battle for vic hall ensemble papers sb news-press 1

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Battle for Victoria Hall : Lease deal forcing Unity Shoppe outcalled into question

PETER LANCE, SPECIAL TO THE NEWS-PRESSDecember 10, 2010 6:46 AM

Part one of a two part series.

Tomorrow Unity Shoppe, a charity that each year serves more than 22,000 people in Santa Barbara, willhold its 24th annual fundraising telethon. But for the first time since 2003, it won't be staged in theVictoria Street Community House.

The star-studded 101/2-hour telethon was moved after the sudden closure of the church hall portion ofthe building last April, the direct result of a seismic report commissioned by Ensemble Theatre Company,which plans a $5.1 million renovation of the historic building at the corner of Victoria and Chapalastreets.

Ensemble's plans to build a 300-seat stadium seating theater in the turn-of-the-20th century space knownas "Vic Hall" — a radical renovation to be financed with a $1 million grant from Santa Barbara'sRedevelopment Agency that would permanently alter the character of the building — has spawned acontroversy that has divided the city's nonprofit groups.

It's a battle that has cost hundreds of thousands of dollars in legal fees in an arbitration that pitted Unitynot just against Ensemble, but the two other charities in the building: Child Abuse Listening andMediation and Retired Senior Volunteer Program.

Ironically it was RSVP's founder Helen Paul who credited Unity's founder Barbara Tellefson withlocating the former home of the First Baptist Church and getting it financed in the first place.

"What makes this conflict so painful," said Ms. Tellefson 74, "is that back in 1988 we invited CALM andRSVP to come in with us, for the very purpose of having a permanent roof over our heads. Now, Unity'sfuture in the building is very much in jeopardy."

Through months of negotiations, starting in 2008, representatives of CALM and RSVP on the Vic Hallbuilding council repeatedly voted against Unity's offers to buy or lease the building, favoring Ensemble atalmost every turn. And on Oct. 5, as a result of the arbitration, Ensemble signed a 30-year lease on thebuilding.



WHAT ARBITRATION DECIDED

Many supporters of all four nonprofits may be under the false impression that Ensemble's victory in thearbitration represented an endorsement by a judge on the merits of its long-term lease. But it didn't.

Further, there have been a series of misstatements published in local media recently regarding the leaseand the city's approval process for the renovation.

On the morning of June 1, the first day of arbitration, Judge Steven Stone (a former Superior Court judge)narrowed the issues under consideration from the metaphorical size of a soccer field to the size of a pooltable — ruling on the single issue of whether the hall's building council had the right to lease toEnsemble.

In ruling that it did, Judge Stone pointedly avoided any decision on whether the lease was in the bestinterests of CALM, RSVP or Unity Shoppe. In fact, the hundreds of pages of evidence entered in thearbitration suggested that by any objective measure — value to the charities, their future use of thebuilding, the immediate loss of income to the three co-owners from Ensemble's lease and its ability tofinance and execute the costly new renovation — Unity's multiple offers to buy or lease Vic Hallexceeded any of Ensemble's. (A history of the proposals along with other key exhibits can be downloadedat http://public.me.com/netgraph1.)

In the end, the war between charities came down to this: the building council members representingCALM and RSVP sided with ETC, whose objective (theatrical production) has little or no compatibilitywith the activities of the co-owners — the litmus test for outside rentals to third parties mandated by theVictoria Street Community House Co-Ownership Agreement.

Not only would Ensemble's redesign change the identity and use of the historic building, but apreliminary seismic report by Ensemble that essentially frightened the building council into closing VicHall in April, has cost all three charities tens of thousands of dollars in lost rental income.

LOSS TO UNITY SHOPPE

Unity has the most of all three to lose: first because the hall closure has forced it to relocate its annualtelethon (the charity's primary source of income) and second because the Ensemble lease threatens toencroach on Unity's use of the basement under Vic Hall — for 22 years Unity proprietary space, whichhas been its principle area for taking in and sorting donations.

All of this runs counter to the public pronouncements on the lease and renovation by Ensemble TheatreCompany and members of the Vic Hall building council. The impression left in Ensemble's Sept. 9, 2009,press release announcing the takeover was that Unity would get Vic Hall for 10 days each year for free.But in fact, the lease contains a clause that could cost Unity thousands in equipment rental, even if it wasable to stage its telethon in the hall (now shuttered).

Worse, the lease could penalize Unity up to $225,000 over the next 30 years if the charity doesn't selectits annual December window for the T.V. broadcast a year before each event — a choice renderedimpossible, at this point, by the hall's closure.

"The media coverage of this controversy has been so misleading," said Tom Reed, Unity's executive



director, "that we're being turned down left and right for donations. The false impression has been that wewere obstructionist and litigious in the arbitration, when all we were doing was defending for our right tooperate."

STATEMENTS IN THE MEDIA

As recently as Oct. 14, in a column published in a local weekly, Derek Westen, Ensemble's vicepresident, was cited as the source behind two specific pronouncements on the status of the renovation:first that, "the city of Santa Barbara has committed $1 million in redevelopment funds," to the renovationand second, that "Because these changes are planned for the interior (of Vic Hall) only, PlanningCommission and City Council approval are not necessary."

But an analysis of the arbitration evidence along with a series of interviews with city officials andVictoria Street Community House Building Council members, revealed a different set of facts that shednew light on the controversy.

CITY'S RENOVATION ROLE

Regarding Mr. Westen's claim that city "approval" would be unnecessary, City Planner Bettie Weissdisagreed. In an interview, she said that the Ensemble renovation would be subject to multiple layers ofreview. Not only do Ensemble's latest plans, received by the city Nov. 1, show a sizable height increasefor the back of the building and encroachments onto Victoria Street and Parking Lot No. 5 behind thebuilding (requiring City Council approval), but the renovation of the theater space will also mandateextensive review by the Public Works Department, Planning Department and Historic LandmarksCommission before building permits are issued.

A reconstructed "fly loft" to accommodate scenery in the latest plans, would rise 55 feet above streetlevel, adding an appendage to the building similar to the one at the rear of the Lobero Theatre on EastCanon Perdido Street. It would tower 14 feet above the existing roofline at the back of Vic Hall.

$1 MILLION DOLLAR RDA GRANT

With respect to the $1 million RDA grant, as recently as Jan. 9, 2009, in his negotiations with thebuilding council on the lease, Mr. Westen pledged "prior to commencement of the lease (as a condition tothe lease) we will have obtained written obligation of the RDA for up to an additional $1,000,000 inrenovation funding."

But in an interview, Brian Bosse, director of the Redevelopment Agency, said that while these funds havebeen set aside for Ensemble, the RDA will not commit them until Ensemble demonstrates its financialcapability to complete the multimillion dollar renovation. Thus, the lease was signed Oct. 5 without that$1 million grant.

Mr. Bosse said that one factor in the RDA's evaluation would be the inclusion of a performance orconstruction bond in the lease, which would guarantee completion, if, for any reason, demolition orconstruction was halted.

At first, Mr. Westen had pledged a guarantee on the financing. In a letter to Jim Acos of the buildingcouncil on Nov. 26, 2008, Mr. Westen warranted that, "If there is any doubt on your part as to ETC's



ability to secure the funds necessary for the renovation, we would be happy to agree that satisfactoryproof of funding necessary to complete the first phase of renovations would be an absolute contingencyof our lease agreement and that if the funds were not available, for any reason, the lease would beterminable at the Victoria's owners' option."

In a March interview, Kip Bradley, a developer who serves on the RSVP board and was a leadingadvocate for the lease to Ensemble, said, "we are requiring them to do construction bonds — so thatprotects us in terms of. . .(Ensemble) having the money up front."

But the lease signed by Mr. Westen Oct. 5 has no performance bond, thus no built-in protection for theco-owners against Ensemble's possible inability to complete the renovation.

