Carter Nowell had a plan. His investors had to know. And when he sent them a letter last September, he told them how it would go.

“We are currently working on a contract to sell the property to CityPartners, who helped us through the PUD process as they believe that they can use political connections to get the project back on track,” wrote Nowell, the principal of notorious D.C. landlord Sanford Capital. 

He was referring to an Adams Morgan-based real estate firm directed by well-connected developer Geoffrey Griffis, a former D.C. zoning official. CityPartners has received millions of dollars in subsidies from the D.C. government, and Mayor Muriel Bowser appointed Griffis to the National Capital Planning Commission in 2015.

Years earlier, around 2010, Sanford Capital and CityPartners had joined forces to redevelop a group of buildings above the Congress Heights Metro station, in an area of the city poised for major changes.

The companies pursued this goal through a special zoning action called a “planned unit development,” or PUD, that the D.C. Zoning Commission approved. Their project proposed retail, offices, and more than 200 apartments—most market rate.

But in 2016, District Attorney General Karl Racine sued Sanford over terrible conditions at the Congress Heights buildings. Dozens of low-income renters had vacated in the preceding years, leaving only a committed few who refused to abandon their homes despite roaches, rodents, and poor maintenance.

After the lawsuit, the redevelopment project stalled. The case has taken manifold twists and turns over the past two-and-a-half years, including the court-ordered installment of a third-party property manager responsible for fixing the buildings to code.

The case has also involved thousands of pages of legal documents, hundreds of hours of attorney time, and a Dickensian cast of characters warring over the future of a single plot of land and an entire neighborhood.

More than that, the dispute is a case study in the kind of development sweeping D.C. from west to east that has unnerved ingrained communities while rousing those who stand to profit.

Racine’s office recently obtained a trove of internal communications between Sanford, CityPartners, and their lawyers through the discovery process in the case. The attorney general says these records show that the companies knowingly violated a court order when, without warning, they transferred the properties from Sanford to CityPartners in late December. He wants the court to annul the land swap, hold the defendants in civil contempt, and grant the tenants “the unfettered opportunity” to acquire the properties in line with D.C.’s Tenant Opportunity to Purchase Act, a 1980 law that lets renters buy the buildings they live in when landlords put them up for sale or demolition.

The companies say they did not breach the court order, given the type of deeds they used in the transaction. They also say the tenants now have the chance to buy the properties at “fair market value”—currently $7.5 million, according to CityPartners. 

Griffis says that if the tenants cannot agree to a deal, his firm would relocate them off-site and move them back to the redeveloped project with the same rents they are paying today, or pay them to leave the site. The tenants, though, deeply distrust CityPartners and Sanford Capital after years of conflict.

If a settlement is not reached soon, the litigation could stretch into 2019. 

Nowell did not specify what he meant by his collaborator CityPartners’ “political connections” in his September letter to his investors. But he did complain about “the hostility of the tenants and the City,” claiming that it drove away a buyer who had offered over $20 million for the properties in spring 2016. (Sanford bought them for about $2.5 million in 2009 and 2010.) “This left us with an entitled site that is largely vacant and not sustainable financially, coupled with a very hostile political environment that has made potential buyer very weary,” Nowell wrote.

The company had a backup plan. It would sell the dilapidated properties to CityPartners through a prepackaged bankruptcy to expedite a sale and pay off debts. Court papers show that Nowell and Griffis negotiated over such a sale in summer 2017. Griffis wrote to Nowell in a July 31 email: “CityPartners must be able to honestly and substantively state we have made a clean break from Sanford Capital. Whatever we structure and represent to Bankruptcy Judge must be truthful and will be public fodder for potential negative reporting.”

The bankruptcy route presented a key benefit for the companies. Bankruptcies are exempt from TOPA, the tenant-friendly law.

Earlier in 2017, Racine’s office opposed a Sanford bankruptcy at another Southeast complex, arguing that Sanford was making a thinly veiled attempt to circumvent the tenants’ TOPA rights. Ultimately, developer WC Smith acquired that complex for $6 million, promising major renovations and the right of tenants to move back in.

Nowell wanted to follow a similar blueprint in Congress Heights, but was frustrated by court action. He told his investors that a bankruptcy sale “will negate the tenants [sic] TOPA (Tenant Opportunity to Puchase Act) rights which could otherwise drag the process out for over a year and force the property into foreclosure.”

But Sanford never put the Congress Heights properties in bankruptcy. At the end of September, D.C. Superior Court Judge John M. Mott ordered them into receivership, and receiver David Gilmore estimated that necessary repairs would cost well over $2 million when accounting for mold remediation.

