California Cornerstone

Reprint Paradise Lost? Part One of Ten "Paradise Lost"

2016-06-24T18:14:00.000-07:00

This is a series of 10 blog posts at El Dorado Magazine from 2009 that outlined the premise of Paradise Lost? The purpose of this re-post is to educate or remind people of California political shenanigans that began in earnest in 1981 with High Speed Rail, again in 1997 with the Bay Bridge Design fiasco. A prelude to the current Twin Tunnels and High Speed Rail boondoggles?

In addition, these posts show how conflicts of interest, cronyism in its defining form, and corruption have come together in its perfected form by way of the 2009 historic water legislation which the enabling of the Delta Stewardship Council and its on-the-rise cohort the Delta Conservancy.

This series of blog posts also reveal just how high and deep the ethical violations and well, cover-ups truly go. (As of 2/6/14, I more clearly state, this is how perfecting collusion to perpetuate fraud is done.)

Original link: http://eldoradomagazine.com/

(As of 2/6/14 this link is no longer valid.)

Paradise Lost

Part One

Beginning in 1981 and continuing through 2008, an interconnected series of transportation and land use bills were introduced and passed in the California State Legislature. These bills benefited politically-powerful insiders with billions of dollars in profits that were achieved through ethically and legally prohibited means.

There are at least eight transportation and/or land use legislative processes that these actions include. Among them are the first bullet train bill in 1982, followed by the Bay Bridge selection process in 1997. They also include the Catellus Development-Mission Bay project in San Francisco in 1997, the Headwaters Forest acquisition in 1999, the Desert Wildlands Act of 2000, and back to the new high-speed rail project of 2001-2002.

These political processes all had many elements in common. The players who put these corrupt political practices in action were all part of the same group based in San Francisco, and operating from Washington, D.C., the State Capitol in Sacramento, and San Francisco City Hall.

The methodology this political machine has employed to produce multi-billion-dollar profits through a corrupt political practice has been refined almost to an art form by the insiders of this group.

Usually, the process begins with a news story that floats the idea: whether it’s a train or a bridge or an airport expansion. Both the first bullet train and the Bay Bridge processes were born with front-page stories boosting the idea. On the bullet train it was a front-page story in the New York Times, published on April Fools Day, 1981. The Bay Bridge deal began with a front-page story published in the San Francisco Chronicle on January 9, 1997.

What both stories essentially did was to “float” these ideas (a high-speed train, a new Bay Bridge) in front of the public partly as a way to gauge the political support for each project. Both “floats” had the requisite effect; both projects gained sufficient public support to proceed, and both produced huge stock profits.

Both projects were empowered by the language of the bills that produced them. On the bullet train and Bay Bridge bills, each was a so-called “spot” or “space-saver” bill. What this means is that both bills were largely empty shells when they were introduced until a deal had been made to fill the “spot” or “place.” Neither bill had to do with trains or bridges until they were amended during the course of their legislative process.

When the bills were amended it was with language that either directly named the corporation about to receive the multi-billion dollar contracts, or seemed tailor-made for that corporation to do so.

Most of these bills were written by Mehdi Morshed, the former legislative transportation consultant who is now the executive director of the California High-Speed Rail Authority. Morshed began his career as a transportation committee consultant in the legislature, as did Morshed’s wife Linda. Mehdi Morshed also wrote the new piece of legislation for high-speed trains in California (a bill sponsored by then-State Senator Jim Costa in 2002) which produced a hefty profit for insiders at URS Greiner and Lockheed-Martin in 2001-2002, and he has also participated in drafting language for other transportation and land use projects, some of them directly related to the Bay Bridge or high-speed rail.

It is supposedly illegal to write legislation targeting a specific corporation, but this has never been enforced on these projects.

What we seem to have here is almost a form of political gangsterism practiced by a very effective and methodical political machine. The main players from this machine are U. S. Senator Dianne Feinstein, her husband, multi-millionaire investment banker Richard C. Blum, and former San Francisco Mayor Willie L. Brown Jr.

The FeinBlum/Brown Machine was also aided by the lobbying firm of Nossaman, Guthrie, Knox and Elliott, and Nossman’s main transportation lobbyist, former California State Senator John Foran. This group led by Foran handled the lobbying on five of these bills. Another key player was Morshed, the former legislative staffer who is now the executive director of the California High-Speed Rail Authority.

All of the aforementioned politically corrupt processes can be illustrated with charts analogous to the two attached charts that document the Bay Bridge and the second bullet train bill. The figures derived for these charts are all a matter of public record. The documents from which they were acquired include listings of political campaign contributions, political lobbying reports, legislative bill histories, and stock issuance and stock sales that were supplied by the principals to the Securities Exchange Commission.

The prime beneficiary of the Transcam and Landscam acts is Senator Feinstein’s husband, investment banker Richard C. Blum.

On the Bay Bridge selection process, URS Greiner, a company that was then owned by Blum, was first in line for the contract. URS turned a billion dollar profit from a near threefold increase in stock prices of URS shares during the Bay Bridge selection process.

Insiders at URS, including Blum, also made significant profits from the stock options they issued themselves during this process. Nearly 3 million shares of URS penny stock was issued to four companies held by Blum that became worth almost $74 million. Another 1.1 million shares of URS penny stock were issued to Blum’s fellow board members at URS. These stocks grew in value to almost $25 million during the Bay Bridge selection process of 1997-98.

The Catellus Development/Mission Bay project, which proceeded through the legislature at the same time the Bay Bridge deal got underway, also benefited the corporation who sponsored the bill. This bill allowed development to proceed along San Francisco’s waterfront through a land swap between the State of California and the City of San Francisco. The Mission Bay project proved to be a billion dollar windfall for Catellus, and much of the $4 billion project has now been finished.

Not long after the Mission Bay project was passed, the Headwaters Forest deal went through. This effort, negotiated by Senator Dianne Feinstein at the behest of the Clinton Administration, proved another windfall bonanza for the sponsoring corporation, in this case timber company Maxxam Corporation. The day the deal went through, on March 1, 1999, Maxxam’s stock price per share increased by $9.89, and insiders at Maxxam made a fortune by cashing out over 1.32 million shares of stock.

A year later, in southern California, Catellus Development reaped an even richer harvest than Maxxam when it traded a huge tract of mostly worthless desert property for valuable state lands within urban centers. This massive land exchange bill, authored by Senator Feinstein, resulted in a net gain to Catellus of $11 to $15 billion, due mostly to the fact that the desert lands were revalued prior to the exchange; so the property values increased dramatically, some by over 300%. A forthcoming part of this series will describe exactly how this process occurred.

Copies of all these documents have been presented by the author to the following investigative agencies in charge of prosecuting political corruption: the FBI, the SEC, the IRS, the U.S. Attorney General’s office, the U.S. Attorney’s office in Sacramento, CA, California Governor Arnold Schwarzenegger, the California State Attorney General’s office, and to Jerry Brown personally, the Fair Political Practices Commission (FPPC), the California Auditor General’s office, the San Francisco County Grand Jury’s office, the Sacramento County District Attorney’s office and the Sacramento Police Department. Not one of these agencies has taken any action against anyone involved in these schemes.

A series of whistle-blower claims were filed with the Internal Revenue Service and the State Auditor General’s office by this author and other citizens regarding the way these processes have been used to benefit insiders. A subsequent story published on this blog will detail how these agencies responded to whistle-blower claims and calls for investigations; another blog installment details the lack of action by a number of public citizen watchdog associations, who have likewise declined to move against this powerful insider band.

In an email to the public interest law firm Judicial Watch, the author laid out the possible law and ethics violations that these eight separate acts have comprised. They include violations of the Securities Exchange Act of 1933 prohibiting insider trading, violations of conflict-of-interest prohibitions as applied to legislators and lobbyists, at both the state and federal level, possible income tax evasion or code violations, business and political codes-of-ethics violations, and more, bringing up the possibility that these acts could be litigated under the RICO (organized crime) statutes, in that they involve many of the same political players in each case.

In a series of articles that will be published on this blog, we will examine all these political processes chronologically and see how this intricate game of multi-billion-dollar profiteering has progressed over the past three decades.

This reporter witnessed and reported these acts while they were occurring, and had his documentation vetted by legal counsel. This counsel verified the documents’ authenticity and said he believed these acts could be litigated under the fair Political Practices Act of 1974, specifically the section that prohibits lawmakers from taking part in a political process that benefits them financially.

The author stands by his figures and his sources, and none of the published work on these subjects has ever been criticized for inaccuracy. All the principal characters named herein were given ample time to respond to the allegations after being apprised by the author of what he intended to publish. None of them have offered comment.

Western Delta Intake Concept Synopsis, June 19, 2014

2014-06-23T18:47:00.000-07:00

The following is a reprint from the hand-out provided last Thursday
CARES Action Committee on June 19, 2014:

Western Delta Intake Concept (WDIC)

By Dr. Robert Pyke

Dr. Pyke's WDIC will have the following benefits at it pertains to the Sacramento-San Joaquin Delta and water transfers.

The WDIC would be located on Sherman Island on the south end of Sacramento County. Sherman Island is now mostly owned by the state of California.
All waters (rivers, streams, island pump-outs, run-off, etc.) must pass through the Delta to the WDIC site.
Due to all of the water passing through the Delta, monies for Delta infrastructure will remain in the Delta.
WDIC is half the distance to the State and Federal pumping stations. Thus a huge reduction in construction and mitigation costs.
WDIC permeable embankments are far more efficient and effective than other fish screen proposals, which are ineffective or unproven.
Due to all waters passing through the Delta and the inclusion of additional storage which allows true Big-Gulp-Little Gulp operation, Southern water users would receive more water over the long haul versus BDCP's proposal.
WDIC is self-regulating: meaning over pumping of water at any time will result in too much brackish (salt) water. The pumps must be turned down or shut off as a result of too much brackish water.

These advantages over the BDCP's proposal are significant. It is in our best interests to investigate the WDIC proposal.

Dr. Robert Pyke is an individual consultant on geotechnical, earthquake and water resource engineering. He was one of the principal authors of the Economic Sustainability Plan of the Delta Protection Commission. He has served as a consultant on numerous high profile projects including dam safety evaluations for both East Bay Municipal Utility District and the Santa Clara Valley Water District. Dr. Pyke can be reached at:

Dr. Robert Pyke

1310 Alma Avenue, W201

Walnut Creek, CA 94596

(925) 323-7338

bobpyke@attglobal.net

www.FixCAWater.com

In addition the following was included:

Two Keys:

Recognition that man-made alteration of the Delta in combination with larger export flows has turned the Delta from an estuarine environment into a more lacustrine environment which favors invasive species over native species, and
Recognition that precipitation in California is extremely variable and that past and future variability, which many clinate scientists predict might be greater, must be addressed in any sustainable water management plan.

Four Principles:

That natural flows through the Delta should be restored to the maximum practical extent;
That much more water should be extracted at periods of high flow and much less, or zero, water should be extracted at periods of low flows;
Scheme should be self-regulating and not rely upon complicated agreements;
Scheme should be simple to design, permit and operate.

Six Physical Elements:

Restoration of floodplains on the Sacramento and San Joaquin Rivers and their tributaries in order to provide flood storage and stretch out the flood hydrograph in addition to providing significant flood management benefits;
New intake facilities somewhere in the West Delta to allow flows to pass through the Delta in a natural way before surplus flows are extracted;
One or more tunnels that can move the extracted water to additional storage facilities that would likely be located adjacent to the existing Clifton Court Forebay;
Additional south-of Delta storage, much of it likely as groundwater but also perhaps including Westside surface storage;
During periods of very high flow, the new intakes and the existing South Bay intakes, with fish screens along the Old River, could be used simultaneously;
To maintain South Delta wate quality, construct lined canal to recirculate water from the aqueducts to the San Joaquin River as necessary

Unaccounted Fresh Water Flow From the Delta...Where did $3.5 Billion in Water Go?

2014-02-24T16:27:00.003-08:00

Data compiled by N. Suard, Esq. and Managing Partner Snug Harbor Resorts, LLC.

Here's the link to the full size PDF which is easier to read.

http://www.snugharbor.net/images-2014/bdcp/unaccounted_diversions.pdf

Very interesting question with some back-up number crunching of DWR's own numbers from 1998-2010...

Personally, I have a darn good idea where $3.5 billion, minimum value, of water went...ready for this?? I say it went into the Kern Water Bank on a separate set of books to miraculously become the SOURCE OF ALTERNATIVE FUNDING for BDCP...the original rob Peter to screw Paul! And we, Californians, are Peter AND Paul.

Seems to me there should be some investigations into not only where did the water go, but the correlations and connections between the same set of persons and entitiess calling the shots and directly profiting from theft of a public resource?

Who authorized that diversion?

Who is keeping the books?

Who stands to profit the most from anything water related?

Do we have Honest Services Fraud occurring??

Federal Grand Jury, hello?? We're knocking on your door...

Appendix Two: Financial Dossiers of Regents to Watch Reprint Spot.us

2014-02-08T13:37:00.004-08:00

Appendix Two: Financial Dossiers of Regents to Watch

http://www.spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

These dossiers were reported and written by Bernice Yeung and Randall Jensen.

Sherry Lansing

Dates of term:
First Term: March 11, 1999 to March 1, 2010
Second Term: March 1, 2010 to March 1, 2022

UC Regents Health Services Committee Chair

Education:
Northwestern University

Profession:
Founder, Sherry Lansing Foundation
Former film executive

Potential Conflict alert
Since Sept. 2006, Regent Sherry Lansing has been a member of Qualcomm’s board of directors. She received $135,000 in director’s fees from Qualcomm in 2008, stock option awards valued at $256,443, and additional compensation of $50,000 for a total of $441,443. According to her UC Regents economic disclosure statement, Ms. Lansing owns “more than $1 million” in Qualcomm stock options (no upper limit is specified), but she has a less than 1 percent interest in the company.

Documents released by the treasurer show that, through its external investment managers, UC has quadrupled its investment in Qualcomm by putting $397 million into stock of the information technology firm since Ms. Lansing joined its board (while she also served as a regent).

Lansing has also served on the board of directors of Dole Food Company since the company went public in the fall of 2009.

Professional bio:
Lansing was the first woman to lead a major film studio in 1980 when she became president of production of 20th Century Fox. From 1984 to 1990, she ran independent production companies, working on films such as Fatal Attraction and Indecent Proposal. In 1992, she was hired as chairperson of Paramount Pictures; under her watch, the studio produced six of its 10 highest-grossing films, including Forest Gump and the Titanic. In 1996, she became the first female studio exec to receive a star on the Hollywood Walk of Fame. She remained at Paramount until 2005. Paramount also named the Sherry Lansing Theatre in her honor, which was at one point, the studio’s largest screening room.

After leaving Paramount, Lansing started the Sherry Lansing Foundation, a nonprofit that focuses on cancer research, education, art, and culture.

Prior to producing films, Lansing had a brief stint as an actress, during which time she also taught high school English and math in Los Angeles public schools.

Major investments:
According to public documents, Lansing has more than a 10 percent financial interest in Sherry Lansing Productions, which is valued between $100,000 and $1 million.

Corporate boards:
Qualcomm: According to SEC filings, Lansing received $133,500 in director’s fees from Qualcomm in 2009, as well as $301,752 worth of stock options and $50,000 in additional compensation for a total of $485,252.

Dole: According to SEC filings, Lansing received $14,413 in director’s fees in 2009, as well as $62,500 in stock awards, for a total of $76,913.

Estimated earnings (2008):
In 2008, Lansing earned a salary of more than $100,000 from Sherry Lansing Productions, and held between $100,001 and $1 million in Viacom stocks (Viacom is the parent company of Paramount Pictures).

She also received $135,000 in director’s fees from Qualcomm in 2008, as well as $256,443.00 in stock options, and an additional $50,000 for a total of $441,443.

Lansing does not draw a salary from the Sherry Lansing Foundation, and donated about $460,000 to the organization in 2008, according to tax filings.

Political ties/campaign contributions:
Lansing is a member of Governor Schwarzenegger's Committee on Education Excellence, as well as the California State Superintendent of Education's P-16 Advisory Council. In 2007, she helped create the EnCorps program, which encourages retired professionals to return to the classroom as teachers. Lansing was able to marshal the support of corporations ranging from IBM to Qualcomm.

In 2004, Lansing was one of 29 members appointed to the Independent Citizen's Oversight Committee, an oversight panel governing stem-cell research in California following the passage of Proposition 71.

Philanthropy and community service:
Lansing sits on several boards for organizations related to cancer research and education, including the Carter Center, Teach for America, the American Association for Cancer Research, Friends of Cancer Research, and the Lasker Foundation, which supports biomedical research.

She has also served on the board of trustees of Scripps College and the University of Chicago, as well as the board of Independent Colleges of Southern California, the board of the UCLA Foundation, and the executive committee of the Dean's advisory board of the UCLA School of Theatre, Film and Television.

Misc:
Lansing blogs for the Huffington Post on topics ranging from cancer prevention to the legacy of Sen. Ted Kennedy.

Russell Gould

Chairman of the board The University of California Regents..

Dates of term:
First Term: September 13, 2005 to March 1, 2017
Previously served as a Regent in 1998.

Education:
University of California at Berkeley

Profession:
President of Gould Financial Consulting

Potential Conflict alert:
Gould served as senior vice president at Wachovia Bank from 2004 until he retired in 2009. Gould led business development and strategic partnerships in California as senior managing director of Wachovia Portfolio Services, formerly Metropolitan West Securities, which he joined in 1996. At Metropolitan West, Mr. Gould also served as executive vice president of the J. Paul Getty Trust where he was responsible for the investments of the Trust’s $5.5 billion in assets.

In 2005, the year Gould became a regent, UC’s endowment and retirement portfolio held about $28 million in Wachovia bonds. That amount gradually reduced, falling to about $2.4 million in 2009.

As part of his financial consulting practice, Gould in 2008 listed IBM as a client that generates income of more than $10,000. In 2009, UC listed $19.7 million in IBM investments.

Professional bio:
As president of Gould Financial Consulting, Gould provides fiscal policy advice to corporations, government and not-for-profit entities on issues related to the state budget, investment and tax policy.

Gould also worked as a financial management advisor to CRHMFA Homebuyers Fund (CHF), which is a government-sponsored Joint Powers Authority that issues tax-exempt and taxable bonds to create affordable single-family mortgage loan programs.

Before entering the private sector, Gould served under Gov. Pete Wilson as secretary of health and human services and as the director of finance. As director, he was responsible for preparing and managing the state budget as well as serving on the Governor's Council of Economic Advisors. Gould previously worked as assistant state treasurer with oversight over California's then-$20 billion investment portfolio.

Major investments:
According to public documents, Gould has holdings of more than $100,001 (the largest amount one may select) in The Gould Family Trust. He also owns The Gould Group, which counts IBM Corporation and National Homebuyers Fund as clients. In addition, he holds a stake in the Post Advisory Group Total Return Fund (between $100,001 and $ 1 million) and the same range of investment in the MetWest Small Cap Fund LLP Partnership.

Corporate boards:
Gould currently serves on The Irvine Company Board. He is also a member and past chair of the Board of Directors of the California Chamber of Commerce.

Estimated earnings (2008):
Gould earned more than $100,000 (the highest amount one may select) from his investments in the The Gould Family Trust and he claimed he also earned above $100,000 from his financial consulting business The Gould Group.

Political ties/campaign contributions:
Gould is a Republican appointed by Gov. Schwarzenegger to The Regents in 2005. Since leaving government, Gould was appointed by Gov. Schwarzenegger to serve on the California Constitution Revision and Performance Review Commission.

Philanthropy and community service:
Gould serves on the the College Access Foundation of California Board and the Sierra Health Foundation Board. He previously served on the Children's Hospital of Los Angeles Board.

_______

Hadi Makarechian

Dates of term:
October 24, 2008 to March 1, 2020

Education:
University at Buffalo, State University of New York

Profession:
Real estate developer

Potential conflict alert
Makarechian is the founder and chairman of Capital Pacific Holdings, which develops residential real estate in California and other Western states.

Since the early 1990s, Capital Pacific entered into numerous joint ventures with IHP Capital Partners, an investment firm that specializes in equity financing for residential development. IHP was founded in 1992 when CalPERS entered the real estate financing realm and it provided IHP with $75 million to develop homes in Northern California. IHP reports providing a 40 percent net return to CalPERS on its first deal, and the state retirement fund has continued to invest with IHP.

Another CalPERS real estate equity partner is an investment firm called Hearthstone. In 2008, CalPERS invested $185 million in Hearthstone and paid the company $1.8 million in fees. Capital Pacific has partnered with Hearthstone on various joint venture development deals for more than six years. Capital Pacific is currently working with Hearthstone on a residential project in Arizona.

Professional bio:
Hadi Makarechian is based in Newport Beach, and one of the local papers, the OC Weekly, has called the Makarechians the “closest thing Orange County has to the Rockefellers.”

For more 30 years, Makarechian has planned, built, developed and invested in luxury residential real estate through the company he founded, Capital Pacific, which is ranked the 65th largest home builder in the country in 2009 with $188 million in new residential revenue and $753,000 in other revenue, according to Professional Builder magazine’s “Annual Report of Housing’s Giants.”

Makarechian is credited with innovating the way that beachfront condos and hotels are developed by maximizing the number of units with ocean views. Additionally, the term “McMansions” was first used in a New Yorker article to describe Makarechian’s deluxe Palos Verdes, California, development. One of Capital Pacific’s largest ongoing projects is the development of Banning Lewis Ranch, a 21,000-acre development that could consist of 75,000 homes.

A subsidiary of Capital Pacific is Makar Properties, which primarily handles commercial real estate developments. Run by Makarechian’s sons, Paul (CEO) and Cyrus (executive vice president), the firm is primarily associated with developing luxury hotels. Its assets are located throughout Southern California, Texas, Florida, and Colorado, and it’s been reported that it has more than $10 billion in development projects.

Major investments:
Makarechian is the founder of Capital Pacific Holdings, and has served as its CEO and chairman. He is also the chairman of Makar Properties, a subsidiary of Capital Pacific.

According to public records, through the Hadi Makarechain Trust, Makarechian and his wife own a number of properties in Southern California valued at more than $5 million (no upper limit is specified).

Corporate boards:
Makarechian does not participate on publicly traded corporate boards.

Estimated earnings (2008):
In a 2008 story about its wealthiest residents, the Orange County Business Journal estimated that Makarechain has an estimated worth of $600 million—down from $1 billion the previous year because of the economic downturn. The newspaper also estimated that Capital Pacific and Makar Properties own several billions dollars’ worth of real estate, and the Makarechians’s stake in these holdings are worth hundreds of millions.

Philanthropy and community service:
Makarechian serves on the board of trustees of Chapman University and the State University of New York, University at Buffalo, where he is the 2005 recipient of the Distinguished Alumni Award.

Makarechian has also donated on an ongoing basis to organizations such as Habitat for Humanity, Boys and Girls Clubs, and the Boy Scouts of America.

Political ties/campaign contributions:
Makarechian was among the top 50 contributors to Gov. Arnold Schwarzenegger’s reelection campaign, and he also served as a national campaign finance co-chair for Mitt Romney’s 2008 presidential campaign.

--------------------------------------------------------------------

Leslie Tang Schilling

University of California Regent
Chair of the buildings and grounds committee

Dates of term:
First Term: Sept. 13, 2005 to March 1, 2013

Education:
University of California at Berkeley
American Graduate School of International Management

Profession:
Founder and Director of Union Square Investments Company

Potential conflict alert
In May 2006, mortgage-lender Golden West Financial was sold to Wachovia Bank for $25.5 billion while Schilling served on the board of the company and fellow Regent Russel Gould was involved in business development and partnerships for Wachovia in California. Both were Regents at the time.

Professional bio:
Schilling is founder of Union Square Investments, a commercial real estate investment and management firm, and is also founder and president of investment firms L.T.D.D. and Golden Bay Investments. Prior, she was assistant manager of the real estate department at the Chartered Bank of London worked at Wells Fargo’s private client division after college.

Major investments:
In 2008, Schilling’s had holdings in Golden Bay Investment Fund, with a limited partnership worth between $100,001 to $1 million and in Tangent Fund Management II, also with a limited partnership worth between $100,001 and $1 million, according to state disclosure forms. She also had an investment in the company Centerbeam, through her company Tangent Ventures, of between $100,001 and $1 million.

She stated in documents that she held a partnership in Tanama Ltd., which owned real property worth between $100,001 to $1 million. In addition, Schilling was listed as a vice president of Windy Hill Inc., which held an investment in GDW Holdings LP that was worth between $100,001 and $1 million.

Schilling also had a limited partnership in Lemana Ltd, a real estate investment company, worth between $2,001 and $10,000.

Corporate boards:
Schilling served as director of Tristate Holdings Ltd. and KOA Holdings Ltd.

She formerly served on the board of The Pacific Bank and Golden West Financial Corp., a mortgage lender acquired by Wachovia in 2006.

She has also served as a director on the boards of the San Francisco Chamber of Commerce, and the Small Business and Agriculture Advisory Board to the Federal Reserve 12th District. She is currently on the Board of the Bay Area Council.

She served as Vice Chairman of San Francisco Economic Development Corp.

Estimated earnings (2008):
As founder of Union Square Investment Co., which was valued between $100,001 and $1 million, Schilling said in 2008 she received a salary of more than $100,000. And she received between $10,001 and $100,000 in income from L.T.D.D., according to 2008 disclosure forms.

Schilling also listed several companies from which she received a salary of more than $10,000: Pacific Irrev. Trust, Golden Bay Investment Fund LLC, Bligh Ltd., Atlantic Irrev. Trust, Tangent Fund Management II LLC, Tanama, Ten Mason Associates, Lemana and the Tang and Smith Fund.

Schilling also said she received a director’s fee from KOA Holdings of between $1,001 and $10,000, as well as the same amount for being a board member for Hong Kong-based Tristate Holdings Ltd.

Political ties/campaign contributions:
Appointed to The Regents in 2005 by Gov. Schwarzenegger.

Philanthropy and community service:
Ms. Schilling has served as a member of the San Francisco Foundation and Women's Forum West, and as a commissioner of the Asian Art Museum.

She has also been a board member for MIT, KQED, the San Francisco Zoological Society, the UCSF Foundation and Give2Asia.

She is also co-founder of Toys for the Tenderloin and is a director for the Committee of 100.

In addition, she founded the Tang Foundation, which supports youth programs such as summer school academic enrichment for low-income students around the Bay Area.

------------------------------------------------------------------------------------------------

Norman Pattiz

Regent, University of California
Chair of the laboratories committee

Dates of term:
Mr. Pattiz was appointed by Governor Davis to fill the remainder of a 12-year term, which expired March 1, 2004. In September 2003, he was appointed by Governor Davis to fill the remainder of a 12-year term which expires March 1, 2014.

Education:
Honorary doctorate from Southern Illinois University

Profession:
Founder and chairman of radio-giant Westwood One

Potential Conflict Alert
As head of the regents’ committee with oversight over the Department of Energy laboratories run by the UC, Pattiz has large investments in energy and scientific-related public companies including between $10,001 to $100,000 in Southwest Energy, the same amount in Exxon Mobil and same relative investment in a large energy fund.

The laboratories deal with much more than just energy and Pattiz has his hand in other large investments, such as biotechnology, pharmaceutical and medical related stocks.

Professional bio:
Pattiz started his radio syndication company in 1976 in a one-room office on the westside of Los Angeles. He is now the founder and chairman of Westwood One, America's largest radio network company and the nation's largest producer of news, sports, talk and entertainment programming. His company owns, manages or distributes NBC Radio Network, CBS Radio Network, the Metro Networks, CNN Radio.

President Clinton appointed Pattiz in 2000 to serve on the Broadcasting Board of Governors of the United States of America. He was reappointed to that post by President Bush in 2002, serving through 2006. The BBG oversees all U.S. non-military international broadcasting including Voice of America, Radio Free Europe/Radio Liberty, Radio Free Asia, Worldnet Television, Radio and TV Marti and the Middle East Broadcasting Network. As chairman of the Middle East committee, Mr. Pattiz was responsible for conceiving and launching Radio Sawa and Alhurra Television.

Norman Pattiz was inducted into the Radio Hall of Fame in 2009.

Major investments:
In 2008, Pattiz had several major investment holdings of between $100,001 and $1 million: Ishares TR S&P, municipal bond fund, managed asset funds GPS Income Fund, GPS New Equity Fund LP, GPS High Yield Equity Fund; and corporate bonds in ESC Conseco.

He also held an unlisted amount in world stock fund Nuveen Tradewinds Global and mutual fund IVA Worldwide Fund.

Pattiz also held position of between $10,001 and $100,000 in numerous public companies.

Estimated earnings (2008):
Pattiz received more than $100,000 in salary (the highest choice available) from his company. And as a trustee of the Norman Pattiz 1996 Charitable Trust he received a salary of between $10,001 and $100,000.

Political ties/campaign contributions:
Pattiz has been a member of the Council on Foreign Relations and Pacific Council on International Policy, director of the Office of Foreign Relations of the Los Angeles Sheriff’s Department, and served on the Region 1, Homeland Security Advisory Council.

Philanthropy and community service:
Pattiz serves as a member of the Board of Councilors of the Annenberg School for Communication at USC, as well as the Communications Board of UCLA and the Dean's Advisory Board of the California State University, Fullerton.

He is also past president and executive board member of Broadcast Education Association and a trustee of the Museum of Television & Radio and the Hollywood Radio & Television Society. He is the primary benefactor of the Hamilton High Academy of Music and the Norman J. Pattiz Concert Hall.

------------------------------------------------------------------------------------------------

Mark Yudof

President of the University of California

Dates of term:
Appointed president on March 27, 2008, and took office June 16, 2008.

Education:
University of Pennsylvania
University of Pennsylvania Law School

Profession:
President of University of California

Potential conflict alert
Yudof served as president on the board of the public medical device company HealthTronics in 2008 until he resigned in 2009, making between $10,001 and $100,000. As UC president, Yudof oversees five medical centers and three affiliated laboratories.

After his appointment as president, Yudof accepted a more than $11,000 two-week trip in July 2008 to Israel from the American Jewish Committee, a Jewish advocacy group.

The university president also in 2008 received between $10,001 and $100,000 in consulting fees, including travel, from Saudi Arabia’s King Abdullha University of Science and Technology.

