Candidate’s background as developer tangled

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John Watson, one of four candidates for two at-large Littleton City Council seats, is running on the experience he gained during his career as a developer.

“I have experience in land development, which gives me the knowledge to understand the financial considerations involved in redeveloping those areas in Littleton which need redevelopment,” he wrote in an email to the Littleton Independent.

But that career ended in a multimillion-dollar bankruptcy for his company, Local Service Corp., in 2008 after he was ordered to pay a construction company about $1.8 million, though that amount was later settled for $100,000.

“I’ve talked about this with my supporters,” Watson said Oct. 11. “They told me it was too remote in place and time, and it wouldn’t affect my ability to serve on city council.”

The judgment arose from a 2002 dispute with Cal-Three, a company he was working on a townhome project with. According to court documents, he guaranteed a bank loan for the company in exchange for a share of the profit.

He asserts Cal-Three stopped paying the loan and other costs associated with the project. When the first unit sold, Watson sent a request to the title company for his share of the profit, which the court found he inflated. Cal-Three did not pay him.

In December 2002, Watson paid off the loan and forced the property into foreclosure. He obtained it at the sheriff’s sale and sold it for about $1.2 million.

Cal-Three eventually sued, and won the sale amount plus punitive damages. Watson filed for bankruptcy shortly thereafter. He says it was a result of the tanking economy, not the judgment.

“We had 10 subdivisions under way, and almost all of our lenders were local and regional, and the feds started taking over,” he said. “They wouldn’t continue to fund construction loans, so they wouldn’t continue for the second year of the loans.”

He also filed an appeal, which, in April 2011, upheld the findings of fact but disagreed with the amount Watson was ordered to pay. The court concluded that Watson had acted in bad faith and had deliberately breached contracts, but that he shouldn’t be held liable for punitive damages. It remanded the case back to a lower court to revisit the amount.

But an agreement was reached in December 2011 that settled the bankruptcy and the civil case with Cal-Three after RTD paid about $3 million for a Denver property on Blake Street that Watson owned. Cal-Three got $100,000 from Watson’s bankruptcy estate.

“There are no outstanding claims. There’s never been anything criminal. You can get more anonymous letters, but they won’t reveal anything factual,” he said, referring to a tip the Littleton Independent received on Oct. 10. The information in it was confirmed through official documents.

In the middle of the civil case, the presiding judge filed a complaint against Watson, who has been an inactive attorney since 1992, with the Colorado Supreme Court Office of Attorney Regulation Counsel. The judge had ordered that the witnesses have no contact with each other, but Watson sent a fax recounting testimony to another witness.

He says he didn’t know about the order, and that his attorney asked him to send the fax. Since he never renewed his license to practice law after it was suspended for 18 months in 1994, nothing further came of that complaint.

According to the Colorado Supreme Court Grievance Committee, Watson had at least nine instances of private censure, official admonitions and suspensions on his record of practicing law between 1988 and 1994. They range from practicing without a license to conflict of interest to neglect.

Watson maintains he quit practicing law in the late 1980s after a grievance was filed, and that he never renewed his license.

“I’ve talked about my business a lot,” said Watson. “Whether it’s a strength or a fault, I’ll let the voters decide.”