HOW MUCH WILL IT COST?

On Nov. 12, 2008, while advocating for the lease, Mr. Westen wrote to Mr. Bradley and Mr. Acos on thebuilding council, describing the "cost of renovation" at $500,000 to $1 million, work he suggested "couldbe completed in a matter of a few months."

On June 3, 2010, in his sworn arbitration testimony, Mr. Westen stated that, "Our current estimates arethat we will spend about $3 million six on rehabbing the interior of the building, including seismic." Butfour months later, on Oct. 21, in a filing with the city, the total construction valuation was estimated at$5.1 million.

ETC'S FINANCE ABILITY

Mr. Westen's estimates of ETC's fundraising goals have varied widely in the past 19 months. In a May14, 2009, letter to Brian Bosse he stated, "We anticipate an initial capital campaign of approximately$4,700,000 to make the vision a reality." In his June 3, 2010, arbitration testimony Mr. Westen cited astudy by consultant Jeff Conway, commissioned by ETC, in which Mr. Conway reportedly "interviewed. ..just under 30 leading philanthropists and foundations in Santa Barbara County" and "concluded with avery, very high level of confidence we would be able to raise at least $4.5 million. And if we receivedone large donation, $6.5 million. And if we received two, $8.5 million. We have since upped that and(are) hoping to raise $8.9 million."

Less than a month later, in a July 1 letter to City Administrator Jim Armstrong, Mr. Westen wrote, "tomake the vision a reality, we anticipate an initial approximately $5,100,000 capital campaign and a$4,000,000 endowment campaign for a total of approximately $9,100,000;" admitting that, "Theassistance of the Redevelopment Agency will be critically important."

In September, Mr. Westen agreed to an interview, but after setting a date he abruptly cancelled. Whenasked to furnish a copy of the Conway study, he refused; calling it "confidential."

But Mr. Westen himself gave some hint of his own concerns about fundraising in the wake of themultimillion dollar renovation of The Granada, which put severe demands on the local philanthropiccommunity. In his 2009 letter to Mr. Bradley and Mr. Acos, Mr. Westen wrote, "We face the worsteconomic crisis in 75 years — a crisis that hits the performing arts especially hard."

ETC INCOME DOWN SINCE '04



Ensemble's latest 990 nonprofit tax exempt form, filed with the IRS and available to the public, showsthat for the fiscal year ending Aug. 31, 2009, net assets went from $1.2 million at the start of the year to$599,247 at the end of the year — a drop of more than 50 percent.

As a broader indication of its long-term financial strength, Ensemble Theatre Company's gifts, grants,contributions and membership fees went from $507,850 in 2004 to $386,847 in 2008 — a drop of$121,003. And gross receipts from admissions fell by almost $150,000 from $546,064 year in 2004 to$396,248 year in 2008.

If Ensemble is losing money in a 140-seat theater, how would it be financially viable in a 300-seat theaterafter paying the $81,000-per-year lease to rent the Vic Hall space?

A former Ensemble executive, who ran several nonprofit theaters across the country, said it is virtuallyimpossible for a company like ETC to pay that kind of rent and remain solvent without owning its theaterspace.

That seemed to be Mr. Westen's initial goal in his negotiations with the VSCH building council, but hesoon learned that the co-ownership agreement grants each of the three charities a right of first refusal topurchase Vic Hall.

So, when Unity offered to exercise that option and buy, Mr. Westen retreated to a lease position.

Just days before signing a pre-commencement lease agreement with Ensemble in September 2009, Unityoffered to buy out CALM and RSVP at a fair market price of $5.5 million to $6 million versus the muchlower formula price envisioned in the co-ownership agreement. It was a deal worth several million dollarsmore to the charities than the triple net lease signed by Ensemble.

But CALM and RSVP again refused in favor of the much less lucrative lease with Ensemble.

It's questionable now whether Mr. Westen's desire to control Vic Hall with a long-term rental isfinancially viable in this economic climate.

In an interview for this piece, Peter Frisch, who recently stepped down as executive director of TheGranada, cited a recent study by the Association of Performing Arts Presenters that found a drop of 30percent in audiences since the 2008 economic meltdown. He also underscored how renovation projects inhistoric buildings can spiral.

The initial estimate for renovation of The Granada was $16.5 million, but after it was decided to widenthe stage and do a so-called 100-year seismic retrofit, the final price tag topped $60 million.

LEASE VOTE LEGALITY

One of the most startling revelations in this investigation was the discovery that at the time theynegotiated with Ensemble for the lease and approved the pre-commencement agreement, each of thecommunity members on the building council had outlived their two-year terms and were, thus,technically ineligible to cast legal votes pursuant to the co-ownership agreement that governs thecouncil's lease of common space in the Victoria Street Community House.

At the time of the approval of the pre-commencement lease, the two-year terms of community members



Kip Bradley, Ron Wolfe, Joe Kautz and Fred DeLorenzo had long since expired. Further, Mr. Bradley,who became perhaps the strongest proponent of the Ensemble lease, may have been in violation of the co-ownership agreement in a second instance.

Article 3.02.02 provides not only that the four voting community members serve for two years, but alsothat, "Elected community representatives shall remain independent and shall neither become members ofthe board or staff of any owner organization, nor form any significant affiliation with any owner agency."

After serving as a community member from July 2004 to June 2006, Mr. Bradley, joined the board of co-owner RSVP where he's served ever since.

Part Two of this series, which will appear in Saturday's News-Press, will reveal new evidence suggestingthat the lease itself may not be enforceable in its current configuration and shed new light on theinfluence exercised by Mr. Westen over the Victoria Street Community House Building Council.

EDITOR'S NOTE: Given his longtime association with Unity Shoppe, producing the annual UnityTelethon, Don Katich, director of news operations for the News-Press, did not take part in the editing ofthis series.

Peter Lance is a five-time Emmy-winning former correspondent for ABC News. Since 2003 he has written

three best-selling investigative books for HarperCollins critical of the FBI's counterterrorism

performance in the years leading up to 9/11 and beyond. Next week Playboy magazine will publish his

third piece in the past 18 months: the untold story of the Pentagon's recent pulping of Lt. Col. Anthony

Shaffer's Afghan War memoir, "Operation Dark Heart." Mr. Lance is a research scholar at the Orfalea

Center for Global and International Studies at UCSB. He's been a Santa Barbara resident since 2001.

e-mail: [email protected]

All Content Copyright © 2010 Santa Barbara News-Press / Ampersand Publishing, LLC unless otherwise specified.


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Battle for Victoria Hall - 'Win-win-win-win' deal clouded by

influence

By PETER LANCE, SPECIAL TO THE NEWS-PRESS

December 11, 2010 6:57 AM

The press release, issued Sept. 9, 2009, announcing that Victoria Theater would become "The New Homefor Ensemble Theatre Company," was actually drafted weeks before the Victoria Street CommunityHouse building council actually voted in principal to lease the historic church hall to Ensemble for thenext 30 years. But the release, which quoted former Santa Barbara Mayor Marty Blum and CouncilmanRoger Horton, read as if the project was a done deal.

Calling it a "win-win-win-win solution," Richard Schuette, board president of Child Abuse Listening andMediation, one of the three co-owners, proclaimed that the lease for the building at Victoria and Chapalastreets would be "good for all the owners of the building."

But new evidence uncovered in this investigation, including a detailed analysis of the lease that wasfinally signed 13 months later and an examination of Ensemble's ability to finance the $5.1 millionrenovation (as reported in Part One of this series on Friday) suggest that the announcement may havebeen premature. Further, a series of e-mails sent by Derek Westen, Ensemble Theatre Company's vicepresident, to members of the building council, suggests that at the time, Mr. Westen was exercising abehind-the-scenes influence over building council members, particularly Mr. Schuette.

