Union Attack Ad Accuses San Jose Councilman of Rewarding ‘Slavery Towers’ Developers

The ad opens with images of twin highrises before the words “Slavery Towers” flash on the screen in bold white font. In a dramatic baritone, a narrator recounts the harrowing discovery that the project’s subcontractor harbored undocumented workers and forced them to labor for free.

The YouTube video proceeds to blame San Jose Councilman Lan Diep for giving developer KT Urban “a $22 million taxpayer-funded subsidy” despite its involvement with the Silvery Towers project at 188 W. St. James St., where a subcontractor made national headlines for using slave labor. It then cuts to Diep popping a bottle of champagne as the voiceover blasts him for voting on an incentive described as a “$67 million developer giveaway,” some of which went to KT Urban.

“No affordable housing requirements, no workforce protections,” the narrator says. “Slavery rewarded.” The video ends by urging viewers to call the District 4 representative to tell him “he’s deeply wrong.” A disclaimer notes that the piece was paid for by a group called “Santa Clara County Residents for Responsible Development.”

It’s a slick ad apparently produced to undermine Diep’s bid for re-election in 2020. According to Diep, developers and a local business advocacy group, however, it’s also brimming with falsehoods.

Diep cast just one of six votes to extend the incentive cited in the ad. And while KT Urban was involved in Silvery Towers, it transferred the land to another developer before the slave-driving contractor came on board and had nothing to do with the dubious hire. The popping-bottles shot—filmed a few years prior when Diep celebrated his predecessor Manh Nguyen’s decision to drop a lawsuit challenging his electoral victory—is also re-contextualized into something sinister. And though there’s some truth to the numbers, they’re wrapped up in a misleading package.

The figures cited in the piece come from a Sept. 11 memo authored by San Jose Housing Director Jacky Morales-Ferrand and Economic Development Director Kim Walesh on a downtown highrise fee exemption offered by the city. Originally enacted in 2014, the program gives developers a 50 percent break on construction taxes and absolves them from paying a $18.26-per-square-foot affordable housing fee if they meet certain criteria.

At the Sept. 24 meeting, the city council narrowly approved an extension to the program, much to the ire of labor advocates who slammed the business-friendly voting bloc for cutting tens of millions of dollars in revenue for below-market-rate housing. And while projects that benefit from the city’s tax-and-fee breaks typically have to abide by certain workforce protections, San Jose officials ruled out those standards for nine downtown highrises in the pipeline.

In September, the San Jose City Council extended the downtown high-rise exemption program. Nine projects are currently in the pipeline to receive the exemption. (Source: City of San Jose)

Among a slew of projects granted the fee cut were the Aviato—a Basset Avenue co-living project by KT Urban and StarCity—and Z&L Properties’ 708-unit Greyhound on South Almaden Avenue. Tom Saggau, a spokesman for the political action group that funded the YouTube ad, says KT Urban qualified for a $22 million discount on those future projects while getting a pass on labor standards.

“The city council majority is poised, yet again, to give away more taxpayer dollars to wealthy developers to incentivize them not to build affordable housing,” he says.

But the figures emblazoned in the ad don’t tell the whole story.

According to property records, a subsidiary of KT Urban sold the land for the Greyhound project for $39 million to an affiliate of Z&L Properties in April 2016. When the project came before the council in May 2017, forms listed Full Standard Properties LLC—the Z&L affiliate—as the owner and developer of the South Almaden Avenue site. KT Urban Principal Mark Tersini, however, was listed as the project applicant. “KT Urban’s role was to secure the entitlements for the project,” Tersini tells San Jose Inside.

As far as KT Urban’s involvement in the Silvery Towers, county records show that an affiliate of the Cupertino-based developer transferred the land to Full Power Properties LLC in August 2014. Tersini says that—as with the Greyhound development—KT Urban’s job was to secure the entitlements. They continued to be involved with the project, however, through a construction management contract that ended in the fall of 2016.

As construction managers, KT Urban officials say they had nothing to do with hiring Job Torres Hernandez, the human-trafficking subcontractor responsible for earning the project its “Slavery Towers” moniker. And according to a lawsuit that was filed in federal court in January, Hernandez’s “companies performed construction work in San Jose as part of a contract with Full Power Properties” between February and August 2017. Full Power Properties was an affiliate of Z&L Properties, not KT Urban.

