First the Feds, Now the Neighbors

San Diego — Michael Ellis, cofounder of the bankrupt Metabolife International, has battled drug enforcers, the Food and Drug Administration, the Justice Department, the Internal Revenue Service, personal injury lawyers, the House Energy and Commerce Committee, bankruptcy probers -- you name it. Now he is fighting with people who live near a mansion he owns in Point Loma. Both sides want to compromise, but the matter may have to be resolved in court.

Ellis owns, but never used as a primary residence, a posh home on the bay in Point Loma at 2905 Nichols Street. Nearby residents and Point Loma community groups charge that Ellis and his immediate neighbor at 2900 Nichols Street have erected walls and planted vegetation that block the public's right-of-way at the foot of Nichols Street. People have a right to have a view of the bay, as well as a path to the water from that spot, say such groups as the Peninsula Community Planning Board and the Point Loma Association, along with the City of San Diego.

Norman Magneson, a retired Navy civil engineer living at 2980 Nichols Street, has led the battle for more than four years. He enlisted 82 property owners nearby to join his cause. If the matter goes to trial, it would be "a case célèbre," he says. The outcome would be "precedent-setting. Every dead-end street in the coastal area of the city of San Diego will be affected by the outcome."

City Attorney Mike Aguirre agrees. "I am trying to work out a compromise, but we must protect public access wherever the public has a right to it, particularly on dead-end streets in coastal areas."

The opposition is formidable. Ellis is now selling his house. Locals believe the buyer is Stephen Games, founder and chairman of Prudential California Realty in Southern California. Area real estate pros say the house was once priced at $13 million but probably went for $8 million to $9 million. Games did not respond to queries for comment. The other house is owned by real estate speculator Todd Sabin and his wife Stacy. They are trying to rent the home for $60,000 a month. When the brouhaha began, another couple owned the Sabin home.

Ellis has had his ups and downs -- lately almost entirely the latter. In 1988, he was arrested for conspiracy to manufacture methamphetamine. He got five years' probation; his partner got five and a half years in prison. In the mid-1990s, Ellis and two partners set up Metabolife, a marketer of an ephedra-based compound primarily used by dieters. The company prospered mightily -- for a while. Then came multiple reports that the pills were dangerous. Congress investigated, as did the Food and Drug Administration. Metabolife went bankrupt facing huge personal injury claims. In mid-2002, an Internal Revenue Service investigator reported that according to inside sources, Ellis and his cofounders had set up secret accounts in offshore tax havens.

One of the founders, William Robert Bradley, was sentenced to six months in prison for tax evasion, but Ellis will not face tax charges, according to a reliable source. One reason is that the company's outside accountant, Michael Compton, committed suicide in 2003, depriving the government of a witness. In 2004, Ellis and Metabolife were indicted by a federal grand jury for lying to drug regulators about the safety of the ephedra pill, which has since been banned. According to assistant U.S. attorney Phil Halpern, Ellis still faces those allegations, as well as charges of owning firearms -- prohibited by his earlier drug conviction. Meanwhile, Metabolife is trying to settle ephedra-related health claims. Ellis's lawyer won't say where Ellis lives; Halpern says Ellis has a home in Florida.

Magneson says prior residents of the two mansions, going back to the early 1940s, honored the long-standing right-of-way. One owner of 2900 Nichols built a fence, but the City forced it to be removed in 1992. Then five years ago, the owner preceding the Sabins built a six-foot concrete wall and planted large trees. Ellis then built a large arch. In 2003, Ellis posted "No Trespassing" signs and installed a motion sensor. The City agreed with the neighbors, denying permits to make the structures legitimate and citing the owners for noncompliance with city codes. But nothing was done.

Last year, the two homeowners changed strategy: they filed suit against the City, claiming the land belonged to them. Maps going back to the mid-19th Century showing a public right-of-way were never properly accepted or recorded, they assert. The City "has no right, title, estate, lien or interest" in the property, claims the suit. The land belongs to the residents of 2900 and 2905 Nichols Street, insist the mansion owners.

But Katheryn Rhodes, a civil engineer, says she has poked into the musty records. The key map was filed with the city clerk in 1876. Attorney Matthew Peterson, who represents Ellis and Sabin, "is making that up," she says. "We all want to settle, but our case is stronger than they think it is."

Peterson disagrees strongly and adds, "This thought that you can't see the beach or bay is crazy. Straight down Nichols Street you can see the water." Magneson's claim that prior owners honored the right-of-way back into the 1940s "is open to debate."

Snaps Magneson, "You cannot see the shore at all from their viewing area. You can see the far shore, but not the near shore. There is no place for people to congregate."

Ellis and Sabin will drop the suit if their opponents will be satisfied with a 25-foot-by-18-foot viewing area at the edge of the curb; a 10-foot-wide pedestrian access to the bay; and a 4-foot security fence. They will give $98,000 to the City for maintenance. But they insist on having ownership of the property.

"It has always been the City's property," says Malinda Dickenson, deputy city attorney handling the case.

Magneson, Rhodes, the Peninsula Community Planning Board, and the Point Loma Association will grant some things, but they won't cede ownership to Ellis and Sabin. "We have given them 58 percent of what they wanted; they want 74 percent," plus ownership, says Magneson.

"Those two mansions, they want all that to themselves," says Edwina Goddard, an activist neighbor.

"If the City gives up anything on this, it's the public that loses," says Cynthia Conger, president of the Peninsula Community Planning Board. "Coastal property is going for $350 to $500 a square foot, so this property would be worth $2 million to $3 million." The City must retain ownership and give a reasonable encroachment agreement to Ellis and Sabin, she says.

On November 9, superior court judge Patricia Cowett gave the parties another 60 days to settle the matter. Earlier, she had said she'd given her last continuance, but she changed her mind. Second district city councilmember Kevin Faulconer is trying to get both sides to reach agreement.

The neighborhood has one thing going for it: Michael Ellis has more pressing matters hanging over him.