LEASE THAT MAY NOT BE ENFORCEABLE

As reported Friday, the recent arbitration decision left out any ruling on co-owner Unity Shoppe'scontention that the renovation would encroach on its basement space. So Kip Bradley, the board memberfrom co-owner Retired Senior Volunteer Program took pains to cure the problem by removing an exitdoor in Unity's proprietary space from the original lease plan. But a closer look at the lease suggests thatEnsemble's ability to complete its project without affecting Unity remains an open issue.

In a Sept. 17, 2009, e-mail to Mark Carlson, arbitration attorney for CALM and RSVP, Mr. Westenstated that, "We originally assumed we had the entire area under the stage and said as much to theowners. It was only when Steve Metsch our Board member and architect did drawings that we discoveredthat Unity was using a part of the sub stage area. . . It will be illegal for us to use the basement dressingroom for any reason without a second exit." (Key exhibits, including that e-mail can be downloaded athttp://public.me.com/netgraph1.)



In the e-mail Mr. Westen attached a drawing by architect Mr. Metsch (designated A-2) showing that anexit door through an area in Unity's proprietary space marked "Not a Part" of Ensemble's lease area wouldbe "Req'd." And in that same e-mail to attorney Mr. Carlson, Mr. Westen admitted that "our plan does usea part of the 'Not a Part' space for exit. That part is marked 'Required Exit.' This is a potential stickingpoint for Unity. If they really do have exclusive rights to the space."

What makes that admission problematic for Ensemble is that an addendum in the current lease directlyreferences Mr. Metsch's drawing as part of the "Phase 1 and Phase 2 Renovations" of "Vic Hall."

In an interview for this series Mr. Metsch said that a change in city building regulations, effective Jan. 1"removes the requirement for a second exit door, so we won't have to intrude on Unity's space."

But in his Sept. 17, 2009, e-mail Mr. Westen concluded by writing that, "We desperately need all thebasement space (i.e. the "Not a Part" space). . .If it is established that Unity does not have the right tocontinue to occupy that space, we would expect that it be added to our lease."

Barbara Tellefson of Unity Shoppe has called that basement space "a key to our ability to function." So,the conflict between the lease as signed and Mr. Westen's stated intentions could give rise to a legalchallenge by Unity Shoppe if construction goes forward and the basement space, where Unity sorts itsdonations, is affected.

This past week, when contractors for Ensemble were jackhammering in the building to test thefoundation, dust came down into the basement area where a series of volunteers were sorting incomingfood donations to be distributed to families via Unity's "Free Store" on State Street.

"If there is dust now," said Ms. Tellefson, "we can only imagine what it will be like when they startformal demolition."

LOSS TO THE CHARITIES FROM ENSEMBLE LEASE

At the end of 2008, in its effort to lease Vic Hall, Unity Shoppe offered to take over the multi-year leaseheld by Herb Kendall, the previous tenant at the same rate of $81,000 per year. But again the VictoriaStreet Community House building council rejected the offer. Had they accepted, CALM and RSVP wouldeach have had the benefit of $2,250-per-month rent from Jan. 1, 2009, through the end of November2010. That amounts to $51,570 per charity — minus the relatively small amount of net rental incomecollected until the hall's sudden closure on April 27 of this year.

The precipitous shutdown of Vic Hall, which had been used by groups as diverse as the West CoastBelievers Church, Adderley School, Brooks Institute, the Santa Barbara International Film Festival andUCSB Arts & Lectures, was the direct result of an 84-page seismic report prepared for Ensemble TheatreCompany by the structural engineering firm of Ehlens, Spiess and Haight.

The report, submitted Nov. 4, 2009, described Vic Hall as being in "good condition. . .having withstoodthe test of time."

John W. Spiess, the co-author, said in an interview that the report was commissioned "so that Ensemblecould determine the cost of seismic retrofitting during the renovation" and that "nothing we found shouldhave led to the imminent closure" of the hall.



But the minutes of the April 27, 2010, building council meeting show that a brief summary of the reportsubmitted by Mr. Carlson described "3 conditions within the building that could lead to a. . .collapseposing a life safety risk." That summary along with three pages leaked from the full report so intimidatedthe council members that they voted to immediately close the hall.

As a measure of the risk of collapse, it's noteworthy that Ensemble sat on the report for almost six monthsand that the majority of Council members, so worried about a "significant seismic event" allowed theportion of the Victoria Street Community House with offices of CALM, RSVP and Unity's basementspace under the theater to remain open. Mr. Spiess said that he was "upset" that his report had been"misconstrued" and saw absolutely no reason for the hall's shutdown at that time.

"Now," said Ms. Tellefson, "in return for $27,000 before taxes, our share of Ensemble's rent, we've lostthe ability to raise $1 million a year with the telethon and other events in the hall. That's why we felt theneed to defend ourselves."

Said Tom Reed, Unity Shoppe Inc. executive director: "Because of the media spin which has cast Unityas the aggressor in all of this, we're hurting. We've had to move our telethon and we're unsure if we'll beable to keep doing business in the basement once demolition and construction starts — even if we had theresources to fight the lease."

In a lengthy interview for this piece, Mr. Bradley, one of the strongest advocates on the building councilfor the Ensemble lease, emphasized that "the vote was eight to two" in favor of granting Ensemble a 30-year lease to Vic Hall.

"It was virtually unanimous," he said. "The only two dissenters were Barbara Tellefson and Tom Reed"of Unity Shoppe.

DEREK WESTEN'S INFLUENCE

But perhaps the biggest unanswered question is why? Why would members of building councilrepeatedly favor Ensemble over Unity Shoppe — the founding charity in the building — despite repeatedoffers to buy or lease Vic Hall from Unity that equaled or bested Ensemble's offers? What would causeco-owners like CALM and RSVP who arguably would not even have been in the building absent theefforts of Barbara Tellefson, to turn against her — voting time and time again for Ensemble?

The answer may lie in a revealing series of e-mails sent by Derek Westen to members of the buildingcouncil and lawyers representing the co-owners and CALM and RSVP in the weeks leading up to thesignature of a pre-commencement lease agreement with Ensemble on Sept. 23, 2009.

In a July 25, 2009, memo to Rob Egenolf, an attorney representing CALM and RSVP, Mr. Westenweighed the merits of sending out a press release, announcing the lease, before the formal vote by thebuilding council had taken place. Hoping to contain any negative media stories about the "controversy,"he wrote, "Even if it works for the first day, Unity will immediately contact the press and say, accurately,that we have misled the press and the public, that neither the owners nor the Council have approved thelease."

Later in that memo, Mr. Westen mused that if "Unity goes negative first. . .it would not be so bad. . .Thepress will contact us immediately. . .and we will be ready with our positive story. Then Unity will look



like they are being deceptive. The tables will have been turned."

In an e-mail dated Sept. 9, 2009, the day the Ensemble release went out — still two weeks before theformal signature of the lease agreement — Richard Schuette, a financial advisor who is CALM's boardpresident, asked Mr. Westen if "it would be wise to forward a copy of your release as a courtesy toUnity?" He then thanked Mr. Westen "for being such a fair and patient partner to the building councilover the last several years."

In a further series of e-mails leading up to the lease agreement's final approval, Mr. Schuette actuallysought out Mr. Westen's advice. On Sept. 15, 2009, describing that area under the Vic Hall's stage, Mr.Schuette asked, "At what point will you need the dressing rooms downstairs? Unity has commandeeredone and we will need to understand our approach in getting them out."

Mr. Westen replied 15 minutes later that Ensemble "desperately need(ed)" the "entire area under thestage." He later suggested to Mr. Schuette that "it would be great if. . .the space were included in thePremises."

Mr. Schuette responded minutes later: "My understanding is that the dressing rooms are, in fact, part ofthe lease and the common area. I have Mark (Carlson lawyer for CALM & RSVP in the Arbitration)already working on that issue."