Professional bio:
Before becoming president of UC, Yudof served as chancellor of the University of Texas system from 2002 to 2008. He also was president of the University of Minnesota from 1997 to 2002. Prior, he was a faculty member and administrator at the University of Texas at Austin for 26 years, during which he served as dean of the law school from 1984 to 1994 and as the university’s executive vice president and provost from 1994 to 1997. He began his career in 1971 in Austin as an assistant law professor. While a member of the law faculty, he spent time as a visiting professor at University of Michigan and UC Berkeley law schools, and did research as a visiting fellow at the University of Warwick in England.

Yudof is a member of the American Academy of Arts and Sciences and a the American Law Institute.

He has also been widely published with a majority of the books related to education or law.

Major investments:
Before becoming president, Yudof disposed of his position of between $10,001 to $100,000 in stock in health and productivity management company I-Trax, according to disclosure forms.

As of 2008, he continues held between $10,001 and $100,000 in stock of Cattlemen’s Restaurant Group, which runs chains of restaurants in Texas. A founding partner of the restaurant group is Mark Adams who is the president and CEO of Advocate, MD Financial Group Inc., a medical liability insurance company.

Corporate boards:
Yudof served on the board of directors of the public medical device company HealthTronics from 2005 to 2009. He also was a board member for test-maker Educational Testing Service from 2000 to 2002.

Estimated earnings (2008):
In 2008, Yudof made between $10,001 and $100,000 as a director on the board of the public company HealthTronics.

Yudof told the New York Times his 2008 salary was $540,000, after he cut his own pay by $60,000. He said he had a $10,000 housing allowance.

It was reported by the Daily Californian in 2008 that he would receive $591,084 in salary, plus $228,000 for his first presidential year in pension contributions beyond the UC Retirement Plan and $743 per month in car allowance. He had received $742,209 serving as the University of Texas' chancellor from 2006 to 2007.

Political ties/campaign contributions:
President George W. Bush appointed Yudof to the President’s Council on Service and Civic Participation from 2006 to 2009. Bush also put him on the advisory board of the National Institute for Literacy from 2002 to 2005.

Philanthropy and community service:
Yudof serves on the board of directors for the Lumina Foundation for Education, the American Council on Education and is a member of the Business-Higher Education Forum. He also served as chair of the Texas Council of Public University Presidents and Chancellors from 2007 to 2008.

The UC president has been presented with numerous awards during his career, including the Higher Education Advocate of the Year in 2010, by Counselors to Higher Education.

----------------------------------------------------------------------------------------------------------------

Monica Lozano

University of California Regent
Chair of finance committee
Chair of the governance committee

Dates of term:
First Term: Sept. 21, 2001 to March 1, 2013

Education:
University of Oregon (did not graduate)
City College of San Francisco

Profession:
Publisher and chief executive officer of La Opinion, the largest Spanish-language newspaper in the United States. Senior vice president of its parent company, ImpreMedia LLC.

Potential Conflict alert:
In 2008, while Lozano served on the board of Bank of America and Walt Disney, the UC General Endowment Pool owned about $5 million in Bank of America bonds and $530,000 in Walt Disney bonds; while the UC Retirement Plan held $99 million in Bank of America bond investments and $8.5 million in Walt Disney bonds.

Also In 2008, Lozano served on the board of the California Healthcare Foundation, a philanthropic organization, which gave hundreds of thousands of dollars solely to The Regents. The foundation also granted tens of millions of dollars to other university programs. It also supports private universities, private research and community programs.

Professional bio:
Lozano has worked since 1985 at the La Opinion, which was started by her family in 1926. From 1999 to 2001, she was a member of the California State Board of Education, serving as its president for its from 2000 to 2001. She was also a member of the California Postsecondary Education Commission. Lozano has served on a number of corporate and non-profit boards, and is a trustee at University of Southern California.

Major investments:
Lozano has more than $1 million of partnership shares in Impremedia LLC, parent company of La Opinion, according to disclosure forms. She also states she has more than $1 million of stock in the Kayne Anderson Capital Income Fund and between $100,001 to $1 million of shares in the Kayne Anderson REIT Fund.

She also has two trusts: the Monica Lozano Centanino Trust and the Monica C. Lozano Living Trust.

Corporate boards:
Lozano serves as a director on the boards of Walt Disney Co. and Bank of America Co. She is also on the board at UnionBanCal Corporation, a bank holding company and a member of the Misubishi UFJ Financial Group.

From 2002 to 2005, she was also a director for the Tenet Healthcare Corp.

Estimated earnings (2008):
In 2008, Lozano made more than $100,000 as publisher of La Opinion, according to disclosure documents. She also stated she earned between $10,001 to $100,000 in income from Walt Disney, and an unlisted amount of deferred compensation. She earned between $10,001 and $100,000 as a board member at Bank of America.

However, according to Forbes, Lozano made a total of $127,376, which includes $47,376 in stock awards, as a director for Bank of America in 2008. And she apparently earned a total of $234,842, including $71,909 in stock awards, $52,090 in options and $17,093 in other compensation, as a member of Walt Disney’s board during the same year.

In addition, Lozano said she earned between $1,001 and $100,000 as a director on the board of the Weingart Foundation and between $10,001 to $100,000 as a director for the California Healthcare Foundation.

Political ties/campaign contributions:
Lozano was appointed to The Regents in 2001 by Gov. Davis to a 12-year term.
She is a member of President Obama's Economic Recovery Advisory Board.

Philanthropy and community service:
Lozano serves as a board member for The Weingart Foundation, a non-profit philanthropic institution in Southern California., and the National Council of La Raza. She is also a trustee for the University of Southern California. Also, she served on the California Healthcare Foundation board.

--------------------------------------------------------------------

Bonnie Reiss

Dates of term:
March 10, 2008 to March 1, 2020

Education:
University of Miami
Antioch School of Law

Profession:
Operating Adviser, Pegasus Capital

Potential Conflict alert
Reiss serves on the environmental advisory board of NetJets, the Berkshire Hathaway subsidiary that sells fractional jet ownership, and which is popular among celebrities and politicians like Gov. Arnold Schwarzenegger. In 2008, NetJets donated $20,000 to UC Davis’ Institute for Transportation Studies as a corporate affiliate, and it served as a corporate sponsor of the 12th Biennial Asilomar Conference on Transportation and Climate Policy conference.

Additionally, as a UC Regent, Reiss is a member of the Committee on Oversight of the Department of Energy Laboratories, which serves as the interface between the U.S. Department of Energy (DOE) and its UC-run laboratories: Los Alamos, Lawrence Livermore and Lawrence Berkeley. According to the UC bylaws, as a member of the committee, Reiss is also charged with recommending leadership appointments to the labs, and reviewing reports related to various aspects of lab management, including the “scientific and technical quality of all work undertaken at the Laboratories.”

In recent years, the DOE has expanded its research in solid-state lighting—such as LED lighting—which is a more efficient and less expensive form of illumination.

LED lighting is an area in which Reiss has a particular vested interest, and where her role as a UC Regent overseeing UC-run DOE labs could benefit her or her employer financially.

Until March 24, 2010, Reiss served on the board of directors of Lighting Science Group, a company that, according to its SEC filings, is engaged in the “research, design, develop, manufacture and market a range of lighting devices and systems that use light emitting diodes (LEDs) as the light source.”

According to documents filed with the SEC in March 2010, Pegasus Capital, Reiss’ employer, is an affiliate of two shareholders that collectively own 83 percent of Lighting Science Group. Approximately 15 percent of Lighting Science is owned by Philips Electronics, which is engaged in several research partnerships with the University of California. In the next five years, for example, Sandia National Laboratories in Livermore, California (not a UC-run DOE lab), will receive $18 million in federal funds to research solid-state lighting. Philips Lumileds Lighting, a subsidiary of Philips Electronics, is cited as a research partner. Another partner in this research is Los Alamos National Laboratory, which is overseen by the UC Regents.

Philips Lighting is also engaged in a joint research program that will explore energy-efficiency for buildings using LED lighting with Lawrence Berkeley National Laboratory, which is overseen by the UC Regents.

In addition, UC Santa Barbara’s Institute for Energy Efficiency was selected as one of 46 federally funded Energy Frontier Research Centers in 2009, and it will receive $19 million over five years for research. A portion of these funds will go toward LED research, and UCSB plans to partner with Los Alamos National Laboratory and UC Santa Cruz on these studies.

Professional bio:
After graduating from the University of Miami in 1976 with a degree in accounting and finance, Reiss worked at an accounting firm where she audited and did systems analysis for major corporations. After law school and a stint as a staffer for Sen. Edward Kennedy, Reiss moved to Los Angeles to work as an entertainment lawyer.

In 1980, she co-founded the Hollywood Women’s Political Committee, and as she became increasingly involved in environmental activism, she founded the Earth Communications Office (ECO), which worked with celebrities to raise awareness of environmental problems. One of the first people to join the organization was Arnold Schwarzenegger, who made trailers and commercials with ECO.

From 2003 to 2007, Reiss served as a senior advisor to California Governor Arnold Schwarzenegger, and one Sacramento Bee columnist called her, along with Paul Wachter and Maria Shriver, “Schwarzenegger’s anchors, the people who were with him before politics and will be with him after.” During her tenure, Reiss became the Governor’s point person on issues such as education, environment, women’s issues, and children's health. Reiss also acted as the liaison to the Governor’s Council on Physical Fitness and Sports.

Currently, as an Operating Advisor to Pegasus Capital Advisors, Reiss focuses on investments to cleantech innovation. She also serves as a senior advisor to Natural Strategies, a research and investment company based in Washington, D.C., that focuses on energy and environment, public safety and homeland security, technology, health, finance, transportation and education.

Gov.Schwarzenegger appointed Reiss as the California Secretary of Education in February 2010.

Major investments:

None known.

Corporate boards:
Reiss serves on the U.S. Environmental Advisory Board of NetJets, for which she was paid between $1,000 and $10,000 in 2008, not including $20,000 in travel reimbursements.

Until March 24, 2010, she was also a member of the board of directors of Lighting Science Group. In 2009, she was awarded $80,000 in stock awards as part of her compensation for serving on the board of directors. According to SEC filings, as of November 2009, Reiss owned about $400,000 worth of the company’s stock. Reiss’s public disclosure statements note that she received travel reimbursements from Lighting Science Group in 2008, but she did not reveal the amount.

Estimated earnings (2008):
In 2008, Reiss reported an income of between $10,001 and $100,000 from Natural Strategies, between $1,000 and $10,000 from NetJets, and more than $100,000 from Pegasus Capital.

Reiss also invests in a variety of stocks, according to 2008 public disclosure filings. Her investments range from the real estate firm CB Richard Ellis Group (controlled by Regent Richard C. Blum), Ralph Polo Lauren and the publishing company Meredith Corp. In total, the fair market value of the stocks she owned was between $320,022 and $3.2 million.

Including board of director’s fees and the stocks, Reiss’s estimated net worth, as determined from public documents in 2008 was between $413,023 and $3.4 million.

Philanthropy and community service:
Reiss has served as the president of Schwarzenegger’s afterschool education program, Afterschool All Stars. She currently sits on its board or directors, along with Gov. Schwarzenegger, Maria Shriver and UC Regent Paul Wachter.

Reiss also serves on the board of the Women’s Conference, purportedly the “the largest one-day conference for women in the nation,” and which is hosted by Maria Shriver.

__________________________

George Marcus

Dates of term:

December 22, 2000 to March 1, 2012

Education:

San Francisco State University

Profession:

Real estate developer

Marcus is the founder and Chairman of Essex Property Corporation, a Palo Alto-based Real Estate Investment Trust (REIT) that primarily deals in apartment communities on the West Coast. According to public records, Marcus owns $1 million in stocks and options in Essex, which owns 133 apartment communities, as well as five office buildings and four development projects. It planned to make $300 million in property acquisitions in 2010.

Public pension funds CalPERS and CalSTRS, as well as the University of California, have invested millions—and in the case of CalPERS, billions—of dollars in Essex Property Corp.

Professional bio:

In 1971, Marcus founded both Essex Property Trust, Inc. (now Essex Property Corp.) and The Marcus & Millichap Company (TMMC), which specializes in real estate investment sales and financing. TMMC has eight subsidiaries that deal in real estate development, investment and service, including SummerHill Homes and Pacific Property Company. In 2009, the company’s 1,300 brokers closed 3,441 investment transactions for investors.

Marcus was also one of the original founders of Greater Bay Bancorp, and served on its board of directors until the company was bought by Wells Fargo in 2007.

Major investments:

In 2008, the entities for which Marcus has more than 10 percent ownership were real estate entities owned by TMMC or one of its subsidiaries. Public records show that Marcus made at least $8 million in gross income from these properties in 2008.

Corporate boards:

Marcus is the chairman of the board of both Essex Property Corp. and TMMC. Essex provided Marcus with $34,000 in director’s fees and $45,195 in stock awards in 2008, for a total of $79,195.

Essex Property Corp. and TMMC sometimes enter into business transactions together. For example, Essex has purchased land from TMMC. In 2008, Essex paid $200,000 in brokerage commissions to a subsidiary of TMMC for purchases and sales of real estate; in 2007, Essex paid $1.3 million in commissions to TMMC.

Federal filings note that Marcus has agreed not to divulge any information that he receives as the Essex chairman to TMMC, and that he’d abstain from voting on any business before the board of directors where it appears that there may be a conflict of interest.

Estimated earnings (2008):

In 2008, Marcus owned stocks or participated in partnerships in a variety of companies such as Wells Fargo and Dolby, in which his ownership interest was less than 10 percent. The fair market value of these myriad stocks and partnerships was about $11 million.

In addition to the $8 million gross income from various real estate investments, Marcus earned $34,000 in director’s fees from Essex in 2008. Additionally, Marcus earned between $21,000 and $210,000 via partnership distributions through three real estate partnerships named Western Blossom Hill, Western Riviera, and Western Seven Trees.

Political ties/campaign contributions:

Marcus is a major democratic donor and receives personal thank-you calls and is referenced in speeches by the likes of former Vice President Al Gore and Speaker Nancy Pelosi.

Philanthropy and community service:

Marcus has donated more than $40,000 to San Francisco State University (SFSU) for its Center for Modern Greek Studies, Cinema department, and for student scholarships. Marcus also served on the board and as chairman of the Modern Greek Studies Foundation, which was formed to support the Nikos Kazantzakis Chair for Modern Greek Studies. In 2005, Marcus and his wife, Judy, donated $3 million to start the International Center for the Arts at SFSU.

Marcus serves on the boards of, or has been involved with, a number of professional and business groups, including the Urban Land Institute, a nonprofit dedicated to real estate development and land use research; the Bay Area Council, a pro-business policy organization; and the Policy Advisory Board for UC Berkeley’s Fisher Center for Real Estate and Urban Economics. He also served as a member of the board of trustees of the California State University System from 1981 to 1989, and as a trustee for the Fine Arts Museums of San Francisco.

http://www.spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

Posted by Peter Byrne on 09/22/10

Appendix One: Research Methodology Reprint UC Regents Spot.us

2014-02-08T13:02:00.000-08:00

Appendix One: Research Methodology

http://www.spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

This investigation primarily focuses on the intersection between the official duties and the business interests of Richard C. Blum, Paul Wachter, and Gov. Arnold Schwarzenegger. All three men have been members of the regents’ investment committee since 2003 (although Schwarzenegger does not attend meetings).

Due to the size of UC’s investment portfolio, as well as the complexity and often subterranean nature of the regents’ personal business interests, it was necessary to design a computer-based method for tracking down possible conflicts of interest.

To find correlations between the regents’ personal business pursuits and UC investments, we reviewed documents available on the web sites of the U.S. Securities and Exchange Commission (SEC), the University of California, and other government agencies. We also used commercial databases that aggregate SEC information, and we custom-designed databases from public records to enable keyword searching. For instance, we digitized the regents’ financial disclosure statements and compared that data with digital lists of UC investments made by both the UC Treasurer’s in-house staff and UC’s external managers.

Using the same methods, we also created dossiers on the investments and financial ties of several regents who, due to their business interests, appear to have the greatest potential for conflicts: Sherry L. Lansing, George M. Marcus, Bonnie Reiss, Russell Gould, Bruce D. Varner, Monica Loranzo, Hadi Makarechian, Mark Yudof, and Leslie Tang Schilling.

Methodology for investigating Blum Capital Partners

Founded in San Francisco in 1974, the activities of Blum Capital Partners span the globe, with several of its private investor partnerships residing in income-tax havens, such as the Cayman Islands. The $2 billion plus firm’s public and private equity holdings include higher education, information technology, medical technology, air transport, casinos, real estate, banking, and, until December 2005, military construction and weapons manufacturing.

Since private equity deals are mostly unregulated by government bodies, the identities of Blum Capital Partners’ investors are cloaked. But public institutions are required to disclose the amount and the rate of return of their investment in private equity firms. For example, CalPERS has reported large investments in Blum Capital Partners, as has the Carpenters Pension Trust of Southern California, the Alaska Teachers Retirement System, the New York State Common Retirement Fund, and the Regents of the University of Michigan.

As a regent, Mr. Blum is also required to file annual economic disclosure statements related to his business interests based in California (but not those outside the state). For a more comprehensive accounting of his business interests and income, we turned to the economic disclosure statements filed annually by Mr. Blum’s spouse, Sen. Dianne Feinstein (D-California), whose wealth is estimated to be as high as $100 million, and whose 200-plus page disclosure statements are almost exclusively dedicated to tracking the labyrinthine activities of Blum Capital Partners. These documents are packed with eye-boggling acronyms for investment funds (e.g., TPG OFF VI SPV, L.P.), which are buried inside complexly nested financial relationships. But in conjunction with SEC filings and other data, these disclosure statements expose the lineaments of Mr. Blum’s vast and intricately balanced holdings, many of which are financed with public funds.

We also examined reports in the financial trade press, investor newsletters, and corporate press releases that pertained to Blum Capital Partners and its business associates. Ultimately, we gathered and sorted and perused more than 12,000 pages of documents. Approximately 1,000 pages were scanned or engineered into a searchable format. These records, however, are only the tip of the proverbial iceberg: Mr. Blum’s business dealings have planetary reach and go back in time nearly a half-century.

http://www.spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

Posted by Peter Byrne on 09/22/10

Part Eight: Blum Capital partners Gets Lucky: UC Owns Stocks in All of the Public Companies in Regent Richard C. Blum's Portfolio Reprint Spot.us

2014-02-07T19:32:00.001-08:00

Part Eight: Blum Capital Partners Gets Lucky: UC owns stocks in all of the public companies in Regent Richard C. Blum’s portfolio

http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

As of December 2009, the external management firms hired to handle UC investments have invested a total of $304 million in all 18 of the public companies held by Blum Capital Partners. These management firms act under the supervision of UC Treasurer Marie Berggren and the regents’ investment committee, which receives periodic reports on specific investment transactions.

The 100 percent overlap in the public securities portfolios of UC and Blum Capital Partners poses at least the appearance of a conflict of interest. It is a truism that UC’s sizeable investments enhance the value of Blum Capital Partners’ portfolio by increasing demand for those particular stocks. This is not a case of two investors coincidentally investing in a blue-chip stock such as Coca-Cola. The companies in Blum Capital’s public securities portfolio are relatively unknown, and his firm has significant or controlling interests in many of them. From an ethical standpoint, it would have been to the UC’s benefit to instruct its external managers to refrain from investing UC monies in these companies, but it did not.

Through a spokesperson, UC Treasurer Berggren said that her office does not track the regent’s personal investments in conjunction with UC investments. However, at our request, UC produced an electronic spreadsheet that made it possible to do exactly that. Each regent’s personal investments are a matter of public record (provided that they disclose them), so it should not be difficult for the treasurer to monitor them; conversely, each regent could refrain from investing in the same entities as UC.

For example, UC could have refrained from investing (but did not) in the following companies that appear in the SEC filings of Blum Capital Partners:

American Reprographics Company, LLC
Avid Technology, Inc.
Career Education Corp.
CB Richard Ellis, Inc.
Collective Brands
Echostar Holding Corp.
Electronics for Imaging, Inc. (EFI)
Eresearch, Inc.
First American Corporation
ITT Educational Services
Kinetic Concepts, Inc.
Moneygram International, Inc.
PRGX, Inc.
Rovi Corporation
SBA Communications, Inc.
SEI Investments Company
Symmetry Medical, Inc.
Williams-Sonoma, Inc.

Note: The term “controlling shareholder” is used to denote a firm or individual owning more than 10 percent of the stock in a company, either singly or in combination with others. The controlling shareholder is in a position to exert some control over the company’s activities; a “majority stockholder” owns more than 50 percent of the stock.

American Reprographics Company, LLC
Glendale, California
The Company: Provides printing and document management services.
Blum and UC Investments: Blum Capital Partners owns nearly 10 percent of the shares in this privately owned company, making it the second-largest shareholder. At the end of 2007, Blum Capital Partners reported its initial purchase of American Reprographics stock. From that date until the end of 2009, UC has invested $1.57 million in the company’s stock.

Avid Technology, Inc.
Tewksbury, Massachusetts
The Company: A digital media hardware and software developer and retailer.
Blum and UC Investments: Blum Capital Partners owns the largest block of stock in the company, and one of the investment firm’s executives serves on Avid Technology’s board of directors. Blum Capital Partners reported buying stock in the company around May 2006. From that date until the end of 2009, UC has invested $3.4 million in the company’s stock.

Career Education Corp.
Hoffman Estates, Illinois
The Company: For-profit vocational training schools.
Blum and UC Investments: Blum Capital Partners is a controlling shareholder and one of its executives sits on the board of directors of Career Education Corp. Blum Capital Partners reported buying stock in the company at the end of 2005. From that date until the end of 2009, UC has invested $15.7 million in the company’s stock.

CB Richard Ellis, Inc.
Los Angeles, California
The Company: An international real estate firm that operates private investment partnerships. (This is getting nauseating...it's not the tasty wine, I swear!! It's the company!)
Blum and UC Investments: As of the end of 2009, Blum Partners was a controlling shareholder, with a $512 million stake in the company. Mr. Blum is the chairman of the board of directors, and Jane Sue, a Blum Capital Partners executive, also sits on the board. CB Richard Ellis holds a range of state and federal government contracts for real estate management and sales. (Last year, Sen. Dianne Feinstein faced allegations of a conflict of interest from a Washington D.C. newspaper after she wrote a letter to the FDIC supporting a program to contract out the disposal of foreclosed properties that was later awarded to CB Richard Ellis.) (We mustn't forget about the good Senator's continued contributions to our Ringling Brothers Circus, now could we?!) Blum Capital Partners helped purchase all of the public stock to take CB Richard Ellis private in 2001. It then took the company public again in 2004, which is when UC began trading CB Richard Ellis stock. Since that date, UC has invested $43 million in the company’s stock. (Again...)

Collective Brands
Topeka, Kansas
The Company: A discount shoe retailer; subsidiaries include Payless ShoeSource.
Blum and UC Investments: Blum Capital Partners owns nearly 5 percent of the company. Since Blum Capital Partners began investing in Collective Brands in February 2008, UC has purchased $2.1 million of the company’s stock. (Why am I not surprised?? That store smothers me with chemical rubber smell every time I walk into that place...I no longer walk into that place!)

Echostar Holding Corp.
Englewood, Colorado
The Company: Operates satellite communications equipment, including digital recording devices.
Blum and UC Investments: Blum Capital Partners is the fourth-largest shareholder of Echostar, and began investing in the company in the third quarter of 2008, a year in which the UC endowment and retirement funds directly purchased $15.6 million in Echostar stock. After Blum Capital Partner’s initial investment, UC bought $10.5 million worth of Echostar stock through its external managers, for a total of $26.1 million. (Of course they would...it is now S.O.P.)

Electronics for Imaging, Inc. (EFI)
Foster City, California
The Company: Digital printer wholesalers.
Blum and UC Investments: Blum Capital Partners is the second-largest shareholder of EFI, with a 10 percent stake. The investment firm initially purchased EFI stock in early 2005. From that date until the end of 2009, UC has purchased $7.9 million worth of the company’s stock.

Eresearch, Inc.
Philadelphia, Pennsylvania
The Company: Designs database technology for testing pharmaceutical and medical devices, and for use in clinical procedures.
Blum and UC Investments: Blum Capital Partners bought shares in the company in the first quarter of 2005, and as of March 2009 it owned 13 percent of Eresearch. During this time period, UC has purchased $8 million worth of the company’s stock.

First American Corporation
Santa Ana, California
The Company: Home equity lender and appraiser.
Blum and UC Investments: In early 2008, after First American was sued for falsifying appraisals to boost sub-prime mortgage loans (the lawsuit is ongoing) [see Washington Mutual in Part Four], Blum Capital Partners purchased a significant number of First American shares. In so doing, the firm entered the group of controlling shareholders, which included TPG Capital (where Mr. Blum is an executive and investor). From 2008 to the end of 2009, UC invested $7 million in First American stock.

ITT Educational Services
Carmel, Indiana
The Company: For-profit vocational training schools.
Blum and UC Investments: Blum Capital Partners is a controlling shareholder, and initially reported buying shares during the second quarter of 2004. From that date until the end of 2009, UC had invested $38 million in ITT.

Kinetic Concepts, Inc.
Santa Rosa, California
The Company: Medical equipment manufacturer.
Blum and UC Investments: In 1997, Richard C. Blum & Associates, the predecessor to Blum Capital Partners, acquired a majority stake in Kinetic Concepts. After Mr. Blum became a regent, UC invested $8.2 million in a private equity partnership connected to the acquisition. When Blum Capital Partners took Kinetic Concepts public in 2004, UC purchased stocks through the initial public offering. Through the end of 2009, while Blum Capital Partners remained a controlling shareholder, UC traded Kinetic Concepts stock extensively, purchasing $46.8 million worth of shares for an investment that totals $55 million. (You know this investment...one of many with blood all over it.)

Moneygram International, Inc.
Minneapolis, Minnesota
The Company: Corporation that specializes in money wire transfers, money orders, and bill payment services.
Blum and UC Investments: Blum Capital Partners owns 21 percent of Moneygram’s shares, and reported its first purchase of the company’s shares in February 2008. From that time through the end of 2009, UC has invested $1.5 million in Moneygram stock. (From here on out, it's Western Union!!)

PRGX, Inc. (formerly PRG-Schultz International, Inc.)
Atlanta, Georgia
The Company: Provides “recovery audit services” for large businesses and government agencies.
Blum and UC Investments: Blum Capital Partners is the company’s largest shareholder, and owns 17 percent of its stock. The investment firm’s managing director also sits on the PRGX board of directors. Since Mr. Blum became a regent in 2002, UC has invested $1.5 million in the company’s stock.

Rovi Corporation (formerly Macrovision)
Santa Clara, California
The Company: Entertainment technology company.
Blum and UC Investments: Blum Capital Partners began purchasing Rovi stock in late 2005 and owned about 5 percent of the company as of March 2008. Since 2005, UC has invested $6.8 million in the company’s stock. UC has also invested $67.1 million in two private equity partnerships operated by Oz Master Fund, an investment firm based in New York City, which had a $107 million investment in Rovi, making Oz a controlling shareholder in 2008.

SBA Communications, Inc.
Boca Raton, Florida
The Company: Owner and operator of wireless communications towers.
Blum and UC Investments: Blum Capital Partners and Goldman Sachs Group, in which UC is heavily invested, are major shareholders. Blum Capital Partners began purchasing shares in May 2009. At the end of 2009, UC owned $4.1 million of the company’s stock.

SEI Investments Company
Oaks, Pennsylvania
The Company: Provides software and consultation to financial institutions for asset allocation.
Blum and UC Investments: Blum Capital Partners and Goldman Sachs Asset Management, in which UC is heavily invested, are major shareholders. Blum Capital Partners began investing in the company in the fall of 2008. Since then, UC has purchased $5.2 million worth of the company’s stock.

Symmetry Medical, Inc.
Warsaw, Indiana
The Company: A medical implant and orthopedic device supplier.
Blum and UC Investments: Blum Capital Partners began buying Symmetry stock in the second quarter of 2007, and owns nearly 9 percent of its stock. The firm is the second-largest shareholder after a partnership between Wells Fargo & Co. and Wachovia Bank, which owns 10 percent. Since Blum Capital began investing in Symmetry, UC has purchased $1.5 million worth of the company’s stock.

Williams-Sonoma, Inc.
San Francisco, California
The Company: Home furnishings retailer; Pottery Barn is a subsidiary.
Blum and UC Investments: Blum Capital Partners began purchasing shares in Williams-Sonoma in early 2007. It owns 2.5 percent of the company, putting it in the controlling group of shareholders. Since 2007, UC has purchased $9.2 million worth of the company’s stock. (Gee...thanks for ruining THIS one for me, too...I refuse to spend my consumer dollars at anything Blum and Reilly/TPG own...any my friends, that's a LOT of enterprises I will not do business with...Consumer dollars, one of the last real weapons we Americans still wield...we just forget the power of that collective dollar in boycotts...that is certainly one way to start starving the beast.)

Posted by Peter Byrne on 09/22/10

Part Seven: Tapping the State Pension Fund: Against All Odds - Literally - a Regent Secures Billions of Dollars in CalPERS Investments Reprint Spot.us

2014-02-07T19:05:00.002-08:00

Part Seven: Tapping the State Pension Fund: Against all odds—literally—a regent secures billions of dollars in CalPERS investments

http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

The California Public Employees Retirement System (CalPERS), the nation’s largest public pension fund, is charged with managing $205 billion worth of investments on behalf of 1.6 million state workers. Its portfolio is larger than the gross domestic products of a dozen nations. Given its deep pockets, CalPERS is viewed as an investor to watch—its influence is so great that it can single-handedly make or break a corporation or private equity fund with its decisions.

Billions for Blum
Since 2004, Mr. Blum has had a direct influence on where CalPERS puts its money. His firm, Blum Capital Partners, is paid $3 million a year to handle $500 million worth of CalPERS investments as an external investment advisor.

According to reports issued for CalPERS by the investment advisory firm, Wilshire Consulting, Blum Capital Partners invests CalPERS money in public companies where Blum Capital Partners itself holds dominant ownership stakes, including the for-profit colleges Career Education Corporation and ITT Educational Services. It also places CalPERS money into its own private equity investment vehicles. But as of March 2010, CalPERS has reported an aggregate loss of 18 percent in these Blum funds.

In addition to hiring Blum Capital Partners to control a half billion dollars in investments, the pension fund has placed billions of dollars with three other companies where Mr. Blum has significant ownership stakes. CalPERS also pays large management fees to two of these entities.

CB Richard Ellis. Mr. Blum serves as chairman of the board of the giant real estate firm, and CalPERS has invested $229 million in CB Richard Ellis’ European funds. As of June 2009, however, these funds had decreased in value by 56 percent because CB Richard Ellis had taken excessive risks with private equity investments, according to CalPERS reports. Nonetheless, in 2009, CalPERS paid CB Richard Ellis a fee of $3 million for its investment advice. (For my long-time readers...names sound familiar?? They were brought up, or attempted to be brought up at some tables, but was sssshhhh'd...how's that shushing working for us now???)

