The SeaTac City Council has OK’d payment of $4.25 million to Gerry and Kathy Kingen after a judge found the city had engaged in misrepresentation, inverse condemnation and interference with business expectancy. The balance of the $13 million settlement will come from insurance.
To hear City Council members tell it, the city of SeaTac did nothing wrong when its staff orchestrated a secret land grab to wrestle a piece of prime real estate from a West Seattle couple more than a decade ago.
Nonetheless, in a 5-2 vote Tuesday night, council members authorized payment of $4.25 million to entrepreneurs Gerry and Kathy Kingen, who sued the city and were awarded more than $18 million in damages, legal fees and interest last year in King County Superior Court, a number that has since swelled to $22 million as interest has continued to accrue.
The city appealed the jury verdict and trial court’s ruling to the state Court of Appeals, then entered into mediation with its insurance carriers and the Kingens’ development company, K&S Development, SeaTac City Manager Joseph Scorcio told council members during a study session Tuesday.
The $4.25 million is the city’s share of a $13 million settlement agreement that was struck weeks before the parties were to make oral arguments before the appeals court. The city’s two insurance carriers — which also filed a lawsuit against the city of SeaTac, arguing they shouldn’t have to pay for the city’s illegal conduct — will each kick in a little over $4.3 million.
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The city’s portion of the settlement will be paid out of its general fund.
As a result of the settlement, the lawsuit filed against the city by its insurance companies as well as two additional lawsuits filed by the Kingens will be dismissed.
The parties also agreed not to publicly discuss the settlement for the next six months and after that, not to speak of it unless someone else — be it a city resident or member of the media — initiates the conversation, council members were told.
Once the agreement is signed, a joint news release is to be issued, indicating only that the case has been settled, Scorcio said.
A video recording of the council’s study session and discussion about the case before Tuesday night’s vote was posted on the city’s website. It was the first time since the Kingens filed their lawsuit in 2012 that council members have spoken publicly about the case.
The current council members and most of the city’s staff were not part of SeaTac government in 2004, when the Kingens first began working with city officials to develop a 1,200-stall park-and-fly garage that was never built.
In 2003, the Kingens purchased a 4.23-acre parcel at International Boulevard and South 154th Street for $5.3 million. The next year, they began working on a plan to develop the garage on the property, located just off Highway 518 near Seattle-Tacoma International Airport.
But unbeknown to the Kingens, SeaTac’s planning director, city manager and other staff decided in late 2005 they didn’t want K&S to build the park-and-fly because it would create competition for a park-and-fly the city wanted to build about a mile south at South 176th Street.
So in February 2006, city staff “devised a secret plan” to get the City Council to pass a moratorium designed to kill the Kingens’ park-and-fly project, according to the King County judge who heard the case.
At the end of 2008, K&S defaulted on its loan but negotiated a two-year forbearance. That’s when the city secretly retained a commercial real estate broker who threatened to go after the Kingens personally if they refused to sign over the deed to the broker’s phantom buyer in lieu of foreclosure, Judge Richard McDermott wrote.
The city wasn’t revealed as the phantom buyer until Dec. 30, 2009, when the City Council unanimously voted to purchase the property during an emergency City Council meeting.
The city purchased the land for $12.3 million, according to court records. But the Kingens said in an interview last year that they didn’t receive any money for their land and were left with $1.5 million in residual debt.
The land remains undeveloped.
The Kingens ultimately proved in Superior Court that SeaTac officials intentionally sabotaged their development plans, strong-armed them into giving up their property and then violated the state’s Public Records Act by withholding city emails and documents proving the deception.
McDermott issued a blistering critique of the city’s shady dealings:
“Quite frankly the actions of the city of SeaTac in this case are unexplainable and totally unacceptable,” the judge wrote.
The city appealed to the appellate court, which led to mediation and the settlement agreement.
Despite the judge’s findings, council members agreed the city had done nothing wrong.
“The whole thing sucks. Has from the beginning,” Deputy Mayor Pam Fernald said during the study session. “Boy, it’s hard to let somebody have money that they really don’t deserve.”
Mayor Michael Siefkes noted that if the city was to lose its appeal, its insurance companies could refuse to pay out, the city could then be on the hook for the full amount owed the Kingens and would still have to defend itself in the other lawsuits.
“I am angry the city would have put out a penny toward any claim, but a jury found against us and in order to stop the bleeding, we gotta stop it,” he said.
Brad Anderson, one of the Kingens’ attorneys, cited the settlement agreement in declining to comment.
But Earl Gipson, a SeaTac resident and blogger who closely follows city politics and sat through last year’s jury trial, believes the city got lucky in settling the case for so little. It was Gipson who alerted the Kingens that the city was the phantom buyer of their property back in late 2009.
“Definitely what they did was not ethical in any sense of the word,” Gipson said of the past administration’s treatment of K&S and the Kingens.
Gipson, who successfully pushed the current council to adopt a code of ethics, called the decision to settle “a pragmatic thing to do.”