Firm Sues City for $10 Million : Development: The building company says city officials sabotaged a plan to build an entertainment complex.

A development firm that bought 12 acres from the Pomona city redevelopment agency to build theaters, restaurants and a fitness center has sued for $10 million, charging that the project was sabotaged by city officials, who feared they had a “financial and political fiasco” on their hands.

The suit, filed in Pomona Superior Court on Thursday, claims that the officials kept the developer from building the complex near the Pomona Freeway and Corona Expressway by reneging on a series of promises.

As a result, the firm says, it has invested more than $5 million in the project without any prospect of construction and now stands to lose the most valuable part of the deal--an option to buy a nearby five-acre city park at a bargain price.

The developer, Ohanian-Eastern Enterprises of Glendale, said the entertainment center project is stalled by its failure to obtain a lease commitment from a theater chain. Without a theater, there can be no entertainment center, said the firm’s attorney, Anthony P. Parrille of Burbank, who represents the developers.

Parrille said the city discouraged theater chains from leasing or building in the center by failing to protect the project from competition and then reneging on promised subsidies.

The suit says the city promised Ohanian-Eastern that its entertainment center would have the only first-run movie complex within five miles. One movie chain was ready to sign a lease, the suit says, when an eight-screen theater complex opened at the Indian Hill Mall, two miles away.

Then, the suit says, city officials promised financial assistance for theater construction, but later withdrew the offer, blocking prospective deals with two theater chains.

City Administrator Julio Fuentes denied that the city did anything to prevent Ohanian-Eastern from going forward. He said the city never promised to protect the proposed center against all competition.

The only assurance, Fuentes said, was a letter to the developers from the redevelopment agency promising that the agency would not make an agreement for another theater in the city’s Southwest Pomona Redevelopment Project Area. Fuentes said the Indian Hill Mall is in a separate project area.

Besides, he said, the mall’s theaters show only movies that have been in release for some time and at bargain rates.

Fuentes said that after buying the property, Ohanian-Eastern sought a $1-million subsidy for its project. Fuentes said the request was denied because movie theaters offer little revenue to the city.

The suit says the city did not live up to its promises because a new team of city officials had concluded that their predecessors, who negotiated the project in 1988 and 1989, had created a “financial and political fiasco.”

If the developers had completed the center, the deal would have given them the right to buy the adjoining Martin Luther King Park at a bargain price, and the city would have suffered a huge financial loss if it had tried to buy new land to replace the park, the suit says.

Fuentes said the city has not reneged and the developers are obligated to build the entertainment center.

If the center is not built in four years, the redevelopment agency has the option of reacquiring the property at the price paid by the developers.

Parrille said that, even if the redevelopment agency buys back the property, his clients would suffer a substantial loss from expenses incurred from borrowing money and developing plans for the project.

Ohanian-Eastern paid the redevelopment agency $3.6 million, or $7 a square foot, for the 12-acre center site and obtained an option to buy the neighboring park for $3.50 a square foot. But the option to buy the park cannot be exercised unless the center is built.

The entertainment center, a neighboring auto center and the nearby site of a proposed regional mall are all part of the Phillips Ranch development, which includes the construction of 4,000 homes and condominium units.

Phillips Ranch developer Alvin Lesser has a separate suit pending against the redevelopment agency, claiming that the city illegally cut him and his company out of the proposed regional mall project. Lesser is seeking $1 million in the suit, scheduled for trial in Pomona Superior Court on Nov. 13.

The Ohanian-Eastern suit alleges that Lesser acted as negotiator for the redevelopment agency on the entertainment center project and was paid a $1-million commission, which the suit calls an excessive amount. Parrille, however, acknowledged he does not have written documentation to back that assertion.

Lesser said the claim is not true.

“That’s a false, erroneous statement,” he said.

He declined to comment further.