Mr. Schuette, a building council member who was theoretically supposed to be in negotiations with Mr.Westen to get the best deal for his own charity on the lease, ended by exclaiming, "I wish you werealready in!"

A half hour later, Mr. Westen replied: "If you/Mark succeed as we hope you do in establishing that theentire area under the stage is common space, that means the Building Council has the authority to leaseit."

RICHARD SCHUETTE'S VIEWS ON UNITY

Mr. Schuette, a principal in the firm of Vida Wealth Partners, notes in his company's online bio that he is"most proud" of his service on CALM's board. But two particular e-mails from 2009 provide a revealinglook at his true feelings toward Unity and his willingness to present one face to an executive of UnityShoppe (a fellow co-owner with CALM in Vic Hall) and another to Mr. Westen, vice president ofEnsemble.

In an e-mail to Tom Reed, Unity's executive director, on Sept. 25 2009, two days after a sub-committeeof the building council signed the pre-commencement lease agreement with Ensemble, Mr. Schuette wasconciliatory, telling Mr. Reed, "I think you are a good man and respect your position. . .No matter wherewe go, I will remain positive toward Unity Shoppe as an entity as I had promised. . ."

But in a response to Mr. Westen a few months later on Dec. 7, Mr. Schuette effectively described UnityShoppe's representatives as "liars" who would "stop at nothing to distort the truth to get what they wantregardless of any logical reason."

"These e-mails, which came out during the recent arbitration, showed that Derek Westen was working inthe background," said Ms. Tellefson. "He was dealing directly with members of the building council to



work against our efforts to lease Victoria Hall."

And there's evidence that the distorted perception of Unity Shoppe is continuing.

"Just this morning," Ms. Tellefson said Friday, "after the first piece in the News-Press was published, Ireceived a phone call from one of our most loyal supporters who asked me if it was true that UnityShoppe is suing CALM. That is totally untrue. Unity wishes to move on so that we can raise the money toreplace the theater space that we have lost, and we want to be assured that we can continue to use all ofthe basement space guaranteed in our proprietary lease. It's space we've been using for 22 years for ourfood distribution program."

FINAL RESPONSE FROM DEREK WESTEN

As part of the reporting for this series, Mr. Westen was contacted Sept. 2, with a request for an interview.After agreeing to meet, he abruptly cancelled on Sept. 9.

Within days of that, Mr. Schuette and every other member of the building council contacted forinterviews also declined — with the exception of Mr. Bradley, board member of RSVP who wasinterviewed on Nov. 30.

Other than that, the only members of the building council willing to talk openly about this controversywere Mr. Reed and Ms. Tellefson.

On Dec. 2, Mr. Westen was sent a list of detailed questions. After repeated requests for his response, hesent the following e-mail on Dec. 7, reproduced here in its entirety:

"With all respect, I believe many of your questions are premised on factual conclusions that are takenfrom an incorrect context, misinterpreted, or pre-judged, and that they reflect a lack of impartial, balancedinquiry. For this reason I have concluded that it would not be productive for me to respond in any detailto your questions."

"The dispute between the co-owners of Victoria Theater was unfortunate. However, it has been fullyresolved by a highly respected justice after a very thorough hearing — a hearing in which all the issuesraised by your questions were fully presented and considered."

"Ensemble Theater is proud to be a partner with the co-owners of Victoria Theater and looks forward todeveloping a vibrant theater district that benefits the City of Santa Barbara and the public. We remainconfident that we will complete a beautiful renovation and that we will be successful at the renovatedVictoria."

EDITOR'S NOTE: Given his longtime association with Unity Shoppe, producing the annual UnityTelethon, Don Katich, director of news operations for the News-Press, did not take part in the editing ofthis series.


three best-selling investigative books for HarperCollins critical of the FBI's counterterrorism

performance in the years leading up to 9/11 and beyond. Next week Playboy magazine will publish his

third piece in the past 18 months: the untold story of the Pentagon's recent pulping of Lt. Col. Anthony



Shaffer's Afghan War memoir, "Operation Dark Heart." Mr. Lance is a research scholar at the Orfalea

Center for Global and International Studies at UCSB. He's been a Santa Barbara resident since 2001.

His website is www.peterlance.com.





The Ensemble papers - Part One - An in-depth look at the battle

for Vic Hall

By PETER LANCE, SPECIAL TO THE NEWS-PRESS

January 16, 2011 12:02 PM

EDITOR'S NOTE: Given his longtime association with Unity Shoppe, producing the annual Unity

Telethon, Don Katich, director of news operations for the News-Press, did not take part in the editing of

this series.

On July 17, 2009, Derek Westen, a prominent Montecito attorney, e-mailed the draft of a press releasehe'd written announcing that Child Abuse and Listening Mediation and Retired Senior Volunteer Programwas "very pleased to announce that the Victoria Building Council" had "approved a long-term lease ofthe Victoria Theatre to Ensemble Theatre Company."

Since 2008 Ensemble had been locked in a contentious battle with Unity Shoppe, the founding charity inthe Victoria Street Community House over the right to buy or lease the church hall portion of the buildingbuilt in 1921.

As Ensemble's president at the time, Mr. Westen was anxious to get the word out about Ensemble'ssuccessful lease negotiations and the press release he drafted contained glowing quotes endorsing thetheater company's ambitious plans to renovate the 10,000-square-foot space known as Vic Hall.

"I am so pleased to hear this wonderful news," former Santa Barbara Mayor Marty Blum was quoted assaying.

"We have worked for 10 years for this accomplishment," declared ex-Council Member Roger Horton.

The problem was that, at the time Mr. Westen wrote the release, the Victoria Hall Building Council,including representatives from CALM and RSVP, was still actively negotiating with both Ensemble andUnity Shoppe.

The council wouldn't even vote on the lease until Sept. 9 — almost two months later.

Furthermore, Mr. Westen had actually made up the quotes from Mrs. Blum and Mr. Horton, along withother testimonials from prominent people like Michael and Ann Towbes, and Tom Parker, president ofthe Hutton Foundation.



Before the press release actually went out Sept. 9, under Ensembles' logo, with modified quotes from Mr.and Mrs. Towbes, Mr. Horton and Mr. Parker, Mr. Westen had drafted three other versions and sentdozens of secret e-mails to four key members of the building council who later voted on the lease,favoring the theater company.

That initial July 17 press release draft was part of 360 pages of e-mails to and from Mr. Westen whichformer Superior Court Judge Stephen Stone ordered released during the recent arbitration pitting CALMand RSVP against Unity Shoppe.

The e-mails, drafts and memos offer an extraordinary look behind-the-scenes at the struggle for controlof Vic Hall, 33 W. Victoria St., and paint a stunning picture of Mr. Westen as a Machiavellian strategistwith extraordinary access to the building council members at a time when they were ostensiblyinteracting at arm's length with Ensemble, a competing suitor for the hall.

The 360 pages — accessible at www.public.me.com/netgraph1 — raise a series of conflict-of-interestquestions, not just for top officials of CALM and RSVP but also for Jennifer Guess, a public relationsconsultant who represents CALM and the building council along with the VSCH co-owners, includingUnity Shoppe.

The e-mails, drafts and memos suggest that, working in concert with Ms. Guess, Cecilia Rodriquez,Richard Schuette and Patricia Durham of CALM and Roger Hand of RSVP, Mr. Westen mounted asecret campaign, unknown at the time to Unity Shoppe, to influence the building council vote and controlthe media spin once it became clear that Unity had lost out to Ensemble for the theater.

CHARGES OF DUPLICITY AND A BACKROOM DEAL

In one extraordinary memo, dated July 25, 2009, during mediation to resolve the conflict between the co-owners, Mr. Westen cautioned Rob Egenolf, attorney for CALM and RSVP, on the timing of issuing thepress release.