Presented with Tersini’s denials, however, Saggau still insists on KT Urban’s involvement. He also bucks any accusation from Diep’s allies that the ad aims to sway votes away from the councilman as he jockeys for a second term. Eddie Truong, director of government and community relations for the pro-business Silicon Valley Organization, says the ad was a “political game that the trade unions are working on.”

Saggau bats away the criticism, saying the ad was paid for by an issues group, not a candidate-controlled committee. “Educating residents about Republican Lan Diep’s trickle-down affordable housing scheme and asking residents to call his office is intended to influence him to find a moral compass,” he asserts.

But San Jose State University political science professor Garrick Percival says that while this is an issues-based advertisement, it appears “designed to frame the issues that voters should be thinking about when they’re thinking about the election. ... These ads aren’t run in a vacuum,” he argues.

Five seats on the San Jose City Council come up for election next year, including Diep’s North Side seat, which he won by a slim margin in 2016. In 2020, he faces employment rights attorney Huy Tran and Berryessa Union School District Trustee David Cohen—both of whom are backed by labor. Of the four seats where an incumbent is running, Percival says he sees Diep as the most vulnerable.

If incumbents win their seats in districts 2 and 6, Percival says, “what happens in district[s] 4 and 10 has the potential to reshape the council in terms of the backing of labor groups.” That Diep won by such a narrow margin in 2016 makes him “the lowest-hanging fruit,” Percival adds.

Diep, who refrained from publicly commenting on the ad until speaking with San Jose Inside, says he stands by his vote for the highrise incentive.

“The cost of building in San Jose is too high,” he says. “So the council lowered fees to make projects feasible. We didn’t ‘give away’ taxpayer dollars. We did not subsidize any development. We just made the risk easier to bear.”

He also lambastes the ad for trying to link him to a human trafficking case—especially considering all the work he put in earlier in his career as a public interest attorney. “Earlier this year I provided the deciding vote to make combatting wage theft a citywide priority,” Diep says. “For organized labor to paint me as supporting slave labor is appalling. It’s further evidence that organized labor in San Jose doesn’t tolerate independent thinkers; you’re an enemy if you’re not with them 100 percent of the time.”

Grace Hase is a staff writer for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @grace_hase.

13 Comments

  1. The vibe I’ve been getting, from the push poll about Diep’s creepy behavior with his female Council staff to this latest ad, is that labor has done some polling and sees Diep as vulnerable for reelection.

    There is some anecdotal evidence available that suggests Diep has not maintained a positive relationship with the Vietnamese community, although that might just be certain factions making their voices heard. I suspect, however, that Diep has been taking his base of support for granted, and there is a good chance that Huy Tran will take a significant portion of it on Election Day, giving David Cohen the advantage with a consolidated base of support.

  2. Why does Dave Cortese get a free pass here?

    Thousands from both developers and law firm clients who are connected to KT Urban?

  3. When I read “hit pieces” done on a local politician I know to be false, it causes me to vote FOR the one being attacked. Diep has consistently voted for projects that will give labor jobs.

  4. Grace, I’m curious about something. In this piece, you said, “Tom Saggau, a spokesman for the political action group that funded the YouTube ad”, but I found him and his business partner, Dustin DeRollo (Saggau & DeRollo, LLC), on the City of San Jose List of Registered Lobbyists at http://www.sanjoseca.gov/DocumentCenter/View/88203 (page 1). Does that mean Saggau is a paid lobbyist for the aforementioned group attacking Diep? I’m trying to understand all of this. Thanks.

    • Hi there – yes Tom Saggau is a registered lobbyist. Him and his business partner represent a number of labor organizations and local businesses.

  5. “(Potential) Candidates have a legal right to lie to voters just about as much as they want.” Apparently, so.

    Thank you, Grace Hase, for your reporting facts we may not have learned any other way.

  6. Swenson, Devcon and Garden City are ALL dirty to the core. They continue to get special treatment and sweet deals throughout the city. For entertainment I looked up how much these companies including their spouses gave to Chuck Reed and his failed Measure B scorched earth pension reform. Now these developers continue to build projects in the middle of the crime and urine infested blight of downtown. Such good stakeholders they are.

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