In total, CalPERS’ investments in Mr. Blum’s private equity empire—via Blum Capital Partners, CB Richard Ellis, TPG Newbridge, and TPG Capital—added up to nearly $2.5 billion in 2009. (2009 is significant?? That awesome "Great Delta Reform Act of 2009" came down.)

The Governor’s Connection
Mr. Blum is not the only regent with a financial connection to CalPERS. Since 2004, CalPERS has paid $4 million a year to Dimensional Fund Advisors—a firm in which Gov. Schwarzenegger and Mr. Wachter have ownership stakes—to manage a $1.5 billion portion of its portfolio.

CalPERS investment in Dimensional Fund Advisors began in the 1990s and has averaged an annual return of 2.6 percent, according to a CalPERS press officer. (That rate of return was substantially lower than the average 6 percent return from fixed income instruments during the same period.)

CalPERS has also committed $2 billion to four private equity funds operated by Apollo Management. As previously detailed, Gov. Schwarzenegger and Mr. Wachter each have significant ownership stakes in Apollo Management.

Probability As an Investigative Tool
In addition to its direct investments with Blum Capital Partners, CalPERS separately held $76 million worth of stock in all 18 of the companies in Blum Capital Partner’s portfolio of public corporations, as of June 2009. (That deserved red, didn't it??...I'm well into my 3rd glass of excellent Delta wine...the sarcasm will increase appropriately!)

This was not an unusual occurrence for CalPERS, which in previous years had also invested in all of the companies that appeared in the portfolio of Blum Capital Partners, as did UC. But according to two probability theory experts consulted for this story—university professors who wish to remain anonymous—this could not have happened through pure chance.[1] Some basic math makes this clear:

Between 10,000 and 12,000 stocks are publicly traded at any given time, and CalPERS’ portfolio includes investments in about 4,000 public corporations. Thus, the chance of CalPERS picking one of Mr. Blum’s stocks is 0.4 or 40 percent. But the chance of CalPERS simultaneously picking all 18 of his stocks is one in 15 million.[2] (I love it when someone savvier than I does the math!!)

CalPERS and UC’s matching investments in all 18 of Blum Capital’s public company portfolio is not likely a coincidence, nor is it likely based on considerations such as industry concentration or historical rates of return, because the relevant stocks crossed into multiple industries, and had varying return rates (including substantial losses). (yeah...like the Monterey Agreements...not likely a coincidence, nor is it likely based on considerations such as industry concentration or historical...blah, blah, blah...because the same thievin' shysters are playing the same damn game on us.)

In fact, based on mathematical probability, it’s likely that investment managers at CalPERS and UC purposefully mirrored Blum Capital Partner’s portfolio. And it is widely known that a CalPERS investment tends to benefit its co-investors. (So there...!!!)

In response to this probability exercise, CalPER’s spokesperson, Clark McKinley, said that not all stocks are “institution-grade investments,” so “the probability of overlap existing [between CalPERS and Blum Capital Partners] would be high.” (Wanna know what's scary?? This genius is speaking on behalf of UC...lol)

He added, “CalPERS staff has never had any contact with the governor or his office regarding [Dimensional Fund Advisors] or Apollo, or any other investment matters involving him. We deal with external managers and general partners and their funds. We don’t gather information about other limited partners or investors in such funds.” (Plausible deniability, that's all I'm saying.)

--------------------------------------------------

[1] While sheer luck can generate windfall profits for securities traders, the stock market is a great leveler over the long run. It is impossible to consistently outsmart or “time” the market without insider knowledge. A long-term investor is more likely to receive an average return by picking stocks randomly, then she is by trying to outwit the system, or by paying for expensive investment advice from advisors with their own agendas. If you do not believe this somewhat counter-intuitive fact: read the classic analysis of stock market investment techniques: A Random Walk Down Wall Street (1973), by Burton Malkiel or the 2008 bestseller by Leonard Mlodinow, The Drunkard’s Walk, How Randomness Rules Our Lives.

[2] Here is the probability calculation we received after asking a probability theory expert, “What are the chances of an investor, that is holding 4,000 stocks picked out of a universe of 10,000 stocks, to randomly pick a particular group of 18 stocks?”

(And here's the math!!)

The answer: “Label those 18 stocks 1 through 18. Chance of No. 1 being in your selection of 4,000 is 4,000/10,000, or 0.4. Assuming that you have No. 1, chance that No. 2 is in the remaining 3,999 (chosen from the remaining 9,999) is 3,999/9,9999. Etcetera. So what you want is (4,000/10,000)*(3,999/9,999)*(3,998/9,998)* . . . *(3983/9983). Every one of those numbers is close to 0.4, so the answer is close to 0.4 to the power of 18. Doing the calculation exactly gives a chance of 6.872 * 10^(-8), or about 1 in 15 million.”

Posted by Peter Byrne on 09/22/10

Part Six: Billion Dollar Babies: University of California Invests $53 Million in Two Diploma Mills Owned by a Regent Reprint Spot.us

2014-02-07T18:51:00.001-08:00

Part Six: Billion Dollar Babies: University of California invests $53 million in two diploma mills owned by a regent

“Berkeley is a microcosm of the intrusion of corporations into education. … While public schools crumble, while public universities are slashed and diminished, while for-profit universities rise as our newest vocational schools, elite institutions become unaffordable even for the middle class.” -- Chris Hedges (Empire of Illusion, 2009)

In 2009, Richard C. Blum, then the chairman of the UC regents, spoke at the Milken Institute’s Global Conference, held at the Beverly Hilton in Los Angeles. The corporate confab was hosted by Michael Milken, the “junk bond king” who went to prison in the aftermath of the savings and loan fiasco of the 1980s. (You know...I raised my daughters to take into consideration the company one keeps. There is such a thing as 'guilt by association' and 'you become that which you surround yourself with'.)

Barred from securities trading for life by federal regulators, Milken has since recreated himself as a proponent of investing in for-profit educational corporations, an industry which regularly comes under government and media scrutiny following allegations of fraud made by dissatisfied students.

At the conference, Mr. Blum, who is a financier by trade, sat on a panel called “The New University and Its Role in the Economy,” alongside the presidents of the Massachusetts Institute of Technology and Arizona State University. The panel focused on how universities can best serve the corporate demand for tech-savvy employees by recruiting smart freshmen with scientific talent. One panel member urged treating universities as “laboratories of business ideas and products.”

As someone who oversees investment policy decisions for UC’s $63 billion portfolio, and as the largest shareholder in two for-profit corporate-run universities (in which UC invests), Mr. Blum had a unique perspective to share. He advised public universities to attract business-oriented students with clever advertisements, just as vocational schools do. “It’s like anything else,” he told the crowd. “It’s how you market it.”

Marketing strategy aside, Mr. Blum has taken on two seemingly disparate roles— one as an advocate for a nonprofit university, and the other as an owner of two for-profit educational corporations. As a regent, Mr. Blum has approved cost-cutting policies for UC that appear to have enhanced the profitability of his vocational schools. And in 2007, Mr. Blum’s spouse, Sen. Dianne Feinstein (D-CA), wrote federal legislation that benefited the for-profit college industry. (These two again?? For crying out loud...FBI??? Hello?? SEC, you there??? Senate Ethics...never mind nonexistent, my bad!)

For several years, Mr. Blum’s firm, Blum Capital Partners, has been the dominant shareholder in two of the nation’s largest for-profit universities, Career Education Corporation and ITT Educational Services. As of May, firm’s combined holdings in the two chain schools was $923 million—nearly $1 billion. As Blum Capital Partners’ ownership stake has enlarged over time, so have those made by UC investment managers, who have invested a total of $53 million in public funds into the two educational corporations.

Government ethics advocates are displeased by the relationship between UC and Regent Blum’s educational interests. “It is hugely inappropriate for the University of California to invest in for-profit colleges when it should be promoting public education,” said John M. Simpson of Consumer Watchdog, a Southern California nonprofit education and advocacy organization. “And something stinks when university investments end up in companies largely controlled by a regent. To the average fellow on the street, this would seem to be a conflict of interest. It is up to Mr. Blum and the UC treasurer to explain how it could not be a conflict of interest.” (Yeah...well I say, grow a pair and enforce it, geez.)

(image from http://www.jasoncrosbyillustration.com)

Recession capitalism Due to cost-cutting polices sanctioned by the UC Regents, including serial tuition hikes, class cuts, and reduced enrollment for in-state students, the gateway to higher learning in California has seriously narrowed. As a regent, Mr. Blum voted in favor of all of these measures—actions which have indirectly benefited the corporate colleges he owns. But Career Education Corporation and ITT Educational Services are not the only chain schools profiting from the financial disaster that besets so many public universities.

On March 13, The New York Times summed up the situation when it reported that many for-profit schools “have exploited the recession as a lucrative recruiting device while tapping a larger pool of federal aid … selling young people on dreams of middle-class wages while setting them up for default on untenable debts, low-wage work and a struggle to avoid poverty.” The Times noted that for-profit schools are directly benefiting from cuts in education, especially in California where state-funded universities and community colleges have been “forced to cut classes just when demand is greatest.”

In marked contrast to UC and other public universities that have turned students away due to budget cuts, ITT’s revenues have rocketed skyward in tandem with new enrollments. ITT recently reported to its shareholders that due to “higher unemployment rates among unskilled workers” company revenue increased to $1.3 billion, a doubling of its profit since 2005. Responding to a recession-induced increase in demand for vocational training, ITT has raised tuition by 5 percent; 70 percent of ITT’s revenue comes from federal tuition aid programs.

Chain schools get the third degree Nationwide, vocational school students are paying billions of dollars in tuition to stockholder-owned education corporations, primarily using federal grants and loans guaranteed by taxpayers. In the United States, the dominant vocational education corporations are the University of Phoenix, Corinthian Colleges, Strayer University, Kaplan (owned by The Washington Post Company), Career Education Corporation and ITT Educational Services. Collectively, these companies operate hundreds of schools and teach hundreds of thousands of low-income students, most of them eligible for public and private financial aid. The chains offer training for such technical professions as radiological technician, beautician, automotive mechanic, medical billing clerk, Web designer and massage therapist. But they also offer degrees in engineering, computer science and business.

Increasingly, they are promoting online education, which limits the education corporations’ operational costs, even though virtual courses are often not suitable for teaching nursing, cooking, massage, or car repair. As a result of delivering substandard education, some for-profit schools suffer from accreditation problems, according to recent news reports.

On a fairly regular basis, government regulators, including the U.S. Department of Justice, have accused chain schools of preying upon low-income individuals and active military service members. Typically, state and federal agency investigators report, chain school recruiters have loaded students down with loan packages averaging $30,000 that are attached to high interest rates. But fewer than 70 percent of enrollees graduate. Such a high dropout rate requires the corporations to continuously wage television, radio, Internet and print media marketing campaigns aimed at enticing students who want to better themselves—and who are, not incidentally, eligible for government-guaranteed loans.

Unfortunately, those who do graduate with two-year associates degrees from the chain schools often discover that the curriculum did not prepare them for the technical requirements of the jobs they seek. When graduates do find work, their wages often do not match the inflated salaries promised by school recruiters, according to government reports. And when dropouts and underpaid graduates inevitably default on their student loans, it’s the taxpayers who remain on the hook.

Every few years, mainstream media re-discovers these so-called “diploma mills,” publishing investigative stories to show that despite the marketing materials that tout their educational and career benefits, the chain schools are primarily focused on cashing in on taxpayer-backed grants and loans. Since last fall, The New York Times, Washington Monthly, ProPublica, Bloomberg, Frontline and The Associated Press have published exposés of the $26 billion vocational college industry.

In particular, the two schools in which Mr. Blum’s firm has controlling stakes have been targets of these investigations, although press reports do not mention him by name, nor do they reveal that UC invests in his for-profit schools while cutting back on public education.

Students as cash machines Blum Capital Partners, Mr. Blum’s investment firm, entered the for-profit education business in 1987, when he purchased a large block of shares in National Education Corporation, an Irvine-based vocational school that specialized in awarding mail-order diplomas. He joined the company’s board of directors, and took a seat alongside former U.S. Senator Barry Goldwater and David C. Jones, a former chairman of the Joint Chiefs of Staff. (And here is where it all began for Dick.)

Two years later, Mr. Blum got in hot water when angry shareholders filed a lawsuit claiming “the company issued rosy financial statements while Mr. Blum and other directors were selling their shares,” according to the Los Angeles Times. The shareholders argued in court documents that Mr. Blum sold $2.7 million worth of shares at about $24 per share after he learned—a day before the public announcement—that the company president planned to resign. When National Education Coropration’s share price bottomed out at $3.50 a share following the leadership change, Mr. Blum then re-invested in the troubled company. According to a 1997 The New York Times report, National Education Corporation was then “battered by accusations that its vocational schools were riddled with fraud.” Fraudulent or not, investing in the corporation’s stock remained a profitable pursuit.

By 1995, Mr. Blum had gained control of 11.5 percent of National Education Corporation stock. He did so by combining his firm’s capital with that of a nonprofit investment fund, Commonfund, for which Mr. Blum worked as an investment advisor. (Commonfund manages investments for more than 1,400 universities, including UC.) In 1997, Harcourt, the textbook publisher, bought National Education Corporation for about $750 million, or $21 a share. Mr. Blum and his private partners appear to have profited handsomely—there was money to be made in education!

After his appointment to the UC Board of Regents in 2002, Mr. Blum continued to grow his investment in for-profit education. In June 2005, Blum Capital Partners invested $24 million to buy 5 percent of the stock of Lincoln Education Services Corp., a $300 million operation with 32 campuses. But most notably, Mr. Blum also acquired large blocks of shares in ITT Educational Services and Career Education Corporation following dips in stock prices after government regulators began investigating corrupt practices at the schools.

In the case of ITT Educational Services, federal and state regulators investigated the company in 2004 after shareholders and students alleged that it was falsifying student attendance, grades, and job placement records in order to keep federal financial aid flowing. When the news broke, the price of ITT shares halved.

Blum Capital Partners pounced, purchasing reams of devalued ITT stock. It soon owned the largest block of stock in the company—a 10 percent ownership stake in 2006. Not long afterward, the investigations were closed with no findings of wrongdoing. By May 2010, ITT’s revenue exceeded $1.3 billion, and Blum Capital Partners’ stake was valued at $415 million.

Similarly, Blum Capital Partners bought shares of Career Education Corporation following a corruption controversy in 2004. A $1.8 billion operation that serves 90,000 students, Career Education Corporation was being investigated by multiple federal agencies after whistleblower lawsuits alleged that the school had allowed failing students to remain enrolled to maintain its pipeline to federal grants and loans. (Speaking of patterns...here's one I'm wondering if any one else has thought about...just exactly who are the people filing these massive amounts of lawsuits, driving down stock prices. Has anyone investigated each individual, see how many degrees from two to six, of separation there is back to Blum.)

In 2005, after “60 Minutes” televised an unfavorable story about the chain school, the value of the school’s stock dropped by more than half. Blum Capital Partners bought in for $33 million. (I'm curious, who pointed 60 Minutes in that direction? Who financed the investigation? Who knew someone that knew the person who made the editorial decisions at CBS...just a line of thought.) As of May 2010, Blum Capital Partners’ stake had grown to $508 million, making Mr. Blum’s firm by far the largest and most powerful shareholder of the chain school. A partner with Blum Capital Partners, Greg L. Jackson, sits on the board of Career Education Corporation. And even as Mr. Blum sat on the regents’ investment committee, UC invested in both ITT Educational Services and Career Education Corporation. (I feel like attorney Fletcher Reed in Liar, Liar...Oohh come on!!)

The UC connectionEven as Mr. Blum was buying stock in Career Education Corporation and ITT Educational Services, UC financial records show that the university’s investment managers were actively buying and selling these same stocks—to the tune of $53 million. But UC was not just holding onto these stocks to accrue value over time (as a prudent manager would do). In fact, UC’s external investment managers were day trading them in large amounts, as much as $2 million a trade, thereby affecting the daily price of these stocks.

To recap: UC was investing in two for-profit schools that were largely owned by a company run by Mr. Blum, a regent who oversees the management of the university’s stock portfolio as a member of the university’s investment committee. Does this situation pose at least the appearance of a conflict of interest? (Here is where a reasonable person slaps their forehead and exclaims, 'duh'!)

Not to UC officials. In response to queries about the propriety of UC’s investments in the for-profit colleges that are heavily associated with Mr. Blum, a spokesperson for UC Treasurer Marie Berggren responded by saying that, “The Treasurer’s Office doesn’t track regents’ holdings in making decisions about security selections, though regents’ holdings are disclosed as a matter of policy.”

In other words, the treasurer does not review the regents’ financial disclosure statements, which are public records, for potential conflicts. On the other hand, UC’s investments are also a matter of public record, and a regent could easily avoid conflicts— should he or she choose to—by not taking substantial positions in companies in which UC invests.

Mr. Blum did not respond to repeated requests for comment about his investments in for-profit education. But UC spokeswoman Lynn Tierney called on his behalf, saying that the university recruits its students from the intellectual elite, and only those with high grade-point averages and SAT scores are accepted. Therefore, she says, “UC is not losing students to Blum’s vocational schools, and there is no conflict of interest.” Ms. Tierney declined to discuss how UC’s cost-cutting measures could result in channeling UC-eligible students toward for-profit colleges largely controlled by Mr. Blum.

Noah Stern, president of Associated Students at the University of California, says he’s troubled by Mr. Blum’s dueling loyalties to UC and for-profit education: “Student trust in the regents was already shaky. In light of these revelations of investment abuse, we need a structural overhaul of the university governance system.”

Note: CalPERS, the state public pension fund, had invested $6 million in Career Education Corporation, and $10 million invested in ITT Educational Services through its public equities investment program as of the end of 2009. And CalPERS held more than $100 million in shares of both companies as part of a $500 million investment with Blum Capital Partners, which is an investment adviser to CalPERS.

Spot.Us Note: This story was first published earlier this year by The Berkeley Daily Planet, SN&R, North Bay Bohemian, Santa Cruz Weekly and the SF Public Press. Also published by UC Santa Cruz Faculty Association and theDaily Casserole.

Posted by Peter Byrne on 06/23/10

Part Five: Four Case Studies in Conflicts of Interest by UC RegentsReprint Spot.us

2014-02-07T18:19:00.000-08:00

Part Five: Four Case Studies in Conflicts of Interest by UC Regents

http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

Study No. 1: Dimensional Fund Advisors and Apollo Management:
The details behind UC’s $486 million investments in deals in which Gov. Arnold Schwarzenegger and Paul Wachter—both UC Regents—had significant interests.
Study No. 2: Glenborough Realty Trust: UC buys a company from Mr. Blum.
Study No. 3: Colony Capital: UC invests in private equity alongside Mr. Blum.
Study No. 4: Janus Capital Group: A remarkable confluence of investments.
(Isn't this getting gooood?? Soon, we will connect the dots of these players and our water fiascoes.)

Study No. 1: Dimensional Fund Advisers and Apollo Management
After Gov. Arnold Schwarzenegger assumed office in 2004, he appointed Paul Wachter, his business partner of more than 20 years, to the UC Board of Regents. Mr. Wachter was also hired to handle Gov. Schwarzenegger’s investments in a blind trust, which (in theory) is set up to sequester investments from all but the trustee’s view in order to limit possible conflicts of interest. For reasons that should be obvious, it was not ethically kosher for the governor to put a business partner, close friend, political advisor, and public servant such as Mr. Wachter in charge of this blind trust.

Still, Gov. Schwarzenegger, who is an ex-officio regent, chose not to place a large portion of his real estate and business partnership holdings in the trust overseen by Mr. Wachter. These assets—valued at about $100 million—became a matter of public record through the governor’s financial disclosure statements.

An analysis of the economic disclosure statements filed by Gov. Schwarzenegger and Mr. Wachter reveal that specific UC investments have benefited the financial holdings of both men. UC has placed $411 million with Dimensional Fund Advisors, an investment firm in which Gov. Schwarzenegger and Mr. Wachter each have an ownership stake. An additional $75 million of UC’s monies was invested in private equity funds run by Apollo Management, a firm in which both men hold substantial financial investments.

Government watchdogs say that this presents a clear conflict of interest. “The regents putting public money into Dimensional Fund Advisors and Apollo is a conflict of interest just like if Schwarzenegger was a plumber and the regents gave plumbing contracts to his company,” says Robert Weissman, president of Public Citizen.

The deals are summarized below.

Dimensional Fund Advisors
Santa Monica, California
The Company: Dimensional Fund Advisors is a privately owned company that operates a type of mutual fund known as an index fund. Stock in Dimensional Fund Advisors is not publicly traded; ownership of the firm is available only by invitation, and investment opportunities are limited to its directors, employees and select individuals, such as Gov. Schwarzenegger and his blind trustee, Mr. Wachter.
Gov. Schwarzenegger’s Interest: According to financial disclosure statements, Gov. Schwarzenegger owns “more that $1 million” worth of Dimensional Fund Advisors stock. (Note: this is not the same as investing with the firm, it is direct ownership of the firm.) Media reports put his ownership stake in the firm at a minimum of 5 percent, and he receives annual cash dividends of “more than $100,000.”
Mr. Wachter’s Interest: According to public disclosure statements, Mr. Wachter owns “more than $1 million” worth of stock in Dimensional Fund Advisors.
UC’s Investment: Since 2004, UC’s retirement fund has invested $329 million with Dimensional Fund Advisors. The UCLA Foundation, an endowment fund overseen by the regents, placed $82.3 million—or nearly 8 percent of its total endowment—in three investment funds offered by Dimensional Fund Advisors. The grand total of UC’s investment in Dimensional Fund Advisors is $411 million.
Fallout: When the economy tanked in 2008, UC’s investments with Dimensional Fund Advisors took a hit. By the end of 2008, the value of UC’s investment with Dimensional Fund Advisors via the retirement fund had fallen to $151 million. UC Treasurer Berggren declined to state whether this was a loss or a divestment.

Apollo Management
New York, New York
The Company: Apollo Management is a private equity firm that specializes in leveraged buyouts. It is run by financier Leon Black, who got his start selling “junk bonds” to small banks prior to their collapse during the savings and loan debacle of the 1980s. Mr. Black now raises large amounts of Apollo’s investment capital from university and union pension funds.
Gov. Schwarzenegger’s Interest: Gov. Schwarzenegger has “more than $1 million” invested in two Apollo Management funds (Apollo IV and Apollo V). Since 2004, he has reported income of more than $200,000 a year in dividends from these two investments.
Mr. Wachter’s Interest: Main Street Advisors, Mr. Wachter’s private investment firm, has invested up to $100,000 in Apollo IV (alongside Gov. Schwarzenegger). He holds up to $1 million in each of two other Apollo Management funds (Apollo VI and Apollo VII).
UC’s Investment: Since 2004, the regents have invested $75 million in two Apollo Management funds in which Mr. Wachter is invested (Apollo VI and Apollo VII). Both Apollo funds helped finance the less-than-lucrative Harrah’s Entertainment leveraged buyout in consortium with the investment firm TPG Capital, where Mr. Blum is an owner and executive. UC is not directly invested in Apollo IV or Apollo V, but all the Apollo funds share the same general partner, Apollo Management. See Harrah's Entertainment from Part Four.

Toeing the ethical Line
As the official who appoints most of the regents, Gov. Schwarzenegger has the ability to influence his colleagues on the board. But state laws and UC policy provide theoretical guidance on how to avoid a conflict of interest. If Gov. Schwarzenegger chooses to influence a regent, he is obligated to do so in a manner that does not conflict with his own financial interests. He could also ensure that his personal holdings do not overlap with UC’s holdings—not a difficult task since both the holdings of the governor and UC are part of the public record.

However, this did not happen with Gov. Schwarzenegger’s investments in Apollo Management and Dimensional Fund Advisors. The two firms received a total of $486 million in UC investments after he and Mr. Wachter joined the board of regents in 2003.

Mr. Wachter defended these investments by saying that the reg ng a UC investment committee meeting, UC Treasurer Marie Berggren told the regents that she is open to their suggestions when hiring outside investment management firms.)

Study No. 2: Glenborough Realty Trust
In addition to his executive position with the global real estate giant, CB Richard Ellis (CB Richard Ellis is another interest 'rabbit trail' that leads back to the same warren of nasty), Mr. Blum’s business interests include the purchase and sale of real estate companies for his personal portfolio. At least one such transaction, the 2006 leveraged buyout of Glenborough Realty Trust, was made possible by a UC investment.
The Deal: A real estate company based in San Mateo, California, Glenborough was sold to Morgan Stanley Real Estate in a $1.8 billion leveraged buyout that took the company private in November 2006.
UC’s Investment: UC invested $42 million in the Morgan Stanley private equity investment fund that bought Glenborough.
The Blum Connection: At the time of the Glenborough sale, Mr. Blum owned Glenborough stock worth about $2.5 million, and he sat on the company’s board of directors. U.S. Securities and Exchange Commission disclosure statements filed by the real estate company prior to the sale asserted that as a member of its board of directors, Mr. Blum would see direct financial benefit from the buyout.
Details of the Deal: Glenborough owned scores of high-end office buildings in a half-dozen major cities, including San Francisco. Private equity suitors regularly came calling on the Glenborough board of directors, hoping to buy the profitable company. Morgan Stanley won Glenborough’s hand with a $1.9 billion offer via one of its private equity investment funds called MSREF V.
Public records show that before the sale, UC held $8 million in this Morgan Stanley fund (MSREF V). After the sale of Glenborough was announced, UC increased this amount by $34 million, for a total investment of $42 million.
The Morgan Stanley fund (MSREF V) put up a cash payment of $325 million to realize the Glenborough deal (UC’s contribution, via the Morgan Stanley investment fund, was equivalent to 13 percent of the cash that was made as a down payment). The majority of the remaining $1.8 billion purchase price was leveraged by a loan from Deutsche Bank Securities. The original members of the Glenborough board of directors, including Mr. Blum, sold their stock at a premium price.
Fallout: Glenborough was saddled with a tremendous debt load from the acquisition and it struggled mightily to meet the loan obligation. The deal turned out to be a bad investment for UC. By the end of 2009, due to the collapse of the real estate market and the company’s debt burden, the value of UC’s investment in the Morgan Stanley fund (MSREF V) had plummeted to $3.5 million, recording an apparent loss of $38.5 million from its height.

Study No. 3: Colony Capital
Since 2007, UC has invested millions of dollars with Colony Capital, a Los Angeles private investment firm. One of Colony Capital’s principal partners is Richard Nanula, a longtime trustee of the University of California, Santa Barbara. One of Colony’s business partners is Mr. Blum. The intersection of financial interests between UC, Colony Capital, and Mr. Blum is revealed through the workings of the leveraged buyout deals of Fairmont Raffles Holdings International in Toronto and Station Casinos in Las Vegas.

Summaries of both deals are presented below.

Fairmont Raffles Holdings International
Toronto, Canada
The Players:
• Colony Capital is a $45 billion private equity firm specializing in the privatization of hotels and casinos. It owns one of the world’s largest casino-hotel conglomerates, Resorts International.
• Prince Alwaleed bin Talal bin Abdulaziz Alsaud is a member of the royal family of Saudi Arabia and one of the world’s wealthiest individuals.
• Kingdom Holding Company (KHC) is Saudi Arabia’s largest corporation. Prince Alwaleed owns 95 percent of KHC, which in turn owns large stakes of American corporations, including Citigroup, Apple, and News Corp.
• Kingdom Hotels International is a KHC subsidiary.
• Fairmont Raffles Holdings International is an international luxury hotel chain. Mr. Blum has been a member of its board of directors since 2006.
The Deal: In 2006, Kingdom Hotels and Colony Capital partnered to realize a $5.5 billion merger and acquisition of two hotel chains: Fairmont Hotel and Resorts and Raffles International. The companies were combined into a privately held entity named Fairmont Raffles Holdings International.
The Blum Connection: To finance the buyout deal, Colony Capital set up a series of private equity investment funds. Sen. Dianne Feinstein has disclosed that Blum Capital Partners invested in the hotel chain merger through a Colony Capital investment fund named Colony HR Co – Investment Partners III. Mr. Blum was appointed to the new corporation’s board of directors by Colony Capital and Prince Alwaleed.
UC Investment: As the hotel deal was in process, Colony Capital created a related fund (Colony Capital VIII) to develop hotel and casino properties in the Middle East and elsewhere. Between 2007 and 2009, UC’s endowment and retirement funds invested $16.6 million in this Colony Capital fund. This fund did not directly finance the Fairmont Raffles merger, but its hotel and casino funds interlock, each sharing an interest in the success of the others.
Fallout: California conflict of interest law deems a limited partner in a private equity fund to be invested in the general partner of that fund. Consequently, say the state’s conflict of interest guidelines: “When the limited partner has such an investment, he or she must disqualify [from the decision making process] with respect to decisions affecting the general partner personally or through business entities controlled by the general partner.” In sum, Mr Blum’s investment in Colony HR Co – Investment Partners III gave him an economic interest in all of Colony Capital’s funds, including the fund UC invested in, Colony Capital VIII. But, apparently, Mr. Blum did not recuse himself from making any policy or other decision making consideration that could have affected UC’s investment in Station Casinos via Colony Capital VIII.

Station Casinos
Las Vegas, Nevada
The Players:
• The Fertitta family operates and partially owns Station Casinos, one of the largest casino chains in Nevada. Until three years ago, it was a publicly traded company.
• Real estate firm CB Richard Ellis bills itself as “the leading global casino real estate advisor.”
The Blum Connection: Mr. Blum is the chairman of the board and a controlling shareholder of CB Richard Ellis. He is a member of the board of directors of the hotel chain Fairmont Raffles Holdings International, owned by Colony Capital. He is also an investor in a Colony Capital acquisition fund.
The Deal: In 2007, Colony Capital partnered with the Fertitta family in a $5.7 billion leveraged buyout (taking the public company private). Colony partly financed the deal with Colony Capital VIII. U.S. Securities and Exchange Commission records show that as the deal was being negotiated, Station Casinos hired CB Richard Ellis to evaluate the Fertitta-Colony offering to Station Casino’s public shareholders. CB Richard Ellis was charged with determining if the offering was fairly priced. Mr. Blum’s firm told Station Casino shareholders that the deal was a solid investment.
UC’s Investment: While Mr. Blum served on the regents’ investment committee, UC invested $16.6 million in the Colony Capital fund (Colony Capital VIII) which bought Station Casinos in a deal that was partly overseen by CB Richard Ellis, a company Regent Blum controls. The deal benefited Colony Capital, a firm to which Mr. Blum is deeply connected through investments and a board directorship.
Fallout: Not long after it was privatized, Station Casinos declared bankruptcy due to the combined effects of the recession and the $1.6 billion operating debt that its new owners had imposed on the company via the buyout. Former shareholders of Station Casinos claimed that the deal was not in their best interest, as CB Richard Ellis had claimed. The Colony Capital fund that financed the Station Casinos buyout (Colony Capital VIII) has lost more than half its value due to the soured deal, enraging institutional investors. As of December 2009, the value of UC’s investment in Colony Capital VIII had decreased by $6.3 million.