Facing high costs for properties that were losing money—largely due to allowing abysmal living conditions and not re-letting vacant units—Nowell agreed under court order in November to “negotiate exclusively” with the tenants over a sale for a 60-day period.

At the time, Will Merrifield, an attorney for the tenants association, told City Paper the tenants were “cautiously optimistic” about purchasing their homes with help from a nonprofit developer, NHT-Enterprise. The group proposed roughly 200 units of affordable housing at the site.

Nowell and the tenants discussed a sale over the next several weeks. By mid-December, the tenants made a final offer of $3 million, expecting to close the deal in early 2018.

But behind the scenes, Nowell was actively talking with Griffis about transferring the properties to CityPartners. Griffis sent Nowell emails on Nov. 21 and 28 requesting a copy of the court order and eventually received one.

The two developers looped in their lawyers to paper the transaction: Richard Luchs for Nowell and Earle “Chico” Horton III for Griffis. Luchs is a heavy-hitting real estate attorney who specializes in TOPA cases and has found loopholes in that law. Horton is a K Street attorney who is close to ex-Mayor Adrian Fenty and co-chaired FreshPAC, a political action committee that raised money for Mayor Bowser’s allies by exploiting a loophole in campaign-finance law and shuttered in 2015 after outcries over pay-to-play politics.

The deal still needed financing. CityPartners acquired most of the mortgage debt on the properties from EagleBank, a preferred lender of Sanford Capital’s. The bank approached Griffis with the idea and CityPartners took out a new consolidated loan.

Court records show that Horton and Fenty/Bowser pal Ben Soto, who served as Bowser’s campaign treasurer until this year and co-chaired FreshPAC with Horton, gave CityPartners $400,000 through their development companies, Blue Sky Housing and Paramount Development. The money covered a smaller amount of debt that Sanford owed to Revere Bank. 

Soto was further involved in the deal as the owner of Premium Title & Escrow, the title company that completed the transaction. He has partnered with Griffis on multiple real estate projects, including the Wharf, sits on the board of EagleBank, and has long notarized documents for Sanford.

“I’ve been doing closings for them for the last decade or so,” Soto testified in a deposition on March 28. He said Griffis had asked him and Horton to provide the $400,000 loan. “We thought the deal was a good deal, the project was a good project, and it was a good deal to lend to, and we decided to do it,” Soto added.

These financial maneuvers effectively made CityPartners a lender to Sanford. But instead of foreclosing on the properties, CityPartners obtained them on Dec. 27 through deeds in lieu of foreclosure, which banks use for friendly takeovers of assets when borrowers default.

Like bankruptcies, such deeds are exempt from TOPA. Sanford and CityPartners argue that the deeds were not “sales,” so they did not shirk the court order. The tenants have sued both companies in a separate lawsuit challenging the transfer.

In a second letter on Dec. 12, Nowell briefed his investors on the plan, saying it “would achieve the same end result that we had contemplated through bankruptcy, but … much faster and with considerably less expense.” He did not disclose his parallel negotiations with the tenants or specifics of his discussions with Griffis.

Nor did he disclose the Dec. 27 transaction to the court, despite the fact that the parties were set to meet at a hearing on the very same day. That morning, Nowell and Griffis met at Premium Title in Columbia Heights to finalize the deal.

In addition to the deeds, they reviewed what Racine’s office calls a “secret letter agreement.” It stipulates that CityPartners must give the Sanford investors at least $4 million in equity in the redevelopment project, and is similar in terms to the potential bankruptcy sale, according to court papers.

Nowell then headed down to court. Before the hearing started, he met nearby with his attorney Stephen Hessler, giving him a check for $49,500 to fund the receiver’s work. 

But Nowell did not attend the hearing as he was expected to. He wrote to Griffis in an email the next day that he “didn’t tell the Judge anything about the transfer yesterday as I didn’t have any paperwork to support it.”

Although the transaction was officially recorded on Dec. 28, Nowell waited until Jan. 2 to tell another attorney for the tenants, Blake Biles, that he could not reach a deal with NHT-Enterprise, the developer the tenants selected. Racine’s office says the court could have halted the transfer of the properties to CityPartners on Dec. 27 because the notarized deeds had not been posted yet.

While the case continues to unfold, Nowell is digging in his heels. In a recent court filing, his lawyers say “the only interests that contempt and unwinding the transfer would serve … are the [Office of the  Attorney General’s] political interests in obtaining what it considers to be favorable publicity.”

Racine’s office says its goal is to get funding for the receiver so the tenants can live in habitable housing. Those tenants include association president Ruth Barnwell, who said at a rainy-day protest outside Griffis’ home in February that the influence of “political favor” would not discourage her. “We will not stop fighting,” she said.