Beginning May 19 of that year, throughout the months of June and July, up to the end of the first week inAugust, Unity Shoppe was in mediation with CALM and RSVP in which the three co-owners discussedUnity's proposals to buy the Victoria Street Community House. The mediation was conducted by veteranmediator Lol Sorensen of Ojai. It included Kip Bradley and Mr. Hand representing RSVP, Jim Acos andMs. Rodriquez representing CALM, along with Barbara Tellefson and Tom Reed, president andexecutive director of Unity Shoppe, respectively.

The mediation efforts by Mr. Sorensen were so intense that on July 7, 2009, he spent six hours meetingwith representatives of all three charities to try and hammer out an agreement. They spent more than 16hours over 10 separate days, continuing the mediation, until talks broke off on Aug. 7, 2009.

But the July 25 memo from Mr. Westen to Mr. Egenolf, who represented CALM and RSVP in themediation, demonstrates that, at the height of the talks, those two co-owners who share the building withUnity Shoppe had decided to abandon the mediation process weeks before its final conclusion, at a timewhen Unity continued to negotiate with them in good faith.

Meanwhile, as early as two months before a pre-commencement lease agreement was signed withEnsemble in late September 2009, Mr. Westen was confident that he'd won a majority of building council



votes; so much so, that he strategized with Ms. Guess, Ms. Rodriquez and Ms. Durham of CALM aboutthe timing of the press release he'd written heralding Ensemble's victory.

At that point, the three women balked at sending out the release in the name of CALM and RSVP, andMr. Westen noted their concern that, "having the announcement come from only 2 of 3 owners will be ared flag."

But in a later paragraph he wrote, "I am seriously concerned that we'll end up like Nixon and Clinton didwhen they tried to avoid Watergate and Lewinskygate — that the cover-up, to which we have no defense,will become the story that outweighs the wonderful news we are trying to convey."

Later in that memo Mr. Westen characterized Unity Shoppe's position on its need to use the theater as"frankly absurd" and "ludicrous."

Apparently briefed on the mediation negotiations, which by state law are supposed to be confidential, Mr.Westen already knew at that point something that Unity Shoppe did not: namely that CALM and RSVP,in Mr. Westen's words, had "decided to end the mediation."

He then warned Mr. Egenolf to "be careful not to issue the press release before telling Lol, because thenyou'll be open to a charge of duplicity, misleading Lol and Unity into thinking you were negotiating ingood faith, while secretly plotting to make a 'back room deal.' "

"In reading these 360 pages, I'm frankly shocked," said Ms. Tellefson, of Unity Shoppe, who first locatedthe Victoria Street Community House in 1988 and negotiated the purchase giving CALM and RSVP apermanent home.

"For months and months we knew that the building council bias was against us, but as we presented offerafter offer that met or exceeded Ensemble's, we couldn't understand why we weren't making any headway— until now," she said. "This collection of memos and e-mails to and from Derek Westen shows that hewas acting for months behind our backs, not just to influence the council members, but to try and controlhow the media would portray us."

UNITY'S OFFER TO BUY VS. ETC'S OFFER TO LEASE

Pursuant to its 30-year lease, Ensemble plans to undertake a $5.1 million renovation of Vic Hall, guttingthe neo-gothic interior and creating a 300-seat stadium-seating auditorium. The annual rent would be$81,000, netting each of the three co-owners $810,000 over the three decades of the lease.

Mr. Westen plans to finance the renovation with a $1 million grant from Santa Barbara's RedevelopmentAgency — funds that were set aside for the renovation in July 2009, but have not yet been formallycommitted to the project.

Before that happens, according to Brian Bosse, the RDA's manager, Ensemble would have to make aformal request for the funds, which will trigger a review process, in which Ensemble's ability to financethe complete renovation will be evaluated. This process could take two to three months from the date ofthe request.

In early negotiations with Ensemble, both a performance bond guaranteeing completion of the project and



that $1 million grant were considered crucial to the lease deal by members of the building council.

But in Mr. Westen's final lease negotiations, the performance bond guarantee was eliminated, accordingto Mr. Bradley of the RSVP Board, who served as part of a two-man subcommittee finalizing the lease.Mr. Westen's earlier pledge that the $1 million grant would be a "condition to the lease" was also absent.

The lease was formally signed Oct. 1, 2010, and Ensemble Theatre Company made its first rent paymenton Dec. 1.

As far back as early 2009, Unity Shoppe offered to lease Vic Hall at the same $81,000-per-year rate,actually going Ensemble one better by pre-paying a year's rent in advance. But on Jan. 12, 2009, Mr.Hand of RSVP and Ms. Rodriquez of CALM turned them down without giving reasons.

Then in early September 2009, a week before the building council voted 6-2 to approve the Ensemblelease, Unity came in with a 12-page offer to purchase the entire VSCH building, including the theater andoffices, for a market price of $6 million.

"That would have netted CALM and RSVP each $2 million in cash within two years," said Mr. Reed,who presented the offer. "Plus the deal would have allowed them to lease back their spaces for 24 monthswhile they decided on acquiring alternate premises."

"When you measure that offer against the $810,000 they'd get by leasing to Ensemble over 30 years indollars that lose their value each year, the deals don't even come close."

But the confidence exhibited in Derek Westen's July 17 press release draft announcing the lease toEnsemble, proved to be prescient. The press release that went out under ETC's letterhead on Sept. 9,within hours of the vote, was strikingly similar to the one he'd drafted two months earlier.

Although it had undergone multiple drafts throughout the summer, with Mr. Westen getting notes fromMs. Guess and Ms. Durham among others, the quote he'd made up for ex-Mayor Blum was intact.

One provision was modified slightly from the first draft. In the original, Mr. Westen's take on the releasesaid that, "ETC has guaranteed in its lease that it will make the Vic Theatre available to Unity everyDecember free of charge for the Theatre itself, in perpetuity, to present its annual telethon," a deal pointthat various building council members considered key in lease negotiations.

The final draft read, "The lease guarantees that Unity Shoppe will have the theater itself free of chargeevery December for its annual Christmas Telethon."

But in a Q-&-A that Mr. Westen modified Aug. 10, 2009, which was intended to go out with the release,he noted: "Caution: only the telethon use would be free. They can rent the theatre at other times as cananyone. Also, even for the telethon they will be charged standard equipment rental charges that any userpays."

That language never found its way into the final release, and a key lease provision now requires thatUnity is responsible for renting any "trade fixtures, furnishings and equipment."

"That could cost us unknown thousands of dollars," says Unity's Mr. Reed. "So the implication that wecould use the theater for free was highly misleading. To this day we cannot understand why CALM and



RSVP voted for a deal that was so much less lucrative than what we offered."

THE JOINT DEFENSE PRIVILEGE

Initially Mr. Westen sought to keep the 360 pages secret, refusing to hand them over when he arrived athis deposition on April 15, 2010. Via Mark Carlson, the arbitration attorney for CALM and RSVP, Mr.Westen asserted what Mr. Carlson called a "joint defense privilege."

Claiming that Ensemble had a "unity of interest" with the two nonprofits that had refused to lease VicHall to Unity Shoppe, Mr. Westen admitted that he'd had "three or four" sub-rosa meetings with membersof the building council including Ms. Rodriquez, Mr. Schuette and Mr. Acos of CALM along with Mr.Hand of RSVP.

"It was just an understanding," he testified, "that we had aligned interests."

Mr. Westen insisted that these meetings, from which Unity Shoppe was excluded, took place "a couple ofdays before July 24th," a date that he recalled was "approximately (at) the end of the mediation with LolSorensen."

"But in fact, that mediation didn't end until August 7," said Mr. Reed, ''and now with these documents andDerek's own testimony, we find out that he was meeting secretly with people from CALM and RSVPwho had decided to end the mediation while we were still talking to them in good faith."