Study No. 4: Janus Capital Group
The Players:
• Axa Rosenberg, a division of the global investment firm, Axa, was one of several dozen external investment managers retained by the regents to handle millions of dollars from the UC’s retirement and endowment portfolios after Treasurer Small was ousted.
• Janus Capital Group is a financial company that manages mutual funds.
• Blum Capital Partners invests in both private and public equity on behalf of its private clients (whose identities are not public).
UC’s Investment: UC Treasurer Marie Berggren has disclosed that her external investment managers—she declined to specify which ones—bought and sold $26 million in Janus Capital stock on UC’s behalf between 2005 and 2008. During the same time period, Axa Rosenberg’s parent company, and three other UC external managers, invested heavily in Janus Capital stock using non-UC funds. These investments were made concurrently with large investments in Janus by Mr. Blum’s investment firm, Blum Capital Partners.
The Deal: These substantial investments by four UC external managers—using UC funds and also on behalf of other clients—had the effect of ratcheting up the price of the Janus stock because these purchases increased demand.
Fallout: Even if the substantial investments in Janus by Blum Capital Partners and UC’s external managers were purely coincidental, there is an appearance of a conflict of interest because Blum Capital Partners, a market mover, invested heavily in Janus stock in tandem with UC, another market mover, and several investment firms contracted to manage UC investments, all market movers. And UC’s investments were overseen by Mr. Blum, as a regent.

The story ends differently for the various parties. Blum Capital Partners sold its Janus stake at its apogee in 2007 for a substantial profit. Meanwhile, it appears that the investment resulted in a financial loss for UC.

TIMELINE OF BLUM CAPITAL PARTNERS’ and UC’S INVESTMENT IN JANUS CAPITAL GROUP (Sourced from SEC filings, UC investment data, commercial databases, press reports.)

2004 to 2005
• In April 2004, UC hires Axa Rosenberg as an investment advisor, ultimately making it responsible for managing $156 million of the UC retirement and endowment funds.
• In the first quarter of 2005, Blum Capital Partners makes an initial investment in Janus of $102 million, paying about $13 a share.
• Throughout the course of the year, UC (though external managers) purchases $5.6 million in Janus shares.

2006
• Early 2006: Axa Rosenberg’s parent company, Axa, invests $7.8 million in Janus.
• Mid-2006: Axa increases its holding in Janus to $56 million. Dimensional Fund Advisors (a UC external manager that is partially owned by Regents Wachter and Schwarzenegger), holds $39 million in Janus stock. Adage Capital, also a UC external manager, holds $2.9 million.
• Third quarter 2006: Blum Capital Partners purchases more Janus stock, and now owns $388 million worth of shares in the company for an ownership stake that exceeds 10 percent. The Janus stock price continues to rise.
• Fourth quarter 2006: Blum Capital sells a portion of its Janus stock, and Axa increases its investment ten-fold to $575 million. The share price reaches $21. Dimensional Fund Advisors nearly doubles its holdings in Janus.
• Throughout the course of the year, UC engages in a series of rapid trades of Janus stock, buying and selling $3.4 million worth of shares. Rather than maintaining a solid position, UC external managers often trade the stock several times a day, hoping for small profits in the margins as the stock price continues to rise.

2007
• Early to mid-2007, Blum Capital Partners buys, sells, and re-buys Janus stock, turning a profit by taking advantage of fluctuations in the market (this tactic is called “arbitraging”). On their own accounts, four UC external managers—Axa Rosenberg, Dimensional Fund Advisors, Adage Capital, and Goldman Sachs Group—also buy large amounts of Janus stock, for a combined total of $781 million worth of shares, or about 15 percent of the company.
• September: After buying and selling Janus stock throughout the year, the value of Blum Capital Partner’s Janus holdings increases to $502 million, making it the third-largest Janus shareholder. Axa remains the largest shareholder, holding $622 million in Janus stock.
• Throughout the course of the year, through its external managers, UC trades $4.2 million in Janus stock. In at least one instance, UC buys and sells $3.1 million worth of shares in a single day.
• Late November: Due to high demand—created in part by the large Janus investments made by UC’s external managers—the price of Janus stock peaks at $36 per share. During the last quarter, Blum Capital Partners sells its entire stake—about 17 million shares—for more than a half-billion dollars, clearly reaping a huge gain.

2008
• As the recession hits, Janus’ stock price freefalls, bottoming out at $3.95 a share.
• UC continues to trade Janus stock, buying and selling a total of $12.7 million in rapidly failing Janus stock—sometimes more than $2 million a day—in an effort to squeeze pennies out of minor fluctuations in the meltdown process. By the end of the year, UC has traded $26 million in Janus stock since the beginning of 2005.
• The amount of money Axa Rosenberg manages for UC plummets from $156 million in 2007 to $69 million by the end of 2008. UC Treasurer Berggren declined to say if this was a result of Janus investments.

2009
• December: Axa holds $1.7 million worth of Janus stock and UC still has nearly $2.5 million in Janus shares on its books. Since gainfully divesting itself of Janus stock in 2007, Blum Capital Partners has not reinvested in it. UC Treasurer Berggren declined to say how much UC has gained or lost as a result of the Janus investments.

Posted by Peter Byrne on 09/22/10

Part Four: Seven Private Equity Deals: How Regent Richard C. Blum Benefited from $748 Million Worth of Private Equity and Bond Investments by UC Reprint Spot.us

2014-02-07T17:43:00.000-08:00

http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

Blum Capital Partners, based in San Francisco, handles a $2 billion portfolio. Mr. Blum is the chairman of the investment firm’s board. He is also a principal executive and an owner of Fort Worth’s $45 billion private equity firm, TPG Capital, which has a history of partnering with a New York-based private equity firm called Apollo Management. (Aaah and here we have one of the ties that bind Mr. Blum to one Mr. William K. Reilly. Who is William K. Reilly, you ask? Well, Mr. Reilly is the Senior Advisor with equity holding in TPG Capital...see link to TPG Capital and Texas Public Utilities leveraged buyout fiasco link in Part 3.

And how is Mr. Reilly significant in this? Well, he sat on the Delta Vision Blue Ribbon Task Force, for starters as related to current water shenanigans...his genealogy will be up next, and his is a very interesting pedigree!! )

Mr. Wachter has disclosed multi-million dollar holdings in a range of Apollo Management funds.

During Mr. Blum and Mr. Wachter’s seven-year tenures on the regents’ investment committee, UC has invested $748 million in private equity deals involving Apollo Management, Blum Capital Partners, and TPG Capital. Several of these deals received contributions from the California Public Employees Retirement System (CalPERS), the country’s largest public pension fund, for which Blum Capital Partners is a paid investment advisor. (Reminder...Blum was the investment director during the Carpenters' Health and Welfare Trust Fund hey day...see a pattern developing?? http://www.sacbee.com/2013/12/30/6035570/from-the-notebook-what-calpers.html

Also note, the original December 28, 2013 front page feature is no longer on Sacbee's website. AND she settled.)

Below are summaries of seven private equity deals in which UC invested when Mr. Blum had concurrent business interests; one of these deals (Harrah’s Entertainment) involved Mr. Wachter.

Theses facts were ascertained from reviewing thousands of pages of SEC filings, commercial databases, UC public records, and press accounts. (Link to original live links http://www.spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story )

Harrah’s Entertainment
Las Vegas, Nevada
The Company: Harrah’s Entertainment Inc. operates 52 casinos in seven countries.
The Deal: In 2008, investment firms TPG Capital, Apollo Management and Blackstone Capital Group partnered in a leveraged buyout of Harrah’s for $30.7 billion.
The Blum Connection: In 2008, Mr. Blum disclosed investments worth “over $1 million” in various TPG funds (including funds named TPG IV and TPG V). He was also a TPG Capital owner and executive.
The Wachter Connection: Since becoming a regent, Mr. Wachter has disclosed investments worth “up to $1 million” in two Apollo investment funds (Apollo VI and VII) that provided capital to the Harrah’s deal.
UC’s Investment: At the time of the Harrah’s transaction, UC had $75 million invested in the same two Apollo Management funds in which Mr. Wachter was invested and which were themselves invested in the Harrah’s deal. During that period, UC also held $4.1 million in two TPG Capital funds, including one that helped finance the Harrah’s deal (TPG V). The investments in the TPG funds were made by several UC campus endowment foundations overseen by the regents while Mr. Blum—a TPG Capital executive who was himself invested in the Harrah’s deal (via TPG V)—served on the the regents’ investment committee. UC also had $120 million invested with a private equity fund run by Blackstone Capital Partners (Blackstone Capital Partners V), which participated heavily in the Harrah’s buyout.
In total, UC’s general endowment and retirement funds committed $200 million to four private equity funds that financed the Harrah’s buyout, a deal in which Mr. Blum and Mr. Wachter each had significant financial interests.
The Fallout: Since the buyout, Harrah’s has hemorrhaged capital due to the overall decline of the gambling industry amid the global recession. Its ability to generate enough cash to pay back limited partner investors such as UC has been hampered by the $12.4 billion acquisition debt that Apollo Management, TPG Capital, and Blackstone Capital Partners placed on the books of the casino empire after acquiring it. UC’s investment in the private equity funds that participated in the Harrah’s deal had lost up to 40 percent of their value, as of March 2009.

Washington Mutual
Seattle, Washington
First American Corporation (now CoreLogic, Inc.)
Santa Ana, California
The Companies: Before its acquisition by New York’s JPMorgan Chase, Washington Mutual (WaMu) was one of the country’s largest banks. In the fall of 2007, it stunned investors by declaring a loss of several billion dollars in the sub-prime housing market. Simultaneously, the New York Attorney General sued a title company, First American Corporation, for conspiring with WaMu to inflate real estate appraisals. The price of WaMu and First American stock fell through the floor.
The Deal: In June 2008, in a major miscalculation of risk factors, TPG Capital bought a $7 billion stake in WaMu, becoming its largest shareholder. (Personally, I disagree with 'major miscalculation', I believe this went down exactly as planned. What better way to simultaneously wipe out an entire segment of society...the entire middle class?)
The Blum Connection: Mr. Blum participated in the WaMu investment through an interlocking series of TPG Capital funds (including TPG V and a related fund named Olympic Investment Partners). Blum Capital Partners also invested heavily in First American shares when the price plummeted following the allegations of appraisal collusion. (What do we have here?? What's that word? Collusion??...and y'all thought I was just making this up!!)
UC’s Investment: In 2008, the UC Berkeley campus endowment fund invested $4.1 million in two TPG Capital funds that financed the WaMu deal (TPG V and TPG VI). UC retirement fund managers made a bad bet (bad bet my butt...from where I sit, seems to me that bet was right on the money!) by increasing their stake in WaMu bonds seven-fold, from $31 million in 2006 to $215 million by the end of 2007. Through its external managers, UC also purchased First American stock when its share price fell, putting $7 million into the failing company by the end of 2009.
The Fallout: The FDIC seized WaMu in September 2008, selling its assets on the cheap to JP Morgan Chase. Stockholders were wiped out. TPG Capital is reported to have suffered a loss of $1.3 billion, which would likely negatively affect the fund that UC had invested in (TPG V), although this information is not public. By the end of 2008, the value of UC’s investment in WaMu bonds had declined by $48 million. First American continues to struggle financially and in the courts.

Univision
New York, New York
The Company: Univision is the dominant Spanish-language media company in the United States, operating 62 television stations and 69 radio stations. (Spanish or English, finally comprehend why we can Not get a fair shake or even level playing field in the MSM??? Well...here you go.)
The Deal: In March 2007, a consortium of five private equity investment companies led by a former UC Regent named Haim Saban acquired Univision Communications in a $13.7 billion leveraged buyout. The private equity investors were Saban Capital Group, TPG Capital, Madison Dearborn Capital Partners, Providence Equity Partners, and Thomas H. Lee Partners.
The Blum Connection: Mr. Blum participated in the Univision deal through his investments in two TPG Capital funds (TPG IV and TPG V). His spouse, Sen. Dianne Feinstein, disclosed Univision as an asset in 2007. Mr. Blum also maintained a financial interest in the deal by virtue of being a principal executive and owner of TPG Capital.
UC’s Investment: A member of the UC investment committee, Saban resigned as a regent in 2004. Mr. Saban then put together the Univision deal. During the acquisition, UC campus endowment funds had invested $4.1 million in two relevant TPG Capital funds (TPG IV and TPG V). Additionally, UC had invested $150 million in the two Madison Dearborn funds that financed the Univision buyout (Madison Dearborn IV and Madison Dearborn V).
The CalPERS Connection: CalPERS invested a total of $1.8 billion in private equity funds that financed the purchase of Univision: $450 million in two Madison Dearborn funds (Madison Dearborn IV and Madison Dearborn V); $125 million in a Providence Equity Partners fund; $300 million in a Thomas Lee Equity Partners fund; and $950 million in the two TPG Capital funds (TPG IV and TPG V). (That's a lot of change passing through this chump's pockets...NOW do you understand why I say when BDCP collapses, and it will...Blum and Reilly and/or their proxies, will come riding in claiming to be Knights in Shining Armour, here to save the day. To build the twin tunnels or any form of conveyance that fast-tracks our Public Trust water into the aqueduct and into Kern County Water Bank is mere child's play for these two pirates...certainly money well spent considered the water auction that just when down...)
The Fallout: Following the buyout, Univision’s new owners—including TPG Capital and Apollo Management—placed the $10 billion debt from the buyout on the company’s balance sheet, creating a financial burden. (Isn't there something called Fiduciary Responsibility?? Isn't it about time this rat-bastard is held to the same standard the rest of us are in handling any form of Other People's Money?) The value of UC’s investment in one Madison fund decreased by 17 percent as the spring of 2009, while the other showed a gain of 18 percent. Apollo Management and TPG Capital collectively charged its investors, including UC, a $200 million transaction fee for managing the deal. (And that loss was made up by withdrawals from account holders accounts to make that transaction fee payment, again...a whole lot of hard work taken by the swipe of a pen, or a keystroke. Gone. How does one replace 20-30+ years of contributions into what you believe is your retirement and old age security?? Well, you don't.)

Freescale Semiconductor
Austin, Texas
The Company: Freescale is one of the largest semiconductor manufactures in the world.
The Deal: In December 2007, Freescale announced that it had been acquired by a consortium of private equity firms consisting of the Blackstone Group, the Carlyle Group, TPG Capital, and Permira Advisors.
The Blum Connection: To purchase Freescale, a multi-billion dollar down payment was raised from investors, including two TPG Capital funds (TPG IV and TPG V), in which Mr. Blum was invested. Mr. Blum was also a TPG Capital principal.
UC’s Investment: UC was invested in both TPG Capital funds involved with the Freescale transaction (TPG IV and TPG V). It had also committed $120 million to another fund involved in the Freescale buyout (Blackstone Capital Partners V, L.P.).
The CalPERS Connection: CalPERS invested billions of dollars in funds that supported the Freescale transaction, with $1.4 billion committed to the relevant Carlyle Group funds, $347 million in a Permira fund, and $950 million in the two TPG Capital funds (TPG IV and TPG V).
The Fallout: Within months of the buyout, Freescale’s sale of cell phone semi-conductors went into a tailspin. The company began to sink, over-burdened with the $9.5 billion in debt that the private equity firms had loaded onto Freescale’s balance sheet to pay for its own acquisition. (Again, isn't this corporate piracy?? Isn't there a law against this crap??) In April 2008, Business Week called the Freescale deal “one of the ugliest buyouts in history.”

Sungard Data Systems, Inc.
Wayne, Pennsylvania
The Company: Sungard Data Systems is a software company that provides information technology services to financial companies, nonprofit organizations, and school districts.
The Deal: In 2005, a consortium of private equity firms acquired Sungard in an $11.3 billion leveraged buyout. The participating firms included TPG Capital, Silver Lake Partners, Bain Capital, and Blackstone Capital Partners.
The Blum Connection: A principal in TPG Capital at the time, Mr. Blum was also invested in two TPG Capital funds involved in the buyout (TPG III and TPG IV).
UC’s Investment: At the time of the acquisition, UC had invested $80 million in two private equity funds that helped finance the Sungard buyout (Bain Capital Fund VIII and Blackstone Capital Partners IV).
The CalPERS Connection: CalPERS committed a total of $325 million to two private equity funds involved in the Sungard buyout (Silver Lake Partners II and Blackstone Capital Partners IV). CalPERS also had $350 million invested in the TPG Capital funds that bought Sungard (TPG III and TPG IV).
The Fallout: In 2005, the Sungard deal was the second-largest buyout in history, and the largest privatization of an information technology company. (Followed by the acquisition of the largest public water bank. ) UC appears to have made a profit on the investment.

Kinetic Concepts, Inc.
Santa Rosa, California
The Company: Kinetic Concepts manufactures medical equipment to treat wounds, burns and injuries sustained in accidents and combat.
The Deal: In 1997, Richard C. Blum & Associates (the predecessor to Blum Capital Partners) entered into a leveraged buyout deal to purchase Kinetic Concepts with Fremont Partners III, a private equity fund run by the Fremont Group (an investment arm of San Francisco’s Bechtel Corporation) Welcome Bechtel to our family of financial inbreeders). The Fremont Group and Blum jointly acquired a majority stake in Kinetic Concepts, and proceeded to take the company private.
UC’s Investment: In 2003, after Mr. Blum became a regent, UC invested $8.2 million in Fremont Partners III, which was still partnered with Mr. Blum's firm on the Kinetic Concepts deal. In 2004, as the number of wounded soldiers increased from two simultaneous wars in Iraq and Afghanistan, the Fremont Group and Mr. Blum’s firm took Kinetic Concepts public for a reported gain of $800 million. As of the end of 2009, UC has purchased $46.8 million in newly-issued Kinetic Concepts stock. (Folks...I haven't even started down that road...)
The Fallout: UC kept its investment with the Fremont Partners III fund until the end of 2006, and the deal appears to have been profitable for both Mr. Blum and UC. (It ’s worth noting that in 2000, Kinetic Concepts held only $116,000 in contracts with the U.S. Department of Veterans Affairs. By 2006, as wounded soldiers rotated through veterans hospitals, the value of these contracts shot up to $12 million. During this time, Sen. Feinstein was the chairperson of the Senate Appropriations subcommittee on veteran’s affairs that vetted and approved these projects.)

Commonfund
Westport, Connecticut
The Company: Commonfund is a $26 billion nonprofit asset management company that handles investments for more than 1,400 public and private university pension and endowment funds.
The Blum Connection: From 1995 to 2004, Blum Capital Partners served as an investment advisor to Commonfund. Advisors are typically paid a percentage of the amount of capital they are able to attract to the fund.
UC’s Investment: In 2002, the same year that Mr. Blum became a regent, several UC campus endowment foundations collectively invested $3.1 million in a series of private equity and venture capital partnerships sponsored by Commonfund. This amount tripled the following year. By the middle of 2004, Commonfund no longer reported Blum Capital Partners as an advisor, but its relationship with UC expanded. By 2008, UC’s overall investment in Commonfund had grown to $41.3 million.
The Fallout: When the sub-prime mortgage meltdown hit Wall Street, Commonfund suffered. The value of UC’s Commonfund investment sank by $5 million. In 2009, UC Treasurer Marie Berggren reported to the regents that Commonfund was temporarily “shutdown,” and that UC would no longer receive its cash back upon demand.

Posted by Peter Byrne on 09/22/10

Part Three: The Regents Club: Conflicts of Interest Are Nothing New at UC, but They May Be Getting Worse

2014-02-06T15:40:00.000-08:00

Part Three: The Regents Club: Conflicts of interest are nothing new at UC, but they may be getting worse

http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

“It is just amazing that these regents are enriching themselves at the expense of the institution they are supposed to be leading. We are not talking about one or two isolated instances, or a piddling amount of money but $2 billion. Financially, California is going down like the Titanic, and these people are pocketing the silverware.”
--Ken Boehm, National Legal and Policy Center

Historical photo - UC Regents, April 18, 1959

For decades, the UC Board of Regents has consisted of wealthy and politically connected individuals who have often been beset by charges of conflict of interest. The past is prologue.

On June 23, 1974, the Los Angeles Times published an investigation titled, “UC Regents: An Elite Club That Runs a Vast University.” The story revealed that many of the regents were millionaires with little or no background in education policy. Most had plenty of experience leveraging political connections for pecuniary gain. This wealthy group of socialites, lawyers, oil men, and industrialists was out of touch with students and the common people, the Times observed: “They drive fine cars and own boats and airplanes. They belong to the best clubs and play tennis on their own private courts.” And in their dealings with each other, “the camaraderie and gentility of a private club are maintained … Most regents consider it bad form to discuss their finances.”

Today, some 35 years later, this clubby mentality still rules.

A history of conflict

The UC Board of Regents was created in 1868 to govern the state’s public research universities. Over the years, usually in the wake of financial scandals or charges of conflicts of interest, its structure has been reconfigured.

Currently, the governor appoints 18 of the 26 members to 12-year terms; the regents themselves select a student representative for a one-year term. The balance of voting regents are considered ex-officio, and they are drawn from a constitutionally-mandated list of state officials that includes the governor. In other words, the regents are—and always have been—a fabulously politicized body.

In the past half-century, the financial pedigrees of many regents have created particular challenges for avoiding conflicts of interest. In 1965, Free Speech Movement activist Marvin Garson responded to a call by the California Federation of Teachers to “investigate the composition and operation of the Board of Regents.” He produced a well-documented study noting that, “taken as a group, the Regents are representatives of only one thing—corporate wealth.” The study observed that the prospect of conflicted interests was very real for the regents, whose “business is carried on in executive session in informal meetings of which no written record may exist. … It is entirely possible for a Regent to telephone his broker with a buy or sell order right after the Committee on Investments decides to buy or sell a big block of shares.”

Five years later, the California State Auditor found that Regent Edwin W. Pauley, owner of Pauley Petroleum, had personally profited when university officials steered $10.7 million dollars into one of his company’s business deals. Additionally, the auditor discovered that several regents had conflicts of interest due to business ties with a private real estate firm, the Irvine Company, which was developing the land surrounding a new campus, the University of California at Irvine. Following these revelations, the regents passed a conflict-of-interest policy prohibiting university officials from “making personal gain out of university transactions.”

The regents were also increasingly bound by state laws enacted in the ‘70s to monitor the ethical behavior of public officials. In 1972, voters passed a statewide proposition requiring open meetings of public bodies, which includes the regents. Although some secret sessions are allowed under this law, a large portion of UC’s financial records are considered part of the public record.

Two years later came the California Political Reform Act of 1974, which prohibits public officials from even the appearance of using their position to influence governmental decisions that might be personally beneficial. To increase transparency and accountability, each regent must now file an annual economic disclosure report listing his or her assets in California.

Notwithstanding these safeguards, conflicts of interest continued to arise:

In 1978, the state auditor found that UC was improperly investing in a corporation that included a regent on its board of directors.

In the early 1990s, the state auditor reported that some regents were improperly availing themselves of lavish travel and entertainment allowances. This audit unleashed a storm of public outrage, since the regents had simultaneously raised tuition.

In the mid-2000s, a series of media exposés were published concerning a variety of problems at UC, including excessive salaries and benefits for UC administrators; the regents’ mismanagement of the nation’s nuclear laboratories; and the hiring of an investment firm (Wilshire Associates) with business connections to then-Regent Gerald Parsky.

During that time period, an employees’ union revealed that then-Regent John Hotchkis had a financial interest in a firm selected to manage $430 million worth of university investments. Additionally, the head of another firm chosen to manage $311 million in UC funds turned out to be Mr. Hotchkis’ daughter.

Today, UC’s current operating budget is $20 billion. The various endowment and retirement funds totaled $63 billion at the end of 2009. With such an enormous amount of public funds in play, the regents are bound to meticulously adhere to state laws and university policies that prohibit self-dealing. It is incumbent upon those individuals who are charged with overseeing the UC pension and endowment funds to avoid influencing or voting on investment decisions that potentially, actually, or even appear to affect their personal business affairs.

The current crop of regents has failed to consistently hold itself to these ethical standards—especially when it comes to private equity investments.

The private equity fiasco

Private equity investing is attractive to sophisticated investors and large institutions because it has the potential for large returns. But unlike deals that take place on public stock exchanges—where sales and purchases are public information and regulated by the U.S. Securities and Exchange Commission—the realm of private equity is opaque, largely unregulated, and extremely difficult to exit should a deal go bad.

After Patricia Small left the UC Treasurer’s office in 2000, the number of private equity partnerships in UC’s portfolio doubled. By 2003 the amount of money placed in private equity had more than tripled, and in 2009, the university’s books carried a balance of $6.7 billion committed to 212 private equity partnerships, which consist primarily of leveraged buyout funds See Leveraged Buyout of Texas Public Utilities for additional players!--more than ten percent of the investment fund total of $63 billion!

These have not proven to be prudent investments, overall. As of spring 2009, UC’s return on the private equity portfolio was running at a negative 20 percent for the fiscal year, asserted Treasurer Marie Berggren's annual report. And according to operating reports made by Berggren to the investment committee, much of the loss to that portfolio was tied to the souring of leveraged buyouts during the recession.

In a leveraged buyout, private equity firms act as a “general partner” by arranging private investment opportunities to purchase companies or real estate. The general partner finds “limited partners”—typically institutions, pension funds, or wealthy individuals—to invest in that fund. (The limited partners have little or no say in how the fund operates since it is being managed by the general partner.) The capital provided by the limited partners is used as a down payment for the purchase, and a large bank loan covers the remainder of the sale price. (Kinda sounds a bit like kiting.)

Although leveraged buyouts can be lucrative for both the limited and general partners, the buyout can also take on a predatory quality. In this scenario, the limited partners have the most to lose.

Here’s how the darker version of these deals go down: Once a company has been acquired, the investors can off-load the responsibility for paying back the large bank loan onto the company itself. At the same time, the new owners can strip the acquired company of cash and other valuable assets to pay dividends to the general partners. Looted companies often collapse from a lack of operating capital brought about by trying to pay off the combination of the unsustainable debt burden and the dividend payouts.

Collapse can cause the limited partners to lose their entire investment. The private equity firm’s general partners may survive because they can charge their investors management fees regardless of a deal’s outcome. While less predatory leveraged buyout acquisitions can certainly benefit both the acquired company and all of its investors, the companies involved in the UC deals discussed in this story, for the most part, do not fall into the beneficial category.

In 2009, Ms. Berggren reported that the average annual “internal rate of return” for the retirement plan’s private equity portfolio since 1979 was a mere 1.8 percent. But fixed-income investments had generated an average annual rate of return of 6 percent over a similar period. The only sector of the portfolio that fared worse than private equity was private real estate.

After Ms. Small left her post as UC treasurer, the university’s allocation to private real estate deals increased from nearly zero to $4.5 billion in less than a decade. By mid-2009, the private real estate portfolio had lost an astonishing 40 percent of its value.

Nonetheless, this notable shift in strategy toward alternative investments—leveraged buyouts, in particular—has had clear benefits for individual regents, as detailed in this investigation. And good government experts question the ethics of these investments. “The investment committee’s act of increasing UC’s allocation to private equity was an extraordinary conflict of interest,” said Robert Weissman, president of Public Citizen. “Some of these regents obviously had vested interests.”

Throwing good money after bad

The private equity losses should not have surprised the regents. In 2008, Ms. Berggren stated in her annual report to the investment committee that private equity and private real estate investments were “overweighted” relative to other financial vehicles during the boom years. She also noted that the regents’ preference for private investment was disproportionately impacting UC during the economic recession.

Amazingly, in the face of the disastrous performance of private equity and private real estate, Mr. Wachter and Mr. Blum have continued to advise Ms. Berggren to increase UC’s investments in these two ailing sectors. (Mr. Parsky left the board in 2008.)

At the February 2009 meeting of the regents’ investment committee, Mr. Wachter, then the committee chair, observed that although private equity and real estate investments were already “overweighted” in the portfolio, they should be “even more overweighted.” (Wow...that's it...just...wow.)

At an investment committee meeting three months later, Mr. Blum, who was then the chairman of the board of regents, urged his colleagues to continue on the same questionable course. According to the meeting minutes, “Chairman Blum expressed concern that the University might become too risk adverse.”

At the same meeting, Mr. Wachter suggested that UC buy bundles of distressed real estate and mortgage debt to profit off of the collapse of the housing market. (Though a matter of continued debate, experts say such investments are a risky undertaking since another wave of home foreclosures is expected). Recently, Mr. Wachter has championed increasing the volume of UC’s investments in risky timber and oil ventures.

But the entire investment committee is not in lockstep with Mr. Wachter’s and Mr. Blum’s predilection for alternative investments. Regent George Marcus, a real estate executive who sits on the committee, has consistently opposed them. In a March 2010 meeting, he described this strategy of over-emphasizing private equity as the equivalent to “gambling in Las Vegas.”

Posted by Peter Byrne on 09/22/10

"UC Santa Barbara Paper Scrubs Regents Story--"UC Regents Face Ethics Allegations" Reprint via Spot.us

2014-02-06T15:09:00.001-08:00

Commentary and emphasis California Cornerstone.

UC Santa Barbara paper scrubs regents story

Posted on 2011 April 15 | Leave a comment

It’s like a tale straight from the pages of 1984, where a newspaper publishes a story one day, only to make it vanish the next, leaving no trace behind.

What makes the tale especially interesting to esnl is the subject of the story: A call for an investigation of potential conflicts of interest in votes by members of the University of California Board of Regents, and, in particular, Richard Blum, the politically well connected regent and former construction company magnate who is married to U.S. Senator Diane Feinstein.

The story appeared in Thursday’s print and online editions of The Daily Nexus, the campus newspaper of UC Santa Barbara. Today, a click on the link brings the familiar 404 message:

404 |Error 404 – Page not found! Sorry, but the page you were looking for is not here.

