An earlier version of this story erroneously reported that Fresno County would owe $87.5 million in damages. The actual damages are $2.5 million.

A breach of contract will cost Fresno County $2.5 million after a jury found the government guilty of violating a deal it made with a construction group over ownership of the University Medical Center.

Before the 33-acre hospital campus in southeast Fresno found its current owner, the county had other deals in place, including with Construction Management Group, Inc.

That deal fell apart when a staffer for former supervisor Sal Quintero, Steven Rapada, who held a financial interest with CMG, was found guilty of violating conflict of interest laws.

While the Rapada controversy was not admissible in court, testimony and evidence revealed that the county had wanted to squeeze more money out of the property, leading them to violate the terms of their own contract, said attorney Nicholas “Butch” Wagner.

He said given the amount of money that went into the building following supervisors’ decisions about the property, the case demonstrates incompetence from supervisors dating back to when it first closed nearly 20 years ago to now.

“This is what happens when people like … these board of supervisors, try to make deals with other people’s money,” Wagner said. “They have no accountability, they have no skin in the game, they’re incompetent.”

The county told GV Wire that they disagree with the ruling and that the board will discuss options during closed session at the Tuesday meeting.

County Keeps $500,000 Deposit

University Medical Center shut down in 2007 when “the most important hospital” in the Valley couldn’t meet state seismic standards, Wagner said.

As the hospital sat vacant for more than a decade, the campus cost the county about $1 million annually to maintain the unoccupied portions, according to county records.

In 2019, CMG had agreed to buy the building for $4 million with a $500,000 deposit and to build 800 housing units, including 320 low-income units, according to the legal complaint.

Before the contract fell apart, CMG had secured a deal to develop the bottom floor, previously a morgue, into an internet technology center, according to court documents. Developer Ahmed Fazil agreed to pay $100,000 a month for a 10-year period, or $12 million.

Originally, the city of Fresno had been tapped to oversee the project and help secure affordable housing grants for the project.

Attorneys for CMG showed, using testimony from former county counsel Daniel Cederborg, that the county had no interest in being involved with the project.

The fallout of Rapada’s sentencing, along with COVID-19 pandemic, however, led the Fresno City Council in 2021 to back out of the project.

Even though CMG said it had other backers to ensure agreements between it and the county, supervisors decided to kill the project — and keep the $500,000 deposit.

County Chasing Dollars Cost Them Greatly: Wagner

The county canceled the deal on the grounds that CMG didn’t have the financing at the time, Wagner said. Attorneys representing the county argued during opening statements that the two additional months for CMG to get the financing cost the county, something Wagner called “unbelievable” given the more than 10 years it had been sitting vacant.

A resolution passed by the board shortly after saying the building would not sell for less than $6 million also demonstrated to attorneys the county only wanted to make more money, Wagner said.

The county eventually sold it to developer Sevak Khatchadourian in 2025 for $6 million.

And after having the opportunity to settle the case for $1.7 million, the board changed its mind, Wagner said.

“Another year-and-a-half of attorneys’ fees for the county — public money,” Wagner said. “They wind up getting a judgment against them for a million dollars more than they should have settled for.”

$2.5 Million Ruling Comes Amid Massive Looming Shortfall

The $2.5 million verdict and the cost of the additional attorneys’ fees come as the county already faces a massive potential deficit after President Donald Trump changed rules regarding MediCal/Medicaid and SNAP/CalFresh.

A worst-case scenario could result in the county facing an additional $241 million in indigent care costs for people no longer covered under MediCal who are unable to pay medical bills.

Budget discussions will begin in September.

The county on Tuesday will also consider litigation against the state of California after Gov. Gavin Newsom on Thursday signed legislation changing state law to force the transportation tax Better Roads Safe Streets onto the ballot.