Five days after the deposition, filing a motion to compel Mr. Westen to turn over the documents, DianaJessup-Lee, attorney for Unity Shoppe, wrote that, "The building council, on behalf of the three owners,supposedly engaged in arm's length negotiations with Ensemble and Unity to determine which entity'slease proposal was most appropriate. We now learn, however, that two months before executing anyagreement with Ensemble, and two months before this litigation was filed, four members of the buildingcouncil, CALM, RSVP and Ensemble entered into a purported 'joint defense agreement' and heldmeetings to strategize on how to assure that Ensemble would be the prevailing tenant."

Judge Stone, who presided at the arbitration, agreed with Ms. Jessup-Lee and on May 17, 2010, orderedMr. Westen to release the documents.

"It was obvious that something motivated the building council's decision to enter into a long-term leasewith ETC, contrary to Unity's interests and in defiance of the co-ownership agreement, that governs useof Vic Hall," said Ms. Jessup-Lee.

That agreement ratified in 1991 provides that, "The owners intend to own, operate, manage and lease theproperty principally for the purpose of providing premises for each owner to conduct the charitablepurposes for which each owner was duly incorporated, and secondarily, to the extent space is available, tolease the property at prevailing market rates to third party tenants whose activities are compatible with theactivities of the owners."

"Compatibility is the key," said Ms. Jessup-Lee.

"Converting Victoria Hall to a theater with stadium seating prevents Unity from effectively using the hallfor its annual telethon, as well as many other fund raising and community events throughout the year



which require a large, open space."

DICTATING STRATEGY TO CALM AND RSVP

The 2009 e-mails turned over in discovery from Mr. Westen to PR consultant Ms. Guess, which werecopied to Ms. Rodriguez, Mr. Schuette and to Mr. Egenolf, their attorney in the mediation, indicate thatMr. Westen was actually running the public relations effort which also included Meghan Fay, anEnsemble employee, and Dwight Coffin, ETC's current president.

On Aug. 13, 2009, while on vacation in Alaska, Mr. Westen wrote to Ms. Guess: "I trust you willcoordinate the logistics to reach out to the media with Meghan. Dwight or I will give the final go aheadfrom our end."

That was in anticipation of the upcoming building council meeting of Aug. 28, 2009, in which Mr.Westen seemed certain Ensemble's lease would be approved.

That same day of the Aug. 13 e-mail, Mr. Egenolf, the lawyer for CALM and RSVP, wrote to Mr.Westen informing him that Unity's lawyer, Dan Reicker, would be away at the time of the buildingcouncil meeting and asked Mr. Westen, "Should we consider scheduling that meeting in September at theoutside to avoid wasting time with (Unity's) future objections?"

A little over an hour later, as if he was calling the plays, Mr. Westen shot back, "No. I don't think so.First we really, really, really do not want any more delay. Plus, we discussed the issue and Rich, Ceciliaand Patricia all agreed that it was unnecessary to await Dan's return. It's 'enough' that we waited for TomReed to get back."

Predictably at that Aug. 28 meeting, when Mr. Reed asked the building council members to "re-considerleasing to Unity so our problems would not be publicly aired and we could save the expense of going toarbitration," Mr. Hand of RSVP, who had been secretly meeting with Mr. Westen for weeks, made amotion to accept Ensemble's proposed lease. The motion carried 6-2, with Mr. Reed and Ms. Tellefsonobjecting.

But even after the lease was approved, the documents released on May 17, 2010, show that Mr. Westenwas seeking to control the media coverage of the vote.

More on that tomorrow.

REPORTER'S NOTE: In researching this series, multiple attempts were made to reach Ms. Rodriquez,Mr. Schuette, Mr. Acos and Mr. Hand by phone. They, like Ms. Guess and Mr. Westen, were sentmultiple e-mails with detailed questions attached.

Only Mr. Westen responded.

As to the behind-the-scenes communication with Ms. Guess, Ms. Durham and the four building councilmembers, Mr. Westen said via e-mail: "With all respect, your reading of the e-mails is biased, read out ofcontext, and completely incorrect. All of the e-mails to which you refer were written only after CALMand RSVP had concluded, on their own, that the mediation was unsuccessful, and that they would ask forthe building council's final vote on the Ensemble lease. Ensemble did not know how the independent



building council members would vote."

But that statement is inconsistent with the e-mails turned over in discovery, facts revealed in Mr.Westen's own sworn deposition testimony and a timeline documenting the mediation prepared by Mr.Sorensen.

The first draft press release, purportedly coming from CALM and RSVP announcing the Ensemble leasewas e-mailed July 17, 2009, more than three weeks before the end of the mediation. Even accepting thestatement in Mr. Westen's July 25 memo to Mr. Egenolf that the two charities had decided by then to "endthe mediation," the discovery material proves that Mr. Westen was preparing to announce the Ensemblelease at least a week before that.

Further, the mediator's timeline suggests that between July 8 and July 24, the day before that Westen-to-Egenolf memo, CALM, RSVP and Unity spent more than 16 hours over 10 separate days activelydiscussing Unity's proposal to purchase the Victoria Street Community House.

As to how he characterized the e-mails under oath, Mr. Westen testified during his deposition that "thedocuments that I did not produce are e-mails back and forth to members of the group. . .talking about thelitigation, deciding. . .how the owners would respond to it, how we would respond to it, and. . .how toproceed in light of the fact that we share(d) a common interest in the outcome."

But 349 of the 360 pages of e-mails Mr. Westen was ordered to turn over by Judge Stone were forbehind-the-scenes communiqués between him and representatives of CALM and RSVP before UnityShoppe commenced its litigation on Sept. 22, 2009.

Mr. Westen made additional comments regarding the e-mails and the nature of Judge Stone's finaldecision in the arbitration that will be included in Part Two.

Tomorrow's edition will also shed light on how the $1 million RDA grant Mr. Westen needs to financethe $5.1 million Vic Hall renovation, may be in jeopardy.



three bestselling investigative books for HarperCollins critical of the FBI's counterterrorism performance

in the years leading up to 9/11 and beyond. On Dec. 17, Playboy magazine published his third piece in

the past 18 months: the untold story of the Pentagon's recent pulping of Lt. Col. Anthony Shaffer's Afghan

War memoir, "Operation Dark Heart." Mr. Lance is a research scholar at the Orfalea Center for Global

and International Studies at UCSB. His website is www.peterlance.com.




The Ensemble Papers - Part Two : Spinning the media

PETER LANCE, SPECIAL TO THE NEWS-PRESSJanuary 17, 2011 12:05 PM

EDITOR'S NOTE: Given his longtime association with Unity Shoppe, producing the annual Unity

Telethon, Don Katich, director of news operations for the News-Press, did not take part in the editing of

this series.

If there is a local equivalent to the Wikileaks "dump" of intelligence which has enraged diplomatic andsecurity officials worldwide for months, it may well be the 360 pages of e-mails, memos and draft pressreleases a former Superior Court judge ordered Derek Westen, vice president of Ensemble TheatreCompany, to turn over May 17, 2009, as the clock ticked down on the arbitration between three localcharities over the 30-year lease Mr. Westen had secured for the theater portion of the Victoria StreetCommunity House.

The documents pull back the curtain on the months of secret meetings and communiquès between Mr.Westen and officials of Child Abuse Listening and Mediation and Retired Senior Volunteer Program ashe competed with Unity Shoppe, the founding charity in the VSCH building for control of the formerchurch hall. All 360 pages entitled "DISCOVERY_5_17_10.pdf can be downloaded fromhttp://public.me.com/netgraph1.

The Ensemble papers include four separate drafts of a press release announcing Ensemble's successful bidfor the hall, the first of which was written by Mr. Westen two months before representatives of CALMand RSVP on the VSCH building council outvoted Unity and agreed to a 30-year lease to Ensemble ,which plans a radical $5.1 million renovation of the hall.