Because the story should be of interest to our readers, we offer it here in full:

UC Regents Face Ethics Allegations

By Jenna Ryan
Published on April 14, 2011

A petition started by a UC Berkeley activist group last spring is demanding that California’s Attorney General address allegations about certain UC Regents’ unethical, vested interests in UC investments.

While UC administrators staunchly refute the claims, the petition has 257 signatures as of press time and accuses former Governor Arnold Schwarzenegger and UC Regents Richard Blum and Paul Wachter of promoting UC decisions for personal financial gain. Circulated by the UC Berkeley Solidarity Alliance, the petition is based off of conclusions from investigative journalist Peter Byrne’s work.

“We feel that criminal conflicts of interest may have occurred and that it is the duty of the California Attorney General, Kamala Harris, to investigate these circumstances,” (anyone else see the problem with that?? Of course, the investigation was scuttled from the get-go...it's what Feinstein et al does best) petition organizer Ricardo Gomez, a fourth-year UC Berkeley interdisciplinary studies field major, said. “Not only are these potential conflicts of interest ethically wrong, the UC has lost billons of dollars from the investment fund, meaning less resources for students, faculty and workers.”

UC Vice President and General Counsel for Legal Affairs Charles Robinson said the University denies any accusations and has rigid infrastructure in place to safeguard against conflicts of interest. Additionally, Robinson said Byrne’s findings largely ignored the University’s explanations. (What? Like the investigative journalist is just going to take the University's explanations of unethical behavior at face value!)

“The companies referenced in the stories for the most part are large publicly-traded entities that have issued millions of shares of stock available for purchase by the general public,” Robinson said in a press release. “The asserted overlap of investments by the University and these Regents is substantially more likely to be the result of independent decisions by like-minded investors than the result of concerted activity.” (yeah......right....just a coincidence, I'm sure.)

Based on the UC Regents’ involvement in the private equity market, Byrne’s eight-article series was published on the web-based spot.us forum, and criticized relationships that benefited the Regents and Schwarzenegger but jeopardized the UC system’s financial stability. Byrne was recognized earlier this month by the Society of Professional Journalists with the James Madison Freedom of Information Award.

Byrne’s findings accuse Blum of conspiring with his wife U.S. Senator Dianne Feinstein to profit from the UC system’s investments while laying off teachers and employees and increasing tuition by 30 percent.

Furthermore, Byrne’s findings stated that CalPERS — the second largest employee union in the country — had teamed up with Blum to pay $4 million a year to a company Schwarzenegger had partial ownership in, as well as take over half a billion dollars in investments. (And prior to this undertaking, Blum was in charge of the Carpenter's Health and Welfare Trust Fund, at that time 2003, that public trust fund was the largest investment portfolio I believe in the nation. Seriously, any other person walking God's green earth would be investigated, indicted, tried, convicted and sentenced...but not these two...must be nice to be above the law.)

According to Byrne’s investigative series, Gerald Parsky, Richard Blum and Paul Wachter ‘took control’ of the UC investment strategy around 2004.

“Sitting on the board’s investment committee, the three men steered away from investing in more traditional instruments — such as blue-chip stocks and bonds — toward largely unregulated ‘alternative’ investments, such as private equity and private real estate deals,” Byrne wrote.

“According to UC internal reports, the dramatic investment change has led to an ‘overweighting’ of investments in private equity.”

UC Berkeley visiting scholar Gray Brechin said a lack of wider media circulation regarding the claims can be attributed to the political influence of Blum and Feinstein.

“Byrne previously investigated conflicts of interest between Regent Richard Blum and his wife, Senator Dianne Feinstein,” Brechin said in an e-mail. “Those articles, like his current work, never appeared in the Blum/Feinstein home newspaper, the San Francisco Chronicle. That hardly surprises me since the couple is now one of the most powerful in the United States. … They move in the very highest of San Francisco’s political and society circles.”

UC Associate Vice President for Communications Lynn Tierney said Byrne’s claims don’t necessarily indicate a conflict of interest. (Maybe in their world, but not out here in the 'real' one.)

“It’s misguided to assume that there’s a conflict of interest simply because there’s an overlap between personal investments by University of California Regents and investments made by the UC Treasurer’s Office,” Tierney said. “The real issue is whether Regents communicate with the Treasurer’s Office about specific investments. They haven’t and wouldn’t, period.” (And here's the main source of the problem...both Mr. Blum as Regent, and Ms. Feinstein as Senator are both bound by laws and rules that forbid 'even the hint of conflict'...what part of that do they apparently not understand? Kinda like the WWD contract specifically stipulating water deliveries in excess years only.)

However, Byrne maintains that his findings are sound. He said the UC Regents have yet to file any formal complaint or present contending evidence.

“The UC general council went over the whole thing with a fine-toothed comb and was not able to identify a single error of fact,” Byrne said. “People of tremendous professional repute looked at the data and decided that these were clear conflicts of interest.”

Byrne also said that the response to his evidence was thoroughly insufficient.

“I would be gratified if the University or any of the Regents mentioned in [my] story said ‘I’m sorry, you are right, we should not have done that, we will not do it again,’” Byrne said. (Again, seriously? These people have no morals, in their twisted reasoning, they don't owe anyone anything except more deposits to their personal bank accounts...we must stop expecting conscientious behavior from unconscionable people.)

“Instead of taking any measures to address the problem so it could not happen again, they are digging in and saying that it is okay for them to flout common sense and conflict of interest laws.” (Kinda...duh!!)

To read Byrne’s series accusing the Regents of ethical mismanagement in investment decisions, visit http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story.

Jack Crosbie contributed to this article.

Spot.us "Investors' Club, How the UC Regents Spin Public Funds into Private Profit by Peter Byrne (Part 1 of 8)

2014-02-06T14:38:00.000-08:00

Here is the the first of eight parts in this investigative reporting done in 2010...still relevant, if not more so today.

The point of these individual posts is to point readers to information regarding the people who have manipulated not only our water law and policy via bogus federal legislation in attempts to over ride California's state's rights, but to also illustrate the inter-connected spiderweb (collusion to perpetuate fraud) that has been woven out of San Francisco.

Hopefully, at some point soon, someone with the legal savvy and the financial backing will throw down the gauntlet and force a legal showdown. One carried out in a genuine court of law and not some jack-rigged panel of judicial activists. (Who quite frankly, should be disbarred for their actions. That's my opinion.)

To access the entire article with live links, please visit: http://www.spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story

Story: The Investors’ Club: How the University of California Regents Spin Public Money into Private Profit

“As universities become glorified vocational schools for corporations they adopt values and operating techniques of the corporations they serve.” – Chris Hedges (Empire of Illusion, 2009)

This piece has been republished by The Berkeley Daily Planet. A version of it also ran in the Sacramento News & Review, Santa Cruz Weekly, North Bay Bohemian, and the SF Public Press. Analysis from California Watch, The Aggie,Huffington Post, KCSB Radio, SFBG, The Daily Nexus and more. The story has been nominated for a Project Censored Award and has won the SPJ Northern California Chapter's James Madison Freedom of Information Award for Journalism. It was also a finalist for an Investigative Reporters and Editors award.

Part One: The Investor's Club -

Introduction and overview of the 8-part investigation. The eight parts of this investigation and two appendixes are linked within the introduction. They may be read sequentially or as stand alone stories.

See Part Two: The Smell Test

How to tell the difference between a conflict of interest and a coincidence.

See Part Three: The Regents' Club

Conflicts of interest are nothing new at UC, but they are getting worse.

See Part Four: Seven Private Equity Deals

How Regent Richard C. Blum benefited from $748 million worth of private equity and bond investments by UC.

See Part Five: Four Case Studies in Conflicts of Interest by UC Regents

The nitty gritty of how these deals went down.

See Part Six: Billion Dollar Babies & The Senator's Educational Conflict

The University of California invests $53 million in two diploma mills owned by a regent married to a U.S. Senator.

See Part Seven: Tapping the State Pension Fund

Against all odds, literally, a regent secures billions of dollars in CalPERS investments.

See Part Eight: Blum Capital Partners Gets Lucky

UC owns stocks in all of the public companies in Regent Richard C. Blum's portfolio.

See Appendix One: Research Methodology

See Appendix Two: Financial Dossiers of Regents to Watch

Reprint Paradise Lost? Part Ten: Who's Minding the Store?

2014-02-06T14:03:00.000-08:00

In order for this Republic to properly function it is imperative that our law enforcement institutions perform their stated duties and uphold and enforce the law. In addition, we are dependent upon a free press to inform the people and provide them an accounting of how our institutions and elected public officials perform. Lastly, those public institutions that hold themselves up as guardians of the public trust also must perform according to their stated missions. Unfortunately, none of these three groups have met those challenges during the Transcam and Landscam travesties in California over the last three decades.

Having received some subtle, and not so subtle discouragements, and feeling like Jake Gittes in Robert Towne’s film Chinatown, in 1998 I began to have concerns about my safety, so I visited the FBI. I went to The Phillip Burton Federal Building near San Francisco City Hall, took the elevator up to the 9th floor where the office of the FBI is located and told the receptionist I wanted to speak to an investigative agent; with visions of nose-slitting dancing in my head.

In good time, a young woman appeared. “Mr. Trainor? I’m Special Agent Nancy Devane,” she said. “Please tell me what brought you here.”

I told Special Agent Devane I was onto a story, and I was starting to get scared. She asked me to wait while she called her superior. A few minutes later she came out and handed me a piece of paper with her name and another agent’s on it, and the time and place I should meet with them. “2 P.M. 9-10-98, 310 Grand Avenue, Oakland, CA” it read. Below that, Devane wrote down her mobile phone number.

Three days later I went to the FBI office on Grand Avenue in Oakland. I brought a number of documents along with me including the evidence of URS insider stock options, and the white paper I co-wrote for the City of Tustin in 1983, which helped kill the first high-speed rail initiative by exposing special interests. This turned out to be ironic, like everything over time.

Devane came out and asked me to follow her, escorting me into a back room where she introduced me to her superior, an intense black man in his mid-forties with hard eyes. He introduced himself: “I’m Special Agent Carl Chandler,” he said, not extending his hand. He asked me to sit down and tell him why I’d come.

I told the agents I was working on a story that seemed to have taken an unexpected turn, and said I was afraid of what might be in store for me if I dug any deeper. I gave them my documents, and they asked if they could copy them. Then they asked what I wanted from the Bureau.

I said I wanted their protection, so I could finish the story in one piece and get it into print. Chandler and Devane thanked me for coming, in and bringing the material. Then they asked if there was anything else that I wanted from the Bureau. “Just one thing,” I said. “What’s that?” asked Special Agent Chandler. “I want to be there when you take Willie Brown out of City Hall in shackles,” I said.

I went back to the FBI a half-dozen times, once in 1999, twice in 2000, once in 2001, once in 2002 and once in 2005. I hand-carried to them computer diskettes and reams of paper full of facts and chronologies, additional factual documentary evidence provided by the principals through their public financial statements, news stories, records of political campaign contributions, and corporate financial records. As far as I can tell, nothing was ever done with it. I might just as well have thrown it in the ocean.

The FBI wasn’t the only investigative agency to ignore the story.

In late 1998, I called up Wayne Imberi, an old friend who worked at the California Fair Political Practices Commission in Sacramento. The FPPC is the state watchdog agency in California, created by legislation sponsored by Jerry Brown when he was California’s Secretary of State. I told Imberi what I had and he set me up with an investigator named Donna Morrow. I gave her a copy of the 28-page story I’d written on the Bay Bridge and she told me she’d get back to me.

When I hadn’t heard anything for a month, I called her back and asked her whether the FPPC had begun an investigation. She said she didn’t recall the matter. “It’s all there in the document I brought you,” I said, “Why don’t you try reading it, and call me if you have any questions.” I never heard from Donna Morrow, after that admittedly sharp response.

In 1999, I tried another federal agency. This time it was the Securities Exchange Commission, at their office in San Francisco. An investigator named Christopher Cooke came out to speak to me. I told Cooke the same story I’d told the FBI and FPPC agents: there was a scam going down involving transportation issues that were being used as vehicles to manipulate publicly traded stocks; that the insiders at these corporations, and their political allies, knew a deal was in the works that would yield multi-billion-dollar no-bid contracts for certain corporations, and they were using this knowledge to make themselves a killing on insider trades. I voiced the opinion that all of this was illegal the last time I looked, and gave Christopher Cooke another pile of documents and a diskette. He gave me his card and thanked me for coming in.

Two years later, I called the SEC office in Los Angeles and told their chief investigator there, Tom Zambrano, all about Transcam and my dealings with Christopher Cooke. I said the SEC didn’t appear to be moving forward with an investigation. Zambrano gave me the name and phone number of Robert Mitchell, another investigator in the San Francisco SEC office.

In October of 2001 I called Robert Mitchell and spoke with him for twenty minutes or so. I wrote him a letter early the next year, asking if the SEC could possibly investigate my claims about Willie Brown, Dianne Feinstein, Richard Blum and friends. No agency would move against this well-connected, politically wired machine.

In 2002, I filled out a 211 “whistleblower” claim with the IRS. I showed Michael Hunter and Todd Andersen, the two IRS special agents with whom I met all my files and charts. They copied all of it, and told me they found me a credible witness and were recommending an investigation to their superiors at the next level. Whatever level that was, it was silent on the matter.

In early 2005 I called Joel Moss, the FBI agent in charge of the political corruption division in San Francisco, and spoke to him over the phone for twenty minutes or so, trying to get an answer to the question of why they weren’t pressing an investigation into the new high-speed train machinations. Moss didn’t say much, and I never did get an answer from him or anyone else in our so-called regulatory agencies.

I also wrote letters to my U.S. Senators and Congressmen in Oregon and Washington, seeking their help and protection in exchange for my cooperation with any prosecution of the principals. Nobody responded.

If the investigative agencies were lax, the working press was even lazier.

On September 29, 1998 I called 60 Minutes in New York and asked to speak to Mike Wallace. I was acquainted with one of Wallace’s former producers, Chris Schenyl. Chris told me that if I ever had a major story I should contact 60 Minutes. A few moments passed while the receptionist put me on hold. Then Mike Wallace came on the line. I told him about the Bay Bridge deal and Willie Brown. He seemed interested. “Well, who’s going to break the story?” Wallace asked. I told him that I wasn’t sure just yet, that I was still trying to find an outlet. “Well, call us when you’ve found someone who’ll break it,” he said. I didn’t say, “I’m breaking the story now, to you, god damnit!” I just told him I’d work on that, and started circulating the story more widely. Again, nothing happened.

In mid-October of 1998 I was tuning my first draft of the Bay Bridge story. I attempted to tie all the seemingly-disparate pieces together: the Bay Bridge, Treasure Island and Indian gaming, Catellus Development, John Foran and Nossaman, Guthner, and the first bullet train scam. I prepared a boilerplate letter dated October 16, 1998 to accompany the simultaneous submission of my story, to let editors know that I had all the information multiply sourced and could provide the documentation to substantiate all my claims.

The San Francisco Examiner responded favorably, especially their main investigative reporter Lance Williams. I went in and spent some time with Lance and Steve Cook, the investigative reporting Sunshine Team’s chief editor. When I left the building, I was feeling good. A week later, Lance Williams sent me a letter. It wasn’t so good.

In a letter dated October 30, 1998, Williams wrote: “the paper is not able to publish your piece as written, but is interested in developing aspects of your work into a story or stories, as described below.”

What was described below was the Examiner’s offer to publish the two most difficult and dangerous parts of my story separately. If the stories made it to the front page of the Sunday paper, I’d be paid $350 per story; if they made it to page one on another day I’d get $150. I wasn’t being offered a staff position, nor would I be under the Examiner’s corporate umbrella, which would have entitled me to legal protection in case I was sued.

One day in March of 1999 I was at the Sacramento Bee and told editor Bill Moore what I was working on. He asked to see a copy of the story. He read it and said he didn’t think the Bee would run it. “Willie [Brown] is a pretty litigious fellow,” Moore said. I told him that I thought newspapers were in the business of publishing the factual truth, no matter whose toes might get stepped on, but Moore wouldn’t touch it.

The world of news had radically changed. With the consolidation of media into a half-dozen mega-corps, it seemed the press was more interested in ignoring or even suppressing the truth than they were in exposing it.

Four months after I’d finished the first story I contacted the online journal Salon.com. David Weir, one of my editors from California, was then Salon’s Managing Editor. I emailed Weir some stories. By then I’d decided to chop the long narrative up into discrete AP-style pieces. Weir emailed me back, expressing an interest in publishing my work. He put me in touch with editor Darryl Lindsey, and we set up a meeting in early May 1999 at Salon’s office in downtown San Francisco.

Lindsay and I began to talk. Lindsay was interested in the URS stuff, but told me that he “couldn’t see Willie” in it. Richard Tolmach had offered the same opinion when I showed him the first draft in late 1998, but Lindsay and I managed to work out a deal by the end of the first meeting. Salon would publish my stories starting with the URS Griner issue and then run six subsequent pieces for a $1000 each, plus expenses.

Lindsay also agreed to my request for expenses to travel to Vancouver, B.C., where I wanted to interview Li Ka Shing, the reclusive Hong Kong billionaire who had backed out of the Treasure Island development deal. I felt he was a critical link in unraveling the chain. I went back home and waited for the contract to arrive by mail, as Lindsay had promised.
A week later the contract arrived, but before I signed it, I talked with Lindsay again and found that he wanted me to interview Richard Blum. I told Lindsay that I was certainly prepared to do that but I first wanted to have the entirety of our deal in writing.

We dickered back and forth for a week. Then Lindsay told me to sign the contract and interview Blum. I told him I wasn’t about to do that unless the deal was in place; that Salon would run the whole series, and send me to Vancouver. “What’s this about Vancouver?” he asked. I reminded him of what we discussed but he said he didn’t remember it. We came to no satisfactory agreement, and I had to move on.

Later that summer, I thought I’d finally found an outlet that would publish my stories when I met John Mecklin of the alternative Bay Area newspaper SF Weekly. Mecklin and his paper had published some hard-hitting investigative stories on Willie Brown’s ethically questionable doings, including a piece on Willie’s investments in property that was under the aegis of Catellus Development. Mecklin and I sat in his office discussing the project for close to an hour. He was interested in the URS stock issuances during the Bay Bridge process too, but like others didn’t see Willie in the deal. I told him he would if he ran the whole series; that it was through the interconnected issues and the relationships of all the players that Willie Brown’s guiding hand could be seen.

By the end of that meeting, we had a deal. Mecklin agreed to pay me $3200 for the URS story.

A week or so later the deal fell apart. Mecklin thought an email I’d sent them had put them in jeopardy, and Richard Blum might sue them. When I read the email to Lance Williams over the phone, he said he didn’t see a problem. “That’s nothing,” he said. “All you did was state some facts and your belief that Richard Blum and Dianne Feinstein were involved in something sleazy.” At any rate, Mecklin killed the story, although he was decent enough to pay me an $850 kill fee.

I couldn’t understand why a story of this magnitude had become so difficult to sell, and asked some of my colleagues what they thought. ”When magazines like California died, there went your market, Richard.” Dan Walters of the Sacramento Bee said to me one day at his office. Bill Moore told me that investigative journalism wasn’t dead, but that now newspapers would only publish hard-hitting investigative stories written by staff members.

I’d heard that same story from the Capitol bureau correspondent of the Wall Street Journal. Former Mayor of Sacramento Burnett Miller had a similar opinion: “When the Bee went from a family operation owned by the McClatchy family to a corporate enterprise they became much more timid,” Miller told me. Mark Dowie offered a more brutal assessment. “It’s like there’s one television camera that’s set up in the middle of Kansas, and what that camera can see is what’s universally accepted as the day’s news.”

By the time I got half way into the book, I’d been turned down by every mainstream and alternative newspaper in the State of California, including the Los Angeles Times, Mother Jones, and the San Francisco Bay Guardian. My record was no better at the national level; everybody from the Atlantic Monthly to Wired Magazine passed.

California’s public interest groups weren’t any more responsive than the press or the investigative agencies. They all turned a blind eye to the story unfolding in their front yard.

The person most responsible for prompting me to cover the Bay Bridge story was Rick Feher, a member of the design team Coman-Feher. When I first met with him, Feher described himself as an activist and former journalist, and a Green Party member. He said he was an ally who wanted to help me get my story out.

Feher did make one significant contact: the late David Brower. Brower was a fighter and he had taken on the new board of The Sierra Club, which he once headed, accusing them of selling out. Brower wrote a story critical of the Headwaters Forest deal, publishing it in the Chronicle’s December 23, 1998 edition, characterizing it as a half-billion-dollar government shakedown. “If we allow tycoons like Charles Hurwitz (the CEO of Maxxam, the company that owned the Headwaters Forest) to exact hundreds of millions of dollars by staring down the government, more will line up behind him,” Brower warned. It was a prophecy that has since proved to be true.

Brower seemed inclined to provide us with some backing, and Feher outlined his proposal for a project titled “CALTRANCE”, an acronym that stood for CALifornia TRANsportation Crisis Elimination.
After we’d discussed the project, Brower turned to Feher and asked him “Is there anything I need to sign?” I took that to mean a check. Feher sat there, saying nothing, doing nothing. The activist couldn’t bring himself to act. Once again, talk but no walk.

In 2005 I traveled to Oakland to meet with my new literary agent Tom Miller, who was also the corporate counsel for Global Exchange. This was the same public interest group whose support I had unsuccessfully tried to enlist in the summer of 2003.

The agent said he had an inside track to a publishing house called Avalon and asked me to come down to Oakland, where we could meet with Avalon chief Charlie Winton. Miller also said he thought we could get my stories published in the Berkeley Daily Planet, a small leftist newspaper. We met with Winton, but he didn’t want to risk publishing my book.

A few months later the Berkeley Daily Planet stiffed me for the series of stories we had agreed on. I wrote the first four parts of what was supposed to be a ten-part series and sent them down to the agent who passed them along to the BDP. Becky O’Malley, the publisher of the BDP then said she wanted one story, for which she would pay me $50. I told her we had a deal for a series. When I brought up breach of contract, she told me to get lost. “No good deed goes unrewarded,” she snidely wrote me in an email. My agent Tom Miller didn’t press the issue with her, or demand that I be paid for the work I’d done.

In April of 2005 I traveled back to Oakland to convene another meeting at Tom Miller’s office. I had prepared a new series of eight political corruption charts with updated figures and new details. In attendance were my agent, Emeryville Vice-Mayor Ken Bukowski, Richard Tolmach and myself. The law firms of Judicial Watch and Terence Hallinan attended the meetings via speakerphone. Rich Tolmach was standing in for The People’s Advocate, the other public interest group I had contacted in 2003 during the Recall Gray Davis campaign.

I had traveled to Sacramento in February 2005 to meet with Tolmach and his contact at The People’s Advocate headquarters. The People’s Advocate is the group who brought the Jarvis-Gann property tax limits into being. This is also the same group who are responsible for instituting term limits, largely in reaction to the iron reign of Willie Brown. That reaction backfired; now the only ones who know anything around The Building are lobbyists. The legislators are too transitory to know much about what’s really happening.

Ted Costa, the People’s Advocate executive director and board member, volunteered that he had a rich backer who would underwrite the political corruption litigation. All I had to do was find an attorney who would take the cases.

I contacted Fred Lerach’s law firm in San Diego and spoke with one of their main attorneys, Dave Walton. Lerach’s firm is a formidable bunch of litigators, and they’ve taken a number of controversial cases regarding securities fraud and public corruption. Walton passed on the cases, but referred me to the LA law firm Sturmgasser & Woocher.

Fred Woocher was with the FPPC when the Political Reform Act went through in 1974, so he knew the law well. Tom Miller and I went to Woocher’s office in Santa Monica on June 13, 2005.
Initially Woocher seemed interested; then he got cold feet and cancelled out later that summer, after I did more work on the project pro bono. This consisted of documenting Mehdi Morshed’s stock holdings in transportation firms, and his wife Linda’s contracts for work on the high-speed rail project.

I next tried Eugene Scheiman of the east coast firm McCarter and English, referred to him by Daniel Sheehan, the Pentagon Papers attorney who formerly headed The Christic Institute. Scheiman seemed interested and asked me to prepare some more material. I did. Scheiman passed on the cases in late 2006.

Between 2005 and 2007 I contacted every public interest group I could think of. I tried Common Cause, the Green Party, and Ralph Nader, all for a second time. Nobody would help. Then I went to all the investigative agencies again, including the IRS and the U.S. Attorney’s office in Sacramento. My agent wrote the U.S. Attorney in Sacramento McGregor Scott a sincere letter on May 24, 2005, asking for an investigation. He described the two assaults I had suffered, and the story that I was working on. Once again, nothing happened.

I went to The Project on Government Oversight in early 2005, recommended to them by Daniel Ellsberg. I tried The Committee to Protect Journalists in late 2006. Then I filed another whistleblower claim with the U.S. Department of Transportation Auditor General, then another with the California State Auditor’s office in 2009. They all did nothing. I went to every public interest law firm I could get hold of out of the Yellow Pages. They offered encouragement but gave no real support.

Jeff Baird, the Catellus Desert Wildlands whistle blower was accorded the same heads-buried-in-the-sand response by law enforcement, as were a number of U.S. Customs agents who filed suit on a tangentially related case.

Baird voiced his concerns about the Catellus desert land swaps to the FBI, the SEC, and the Department of the Interior. He also sent letters to U.S. Attorney General John Ashcroft and President George W. Bush. Of course there was no reply from George or John. Return letters from the SEC (dated April 10, 2001) and the Department of the Interior (dated May 3, 2001) thanked Baird for writing them and said they’d pass his letters on to the proper agencies. “They blew me off,” says Baird, shaking his head disgustedly. “I couldn’t believe it. It was a thanks, but no thanks kind of deal.”

Everywhere I turned, there was no relief, but this had become old hat for me, dating back to my assignment in June of 1997, to write a magazine story about the new Bay Bridge design competition. Six weeks after I was given that assignment I was assaulted on a city street in Sacramento. I woke up in the hospital four days later. For months after that I was barely ambulatory, and I am permanently disabled as a result of my injuries. I can’t prove it had to do with my reporting, but who thought transportation and land use issues could prove so potentially dangerous?

Finally, publisher Kris Millegan of TrineDay took on the story, and after several years, we now have the book, Paradise Lost?.

I did what I did for what I think are good reasons, and there is no way I can undo that, even if I wanted to. I can’t put the genie back in the bottle. I knew who and what I was taking on… or maybe I didn’t, but I surely do now.

Reprint Paradise Lost? Part Nine: Dupes and Stooges

2014-02-06T13:16:00.001-08:00

Dupes & Stooges

In order to pull off a series of schemes like Transcam and Landscam, it’s imperative to have an operation that can work the political process to perfection; and the San Francisco Machine had all the essential elements:

1) Politicians like U.S. Senator Dianne Feinstein, San Francisco Mayor Willie Brown, former State Treasurer Phil Angelides and former California State Senator John Burton to sponsor and push forward legislation.

2) The high-powered lobbying firm of Nossaman, Guthner, Knox and Elliott and its principal lobbyist John Foran to grease the business wheels.

3) Legislative bill-writing wizard and California High Speed Rail Authority Executive Director Mehdi Morshed, and his wife Linda, to spin the “spot bill” straw into gold.

4) Money Manager Richard Blum to handle the stock issuances and trades.

A dumbed-down media, to tamely whitewash the reportage.

6) A compliant public, oblivious to the inner workings of the process. (You do need their votes to open up the public coffers.)

The Transcam-Landscam gang mastered this aspect of the game. They used the public, most often the environmental activist community. They did this through bait-and-switch tactics, and by throwing them bones.

Whether it was a bikeway on the Bay Bridge for the bicycle activists, the preservation of a virgin growth redwood forest in the Headwaters, wetlands protection on the SFO expansion or protecting endangered desert tortoises, use these people they did; and the net result was multi-billion profits.

The Bay Bridge process had a number of dupes and stooges, beginning with Sacramento design team Coman-Feher, followed by the bicycle activists, and U.C. Berkeley engineering professor and Bay Bridge design contestant Abolhasan Astaneh-Asl.

As Rick Feher described how he and Daniel Coman came into the Bay Bridge game “We heard that they were going to be selecting a bridge and that the process was supposedly open. An engineer named Brian Maroney, who was the Caltrans project manager on the Bay Bridge, told us to call the MTC. Marjorie Blackwell, the MTC spokesperson, told us that she didn’t know anything about it. This was on April 28. Several calls later, Daniel [Coman] reached Steve Heminger of the MTC, who said he’d FAX us the criteria, a document which was apparently drafted April 29.”

The Request for Proposals, or RFP’s as they’re known in engineering parlance, was for a supposedly open competition that would be convene in two weeks. It was hardly enough time necessary for other engineering and design firms who were out of the California loop to prepare proposals for the upcoming “competition”. I spoke with an architect in British architect Norman Foster’s office in the summer of 1998 and he told me “we didn’t know anything about it until we heard about it on the BBC.”

Although Caltrans spokesman Denis Mulligan disputed the claim of Coman and Feher by telling me that the competition was public knowledge, it doesn’t jive with the facts. Nor does it explain the absence of such noted bridge designers as Foster, Santiago Calatrava or Renzo Piano.

Dr. Astaneh told a story similar to that of Coman and Feher, and Astaneh had long experience on the Bay Bridge.

In the intervening years between the Loma Prieta earthquake and the Bay Bridge design competition, from 1989 through 1997, there was intense discussion of rebuilding the existing bridge. In 1995, Astaneh prepared an estimate for the Federal Emergency Management Administration (FEMA) that said it would cost $250 million to do a complete steel retrofit of The Bay Bridge. Dr. Astaneh’s specialty was steel.

I met Astaneh at a bridge meeting in Berkeley in the summer of 1998. He told me about his history with rebuilding or retrofitting the Bay Bridge with steel, and it was extensive, going almost all the way back to the bridge collapse.

But Caltrans doesn’t like steel. Caltrans likes concrete–Lots of concrete. “It’s more dependable,” said Bay Bridge EDAP chairman Joseph Nicoletti, an engineer with URS Greiner, the company opwned by Richard Blum whose stock skyrocketed during the Bay Bridge selection process. It should be noted that URS was first in line for the Bay Bridge contract due to a no-bid process that was then in place. One member of the Bay Bridge Task Force, who was an elected politician, told me he was approached during the selection process by a cement contracting firm who said he could name his price for a campaign contribution if he could get the city to donate a ten-acre site for sand-and-gravel alongside the bay. “I told him to forget it,” he said. “We don’t have ten acres to give you and you don’t have enough money to buy me if that’s what you’re proposing.”

