanted it. You took the roughed-out patch of weeds and gave Ione a first-class golf course that our community can be proud of.”

George Lee, vice president of Portlock, said he was pleased with the settlement. “It’s mutually beneficial to both parties,” he said. “It allows the city to get on with other business and allows us to move forward with the golf-course project. This will let us build for the future.”

James Brown, a Stockton attorney who represented Portlock, said his client has wanted to build a 10,000 square-foot clubhouse, but the litigation has held up that project.

Brown said Portlock could not invest $2 million in a golf course not knowing if its lease with the city would remain intact.

Under the new agreement, Portlock will give the city 2 percent of its gross revenues from operating the golf course, clubhouse, pro shop, driving range and other golf facilities between 11 and 15 of the 55-year lease, 3 percent in years 16 to 20 and 4 percent hereafter.

The old agreement called for the city to get 1.5 percent of Portlock’s gross revenues in years 11 to 20, 2 percent in years 21 to 25 and 4 percent thereafter.

Mayor Tom Shone, who joined the council in December, said he was “embarrassed” at the allegations made against Portlock and Hahn. “It was a frivolous lawsuit, and the motivation behind it was wrong,” Shone said. “It never should have been filed.”

The lawsuit cost the city some $300,000 in legal fees, Shone said.