In an attempt to control the media spin on what might have proven a negative story, namely the lease toan outside third party over co-owner Unity, Mr. Westen drew up a Q-&-A that he titled "ConceptQuestions and Responses." On July 17, 2009 he e-mailed it to Richard Schuette and Cecelia Rodriquez ofCALM and Kip Bradley representing RSVP three members of the VSCH Building Council who wouldsoon be in a position to approve Ensemble's lease bid.

Ten days later, Patricia Durham, who became vice president of CALM's board of directors in October, e-mailed back a revised version of the "concepts" document in which she'd added some bullet points. Atthat moment in the lease negotiations, Ensemble's takeover of Vic Hall seemed to be a forgoneconclusion and she was instructing the building council members on how to prepare for the mediacoverage once the vote was announced:



"High Level TIPS to keep in mind when answering the questions:

• Keep the answers as short and succinct as possible

• Never repeat the question back to the reporter or let the reporter put words in your mouth -- it canbecome part of the sound bite.

• Correct the reporter, if they make a mistake.

• Only speak for your own organization. Direct them to the other organization's spokesperson.

• Don't speculate. If you don't know an answer, tell them you don't know but you will get back to themand tell them when if it is a reasonable question."

On Aug. 10, Ms. Durham e-mailed Mr. Westen and wrote, "Thank you again for all your work on thisproject. I am actually eager to see how this story unfolds." She warned him that "reporters sometimes use'hot' or loaded language in their questions to make their story more interesting and to get a sound bite."

Referring to CALM's behind-the-scenes meetings with Mr. Westen, she wrote: "In our circumstancetoday a reporter could use words like, 'colluding, secretive, taking advantage, etc.' Obviously these claimsare farcical and blatantly untrue. Our answers must refute each claim without appearing to be defensive."

In most of the e-mails throughout the summer months when representative from CALM and RSVP onthe building council were still negotiating with Unity as they hammered out ETC's lease, Mr. Westenseemed obsessed with how the media would cover the "controversy" behind Ensemble's pursuit of thelease at Unity's expense.

"Even if the first story doesn't include the controversy," he wrote in a July 25, 2009 memo, "there is astrong chance that it will backfire and be worse." In the same memo he concluded that, "All the debatemay turn to our conduct, rather than the story. That could be worse than having Unity seize the initiative."

In virtually all of the e-mails turned over pursuant to Judge Stephen Stone's order, Mr. Westen copiedJennifer Guess, a PR consultant who worked for CALM. One e-mail, dated September 14, offers a rareinsight into a plan Mr. Westen had to get a senior local journalist to do his bidding.

MANIPULATING A REPORTER?

In that e-mail to Ms. Guess just days after the lease to Ensemble was announced, Mr. Westen wrote, "Iexpect that the News Press and maybe The Independent will turn to the story this week, and (I) have anidea for your to consider... in this case... Unity is grossly overstating its need for the building by saying ithas made extensive use of the facility over the years. What would you think, instead of just asserting theCouncil's position, of telling a decent reporter (maybe Nick Welsh of The Independent), off the record,that Unity is distorting the facts, and suggesting that first he have them make their statement aboutextensive use, and then have him ask and investigate what events they used it for over the last 6 years."

"We could suggest the question to the effect that the theatre has been vacant for coming on 9 months, andhow many times have they used it?" Mr. Westen continued. "If he catches them in a distortion, as he will,we'd end up with the reporter saying they are not telling the truth, rather than us, and it won't be



attributable to us because it was off the record. We could stay above the fray, and the reporter would feelhe had been misled, so might write a stronger article."

In a follow-up e-mail, Ms. Guess advised Mr. Westen against this strategy, warning him that "you reallydon't want to get into an 'off the record' conversation with a reporter in a controversial situation like this.We could come off looking like we were campaigning against Unity."

A CONFLICT OF INTEREST?

At that point, the building council had approved the Ensemble lease, so Ms. Guess's many e-mails to Mr.Westen and members of the council who voted on it raise serious ethical questions about her conductduring the negotiations.

According to the final press release drafted by Mr. Westen and made public on September 9, 2009, Ms.Guess was identified as the go-to person "for questions pertaining to the owners of the Victoria Buildingand the Building Council."

Since Unity Shoppe is a co-owner and also holds two seats on the building council, the question iswhether by giving advice to Mr. Westen -- Unity's competitor in the lease negotiations -- Ms. Guess wasin a conflict of interest.

"I had frankly never heard of this young woman," said Barbara Tellefson, Unity Shoppe's founder, "until Iread these e-mails. If she was working for the Building Council, I'd like to know how much she was paid,if anything. I don't understand how she could be advising some members of the Council, includingCALM and RSVP and not talking to us."

I contacted Ms. Guess repeatedly in researching this series. But she never returned my phone calls or e-mails. The same is true of attorney Rob Egenolf who represented CALM and RSVP in the mediation andthe four members of the building council who sided with Mr. Westen against Unity: Ms. Rodriquez, Mr.Schuette and Jim Acos of CALM and Roger Hand from RSVP.

UNANSWERED QUESTIONS

On Jan. 11, 2010, five days before this series ran, I sent a series of questions to Ms. Guess and the fourbuilding council members she reportedly represented. I then resent them two more times but never got aresponse. Among the questions presented to the CALM & RSVP representatives:

"The 360 pages of e-mails, press release drafts and other correspondent turned over pursuant to JudgeStone's order signed on 5.17.10 suggest that in the summer of 2009, on behalf of your charities, CALMand RSVP, you were conspiring directly and secretly with Derek Westen of Ensemble Theatre Company(ETC) who was attempting to secure a 30-year lease for Victoria Hall in competition with Unity Shoppe,one of the VSCH's co-0wners and the founding charity in the building.

"QUESTION: In negotiating the lease of Vic Hall, shouldn't the majority of the Building Councilmembers and co-owners CALM & RSVP have maintained the same arms-length relationship with ETCthat they maintained with Unity Shoppe?

"The final terms of ETC's 30 year lease will guarantee the three co-owners $81,000/year for 30 years.



That amounts to $810,000 per owner over the life of ETC's lease, which will be paid out in dollars thatdiminish in value each year.

"On Sept. 2nd, 2009, Unity Shoppe presented the VSCH Council with a purchase offer for $6 millionwhich would have guaranteed each owner $2,000,000 within two years of the closing and allowed CALM& RSVP to lease-back their spaces.

"QUESTION: Other than the radical renovation of Vic Hall, which would make it a dedicated stadium-seating auditorium, what benefit to the co-owners is there in ETC's lease over Unity's purchase offer,especially since, despite Mr. Westen's earlier promises, there is no performance or construction bond inthe lease and he doesn't yet have a guarantee of the $1 million from the city's Redevelopment Agency?

"QUESTION: What will happen if ETC begins demolition and construction and stops short, forcing aclosure of Vic Hall? Since ETC owns no real property and you will have nothing to attach if ETCdefaults, what protections, if any, will insure the integrity and continued use of the building?"

With respect to Ms. Guess, I raised these questions:

"The dozens of e-mails between you, members of the VSCH Council and ETC, suggest that in thesummer of 2009, while Unity Shoppe was still actively attempting to mediate the issue, members of theCouncil that you were advising, regarded the lease with ETC as a fait accompli and had already decidedto withdraw from the mediation.

"That is significant because on page 3 of the final press release sent out on September 9th, you areidentified as the contact for both the Building Council and the 'owners.'

"QUESTION: As a PR person who represented CALM do you see any conflict of interest in your secretcommuniquès with Derek Westen? I ask this because, throughout the period of these e-mails from7.15.09 through 9.23.09 the date the Pre-Commencement Lease Agreement was signed, ETC wascompeting against Unity Shoppe, one of the 'owners' that the press release said you represented?"

DEREK WESTEN'S DENIAL

In a statement released specifically to address the claims in this two-part series, Mr. Westen insisted that,"Ensemble did not know how the independent Building Council members would vote. But we wereoptimistic it would approve the lease because it had already voted overwhelmingly to do so, and had evenhired an independent attorney, at great expense, to finalize the details."