“They took my design and added what I call the Chernobyl effect,” Astaneh told me. He drew a sketch of what Caltrans had done with his steel retrofit. Caltrans added massive concrete cladding to Astaneh’s design. The cost went up along with the girth. The initial $250 million FEMA estimate grew to become $700 million, then that grew to $900 million, then $1.2 billion. In 1996, Caltrans began considering replacing the span with an unadorned viaduct on a straight southern alignment between Oakland and Yerba Buena Island.

Another dupe/stooge was Jerry Meral, who headed an environmental group called the Planning and Conservation League. It seemed that there was a constitutional issue related to the passage of SB 60, the Bay Bridge bill. A proposition had been passed by California voters in 1996 to retrofit the state bridges with bond money.

Proposition 192, which was passed by the California electorate a few months earlier than SB 60’s passage, specifically forbade bridge toll surcharges and mandated that seismic retrofits of the bridges be paid for with state bond money. A state initiative like 192, passed by California’s voters, usually takes precedence over a statutory law passed by the legislature, like Senator Quentin Kopp’s SB 60. The Planning and Conservation League, which sponsored 192, never bothered to challenge the legality of SB 60 in court. When I asked Jerry Meral (then president of PCL) why he never pressed the issue Meral shrugged: “I was too busy and there were other issues we’d moved on to,” he told me.

The bicycle community were duped and stooged during the Bay Bridge deal when the MTC agreed to increase the amount of money they would spend on bikeways, bumping up the $65 million proposed in the initial budget forecast to $130 million. When I saw Steve Heminger meeting with the bike community’s lobbyist at this meeting, I went over when they were through and asked the bike lobbyist what had happened. When he told me, I told him that they might just as well have promised him $130 billion; the bikeway was just a ruse, a smokescreen, an amenity that might not happen, given the fact that it was one of the three amenities competing against the bridge tower and the Transbay Terminal. SB 60 said you could only do two, not all three.

I told the bicycle lobbyist that the Bay Bridge process was motivated by the stock profits presented by the process. As this discussion was going on I overheard a woman named Kay Wilson quoting stock prices over the phone. When I confronted Ms. Wilson about it, she denied that I’d heard what I did. “But I heard you,” I told her. “It sounded like you were quoting stock prices to me.” Then I asked for her card and wanted to know whom she was representing. The card was from Public Affairs Management. Wilson said she was representing Parsons-Brinckerhoff and the City and County of San Francisco.

The San Francisco cabal also used the Indians in their Bay Bridge scheme. And this relates to the plans to build an Indian gaming casino on Treasure Island, one of the few failures during the Transcam/Landscam era.

Indian Gaming has become one of California’s most productive cash cows over the past few years, bringing in $5-10 billion a year, all of it going to the Indians. The state derives no revenue from the gaming itself, but does profit off the tax revenues from spin-off industries like parking, gas taxes from gamblers driving to the casinos, and from other tax revenues on the sale of goods and services derived from the businesses whose revenues are boosted from their proximity to the gaming casinos.

In November of 1998, California voters passed a state initiative authored by John Burton called Proposition 5. This measure mandated that then-newly elected Governor Gray Davis would have to enter into more favorable compacts with the 80 tribes who were dissatisfied with the Pete Wilson-brokered gaming compacts. In September 1999, after a huge three-day conference in Sacramento, Governor Davis signed a series of new compacts with Indian tribes that allowed them more freedom to engage in Class III, Nevada casino-type gaming. In November 2000, California voters approved a new measure, Proposition 1A, again authored primarily by John Burton, and the Indian gaming Gold Rush was poised to boom.

With a new mega-billion dollar California industry about to grow by leaps and bounds, the issue began attracting heavy hitters anxious to take a bite out of the Indians’ pie. At the September, 1999 conference in Sacramento that I attended, Mickey Cantor, the Bill Clinton administration’s Commerce Secretary who succeeded Ron Brown after Brown’s plane went down in Croatia, and other political heavy hitters were in attendance to see what they could milk from the casino-enriched 63 California native tribes.

According to Bill Wiggins, who at the time was an ex-officio lobbyist for five Indian tribes from the coast calling themselves The Paladin group: “Cantor wanted all of the eighty Indian tribes to pay him $50,000 a year each to represent them in any further compact negotiations with the state. I told my Indians not to do it.” Cantor’s proposal didn’t fly. Nor were the other heavy hitters able to intrude much. For once, the Indians won the war.

I asked Wiggins about the possibility of Indian gambling coming to Treasure Island, and he said:“I think that it’s a winning combination. When you have a situation like Treasure Island, where a military service grants a parcel of land to a city, there’s a certain process that has to be followed. First, the Defense Department will offer it to a like service, in this case the Navy. Then it’s offered to the other services—the Army, the Air Force, the Marines. If they don’t want it, then the state is next, then the county, then the city. After these, the next on the list are the Indians.”

Wiggins’ recitation of the proper procedure proved to be correct; that is exactly the process attending military base closures and possible Indian claims to them, as numerous government publications relating to the Base Relocation and Closure program attest.

None of the Indian tribes that were then represented by Nossaman, Guthner, Knox and Elliott and John Foran could make such a claim, according to the map Wiggins showed me and the information I could obtain from the California Secretary of State’s office. But the Federated Coast Miwok and the Amah Band of Ohlone/Coastanoan Indians could, and both had begun staking out their claims for Treasure Island in 2000.

“Indian gaming on Treasure Island would make an irresistible combination,” said Wiggins. “You’d be helping tourism, which is San Francisco’s #1 business, and aiding an economically disadvantaged group, the Indians. It’s good for the city, good for the Indians, and good for the developers, and it’s definitely best for Willie Brown.”

According to Bill Wiggins, Willie’s philosophy is as follows: “What’s best for Willie Brown is what’s best for San Francisco, and what’s best for San Francisco is what’s best for Willie Brown.”

The signing party for the Bay Bridge bill, SB 60, was on Treasure Island, and Willie Brown danced. Even more interesting than Willie’s gleeful response to the signing of SB 60 is the fact that he proceeded to use Treasure Island as his reason for suddenly coming out against the Donald McDonald-designed Self-Anchored Suspension bridge, the SAS, when the MTC voted to adopt it on June 24, 1998.

The next day at a press conference I attended, Mayor Brown turned a 180 on the heels of his shiny Florsheim shoes, and declared his opposition to the committee’s choice, leaving his old ally Bay Bridge Task Force chairwoman Mary King holding the bag. Brown claimed that the new, northern alignment bridge, which he had agreed to support in a March,1998 letter to King, would not give him adequate off ramps to Treasure Island, and Treasure Island was then very important to Willie’s development plans. “I’ll bet on the Democratic Willie versus the Republican Caltrans,” Willie crowed as he threw down the gauntlet. When I asked him why he had changed his position, he answered, “Everything you just said is correct, but as is often the case with newspapers, I had been given bad information. That northern alignment would reduce the value of the property at Treasure Island by 25-40%.”

When Willie joined with Mayors Jerry Brown of Oakland and Ken Bukowski of Emeryville to launch a series of initiatives to overturn the bridge decision, he brought in Dr. Astaneh to help carry the water. So much for Dr. Integrity.

Six months after the Bay Bridge show officially concluded in June of 1998, there was some new action that I thought I’d follow. On February 24 of 1999, chairwoman Mary King of the Metropolitan Transportation Commission’s Bay Bridge Task Force, the woman who set up EDAP, convened a special meeting to address the Bay Bridge concerns of the U.S. Navy, Mayors Willie Brown of San Francisco and Jerry Brown of Oakland, and the Bay Area’s Congressional delegation. The Task Force meeting at the MTC office in downtown Oakland was held to discuss the proposed alignment route that was chosen for the new eastern span of the bridge. The meeting had been sought by the Bay Area’s five-member congressional delegation, including U.S. Senator Dianne Feinstein, whose husband, Richard Blum, and his company URS Greiner, had made a tidy profit on URS stock trading during the crooked Bay Bridge process. Although the meeting was demanded by the congressional delegation, not one Senator or Congress member bothered to show up.

A letter signed by Senators Barbara Boxer and Dianne Feinstein, Congresswomen Nancy Pelosi and Ellen Tauscher and Congressman George Miller said they “wanted to achieve community consensus” in regard to the project and directed MTC to consider the “redevelopment and land use impact issues of the local communities.” They also wanted the MTC to look at a bridge favoring the southern alignment that San Francisco Mayor Willie Brown now said he favored…Again.

The same operative philosophy also attended the Feinstein-brokered Headwaters Forest multi-million dollar shakedown and the Feinstein-authored Desert Wildlands Act. It was the same kind of promise for wetlands preservation that the enviros went for on the SFO expansion, where Blum’s company, URS Greiner, had “won” the contract for new runways.

I shared my information on stock trading and corruption with the late David Brower, the one environmental stalwart who fiercely opposed the Headwaters deal, and asked him why the movement wasn’t moving. He shook his head and sighed. “They’re fiddling while Rome burns,” Brower said disgustedly.

I know this dupes & stooges routine well. I watched it happen right in front of me. It even happened to me, when I was an unwitting dupe on a similar Landscam in Sacramento, California. Though not dealt with in detail here, it is a key element in the book, Paradise Lost?

I was working for the Sacramento Bee on a story about the building of a new Governor’s Mansion in Sacramento. I visited the so-called “pedestrian pocket” development of Laguna West designed by U.C. Berkeley architect Peter Calthorpe, a former member of the Jerry Brown administration. I wrote a positive profile on Laguna West in the Bee in 1989, and the story had some impact, as the plan was approved by the Sacramento City Council.

When I saw the actual result, there wasn’t anything pedestrian-oriented about it. It was a walled-in compound of typical sprawl development. The transit and housing-residential-retail mix it was supposed to contain just didn’t exist.

Laguna was just the sweetener, part of a larger land-rezoning scheme that was advocated by Phil Angelides’ financial angel and former business partner, Angelo Tsakopolous. The official reason cited by Angelides when I asked him about it was, “That’s a no-brainer. The market changed and there was a recession; that’s what killed the pedestrian pocket.”

I concluded otherwise. I thought Peter Calthorpe and I had been used as media pawns on the rezoning deal, a classic bait-and-switch.

Reprint Paradise Lost? Part Eight: More Gold and a Few Notable Failures

2014-02-06T13:15:00.001-08:00

More Gold and a Few Notable Failures

Not every Transcam and Landscam bill put forward by the San Francisco cabal proved successful. In March of 1999, Senator Dianne Feinstein’s call for a Mid-Bay Crossing Bridge didn’t get far before it was killed. This bridge would have provided an additional crossing of San Francisco Bay from Alameda to the Mission Bay or Hunter’s Point landfalls in San Francisco. The MTC agreed to study the proposal, but then it died.

Another failure was the proposal to redevelop Treasure Island, partly as the site for an Indian gaming casino. Then-Mayor Willie brown floated the idea for an Indian gaming casino at Treasure Island in 1996, then backed away from it when his choice for developer, Li Ka Shing, didn’t get a favorable response. This proposal withered on the vine in 2000, but was later revived.

Of all the legislative prestidigitation proposed during the height of the Transcam and Landscam bonanza, perhaps none was more blatant than the attempt in the 2000 legislative session to win the trifecta: an interlinked series of bills that would have benefited, among others, Richard C. Blum, who had holdings in two key companies: URS Greiner and Catellus Development.

In 1997-98 Quentin Kopp’s Bay Bridge bill, SB 60, had been the vehicle for a few sharp investors at URS Greiner to make serious profits. Though the bridge design competition was officially still undecided, an amendment to SB 60 essentially narrowed the field to two choices: the T. Y. Lin cable-stayed bridge and Donald MacDonald’s self-anchored suspension bridge. As the bill itself states, “$80 million will be provided for a cable suspension design [Emphasis added].”

If the bridge was contracted out to private companies, URS Greiner was first in line to board the gravy train, holding a ticket for no-bid contract # 59N770.

URS stock shot from 10 to 18 1/2 after the amendments were added to SB 60 in the late spring of 1997, and proceeded to perform according to the current legal status of “contracting out.” In the beginning, URS stock rose. Then Sacramento Superior Court Judge James Ford prohibited the practice in August 1998, and URS fell. When Judge Ford exempted the Bay Bridge from his ruling, URS rose again. Obviously, insiders knew URS was the only real player in the Bay Bridge contract game.

During the Bay Bridge selection process, board members of URS Greiner issued themselves almost 5 million shares of stock, in the form of 10K stock options issued first in March of 1997, then again in March of 1998. U.S. Senator Dianne Feinstein’s husband, Richard C. Blum was then the primary shareholder in URS.

The Selling Shareholders Amendments filed with the SEC regarding the first issuance of URS stock were for 2,933,748 shares of penny stock issued to BK Capital Partners I, II, III and IV, all companies owned by Richard C. Blum and the Bass Brothers of Fort Worth.

The URS stocks were issued March 25, 1997, three days before Joseph Nicoletti of URS was named chairman of The Bay Bridge EDAP committee. The Selling Shareholders Amendments filed with the SEC stipulated that the shares could be sold at market rate, and that those who issued themselves the shares were acting as their own underwriters, entitling them to all profits derived from stock sales.

As the document states under the section titled “Risk Factors” in the subtitled section “Dependence upon Government Contracts”: “The Company derives a substantial portion of its revenues from local, state and Federal government agencies. The demand for the Company’s services is directly related to the level of funding of government programs that are created in response to public concern with rebuilding and expanding the nation’s infrastructure and addressing various environmental concerns. The Company believes that the success and further development of its business is dependent, in significant part, upon the continued existence and funding of such programs and the Company’s ability to participate in such programs… A substantial portion of the Company’s current and anticipated work is related to government contracts.”

The amendment also stated that the four BK Capital companies intended to sell all the shares they had, indeed, issued themselves.

The insiders made a profit of close to $74 million during the Bay Bridge process. Some of Blum’s fellow URS board members exercised similar SSA’s filed with the SEC in the spring of 1998 during the final days of the Bay Bridge selection process. Their profit taking ranged from URS CEO Martin Koffel’s $10 million, to Treasurer Kent Ainsworth’s $3.36 million, down to URS board member Joseph Masters’ $547,000. The 1.1 million shares of URS stock issued to eight URS board members had a value of $25 million in less than six months.

The BK Capital Partners’ $74 million profit and the $390 million increase in outstanding revenues of URS Greiner during 1998-99, demonstrate how a transportation infrastructure process can produce fantastic profits.

Although Willie Brown only lurked around the periphery of issues like the Bay Bridge and the Desert Wildlands, his connection to both bullet trains is firmly established. Willie Brown bought Irvine Sensors stock in October, 1982 when it was trading at $3 a share, and sold it in December, 1982 when it hit $7, nicely doubling his money and then some.

The trifecta legislative package of 2000 finally brought all the principals into the open. The first bill was John Burton’s Catellus-backed SB 1215, from the 1997 session. During the process of SB 1215, Catellus stock went from below $10 a share to $18 a share. On November 26 and 28, 1997, right after SB 1215 became law, almost 4.25 million shares of Catellus stock were traded at over $18 a share, with heavy insider activity on both days.

Burton’s additional bill in 2000, SB 1562, called for development of a new rail link between San Francisco Airport and another airport located in another county. There is only one place this can be: the former Fisk Naval Air Center in Alameda. By some strange quirk, part of this airbase is within the city and county limits of San Francisco. The Fisk Center is presently being developed as a mixed-use commercial office and retail facility, with 350 dwelling units. The developer is Catellus.

Directly after Burton’s SB 1215, was passed in the 1997 session, his campaign received three contributions totaling $155,000 from the Southern California District Council of Carpenter’s Political Action Fund. Richard C. Blum was the union’s pension fund manager at the time.

On the day his second bill, SB 1562, was introduced in the 2000 session, Burton’s campaign received a $4,000 contribution from Nossaman, Guthner, Knox and Elliott, the lobbyist group headed by John Foran, who has been active on every speculation-driven transportation process from the bullet train in 1982 up to the present.

The third bill was sponsored by Assemblywoman Carole Migden, and called for an expansion of the San Francisco Airport. The notice that there was going to be a “competition” for the expansion was posted the same day the competition closed. Like the Bay Bridge circus act, it was an insider’s game, a stacked deck involving “all the usual suspects,” as one of my sources described it.

Migden’s AB 398 was a “juice” bill, and the juice that this bill exuded was the opportunity for the powerful band of San Francisco political insiders to make huge profits. Lo and behold, the company with the contract was, again, URS Greiner. During the timeframe of the Airport bill process and its subsequent passage, from summer 2000 to the end of that year, URS jumped from $12 to $19 a share.

An opportunity for speculators was the possibility of a Mid-Bay Crossing Bridge. If the bridge included a landfall at either of two Catellus properties—Mission Bay or the Fisk Naval Air Center in Alameda—it would surely have a beneficial effect on Catellus stock prices.

In the weeks leading up to the Burton-Migden-Feinstein legislative package in 2000, the savvy investors were furiously buying up shares. Blum was purchasing URS stock in 100,000 share lots; it had fallen from 28 to 12 during Willie Brown and Dianne Feinstein’s efforts to kill the the MTC’s chosen Bay Bridge design. When they failed, URS turned around and began rising again, from $12 to $20 a share in six months.

Imagine the effect on Catellus stock if the Mid-Bay Crossing Bridge had run from one of their properties to a landfall on another. The previous study done for the MTC by Korve Engineering in May 1991 alluded to that possibility in Alternative #6. As a matter of fact, the late T.Y. Lin already had a design for just such a bridge. When Mayor Willie Brown was trying to kill the Bay Bridge selection in 1998, he hired Korve Engineering to help, paying them $10,000 for a study of the bridge in November of 1998. He then dusted off his lobbying shoes.

On August 22, 2000, a hearing was scheduled for 1:30 in one of the old restored hearing rooms in the east wing of the State Capitol building in Sacramento. Although the scheduled hearing was supposed to be about “wetlands reclamation,” the real action was the proposed expansion of the San Francisco Airport.

It was the last day of the legislative session, and the Senate Resources subcommittee was hearing a bill sponsored by Democratic Assemblywoman (now Senator) Carole Migden of San Francisco. The bill would provide $150 million in state funds to acquire the Cargill Salt Flats adjacent to the San Francisco International Airport. The acquisition and preservation of the salt flats was tied to a $3 billion expansion plan for SFO. Six months before, a design competition had been held for the two new airport runways in the SFO expansion project, and five engineering-and-design firms were chosen as finalists.

Representatives of a number of environmental groups— most notably the National Audubon Society and the Sierra Club—were present in the hearing room to give their qualified support of the bill, providing the salt flats were preserved.

Also present during the hearing chaired by then-Senator Tom Hayden was Senate President Pro Tem John Burton, (D) San Francisco, pushing SB 1215 from the 1997 session and SB 1562, which was introduced and passed in the 2000 session.

The first was the land swap bill between the State of California and the City of San Francisco involving Mission Bay. The second was for a high-speed transportation link from San Francisco International airport to another airport across the bay. The hulking and mustachioed Senate President John Burton circling nervously around the room, awaiting the outcome.

Seated in the audience were a number of other players with a direct interest in AB 398. Tina Thomas, the environmental attorney who helped author the California Environmental Quality Act (CEQA) in 1974, was there to give testimony on behalf of the bill. Once an environmental stalwart, she now tends to work on behalf of big-time developers, in whose interests she tosses an occasional bone to groups like the Audubon Society (represented that day by lobbyist John McCaull), and the Sierra Club (Warren Alford attending).

Two other lobbyists were also present. At the end of one row sat Jo-Linda Thompson, with Nossaman, Guthner, Knox and Elliott. Seated alongside her was the Nossaman group’s main man, John Foran, former Senator from San Francisco.

But the real star of the show hadn’t appeared yet. He was late, as usual, en route from San Francisco. “Does anyone know when His Eminence is due?” inquired Hayden from the dais. “Well, when he gets here then we’ll hear the Willie Brown bill,” said Hayden, ignoring Carol Migden’s sponsorship, and referring to the true guiding hand in the matter.

It was 2:33 P.M. when His Eminence finally showed. Willie entered the committee room to speak on behalf of AB 398, and the airport expansion.

He was, as usual, impeccably dressed, in a green suit, an electric-blue monogrammed shirt with contrasting white collar, and blindingly shiny black oxfords. It was Brown’s first appearance on behalf of a bill since he’d stepped down after a record fifteen years as Assembly Speaker.

“The expansion of the airport is the lifeblood of the city,” Willie said in opening his testimony. “Another twenty-six gates are being added, and this is a golden opportunity. The Cargill Salt Flats represent a once in a lifetime opportunity to acquire these wetlands and help keep SFO healthy. The money that we need from the state will be matched by federal dollars, and Senator Feinstein is pushing ahead in the Senate with a bill that will provide the additional $150 million. Senator Feinstein managed to get a placeholder bill [a spot bill, author’s note] in the Congress and Governor Davis has also signed on with this project.”

After Brown’s presentation, Assemblywoman Migden echoed the same general tone; Feinstein’ spot bill was holding a place for the expected federal approval of funds for the SFO expansion. “Senator Feinstein is moving on this and she’s lobbying to acquire the whole 19,000 acres of the Cargill Salt Flats for $150 million. My interest is in helping the state acquire the lands for the airport expansion,” said Migden.

The San Francisco Chronicle smelled a rat in the wetlands preservation deal. In a column published on June 2, 2000, Matier & Ross reported: “…It’s not just the $250 million or more that may be needed to convert the murky Cargill Inc. pools into a wildlife paradise. There’s also the possibility that closing the deal will have to be sort of a “wink-wink” arrangement to go ahead with San Francisco International’s controversial plans for building a pair of runways in the bay.”

Later in the Column, Matier and Ross reported: “Sen. Dianne Feinstein (who helped craft the bill) says it’s not linked… But Assemblywoman Carole Migden, who actually carried the bill signed by Governor Gray Davis, says as far as she’s concerned, the two projects absolutely are linked. “It’s a trade-off… Anyone who is straight will tell you the pond restoration and runways are linked.”

Through all these processes the real winners have been the same: Corporate insiders and their political partners in plunder.

Reprint Paradise Lost? Part Seven: Mag-Lev: An Ultra-High-Speed Daily Double

2014-02-06T13:13:00.000-08:00

Mag-lev: An Ultra-high-speed Daily Double”

Between 2001 and 2002 a pair of new high-speed train bills were drafted and passed in Washington, D.C. and Sacramento, California. Senator Dianne Feinstein was one of the main federal supporters. In Sacramento, the legislative architects were California High-Speed Rail Authority executive director Mehdi Morshed and former State Treasurer Phil Angelides.

The new high-speed train bills were basically clones of the earlier money-train scams. The federal bil, as in the Desert Wildlands process, actually named the corporations who would get the contracts, including Richard C. Blum’s company, URS Greiner. As the song goes, “Second verse, same as the first.”

This was the high-water mark of hubris. This was the paragon of political sleaze. Welcome to the politics of New Millennium America.

In the late spring of 1999, there was a meeting at the San Francisco Public Utilities Commission on Van Ness Avenue. The California High-Speed Rail Authority had called it. They now had a new bullet train process up and running.

The Mayors Brown were both in attendance; Willie of San Francisco and Jerry of Oakland. Willie wanted San Francisco designated as a major high-speed rail station. He also wanted a station at the San Francisco Airport. Jerry wanted the same thing for Oakland. The meeting was the beginning of a new process into profits bonanza, producing hundreds of millions of dollars in profit from stock trades.

In 1996, Senator Quentin Kopp joined up with fellow Senator Jim Costa to author SB 1420, which revived the dormant California High-Speed Rail Authority.

The action on the federal side of the high-speed train act was also brisk.

In 1998, Congress authorized the Transportation Empowerment Act for the 21st Century, better known by its acronym, the TEA 21 Act. This act would provide $218 billion in federal funds for transportation projects over the next ten years.

The CHSRA was brought back into existence in the late 1980s by Quentin Kopp and Jim Costa, and the project got up to full speed in 2001 when federal legislation was enacted. Senators Jim Jeffords and Frank Lautenberg authored S.1900, a bill that allowed AMTRAK to sell $10 billion in bonds to build new high-speed rail projects. It envisioned the future of high-speed rail as a private-public partnership.

Additional federal legislation provided $950 million to implement mag-lev trains on a number of pilot programs. The federal legislation named Transrapid International as the company who would provide the mag-lev trains. Transrapid was affiliated with Lockheed-Martin, which had acquired them in November 1999.

After a trip to Germany in the fall of 1998 where the mag-lev was shown off, some members of the CHSRA jumped right on the mag-lev train. But Dean Dunphy, at that time Secretary of Business, Transportation and Housing in the Pete Wilson administration, thought they were suspiciously zealous in their mag-lev mania. In a December 9, 1998 letter to Michael Tannenbaum of CHSRA, Dunphy wrote: “Neither the Governor, any part of his administration, nor I support the California application that commits the state to build a multi-billion dollar high-speed train with technology that is not in revenue service and has no record of reliability.” Dunphy went on to say that the application would “benefit one vendor- Transrapid International” and that he found “such underhanded and meddling behavior reprehensible.”

As soon as Pete Wilson left office in Sacramento, the push began again for mag-lev. At the six or so meetings I attended in the spring and summer of 1999, it was the first item up on the CHSRA agenda— always a sign of the Gods’ favor. And maglev was also on the fast track to build a new super-speed train between Las Vegas and Ontario Airport in California.

As a press release from the California-Nevada Super Speed Train Commission (CNSSTC) states: “Formed in 1988, the CNSSTC is a California non-profit public benefit corporation… for the express purpose of promoting the development of, and issuing a franchise to build, a 269-mile super-speed train system capable of meeting the transportation, economic, energy, environmental and congestion needs and challenges of the 21st Century. With its focus on the 21st Century, the California-Nevada Commission in 1991 selected the Transrapid™ Mag-lev technology as the ideal high-speed ground transportation system for this corridor.”

URS was also on board. As the CNSSTC press release continued: “In 1994 the California-Nevada Commission selected AMG as its private partner to: (i) build, operate and maintain an Americanized version of the Transrapid™ system in this corridor, and (ii) assist the Commission in building the wide ranging local, regional, state and federal support necessary to successfully develop a transportation infrastructure project of this magnitude. AMG is a consortium of technology, manufacturing, and management firms, including General Atomics, Parsons Transportation Group, Hirschfeld, Inc., and M. Neil Cummings & Associates, APLC, charged with promoting the development of, and issuing a franchise to build, a super-speed train system connecting Las Vegas with Anaheim and other points in Southern California. Other key private sector participants are Transrapid International, Solomon Smith Barney Inc., and URS Greiner-Woodward Clyde.”

The enabling federal legislation went through in 2001. In it, both Transrapid and URS were named, one of them (Transrapid) directly, the other (URS) obliquely.

In 2002, State Senator Jim Costa introduced his bill, SB 1856, to provide $10 billion in start-up state bond financing for a statewide high-speed train system that was pegged to cost somewhere close to $40 billion. The Costa bill specified that the issue would come before voters on the November 2004 ballot.

This was primarily the handiwork of legislative Houdini Mehdi Morshed and State Treasurer Phil Angelides. According to an analysis provided by Treasurer Angelides: “The bonds proposed by this measure may be prudently authorized, while still maintaining moderate debt ratios and cost-effective borrowing rates.” In short, Angelides’ analysis showed that California could afford to bite this high-speed train bullet.

The new bill advertised that the train would travel from downtown San Francisco to downtown Los Angeles in about 2 1/2 hours. As the bill read “The train shall travel over 200 mph and will have limited stops along the 440-mile route. The system could be in partial operation by 2014.”

Federal matching funds and private resources would complete the financing for the first leg of the high-speed train in California. The 700-mile-long system proposed by CHSRA would serve all the state’s major population centers, including Los Angeles, the Inland Empire, Orange County, San Diego, Sacramento, the Central Valley and the Bay Area.

Costa sang the praises of a California future served by high-speed rail: “Ridership estimates prepared for CHSRA indicated that the statewide high-speed train system would carry 42 million passengers per year. Building a high-speed train will create jobs and stimulate economic growth. An estimated 300,000 jobs would be created, and the funding for transit commuter and inner city rail improvements will create additional jobs statewide. SB 1856 will help to improve the environment and quality of life. SB 1856 will provide for safe reliable and convenient travel options to meet the needs of California’s growing population,” crowed Costa.

Supporters of SB 1856 included the California Cement Promotion Council, the California Labor Federation, the California State Council of Laborers, the cities of Bakersfield, Fresno (Jim Costa’s home town), Los Angeles and San Jose, the AFL-CIO, the Sacramento Area Council of Governments, the Planning and Conservation League, Phil Angelides, and Dianne Feinstein.

As the Costa bill was heading toward the ballot in 2004, a number of competing measures were put forward in the legislature. By the end of that year’s session the four bills were down to two. One that would have delayed the election until 2006 was favored by Senate President Pro Tem John Burton. The other, delaying the vote until November 2008, reflected Governor Arnold Schwarzenegger’s position.

On January 14, 2005, Richard Tolmach wrote a story in the Sacramento Bee’s Sunday Forum section titled “Playing Fast and Loose with Fast Trains Here.” Tolmach ripped the new high-speed rail plan to shreds, and was especially critical of the CHSRA’s plan that called for a route over the Pacheco Pass.

“Critics say the authority’s work during the past five years has been tainted by a uniquely Sacramento combination of campaign contributions, sole-source contracting and questionable back-room technical decisions,” Tolmach wrote. “The result is that the California High Speed Rail project now looks like a combination of a pork barrel and a land scam…Some observers even suggest that the route planning process is being abused by project insiders to manipulate investor expectations.”

Regardless of the outcome in the 2008 election, the money was already made in the stock market.

Between October 29, 2001 and April 4, 2002, after the federal legislation was enacted and while Costa’s bill was proceeding through the California State Legislature, insiders on the board of directors at URS and Lockheed Martin made $203,416,298 from non-general issue penny stocks, which they then cashed out in insider trades. In one trade alone, on January 4, 2002, money manager Richard C. Blum dumped a pile of URS stock for a cool $20,778,320.

The CHSRA still had to go through a lengthy EIR process in order to get the high-speed train bill up and running. The CHSRA’s major subcontractor, in charge of dispensing the subcontracts worth billions of dollars was Parsons-Brinckerhoff. They were also part of the AMG public-private consortium. A letter from the CHSRA states as follows: “As a result of the usual selection process the firm of Parsons, Brinckerhoff Wade and Douglas was selected as team leader.”

For two years a series of letters were exchanged between federal and state agencies and citizen and environmental groups, who felt they were being paved over by high-speed rail. One letter from Jose Morales, the director of Caltrans to Dean Flores, a State Senator, said the following: “clearly, as is the case with any State contract, the CHSRA’s contracts should be awarded through the appropriate open and competitive processes.”

