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BATTLE ON THE BEACHGOSNELL, HOTEL DEVELOPER KICK SAND IN EACH OTHER'S FACES

Phoenix builder Bob Gosnell once again is embroiled in a controversial hotel project--this time on the beachfront in Los Angeles.

Gosnell Builders claims it's owed millions of dollars by the owner of the Park Hyatt luxury hotel under construction on Santa Monica Beach.

However, several months after the Phoenix firm filed an arbitration claim, hotel owner Sam Stein claimed that Gosnell, the general contractor on the project for almost three years, did shoddy work and fired the Phoenix firm. Gosnell spokespersons deny the allegation; a lawyer for Gosnell has described the situation as "a nightmare."

While the bricks are being hurled back and forth, the cost of the much-delayed project has soared to an estimated $130 million and construction has virtually stopped. Stein, an L.A. developer, has refinanced the project at least once, and, according to one observer, is in danger of losing the hotel to Tokai Bank, which loaned him the money. Stein says the Japanese bank "has never made any move to do that."

The case is in formal arbitration proceedings in L.A., but so far the only result has been $500,000 awarded in interim relief to Gosnell, to pay its subcontractors. A spokeswoman for Bob Gosnell--he hasn't given interviews for several years, she says--points to that decision as a victory for the Phoenix builder. But Stein's attorney, Tom Palffy, calls the decision "temporary" and "subject to being undone."

Gosnell Builders, Arizona's second-largest commercial-building contractor, was ensnared in controversy in the mid-'80s over a land swap with the City of Phoenix that resulted in construction of a golf course adjacent to South Mountain Park. Gosnell owns three Pointe resorts in the Valley.

The hotel project on Santa Monica Beach was controversial before the first spade of sand was turned. It took Stein three years of lobbying before he received approval from Santa Monica officials to build the resort. The area had been recently rezoned and other hotel projects had been planned.

Stein got the go-ahead in 1987 and hired Gosnell as his general contractor in August 1988.

Gosnell officials say the hotel was 95 percent complete when the firm stopped working on the project in May 1991. Thomas Ysasi, the project director for Gosnell, says his firm was unable to finish the project by the June 1990 contracted deadline because plans were constantly changed and submitted behind schedule. Stein has gone through two construction managers, five architects and three interior designers.

Spurring the fatal round of acrimony between Stein and Gosnell was an arbitration claim for $1.6 million filed a year ago by Gosnell. Stein fired the Phoenix builder this past May and filed a counterclaim seeking $47 million. Gosnell has filed a lien seeking more than $12.4 million from Stein.

Stein claims that the project is only a little more than 80 percent complete and that he's spent millions redoing Gosnell's work. "It was done badly and incompetently," Stein says.

Jennifer Whittle, a Gosnell spokeswoman, says that what Stein now calls "problems" actually was work approved by Stein's own inspectors. Stein denies that.

Some of the subcontractors that have been called in since Gosnell left the project say the not-yet-opened hotel already is in dire need of repair. Among the reported problems are subsidence of up to four feet on some parts of the property and misaligned framing. In addition, thousands of feet of plumbing pipe have been replaced, says California contractor Don Chase.

Stein, the hotel owner, also claims that some of the hotel's wooden siding was not fire-retardant. Ysasi admits that one subcontractor Gosnell hired did not use fire-retardant wood, but says he offered to paint the wood with a fire-retardant coating--at a substantial savings over replacing all of it. Stein refused, according to Ysasi.

Of the other allegations by Stein and the subcontractors, Ysasi says, "These are things that somebody is fabricating."

The next arbitration hearing in the dispute between Gosnell and Stein is scheduled for next week.

A lawyer for Gosnell has described the situation as "a nightmare.

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Dave Newbart