His description of the lease approval, however, is inconsistent with the monthly minutes of the buildingcouncil. On Jan. 12, 2009, during a conference call, the council voted 6-2 in favor of commencing leasenegotiations with Ensemble. But it never officially approved the lease until more then seven months later,on August 28.

In that same statement, Mr. Westen went on to insist that, "Ensemble did not have any communicationswhatsoever with the independent Building Council members regarding final approval of its lease."

Indeed, Ron Wolfe and Kip Bradley, members of the building council, served on a real estatesubcommittee that negotiated the specifics of the ETC lease.



Mr. Bradley of RSVP's board of directors told me that he had "absolutely no contact with Derek Westen"as the lease was being negotiated and Mr. Westen swore to that under oath at his deposition on April 15,2010.

But, in fact, Mr. Bradley was copied by Mr. Westen on several of the e-mails in the discovery materialand on Sept. 1, 2009, the day before Unity Shoppe presented the building council with its $6 milliondollar bid to buy the VSCH building, Mr. Schuette of CALM e-mailed Mr. Westen to say that, "Kip sentan email expressing serious concerns about having not resolved this." Then, betraying his own Ensemblebias, Mr. Schuette exclaimed, "I'm so glad we are close."

In another part of his statement, Mr. Westen challenged my reporting in the first two parts of this series,published in the News-Press Dec. 10-11, 2010.

On June 1, 2010, the first morning of the arbitration, Judge Stone narrowed the issues under considerationfrom the metaphorical size of a soccer field to the size of a pool table - narrowly ruling on the singleissue of whether the VSCH Building Council had the right to lease to Ensemble.

In ruling that the council did, the judge pointedly avoided any decision on whether the lease was in thebest interests of CALM, RSVP or Unity Shoppe. In fact, the hundreds of pages of evidence entered in thearbitration suggested that by any objective measure, value to the charities, their future use of the building,the immediate loss of income to the three co-owners from Ensemble's lease and the theater Company'sability to finance and execute the costly new renovation, Unity Shoppe's multiple offers to either buy orlease Vic Hall exceeded any of Ensemble's.

But in his statement, Mr. Westen declared that the "dispute between co-owners of the Victoria Theatrehas been fully and conclusively resolved by a highly respected Judge after a very thorough hearing. Thelease cannot be legally challenged a second time. The statements in the New-Press articles to the contraryare completely incorrect."

Diana Jessup-Lee, one of the two lawyers who represented Unity Shoppe in the arbitration begged todiffer.

"Not all the issues in the arbitration have been resolved," she said. "At the end of his decision, JudgeStone wrote that Unity presented evidence of encroachment by the proposed lease to Ensemble as well asother problems with the lease. He ruled that, 'those issue are not involved in this arbitration and so are notaddressed.' "

One of the key documents in the 360 pages of discovery is a Sept. 17, 2009, e-mail from Mr. Westen toMark Carlson, attorney for CALM and RSVP in the arbitration. In it Mr. Westen stated that, "Weoriginally assumed we had the entire area under the stage and said as much to the owners. It was onlywhen Steve Metsch our Board member and architect did drawings that we discovered that Unity wasusing a part of the sub stage area... It will be illegal for us to use the basement dressing room for anyreason without a second exit."

Attaching a drawing by architect Metsch, designated A-2 and referenced in the final lease, Mr. Westencalled the exit door issue "a potential sticking point for Unity. If they really do have exclusive rights tothe space."



When I interviewed Mr. Metsch for today's portion of the series, he was adamant that a change in theBuilding Code, which became effective Jan. 1, "removes the requirement for a second exit door, so wewon't have to intrude on Unity's space."

But after an interview I conducted on Dec. 13, 2010, Santa Barbara's building chief George Estrella sentme a copy of the new code provision, advising that, "The issue of whether or not that exit door isnecessary is still an open question. It will involve several sections of the Code and take additionalinvestigation once more-detailed plans are filed."

CONTINUING TO FIGHT

BEHIND THE SCENES

The tactics used by Derek Westen, who worked behind the scenes to influence members of the buildingcouncil to control the media spin on the Vic Hall controversy, didn't end with the approval of Ensemble'slease.

On Dec. 13, 2010, two days after the first two parts in this series ran, he wrote a proposed letter attackingmy reporting and sent it to 18 prominent Santa Barbarans, including Mayor Helene Schneider, ex-MayorMarty Blum, Tom Parker of the Hutton Foundation and Michael and Anne Towbes, asking for theirsignatures

"The two-part Peter Lance article 'Battle for Victoria Hall' published by the News Press is replete witherrors and simply wrong in its speculative conclusions," wrote Mr. Westen.

"It is exceedingly unfortunate that the News Press would publish a front-page 'news' article that isactually just advocacy. Worse yet, it attacks numerous unpaid volunteers who have worked selflessly andtirelessly to improve our community, and attempts to pit wonderful local non-profits against one another.It is disappointing and unproductive."

After a source sent me a copy of the e-mail and letter, I wrote to Mr. Westen asking him to document asingle factual error in the piece. He never responded to my request for details and the letter, signed by ex-Mayor Blum and 10 others from Mr. Westen's intended group went out to Don Katich, director of newsoperations for the News-Press, two days later. It was e-mailed by Peter Stalker II.

In reply, Mr. Katich wrote, "We stand behind the story. If you believe there are any factual errors in thisstory, please provide specificity. To generically claim the story is 'replete with errors' without any factualsupport is in my opinion 'disappointing and unproductive.' I look forward to your factual reply."

Mr. Stalker never wrote back to Mr. Katich to substantiate the letter's allegations. Finally, after multiplerequests to interview Mr. Westen regarding the e-mails, drafts and memos turned over in the arbitrationdiscovery, he called me the night of Jan. 12 and insisted that we talk off the record.

It was a similar tactic to the one involving Mr. Welsh that he'd proposed to PR consultant Ms. Guess inSept. 2009; a strategy she had rejected at the time.

I ended the call by asking Mr. Westen to respond to a series of questions, or, at minimum, make astatement regarding the new allegations raised in this series. I've now printed all of Mr. Westen's



statement except for this:

"Ensemble Theater is proud to be a partner with the co-owners of Victoria Theater and looks forward todeveloping a vibrant theater district that benefits the City of Santa Barbara and the public. We remainconfident that we will complete a beautiful renovation and that we will be successful at the renovatedVictoria."

THE UNCERTAINTY

OF THE $1 MILLION RDA GRANT

Mr. Westen's optimism may prove premature. On Jan. 10, Governor Jerry Brown presented a draconiannew state budget, which called for the wholesale elimination of all of the redevelopment agencies inCalifornia including Santa Barbara's. A cornerstone of Ensemble's ambitious renovations for Vic Hall isthat $1 million grant which the local RDA has earmarked for ETC.

But in an interview last week, Robert Samario, the City's Finance Director, told me that the state maywell take away any RDA monies that are not yet legally obligated.

"If Ensemble had a contract let for renovation of the Victoria Theatre at this point and our RDA hadofficially approved the use of that $1 million grant, we would certainly commit the funds," he said. "Butright now, in the absence of a legal obligation to Ensemble, it's likely that the state will take that fundingaway to help offset the state's deficit."

As this series went to press, Ensemble Theatre Company had yet to make a formal request for a grantreview by the RDA.

"Once that happens, it could take as long as two to three months to get approval," Brian Bosse, theredevelopment agency manager said.

Mr. Westen has made the Victoria Hall renovation his personal crusade. He's proven to be a brilliantbehind-the-scenes strategist, with an astonishing skill at influencing key members of the VSCH BuildingCouncil.

Now, the state's dire economy may prove to be greater adversary for him than Unity Shoppe.



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