The letters between agencies and from citizen groups reveal that the main objection to the CHSRA plan was the planned routing for the train between the California Central Valley and the Bay Area. The CHSRA wanted the train to run through the Pacheco Pass, closer to San Jose, while most of the citizen watchdog groups and passenger train advocates wanted the routing to include the Altamont Pass and empty into Oakland. The Pacheco Pass option would induce sprawl, said its critics, while Altamont was a proven commuter corridor through a developed urban area.

A May 10, 2004 letter from California State Senator Don Perata to Steve Heminger of the Metropolitan Transportation Commission reads as follows: “I am writing this letter to request that MTC sponsor a regional rail master plan project to study the potential high-speed rail alignment over the Altamont pass. The Altamont pass alternative was not included as an alternative in the programmatic EIR because it was screened out of the High-Speed Rail Authority’s business plan.”

In other words, the route that had been promised to serve Oakland in that 1999 meeting at the San Francisco PUC wasn’t even part of the plan.

The Costa bill was introduced on February 22, 2002, amended on April 30 and later amended on May 24. The amended version of the bill said that the bonds are “for display purposes only and that the bonds shall not be submitted to the voters without further authorization of the legislature.” This meant the bill would have to be approved again by the legislature before it could be submitted to the voters for approval, which it was, when Governor Arnold Schwarzenegger signed the new high-speed rail bill in 2004. The election was postponed to 2006 and then to 2008.

State Treasurer Phil Angelides would serve as chairman of the committee, just as Treasurer Jesse Unruh would have chaired the first commission on the original bullet train bill in 1982. The bill also mentioned that the state was seeking private capital investments to complete the program. The bill stated its intention was to “obtain other private and public funds, including but not limited to, federal funds, funds from revenue bonds, and local funds.”

On February 26, 2002, four days after Costa introduced SB 1856, actually written by Phil Angelides and Mehdi Morshed according to reliable sources, Phil’s campaign received a $25,000 contribution from the Southwest Regional Council of Carpenter’s P. A. C. small contributor committee of Los Angeles. At that time Richard Blum controlled this fund. On March 29th another prime Blum firm, the Tutor-Saliba Corporation, contributed $10,000 to the “Friends of Phil Angelides.” On April 8, 2002 the Blum-connected accounting firm KPMG, of Dallas, Texas gave Phil Angelides $2500. On May 21, 2002 the firm of Townsend-Raimundo gave $1000 to Phil’s “Friends.”

On June 19, 2002 Angelo Tsakopolous, Phil Angelides’ financial angel, gave $50,000 to the campaign. On May 22, 2002, River West Investments, a company once owned by Angelides but now controlled by Tsakopolous, contributed $50,000, and the Plumbers and Pipe fitters local 447 contributed $12,000. On June 12th 2000, the Irvine Company, from the first bullet train, contributed $2000 to. On June 25th Nossaman, Guthner, Knox and Elliott contributed $5,000 and the Southwest Carpenter’s Political Action Fund, again controlled by Blum, contributed another $25,000. Then KPMG contributed another $1000.

On October 24, 2002, Eleni Tsakopolous, Angelo’s daughter, contributed $32,600, then wrote another check the same day for $10,243. On November 1, 2002, AKT Development Corp., Angelo’s main company, contributed $250,000 to Phil’s campaign. On November 4, 2002 three contributions connected to Tsakopolous, one from him, the other from a company he controls, the third from a personal friend of his, contributed a total of $690,000 to the Friends of Phil Angelides. Through the next year more contributions from the Transcam posse poured into the campaign.

When I added it all up, it was over $1.6 million in political contributions to Phil Angelides’ 2002 campaign. Money from sources directly connected to the high-speed train project made up almost 35% of Angelides’ war chest, an even greater percentage than Willie Brown’s Democratic Leadership Fund collected during the first bullet train bill in 1982.

Early in 2005 Angelides remembered he had a conflict of interest regarding the project. On January 17, he wrote a letter to John Burton informing him of this unfortunate oversight. The letter was sent three days after Richard Tolmach’s highly critical story was published. Angelides was silent on the subject of high-speed trains during his 2006 campaign for governor.

When Willie Brown was brought in to run the high-speed rail campaign and Dennis J. Papilion, an engineer from URS presented a mag-lev get-to-know-you presentation down in Victorville, right in the heart of Landscam country, it became even more obvious that this was just the latest wrinkle in The Game.

On May 11, 2004 a meeting was held for a number of potential subcontractors of the high-speed train system, at 55 Second Street in San Francisco. Joseph Petrillo, the chairman of the board of the CHSRA, had convened the meeting. He opened by saying that he shouldn’t really be there, and would have to recuse himself shortly. True to his usual form, the keynote speaker was late. Forty minutes after the meeting began, former Mayor of San Francisco, Willie Lewis Brown Jr., made his entrance.

Willie was joined on the dais by two old buddies from the Assembly. One was Richard Katz, the former Assembly Transportation Committee chairman. The other was Terry Goggin. All of them were lawyers, but none were registered as lobbyists. At the meeting, Brown laid out a strategy to get the campaign moving, and asked the future bullet train contractor/providers to pony up six figure contributions to the forthcoming political and lobbying campaign.

“One million dollars is needed to promote this effort,” said Willie to the assembled guests, and then went on to say that the money being raised would go to pay for the forthcoming election campaign and for lobbying the Governor, the Director of Finance, the Secretary of Business of Transportation and Housing, and other state agencies.

In his three-page follow-up memo, Willie said he was going to pay himself $50,000 a month, while Goggin and Katz would each get $25,000 a month. The memo said they wanted $400,000 to lobby the governor and other agencies in the 2004 legislative session. The political campaign would cost $600,000 if the vote took place in 2004, more if it was delayed until 2006, probably somewhere in the $2 million range. Willie also said that the CHSRA needed $10 million a year to continue its operations. He wrote that he would be working with the legislature, with Senate President Pro Tem Burton, the Assembly Speaker and the conference committee to see that the high-speed rail agency got the money it needed.

The San Francisco high-speed train terminus was scheduled to be located at The Transbay Terminal. The Transbay restoration was also part of Kopp’s Bay Bridge bill, SB 60, as one of three amenities along with the tower and the bikeways. Mehdi had written additional legislation relevant to the Transbay in 2001 and again in 2004. Jim Mills, the former Senator who then served on the CHSRA board, criticized Morshed’s bill. “This thing is a sleazy exercise; this is a rotten bill the way it’s written,” said Mills to Morshed. “Well, that’s not what the bill’s supposed to say,” said Morshed. “What do you mean, Mehdi? How can you say that? You wrote the bill!” replied Mills.

Under the new standards for high-speed train platforms, the terminal wasn’t long enough to accommodate a 1400-foot long platform. Ah, but if they could acquire an adjacent property it would be. There was just such a property located next door to the Transbay, at 80 Natoma Street, owned by a man named Jack Meyers. Mr. Meyers hired an attorney to represent him in negotiations to develop this property as part of the train station. The attorney Meyers hired was Joseph Petrillo, who served on the board of CHSRA.

About three weeks after the meeting in San Francisco was held, a mag-lev meeting was convened in Victorville, near the Desert Wildlands Park. Dennis Papillon, an engineer from URS led the meeting. Jeff Baird attended it. “I about fell off my chair when the guy said he was with URS,” said Baird.

Reprint Paradise Lost? Part Six: Gold Mine in the Desert Sands

2014-02-06T13:11:00.002-08:00

Gold Mine in the Desert Sands

Beginning in 1994, and culminating in 2000, a supposedly altruistic legislative process turned desert sand into gold. This magical miracle was credited mainly to California’s U. S. Senator Dianne Feinstein; and the corporation that owned the sand was Catellus Development, in which Feinstein’s husband, Richard C. Blum, held a serious interest.

Catellus was then the second-largest private landholder in the western United States, with 817,000 acres in California alone. The company developed commercial real estate, shopping centers, and housing. It also acquired a number of properties on some defunct military bases during the Clinton administration’s base closure program. Catellus had also been active in a number of land swaps, exchanging profitless rural properties with the Federal Bureau of Land Management for prime development sites within urban areas, or directly adjacent to planned freeways.

Catellus was one of the most politically-wired development companies in the state, with significant ties to Feinstein, former San Francisco Mayor Willie Brown (first a Catellus attorney, then a limited partner in the firm), former California State Senate President Pro Tem John Burton (another ex-Catellus attorney), and John Foran, who lobbied for Catellus in favor of the Mission Bay legislation carried by Burton in 1997.

In a 1997 article published in Forbes Magazine, writer Mary Beth Grover put it this way: “With real estate, politics matters a lot, almost as much as location. In California real estate, politics is the most important thing [and] aside from sheer corruption there are a number of ways to appease these little gods. Catellus knows the game well.”

Catellus Corporation and its officers, including former CEO Nelson Rising, were significant contributors to the political war chests of both Willie Brown and Dianne Feinstein. The campaign contributions proved to be a sound investment for Catellus, especially in regard to Senator Feinstein’s sponsorship of the Desert Wildlands Protection Act of 1994. The act was funded with additional legislation sponsored by Senator Feinstein, with $30 million in federal funds provided for the project in the 2000, 2001 and 2002 federal budgets. The Senator is very proud of this project, and lists it as one of her prime accomplishments on her official Congressional website.

This bill involved the transfer of over 400,000 acres in the Mojave Desert from Catellus to the Bureau of Land Management. The area became a nature preserve for endangered species, especially the desert tortoise.

On her Senate website under the heading “Accomplishments”, Senator Feinstein outlined this act as follows: “The California Desert Protection Act protected more than 7 million acres of pristine California desert. It was the largest such designation in the history of the continental United States – and established the Death Valley and Joshua Tree National Parks and the East Mojave Natural Preserve.

“The California Desert is home to remarkable archaeology, beauty and wildlife – some of the last remaining dinosaur tracks, Native American petroglyphs, abundant spring wildflowers, and threatened species including the bighorn sheep and the desert tortoise, an animal known to live for as many as 100 years. The California Desert Protection Act ensured that these lands would be preserved for years to come.”

Then Senator Feinstein listed the specifics of her legislation.

“Specifically, the Act:

• Designated nearly 3.5 million acres of desert administered by the Bureau of Land Management (BLM) as wilderness.

• Added 1.2 million acres of land to Death Valley National Monument and re-designated the monument a national park.

• Added 234,000 acres of land to Joshua Tree National Monument and re-designated the area a national park.

• Established a new 1.6 million acre Mojave National Preserve.

• Transferred 20,500 acres of BLM land to the state of California to expand the Red Rock Canyon State Park.

“Since 2000 the wilderness area has been expanded even further with the purchase of nearly 600,000 acres of land primarily in and around the Mojave National Preserve. The transaction, the largest conservation acquisition of private lands in U.S. history, combined federal Land and Water Conservation Fund appropriations with funding from the Wildlands Conservancy to buy discounted land owned by the Catellus Development Corporation.”

In a press release put out by Senator Feinstein’s office, Catellus’ CEO Nelson Rising gave a major shout-out to Feinstein for the deal: “The successful completion of these transactions would not have been possible without the significant efforts of Senator Dianne Feinstein.” Rising then went on to credit David Myers and the Wildlands Conservancy for raising “…the private funds necessary to complete these sales.”

Not everyone is as thrilled with Feinstein’s land-swap acumen as Nelson Rising.

Jeff Baird works as a computer programmer for the County of San Bernardino. He’s married with two daughters and lives in the high-desert community of Apple Valley, where the land exchanges occurred.

Baird told me what he thought about Catellus. “I believe that a number of these non-profit groups like The Wildlands Conservancy are masquerading under the cloak of “environmentalism. I believe that these environmental groups are being used as vehicles to initiate a series of land purchases and swaps that will ultimately benefit Catellus Corporation and their friends—all at the expense of John Q. Public.”

“These were all public lands; at least those that weren’t privately owned, “ Baird told me. “The private lands were these small ranching operations. The public lands were where people used to go out shooting or ride horses or drive their ATV’s. Then, suddenly, the public lands became private holdings, and they’re going to create this massive new park. Then they start throwing the ranchers off their lands. The whole thing stunk as far as I was concerned. And this was for an “endangered” species, the desert tortoise? Come on, there’s thousands of desert tortoises all over the place out there. They’re not that endangered.

“All of these environmentally related issues appear to be a smokescreen to give this public land away to big private developers,” said Baird. He too believes that, in a sweetheart deal, Catellus gave up essentially worthless desert tracts for lucrative freeway properties. Baird thinks there is also a connection between Catellus Development and The Wildlands Conservancy, which constitutes a direct conflict of interest. The Wildlands Conservancy did not come into being until September 1995, after Senator Feinstein introduced the first desert protection bill, which initially named Catellus specifically.

Later, Clinton’s Secretary of the Interior Bruce Babbit persuaded her to delete the direct reference. How often is an environmental group created to join a bandwagon driven by a U.S. senator? Talk about the cart pulling the horse!

Baird also said he feared “…that the resulting values of ostensibly appreciated land when they were exchanged were inconsistent with the underlying land values of these properties as determined by the county assessor.” Baird looked at scores of parcels related to the desert exchanges, and saw that the assessed values of the desert land increased sharply after being transferred to the Wildlands Conservancy; as high as 300% in some cases.

This yielded huge potential tax benefits to private donors who gave their properties to the Wildlands group as part of the exchanges.

This inflated value estimate also allowed the swap for more valuable land alongside freeways to proceed, because the transfers could then be classified as “fair market value,” specified as part of the BLM’s codes involving land exchanges. “These guys can take a huge tax write-off, because they would be giving up land that was artificially inflated by what I believe was a corrupt process.”

Baird also believes that some of the deals involved public lands that had been illegally transferred to private ownership by the BLM. Baird showed me a series of parcels with map overlays that seemed to establish his contention that the parcels were in fact public lands until just recently.

In a May 1997 issue of Media ByPass magazine, Karen Lee Bixman explored an area of the land swap that made some of Baird’s concerns seem timid by comparison. In a story titled “The Great Gold Heist: The Desert Wilderness Protection Act,” Bixman characterized Senator Dianne Feinstein as “The Modern Jesse James.” Exchanging worthless desert land for more viable commercial land alongside interchanges, as Jeff Baird’s file documented, is bad public policy, but Catellus was also swapping worthless land for rich, gold-bearing deposits.

Bixman wrote: “The real motivation for the passage of [the Feinstein] bill lies with the special interest groups that would benefit monetarily. Through a complex series of land exchanges, Catellus will receive land that contains some of the richest gold deposits in the world.”

Part of the Catellus exchanges in the Mojave included a swap for a decommissioned military base called Chocolate Mountain. Bixman wrote that geologists told her Chocolate Mountain has deposits worth somewhere between $40-100 billion. Catellus owns the nearby Mesquite mine in the Chocolate Rift zone, which, Bixman wrote, “is one of the ten most profitable mines in the United States and has some of the most profitable gold deposits of any mine in the world.”

In the company’s annual report for the year 2000, Catellus’ CEO Nelson Rising in his letter “To Our Shareholders” wrote: “In 2000 we closed on two sales totaling more than 405,000 acres of desert lands. We also entered into an option agreement with The Wildlands Conservancy to sell an additional 277,000 acres of desert land… These transactions have generated more than $320 million in sales proceeds.”

The year-end report for Catellus in 2000 credited Senator Dianne Feinstein for the Desert Wildlands bill and said: Catellus’ fortunes were “directly affected by cash derived from the sales of these surplus lands.” That annual report also listed the fact that CALPERS, the California Public Employees Retirement System, was the largest institutional investor in Catellus Development, then owning some 28% of the 100,000,000 shares of stock. The same report mentioned that Catellus was issuing 150,000,000 new shares of stock, which at the end of the year 2000, when Catellus was trading for $28 a share, were worth a total of approximately $4.4 billion.

Rising also wrote: “As a result of all of these factors, we are very positive about our prospects for 2001 and believe we will meet or exceed our 2001 EBDDT per share growth goal of 15%.”

In the official document on the California Desert Protection Act, the overview of the project states in the first paragraph: “The United States Senate Committee on Energy and Natural Resources approved, on October 5, 1993, the California Desert Protection Act (S21) sponsored by Senator Dianne Feinstein after the bill was blocked in committee for seven years.” The document then states that the Feinstein bill “protects all active mines and valid mineral claims which will protect jobs (bold letters in original) in the region.”

With the profits derived from the new stock issuances and the overnight increase in land valuations, Feinstein’s legislative Rumpelstiltskin act helped Catellus turn a huge profit in 2000. The closest I can determine, Catellus made from $11 to $15 billion during the Desert Wildlands process. And Richard C. Blum had a very good year.

Who knew environmental protection could prove so profitable?

Reprint Paradise Lost? Part Five: Catellus and Mission Bay

2014-02-06T13:10:00.003-08:00

CATELLUS & MISSION BAY

Not long after the first bullet train smoke-and-mirrors show was terminated by the City of Tustin, California’s 1983 White Paper, which set out in detail the politics behind the sleazy political process, a major land use project in San Francisco was put forward in 1986 by a real estate development corporation called Catellus Development.

San Francisco Mayor Dianne Feinstein fought hard to win approval for the Mission Bay project throughout her two terms as Mayor, but it was turned down by San Francisco voters in 1990.

Mission Bay is a 303-acre mixed-use neighborhood located on the central bayshore of San Francisco, bounded by Townsend Street on the north, San Francisco Bay on the east, Mariposa Street on the south, and Interstate 280 (the John Foran freeway, named for the former California State Senator turned lobbyist) on the west.

Mission Bay was re-created in 1998 by the San Francisco Board of Supervisors as a redevelopment project. Much of the land was railyard and warehouses owned by Southern-Pacific Railroad. When Southern-Pacific was bought by Sante Fe Railroad, Sante Fe established a real estate arm, and that division was transferred to Catellus Development Corporation. Catellus subsequently sold or sub-contracted several parcels to other developers. In 1997, Catellus agreed to donate 29.3 acres to the University of California, and the City of San Francisco donated an additional 13.3 acres, allowing UC San Francisco to double its size and grow its research capability.

Materials published on the Internet and derived largely from Catellus’ own corporate papers tell an interesting story. As the Funding Universe website on Catellus states, “The largest private landowner in California, Catellus Development Corporation is a diversified real estate operating company supported by a large portfolio of income-producing properties, and land awaiting development. Catellus was formed in 1984 as an indirect subsidiary of Santa Fe Pacific Corporation to oversee its parent company’s non-railroad real estate activities. Catellus gained its name and its independence when it was spun off from its parent company in 1990. During the late 1990s, the company’s portfolio of industrial, residential, retail, and office projects were located in major markets in California and 10 other states. Of Catellus’s total property, 76 percent of its industrial property, 65 percent of its office property, and 85 percent of its retail property were located in California. The balance of the company’s properties was located primarily in Texas, Illinois, and Arizona.

“Catellus began life on its own in 1990, although the assets of the company–its vast real estate holdings–had roots stretching back to the 19th century-predecessors of the Santa Fe Pacific Railroad. Until 1990, Catellus operated as Santa Fe Pacific Realty Corp., the massive real estate development arm of the Chicago-based railroad company. Financial difficulties during the late 1980s prompted the railroad company to spin off its real estate businesses to shareholders, creating a new, independent company that emerged from the expansive corporate umbrella of Santa Fe Pacific Corp. as Catellus Development Corporation.

“… The company was rich in land holdings, owning 1.5 million acres of land, but needed to develop its properties to realize the full financial potential of its assets. It also was hobbled by the heavy debt load it inherited from Santa Fe Pacific Corp., which made the difficult and costly task of financing its development projects that much harder. Further, the company broke free from the starting blocks at the outset of a pernicious economic recession.

The early 1990s were tenuous years for many businesses, particularly for those companies like Catellus: positioned in a real estate market weakened significantly by an anemic economy. The boom years of the 1980s, when the California real estate market grew energetically, were over, leaving Catellus in the unenviable position of having to contend with nearly $1 billion of debt while it tried to develop mammoth industrial and commercial projects in a market stripped of its vitality. Against this backdrop, the company steeled itself for the difficult challenges ahead.

“From Catellus’s starting point in 1990, conditions worsened before they improved. One month before the company’s debut on the New York Stock Exchange, San Francisco voters dealt Catellus a serious blow, stalling the company’s efforts to develop what was regarded as the prime property within its portfolio. On the site of an old Santa Fe railyard, Catellus owned 166.9 acres of a 313-acre site adjacent to downtown San Francisco called Mission Bay. Undeveloped, the property was not worth much, at least in comparison to its potential value if the site, by all accounts an industrial wasteland, was developed into a residential and commercial property. The decision to develop the property, however, was not strictly up to Catellus. In the business of real estate development on the scale that Catellus operated, politics played a major, and a frequently decisive, role in determining whether development projects could break ground. In November 1990, San Francisco voters contributed their part in the decision-making process concerning the Mission Bay project by narrowly defeating Proposition I, which would have exempted Mission Bay from growth limits. It was the first stumbling block of many that slowed the company’s progress during its first several years of business; ahead were further obstacles.

“As the company’s management scrambled to discover alternative means to turn Mission Bay into a revenue-generating property, Catellus began trading as a public company, making its debut in December 1990. Shortly thereafter, in early 1991, the company announced a new Mission Bay development plan, declaring its intention to transform the property into a residential and commercial neighborhood that would include five million square feet of new office space. As the national economic recession deepened, however, the redevelopment project was put on hold. Critics contended the project drew its strength from the halcyon days of the 1980s, when the fertile real estate market gave birth to one major development after another. In the bleaker economic climate of the early 1990s, the project withered on the vine.

“The once bleak forecast for Catellus’ Mission Bay began to alter in 1995 when Willie L. Brown Jr., the former Speaker of the California State Assembly was elected Mayor of San Francisco. As soon as he was elected, Brown began pushing to revive the Mission Bay project, and in 1997, a bill carried by his best friend, State Senator John Burton, was introduced in the legislature. The bill was designated an emergency status, meaning that it became law immediately as soon as it was passed by the legislature and signed by the Governor. When the bill was passed and signed during the fall of 1997, Mission Bay finally was underway.”

This was the background I was able to collect on Catellus Development and Mission Bay in 2000. All I knew about Catellus when I left California in the fall of 2000 was that they were a major development company, once the real estate wing of the Southern-Pacific Railroad. I knew that S-P Realty’s progeny, Catellus Development, was supposed to build a mixed-use, pedestrian-oriented development in San Francisco’s Mission Bay. I remember reading about the project designed by ROMA Associates when I lived in San Francisco during the 1980s. ROMA was also in on the Bay Bridge deal. They were the firm that designed the tourist theme park on Treasure Island. This was also the same firm who drew all the pretty pictures of the proposed new S-P depot cité in Sacramento in 1991, which was another of those mixed-use, “smart growth” developments that I used to tout in my stories in the Sacramento Bee and other publications. Then I remembered that Mission Bay somehow came unglued around 1990, although I didn’t remember why.

I also knew that Catellus had hired John Foran and his lobbying firm, Nossaman, Guthner, Knox and Elliott to lobby on behalf of SB 1215, the Catellus-sponsored Mission Bay bill carried by John Burton.
The language of the Burton land swap bill was particularly illuminating:

“It is therefore the intent of the Legislature, on and subject to the terms and conditions set forth in this act, (1) to authorize, ratify and confirm any agreement by the city to enter into an exchange or exchanges of granted tidelands and to terminate the public trust or the Burton trust (in reference to John’s brother, Phil Burton’s federal parks law, author’s note), or both trusts, over granted tidelands consistent with the findings and declarations set forth in this act, and (2) to authorize the city to dispose of any and all granted tidelands originally laid out and reserved to the state for street purposes for private use free from those trusts.”

John Burton’s bill from the 1997 session was co-authored by legislators Carole Migden and Kevin Shelley, two of Willie Brown’s hometown political allies. When I showed former State Senator Quentin Kopp this bill during my interview with him in August, of 1998, he said, “I always had a strange feeling about that bill. You’ll notice that there’s only one person missing from the San Francisco delegation in the authorship of it. That person is Quentin Kopp.”

SB 1215 resolved a long-standing dispute between the City of San Francisco and the State of California to allow development on tidelands in Mission Bay. It also provided the means to locate a new campus on the University of California, San Francisco on the site. The bill was pegged as an emergency measure, to take effect as soon as the Governor signed it.

John Foran of Nossaman, Guthner, Knox and Elliott was the lobbyist on SB 1215, hired by Catellus Development to work on this bill on March 20, 1997, and terminated by them three weeks later on April 11, 1997, with a nice fee of over $16,000. Foran filed his lobbying statement as a one-page late amendment to his regular report, seemingly trying to veil his involvement.

Mission Bay was included in the language of the Burton bill, and it was a potential bonanza for Catellus if they were allowed to proceed with Mission Bay.

Burton, Foran and Nossaman, Guthner shepherded SB 1215 through the legislature so silkily that SB 1215 didn’t generate a single nay vote, nor did a single word about it ever appear in any Bay Area newspaper or magazine, until the deal was done.

It certainly didn’t hurt Catellus’ cause that the corporation and its officers had been significant contributors to the political war chests of both Willie Brown and Dianne Feinstein. Besides the $140,000 in legal fees that Willie Brown received from Catellus as one of its attorneys from 1982 until 1994, Brown’s two San Francisco mayoral campaigns also received a whole lot of cash from Catellus. So did Dianne Feinstein’s U.S. Senate campaigns. Over ten years, Feinstein’s campaigns received over $200,000 from Catellus and individuals associated with the corporation, including Nelson Rising. Brown’s two mayoral campaigns received close to $150,000 from Catellus and individuals associated with the corporation.

Directly after Burton’s first bill, SB 1215, was passed in the 1997 session, Burton’s campaign received three contributions totaling $155,000 from the Southern California District Council of Carpenter’s Political Action Fund. Richard Blum, Senator Feinstein’s husband, is the union’s pension fund manager.

On the day that he introduced SB 1562, another Catellus-related bill in the 2000 session, Burton’s campaign received a $4,000 contribution from Nossaman, Guthner, Knox and Elliott, the lobbyist group headed by John Foran, who has been active on every speculation-driven transportation stock from the bullet train in 1982 until now.

During her second term as Mayor of San Francisco, Feinstein fought for the development of Mission Bay but lost. When Willie Brown became Mayor in 1995 he said that the first call he was going to make was to Catellus to see what he could do to get Mission Bay back on track.

While the political process of John Burton’s SB 1215 was proceeding through the California State Legislature, Catellus stock went from below $10 a share to $18 a share. On November 26 and 28, 1997, right after SB 1215 had become law, almost 4.25 million shares of Catellus stock were traded at over $18 a share. Insider activity on Catellus stock was heavy on both of those days.

Perhaps this is only a coincidence, but events had begun to take on so many similar characteristics and involve so many of the same characters that I could no longer accept them at face value. This feeling grew to become factually indisputable when the Catellus/Desert Wildlands bill went through in 2000. If Mission Bay was an insiders’ bonanza for Catellus and its board members, those profits were dwarfed by the multi-billion dollar fields of dreams they reaped in the Mojave.

Reprint Paradise Lost? Part Four: The Headwaters Forest Land Swap

2014-02-06T13:04:00.002-08:00

The Headwaters Forest Land Swap

I believe in the golden rule. He who has the gold rules.
—Maxxam CEO Charles Hurwitz after his corporate takeover of Pacific Lumber in 1985.

Maybe the bullet train and the Bay Bridge were predictable in their methodology and in their ability to produce profits from transportation projects, which are traditionally laden with pork, but that’s usually in the form of mega-million dollar construction projects, not through stock options based on the contracts called for in the legislation.

Usually, you have to build something to make millions; in the Transcam cases like the Bay Bridge and the bullet train, you don’t. You just issue the stocks. Voila! Instant money.

Although both the bullet train and the Bay Bridge produced some drama, it was nothing close to the sturm und drang of the Headwaters Forest.

This show had it all: heroes and villains, courtroom drama, high-level deal making and an eleventh-hour salvation of the symbol that galvanized the environmental community. That a young woman, Julia “Butterfly” Hill, had been cynically used as a pawn by insiders in the other, far quieter events surrounding Hill’s symbolic act of sitting in a redwood tree she named “Luna,” for over a year, was never reported. The Headwaters deal also included a pump-and-dump, and the deal was negotiated for the Bill Clinton and Gray Davis administrations by U. S. Senator Dianne Feinstein.

Sometimes life has an uncanny ability to imitate art, and in this part of the series we have a character who is the real-life counterpart of Wall Street’s Gordon Gekko, with his unscrupulous business practices, and rapacious desire for milking wealth from unsuspecting taxpayers and Mom-and-Pop shareholders. This man is Charles Hurwitz, owner and CEO of the Houston-based Maxxam Corporation.

Hurwitz’s business style was revealed when he acquired a California-based company called Pacific Lumber in 1986. Pacific Lumber was an old North Coast logging company that owned the Headwaters’ virgin redwood forest. Hurwitz mined this prize stand of lumber to maximum effect by forcing a $700 million sale of Headwaters to the State of California in 1999. The sale preserved the trees, but at a price that many observers feel was highly over-valued. Since that deal in early 1999, Hurwitz, in true Gordon Gekko fashion, has torched Pacific Lumber, which is now in bankruptcy proceedings.

In Wall Street, when asked why he wants to wreck the company of his young informant’s father, Gekko replies, “Because it’s wreckable!”

Charles Hurwitz’s office is decorated with a large picture of a big fish swallowing a smaller fish. Maxxam’s takeover of PL was one of many in the 1980s. Under these deals a company buys another company and finances the deal using high-interest, high-risk loans called junk bonds. The assets of the company must then be sold or turned into profit very quickly in order to pay these high-interest loans. Maxxam’s takeover was financed by the notorious firm of Drexel Burnham Lambert, headed by Michael Milken.

There were many shady deals that went into this takeover, including insider trading (using secret information that is not available to the public) and having people secretly purchase and hold stock to avoid public reporting requirements. Several of the key players ended up going to prison for their roles in the PL takeover, or other financial dealings. However, their sentences are not like those given to regular people. For example, Boyd Jeffries, a financier who purchased 2.5 percent of PL stock for Hurwitz, pled guilty to several violations of federal regulations. His “penalty” was community service, teaching young people to play golf in Aspen, Colorado.

The story of Pacific Lumber is an instructive one in and of itself. For over a century Pacific Lumber owned Headwaters Forest and nearly 200,000 acres of redwood timberland in Humboldt County. They were the largest employer in the county, with their mill in Scotia as their main base of operations. In the early 1980s PL still owned healthy forests long after other timber companies had cut their holdings.

