Barbieri accused of inflating Upper Falls project costs
A partner in Don Barbieri’s high-profile riverside condo building is suing the Spokane businessman, alleging Barbieri and companies he owns overstated costs by more than $3 million to avoid sharing project profits.
GVL Investors LLC, held by Flour Mill owner Maxwell Drever, asks for an independent accounting of income from the 32-unit Upper Falls condominiums, unspecified monetary damages and attorney fees and costs, according to the lawsuit filed in Spokane County Superior Court.
But Barbieri contended accounting of costs for the six-story building is not finished pending sales of the two remaining units and unspecified issues with contractors. He wouldn’t elaborate on those issues. With upscale, spacious condos sold at prices from more than $500,000 to $1.5 million, Upper Falls is considered one of the area’s most successful projects. Barbieri, a former congressional candidate, developed the building between 2005 and 2007 – the height of the area’s condo boom – through Upper Falls LLC after buying the land along North Post Street from Drever.
GVL Investors claims Barbieri breached his contract, which had called for GVL to receive about 53 percent of profits. The company alleges Barbieri provided “incomplete or partial responses” to requests to review a project audit that showed a loss. GVL Investors asserts costs were overstated by about $3.7 million.
“He was paying himself fees that weren’t actually proposed in the contract documents,” said Bob Dunn, an attorney for GVL Investors. “That’s what this fight’s about: How much money he actually put in his pocket.
“On a project where you have to pay a partner from net profits, the way you get around that is to have no net profits,” Dunn said.
Barbieri said auditors were retained after the building opened last year, but, “there are numerous ongoing items that need to be completed before the audit can be completed.
“We have no idea if this project is going to come in at a loss; we really don’t,” Barbieri said. “I’m surprised to see that he’s obviously in a hurry to want an accounting on a project that’s not done.”
Barbieri said he has “all the faith” that the project’s accounting was accurate. Fees would be “appropriate with peer-group fees,” he said.
Mark Conroe, president of San Francisco-based Presidio Development Partners LLC, who acted as an adviser to Drever, said, “To me, it’s a smokescreen … We’d love to understand more fully what is happening with the development at a fundamental level. That’s what we’re asking for.”
The accounting had been going on for months, Conroe said.
Barbieri said he has not been able to construct a new project because of the capital and credit tied up on Upper Falls.
“It’s really hard to build a project in Spokane without deep personal credit and a lot of cash,” he said. “I’m sure he’d like a profit, but right now we’re the ones paying the bills and trying to get the project sold.”
In a spring 2005 deal, GVL Investors agreed to sell the land to Upper Falls LLC for $1.7 million. The agreement also said once the project ended, a separate company, River Run Ventures LLC, would receive $1 million for cash equity it invested, according to the lawsuit.
Barbieri and partner Sharon Smith own River Run Ventures, through which they bought two of the units, one of which is occupied by Barbieri.
It’s not the first time the project has sparked litigation.
In 2005, Spokane attorney Steve Eugster filed a lawsuit alleging the city incorrectly sold parkland to the developer without a vote of the people; it was later dismissed.
Barbieri called the project “a really wonderful addition to the city.”
“We hope that when all the bills are paid, at the end of the day that it comes out with a profit-sharing number,” Barbieri said.
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