Compared to some of Hurwitz’s other deals the takeover of Pacific Lumber was relatively straightforward. Pacific Lumber’s stock did not reflect the real value of its assets, largely because the company was harvesting its timberlands at a conservative rate compared to other timber companies. Drexel had been unable to interest other buyers in Pacific Lumber largely because of environmental issues. It was clear to everyone, in advance, that in order to buy Pacific Lumber with junk bonds, the plan would have to include not just a higher rate of logging, but rapid destruction of rare old-growth redwood forests.

Pacific Lumber also had $65 million in a pension plan for its employees. After the takeover Maxxam used this cash for its own purposes.

Interestingly, the Securities and Exchange Commission, in September 1988, charged that Drexel forced its client, Maxxam, to pay an inflated price for Pacific Lumber Company. As outlined in the SEC lawsuit, on September 30, 1985, Maxxam made a tender offer for Pacific Lumber at $36 a share, and the same day demanded and received a 50% cut in Drexel’s fee. Then Ivan Boesky started to buy stock for Michael Milken at Drexel, without Maxxam’s knowledge, pushing the open market price of Pacific Lumber above the offer price. Maxxam raised its tender offer to $38.50 a share. On October 22 Maxxam increased its offer to $40 per share and Pacific Lumber capitulated.

Several other lawsuits attended the Pacific Lumber takeover, including one by the heirs of the family that had controlled Pacific Lumber, and one over the raid on the pension fund.

Pacific Lumber’s financial outlook is heavily dependent on the outcome of a variety of lawsuits and regulatory proposals, and the proposed deal for the California and Federal government to acquire a small part of the Headwaters forest area of Pacific Lumber’s timber holdings…According to Pacific Lumber’s SEC filing 10-K405 of 3/26/98, the long list of laws that must be complied with “have not had a significant adverse affect on its financial position, results of operations, or liquidity. However, these laws and related administrative actions and legal challenges have severely restricted the ability of Pacific Lumber to harvest virgin old-growth timber.” Pacific Lumber claims that these timberlands have been “taken” by California and the Feds, and Pacific Lumber should receive just compensation.

According to the same filing, Pacific Lumber and Maxxam entered into an agreement with the US and California which “provides a framework for the acquisition of approximately 5,600 acres of Pacific Lumber’s timberlands” known as the Headwaters Forest.

In 1997, Hurwitz’s corporation Maxxam reported a net income of $65.2 million, or $2.42 per share. Net sales for 1997 were $2.7 billion. Aluminum operations (Kaiser) created operating income of $174 million for 1997. Forest products operating income (Pacific Lumber) was $84.9 million. Real estate and other operations lost $5 million. Interest received was $50 million. Interest expense ($211 million) on junk bonds is the main reason the net income of Maxxam is far lower than the total income of its three types of operations. On April 3, 1998 Maxxam shares, traded on the American Stock Exchange, closed at $60 per share. In 1994 Texas Monthly Magazine reported Charles Hurwitz’s personal wealth to be estimated at $140 million.

Hurwitz also acquired United Savings Association of Texas (USAT) along with Milken and Co. Hurwitz was Chairman of the Board of the United Financial Group, whose main asset was USAT. USAT was heavily invested in highly risky junk bonds and speculative real estate, with 97 percent of it’s securities portfolio in junk bonds. When USAT collapsed in 1988, it would leave the federal government a $1.6 billion debt, the fifth largest bank failure in U.S. history.

Meanwhile, Hurwitz commenced liquidating PL’s assets to pay his huge loans. One of the first things that Hurwitz did was raid the PL pension fund. By “renegotiating” the pension fund with a company called Executive Life Insurance, Hurwitz and Maxxam were able to walk away with $55 million of the $65 million-dollar pension fund. Outside consultants recommended against placing the pension fund with Executive Life, which was financially unstable and heavily invested in junk bonds. In 1991, the California Insurance Commissioner seized control of Executive Life, in the largest insurance failure in U.S. history. According to the reorganization worked out by the insurance commissioner the PL retirement plan continued to pay benefits, but only at the rate of 70 cents on the dollar. Maxxam has promised to make up the difference. After the failure it was revealed that Executive Life held $350 million in Pacific Lumber junk bonds.

Of course the main asset that PL needed to turn into cash was its huge timber holdings, including the Headwaters Forest. Immediately after the takeover PL tripled its redwood logging, purchased a fourth lumber mill, and added an extra shift. The ancient trees began falling at an alarming rate.

As huge logging trucks began to clog the highways of Humboldt County, environmental activists began to organize against the devastation. Earth First! organized direct action to slow down the pace of the cutting and to bring public awareness to the issue. They strung a huge banner over Highway 101, busted into corporate meetings, staged “tree-sits” where activists sat on three-foot by six-foot platforms high up in the redwoods. They blocked roads, and chained themselves to machinery and to trees.

In 1996 California Senator Dianne Feinstein brokered a deal with Maxxam to trade $380 million in state and federal money for 7,500 acres of Headwaters containing two of the six ancient groves. Environmental activists denounced this deal, saying it was primarily set up to end the protests. They were right; it did end the protests, and the protestors helped make Hurwitz and Maxxam a billion dollar profit.

When the deal went through in 1999, the insiders sang hosannas to their successful effort to “save” the Headwaters. On March 1, 1999, the United States Bureau of Land Management and the state of California acquired the Headwaters Forest Reserve and surrounding lands totaling 7,400 acres in central Humboldt County. These newly acquired public lands are co-managed by the Bureau of Land Management and the California Department of Fish and Game. Their mission is to protect the ecological and wildlife values, particularly the old-growth redwoods that provide habitat for the threatened seabird, the Marbled Murrelet. The forest also protects the headwaters of several major stream systems in the Reserve, which provide habitat for the threatened Coho Salmon and other fish. The forest was a focal point of the largest environmental movement in recent years and is now owned by the Federal government.

The late David Brower was an environmental heavyweight who was one of the few to say the deal stunk from the head. Brower was a fighter and he had taken on the new board of The Sierra Club, which he once headed, accusing them of selling out. “They’re fiddling while Rome burns,” Brower told me when we met in Sacramento.

Brower had written a critical piece of the Headwaters deal in the San Francisco Chronicle’s December 23, 1998 edition, characterizing it as a half-billion-dollar government shakedown. “If we allow tycoons like Charles Hurwitz to exact hundreds of millions of dollars by staring down the government, more will line up behind him,” Brower warned. It was a prophecy that has since proved to be the case.

In his column on another land swap in the Sacramento Bee called “A Succession of Land Deals” published in March of 2001, Dan Walters wrote that the Catellus desert land swap amounted to a deal where “Catellus walked away with cash and valuable land and gave up virtually nothing of real value. It was a coup for the company’s top executive, Nelson Rising,” wrote Walters, who went on to state that the Catellus desert bill bore some similarities to the Headwaters Forest bill: both were used to appease environmentalists, those who favored the desert park and wanted to protect the desert tortoise, and those who wanted to preserve the virgin-growth Headwaters redwood forest.

Feinstein negotiated the Headwaters deal for the Clinton and Davis

Administrations in the fall of 1998, right before she authored a new bill we will cover later in this blog. This bill was the Desert Wildlands bill. The Headwaters negotiations began in 1997. The company that owned Headwaters, Houston-based Maxxam Corporation, was trading at around $45 a share with volumes of 10,000 shares a day when the negotiations got underway. The deal went through March 1, 1999. The land transfers were administered by the Bureau of Land Management. The next day, Maxxam’s stock jumped nearly $9.89, to $57.69. That translated to $1,107,414 of profit in one day. That same day, 112,200 shares of Maxxam stock were traded. The two-day aggregate sales of Maxxam on March 1 & 2, 1999 totaled 252,000 shares that netted them $13,155,224. The one day increase in stock price multiplied by the outstanding number of stocks at the time equaled a cool $53,028,000. Insiders at Maxxam held over 50% of these stocks.

If we refer to Senator Feinstein’s official website on the Headwaters under the heading “Accomplishments”, she wrote “Between the years 1995 and 1999, I brought together officials from the Federal Government, the State of California, and the Pacific Lumber Company to negotiate a compromise agreement that protects the magnificent grove for all time. The Headwaters Agreement, provided for the Federal acquisition of the 7,500-acre Headwaters Forest from the Pacific Lumber Company, required that the Pacific Lumber Company’s entire 210,000 acres be governed by the terms and conditions of a Habitat Conservation Plan… protected 12 additional groves of ancient redwood trees, comprising over 8,000 acres, as habitat for the marbled murrelet; and provided habitat protection for the endangered coho salmon and other aquatic species.”

Senator Feinstein summed up this accomplishment by writing “I am very proud of this agreement because it saves all of the Headwaters Forest and all of the 12 lesser groves of ancient redwood trees. This is something that at the beginning of this process and even two years into the negotiations I didn’t think possible. The end result is a strong plan on which all of us will have to work closely together to implement satisfactorily.”

Reprint from Paradise Lost? Part Two: The First Transcam: The Bullet Train, 1981-1983

2014-02-06T13:01:00.000-08:00

The First Transcam: The Bullet Train, 1981-83

On April Fools Day 1981, a pair of articles were published in the business section of the New York Times. At first, the stories didn’t seem at all related.

The first story gave readers an overview of the faltering Japanese economy, which was in the midst of a recession due to inflation and economic stagnation. The article posited the theory that Japanese industries would need to export hard goods if they were going to recover.

A reporter named Agis Salpukas wrote the other story. It floated the idea that a new bullet train was being considered for California. The train being considered was supposed to run between Los Angeles and San Diego. The Salpukas story also mentioned the fact that the California bullet train had the backing of a Japanese billionaire, who was helping to fund the project by providing the backers with a $5 million grant for preliminary marketing studies. The backer was Ryoichi Sasagawa.

Sasagawa said he was absolutely committed to seeing that a new bullet train came to California, and would fund a hundred such studies if necessary.. The start-up corporation promoting the train was called American High Speed Rail Corporation.

The bullet train was one of Jerry Brown’s pipe-dream projects during his two terms as Governor, at least that’s how it was regarded. When the brilliant but high-strung Adriana Gianturco became Jerry Brown’s chief of Caltrans in 1976, she began pushing for a bullet train.

In 1978, Gianturco commissioned a San Diego-to-Los Angeles high-speed rail corridor study and Caltrans did some preliminary work-ups. But the project was going nowhere. Gianturco was on San Jose Senator Alfred Alquist’s shit list. Alquist was then the chairman of the Senate Appropriations Committee. In other words, he ran one of the legislature’s two money committees.

Alquist loathed Adriana. During one of her bullet train presentations—in 1978, I believe—Alquist told Gianturco that if he ever heard the words “bullet train” come out of her mouth again he’d cut off all of Caltrans’ funding. Gianturco did as she was told and gave it up. But Jerry wouldn’t let go of his pipe dream, and when his former Secretary of Business, Transportation and Housing, Richard Silberman, the Jack-in-the-Box billionaire, became Brown’s Chief-of-Staff, the Japanese-funded bullet train crusade commenced again.

Besides Jerry Brown’s interest in bullet trains, there was now a national interest coming from Washington, D.C. There, the president and vice-president of AMTRAK, Alan Boyd and Larry Gilson respectively, were leading the effort to bring high-speed rail to California.

What Boyd and Gilson did was either shrewd or cynical, depending on how you define loaning yourself money from the public corporation you work for to start your own private, for-profit corporation. At the very least it seemed unethical. Boyd and Gilson loaned themselves $750,000 from AMTRAK to fund their new corporation, American High Speed Rail Corporation (AHSRC), which officially came into being on December 16, 1981. When the loan was made, Boyd and Gilson were still drawing AMTRAK salaries. Most of the money Boyd and Gilson loaned themselves was paid to the Arthur D. Little Company of Boston, Mass. for the first bullet train marketing study.

The train then began building up steam. California legislators began receiving free junkets to Japan so they could check out an actual bullet train. Among those going to Japan were the two legislative chairmen of the California state legislature’s transportation committees, Assemblyman Bruce Young, from Norwalk, and Senator John Foran, from San Francisco. Also making one of these junkets was Assemblyman Mike Roos, Willie Brown’s Assembly Majority Leader. Roos was Willie’s Field Marshall in the Assembly, and Roos’ chief bright boy on his staff was a funny-looking Greek kid from Sacramento, a Harvard grad with a big Adam’s apple and thick, dorky glasses named Phil Angelides. Angelides was first a staffer for Jerry Brown. Then he went to work for Roos, Willie’s floor leader. Angelides later served as the California State Treasurer from 1998-2006, and was also the Democratic Party’s gubernatorial candidate in 2006.

Footing the bill for all these junkets was Sasagawa and a lobbying group called Californians for Economic and Environmental Balance, CEEB, as they were commonly called. The man who brought CEEB into being was Jerry Brown’s father, Pat Brown. In the background were Nossaman, Guthner, Knox and Elliott, the main transportation-lobbying firm in Sacramento, maybe the Number One transportation- lobbying firm in the United States until recently.

From the Center for Investigative Reporting in San Francisco, I was able to obtain files that claimed Sasagawa’s money was largely derived from his interests in speedboat racing, which was then a known Yakuza, organized-crime enterprise.

Also in these files were allegations regarding Sasagawa’s career before the Japanese fascists came to power. They said that Sasagawa was a suspected World War II war criminal, and the U.S. State Department had acquired evidence that tied him to the assassination of Japanese Prime Minister Takeshi Inuki, in 1936. I saw telegrams from The State Department attesting to this, and recommending that Sasagawa be tried as a war criminal. Then they let him walk without coming to trial.

Four months after the “float” story in the New York Times Sasagawa started flying all those California legislators to Japan.

In early 1982, Larry Gilson and Alan Boyd came west to pitch California legislative unbelievers on the wonders of high-speed rail. They hosted parties in San Francisco and Los Angeles, pitching their project. In January of 1982, just weeks after forming their corporation, American High Speed Rail in Delaware, they hosted a reception for Sasagawa at The Sanwa Bank in Sacramento. They met with key legislators like Senators Foran and Alquist, and with Assemblymen Mike Roos and Lou Papan to tout their project. They also enlisted the support of Lynne Schenck, a key aide to former Secretary of California Business, Transportation and Housing Richard Silberman. Schenck then worked as assistant to Jack Harper, Silberman’s successor at BTH. AHSRC also announced that they had managed to secure the support of the Los Angeles Times and the Copley newspaper chain.

The legislative action on the first bullet train was a mirror image of what later occurred in almost every other Transcam bill process covered in my forthcoming book, Paradise Lost? .

The first thing they did was to introduce a “spot” bill by Assembly Transportation Committee chairman Bruce Young. The bill, AB 3647, was purely regulatory in nature and had nothing whatsoever to do with bullet trains. This bill floated through the respective committees and legislative houses without notice or controversy until late August of 1982, when it was hijacked and amended with legislation that all but named the Japanese companies. As soon as the bill was passed, the stocks of these companies soared.

A source that served under the legendary Jesse “Big Daddy” Unruh when he was Treasurer told me what happened on AB 3647. “I got a call on a Friday from someone who said that there were some people here in town (the AHSRC backers) and that they had a piece of legislation that we might want to take a look at because it involved state bonds.”

This source was then summoned to a Friday meeting with Mehdi and Linda Morshed. The Morsheds were then the chief transportation committee consultants in the California State Legislature. Mehdi worked in the Senate for John Foran, while Linda worked in the Assembly for Bruce Young.

The Morshed’s presented this person with a sample draft of the bill, who told me he saw that the state had a potential liability if the bonds failed. He asked the Morsheds if he could have a little bit more time to look it over more carefully. The Morsheds asked if he could make his changes by the end of day. The source said he would need the whole weekend. On Monday, August 23, 1982 my source told me he gave the Morsheds his amended version of the bill. On Wednesday, August 25, the bill was sent to the joint legislative conference committee.

The legislature had passed all of its legislation by then, and the only thing left for them to do was resolve the differences between the Assembly and Senate versions in the joint conference committee. The two legislative leaders, Senate Rules Committee chairman David Roberti and Assembly Speaker Willie Brown, appointed the six members of the joint conference committee.. The conference committee members were John Foran, Robert Beverly, and Jim Mills from the Senate, and Larry Stirling, Richie Robinson and Bruce Young from the Assembly. Suddenly, the AB 3647 bill about highway regulations was amended. The Morshed’s gutted the bill, striking out the language entirely and replacing it with a paragraph that called for “$1.25 billion in tax exempt California state revenue bonds for a Shinkansen-type bullet train” to be operated by a private corporation for profit.

Mills was the lone dissenter to the conference committee’s final report. “The whole thing, from the AMTRAK loan to American High-Speed Rail Corporation, which I opposed because I sat on the AMTRAK board at that time, to the conference committee bill of Young was totally unethical, and these guys were using their connections to that Japanese billionaire to make money for themselves,” Mills later told me.

AB 3647 was passed out of the joint conference committee by a 5-1 vote with Mills dissenting. After five minutes of floor debate, the bill was approved by the entire legislature. A month later, on September 29, 1982, Jerry Brown signed the bill into law, saying “the bullet train is controversial because the technology is not a way of life in California or in the nation.”

On October 12, 1982, AB 3647 became California law.

Shortly after the bill passed, a couple of Japanese companies associated with bullet train production—the kind of exportable hard goods sales which the New York Times said were necessary in order for the Japanese economy to recover—experienced sharp increases in their stock prices. The firms were Kawasaki Heavy Industries and Mitsubishi.

Both firms were involved in the manufacture of Japanese “Shinkansen” bullet trains. In December of 1981, Kawasaki stock was trading at $117 a share, Mitsubishi at $166 a share. In August 1982 after AB 347 had passed both houses of the California legislature, Kawasaki was trading at $159, Mitsubishi at $230.

Another company whose stock price dramatically increased during the bullet train legislative process was Irvine Sensors. This company was going to be providing the signaling equipment for the new bullet train. Irvine Sensors was an over-the-counter stock that started trading at $3 a share on October 13, 1982 the day after the legislation became law. By December it was trading at $7 a share.

The passage of AB 3647 stunned many observers, including Adriana Gianturco, who had been led to believe that a bullet train would fall under the aegis of Caltrans. In fact, Alan Boyd and Larry Gilson of American High Speed Rail had promised Gianturco when she met with them in the spring of 1982 that Caltrans would still be involved in the project. Gianturco told me this when I interviewed her in the spring of 1983. Gianturco then found that Caltrans was cut out of the process entirely. American High Speed Rail Corporation would instead build the bullet train with private engineering and design, and construction firms like the Irvine Company and the Fluor Corporation, the two biggest developers in Orange County, and both politically wired. The environmental work on the project was going to be the responsibility of a firm called Woodward-Clyde. AHSRC was supposedly on the hook if the system failed to perform as advertised, or if the tax-exempt revenue bonds failed.

The bullet train process and the low-ball legislation outraged a number of environmental groups and citizens along the route. AHSRC held a number of public and legislative meetings in an attempt to mollify them with some pork. Station stops were promised to so many small communities that the train would spend most of its time braking or accelerating; rarely hitting its 125 mile-per-hour top speed where it was most efficient. The promoters also promised clean-up legislation to the environmentalists.

At one legislative meeting, Jess Unruh was called to testify and said: “I am here to bite the bullet on this bullet train.” Unruh, the former all-powerful Assembly Speaker, confessed that he too had been promised studies showing how the bullet train would produce such fantastic ridership figures that it would shortly be in the black, with the ability to cover the tax-exempt state bonds.

On February 12, 1983, at a Senate Transportation Committee hearing I attended, one of the bullet train’s chief critics came forward to testify. Jonathan Richmond was then a visiting Fullbright scholar and London School of Economics graduate. He specialized in transportation issues and questioned the figures contained in the Arthur D. Little marketing study report, which until then had never been made public.

Richmond was then a full-time employee of the Southern California Association of Governments (SCAG), the regional government and planning agency for metropolitan Los Angeles. Before he took the stand, committee chairman John Foran read a letter that said Richmond was “appearing here on his own and does not represent SCAG.” Then, after being all but discredited by Foran, Jonathan Richmond presented the Senate Transportation Committee and the assembled press with the theretofore “secret” Arthur D. Little study, which had been funded with the AMTRAK loan to AHSRC.

Richmond tore it to shreds. The studies were flawed, said Richmond. The numbers in the Arthur Little report didn’t make sense. They wouldn’t stand up; they were make-believe. Richmond demonstrated that the methodology used to assemble the figures showing the bullet train could operate without further state funding was insupportable, until John Foran shut him up. AHSRC tried to undo the damage, but it was too late. Their credibility was shot.

Six months later, the City of Tustin released a “white paper” detailing the politics behind the passage of AB 3647, exposing the murky Japanese connections and the bill’s effect on the Japanese corporations’ stocks. American High Speed Rail Corporation, the bastard offspring of AMTRAK’s Alan Boyd and Larry Gilson, then folded its tent and the bullet train faded into memory.

One Citizen Speaking: Dianne Feinstein: Oops I Did It Again? Reprint from One Citizen Speaking Blog

2014-02-06T12:38:00.001-08:00

http://www.onecitizenspeaking.com/2009/04/dianne-feinstein-oops-i-did-it-again.html

April 22, 2009

DIANNE FEINSTEIN: OOPS I DID IT AGAIN?

There is no doubt in my mind that the democrats pander to their special interests and are infamous for nepotistic deals involving spouses, relatives and close friends.

So why should we be surprised when the Washington Times is reporting …

“Senator's husband cashes in on crisis”

“On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband's real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.”

“Mrs. Feinstein's intervention on behalf of the Federal Deposit Insurance Corp. was unusual: the California Democrat isn't a member of the Senate Committee on Banking, Housing and Urban Affairs with jurisdiction over FDIC; and the agency is supposed to operate from money it raises from bank-paid insurance payments - not direct federal dollars.”

“Documents reviewed by The Washington Times show Mrs. Feinstein first offered Oct. 30 to help the FDIC secure money for its effort to stem the rise of home foreclosures. Her letter was sent just days before the agency determined that CB Richard Ellis Group (CBRE) - the commercial real estate firm that her husband Richard Blum heads as board chairman - had won the competitive bidding for a contract to sell foreclosed properties that FDIC had inherited from failed banks.”

“About the same time of the contract award, Mr. Blum's private investment firm reported to the Securities and Exchange Commission that it and related affiliates had purchased more than 10 million new shares in CBRE. The shares were purchased for the going price of $3.77; CBRE's stock closed Monday at $5.14.”

“Spokesmen for the FDIC, Mrs. Feinstein and Mr. Blum's firm told The Times that there was no connection between the legislation and the contract signed Nov. 13, and that the couple didn't even know about CBRE's business with FDIC until after it was awarded.”

“Senate ethics rules state that members must avoid conflicts of interest as well as "even the appearance of a conflict of interest." Some ethics analysts question whether Mrs. Feinstein ran afoul of the latter provision, creating the appearance that she was rewarding the agency that had just hired her husband's firm.”

Déjà vu all over again …

Apparently this is not the first time Senator Feinstein has been associated with suspicious dealings …

“Feinstein Resigns: Senator exits MILCON following Metro exposé”

“SEN. Dianne Feinstein has resigned from the Military Construction Appropriations subcommittee.”

“As previously and extensively reviewed in these pages, Feinstein was chairperson and ranking member of MILCON for six years, during which time she had a conflict of interest due to her husband Richard C. Blum's ownership of two major defense contractors, who were awarded billions of dollars for military construction projects approved by Feinstein.”

“As MILCON leader, Feinstein relished the details of military construction, even micromanaging one project at the level of its sewer design. She regularly took junkets to military bases around the world to inspect construction projects, some of which were contracted to her husband's companies, Perini Corp. and URS Corp.

“Perhaps she resigned from MILCON because she could not take the heat generated by Metro's expose of her ethics (which was partially funded by the Investigative Fund of the Nation Institute). Or was her work on the subcommittee finished because Blum divested ownership of his military construction and advanced weapons manufacturing firms in late 2005?”

For a liberal left-wing democrat, it must have been extremely hard to constantly denounce the war that was supplying herself and her husband with a handsome lifestyle?

“Feinstein abandoned MILCON as her ethical problems were surfacing in the media, and as it was becoming clear that her subcommittee left grievously wounded veterans to rot while her family was profiting from the occupations of Iraq and Afghanistan. It turns out that Blum also holds large investments in companies that were selling medical equipment and supplies and real estate leases—often without the benefit of competitive bidding—to the Department of Veterans Affairs, even as the system of medical care for veterans collapsed on his wife's watch.”

Must have been tough railing against Halliburton, who was often the only contractor suitable to perform services, and no-bid contracts while her husband was doing the same thing?

“As of December 2006, according to SEC filings and www.fedspending.org, three corporations in which Blum's financial entities own a total of $1 billion in stock won considerable favor from the budgets of the Department of Defense and the Department of Veterans Affairs:

Boston Scientific Corporation: $17.8 million for medical equipment and supplies; 85 percent of contracts awarded without benefit of competition.

Kinetic Concepts Inc.: $12 million, medical equipment and supplies; 28 percent noncompetitively awarded.

CB Richard Ellis: The Blum-controlled international real estate firm holds congressionally funded contracts to lease office space to the Department of Veterans Affairs. It also is involved in redeveloping military bases turned over to the private sector.”

I seem to remember something about Senator Feinstein and gold mining that I had heard when I was with my hunting buddies on a daytrip to the old ghost town at Bodie State Park. And then I found this …

“On October 8, 1994 the biggest gold heist in history occurred, but this theft lacked the melodrama of a Jesse James holdup or the excitement of a Brink's truck robbery. Nary a word was reported by the media even though this thievery was committed in the light of day. The citizens that were being robbed tried to cry out for help but the lawmen wouldn't listen because unbeknownst to them they were helping the bandits gain their booty.”

“The 103rd Congress managed to accomplish more than a gang of train robbers could achieve in a lifetime when they approved the Desert Wilderness Protection Act. ‘Instead of voting on the Desert Wilderness Protection Act, Congress should be convening a criminal investigation,’ said Donald Fife, spokesman for the National Association of Mining Districts. Fife was commenting on recent information that indicates tens of billions of dollars in gold deposits and huge real estate swindles may be the motivating factors behind the act.”

“Sponsored by Senator Diane Feinstein, the Desert Wilderness Protection Act and it's companion bill known as the California Desert Protection Act create three new national parks and seventy-four new wilderness areas in the desert of California that would total 8 million acres (an area the size of Maryland). This will close this acreage to development, force out private owners within the protected area and close down mines and ranches. It would also expand the Death Valley and Joshua Tree national monuments and upgrade them to national parks. This is the largest wilderness land lockup since the 1980 Alaska Lands Act; largest ever in the lower 48 states. Senator Feinstein contends that the fragile ecosystem of the desert must be protected from development, but in reality the areas being placed into park and wilderness closures are not threatened.”

“In 1980, the California Desert Conservation Area Plan was enacted to protect the desert and it has been rigorously enforced by the U.S. Bureau of Land Management. Furthermore, the designated acreage mentioned in this bill have largely been for sale at bargain prices for over 100 years with no takers because there is absolutely no water or any prospect of water for development. It seems that the real motivation for passage of this bill lies with the special interest groups that would benefit monetarily.”

“Through a complex series of land exchanges, Catellus Corp., a subsidiary of Santa Fe Pacific, would receive land that contains some of the richest gold deposits in the world. In exchange the public gets seventy-four widely scattered tracts of desert which have found no economic use in more than a century.

“Catellus owns over 400,000 acres of worthless land in the California Mojave Desert. This land was obtained by Santa Fe Pacific and its predecessor railroad companies as part of the ‘checkerboard’ railroad lands awarded for the building of the transcontinental railroad. Santa Fe transferred these lands which have been for sale for over 100 years, over to its subsidiary, Catellus Corp. In the land swap, Catellus Corp. will receive land from decommissioned military bases. One of the bases will be the Chocolate Mountain gunnery range. Unbeknownst to the public, inside the range is the world's richest gold rift zone. Geologists estimate that the gold contained in this zone is worth between $40 to $100 billion. These are surface gold deposits which are more profitable to mine than the one-mile deep gold deposits in South Africa.”

“In addition to controlling Catellus, Santa Fe owns and operates the Mesquite gold mine located on the Chocolate Mountain rift zone. The Mesquite gold mine is one of the top ten mines in the United States and has some of the most profitable gold deposits of any mine in the world. To the north is the Chocolate Mountain gunnery range. The Mesquite open pit gold mine literally stops at the fence that borders the gunnery range.”

According to mining engineers who work at the Mesquite mine, the main gold ore body is north of the fence inside the gunnery range. Engineers allege that in 1981 and 1982, Consolidated Goldfields, which owned the mine at the time, illegally drilled into the gunnery range area to determine the composition of the ore body. The samples proved to be of high quality. According to these same engineers, beginning in the mid-1980s, military helicopters brought high ranking military officers, Congressmen and Senators to the area to examine these large gold deposits. Congressman Bruce Vento (D-Minn.) was one of those who toured the area. Engineers allege that the purpose of these tours was to come up with a way to hand these gold deposits to Consolidated Goldfields. No legal mechanism was then available to transfer this land without alerting the public to the existence of the gold. But around the same time the California Desert bill was introduced into Congress by former Senator Alan Cranston.

The California Public Employees Retirement System, (CALPERS) is a nearly $80 billion pension fund whose investment clout is heavily influenced by California leadership which includes Sen. Diane Feinstein. Several years ago, CALPERS made a $400 million investment in Catellus. Shortly after CALPERS made its investment in Catellus, the value of the stock collapsed 82%.

“Dehnert Queen, a San Francisco businessman, filed a criminal complaint in regards to this investment to U.S. Attorney Michael J. Yamaguchi and Ms. Sylvia Scott of the U.S. Securities and Exchange Commission. Queen states, in his complaint that Sen. Feinstein ‘misrepresented facts to defraud a public corporation (CALPERS), abused power and conflicts of interest to defraud State and U.S. taxpayers. In early 1993, CALPERS doubled its investment in Catellus to 41 percent...Queen contends ‘that both former Senator Cranston and Senator Feinstein acted to sponsor the Desert Protection Act in order to preserve and protect the formal agreement that then Mayor Feinstein signed with Catellus to build the Mission Bay Project in 1984, updated in 1986 and shepherded same through the City's (San Francisco) departments and commissions.’"

“Ed White, who owns a family mining business in the area is one of many whose business will now be destroyed. ‘The Sierra Club was just used, in my opinion, by Feinstein's bankers friends and the railroad or their land company Catellus, to create the public perception that these lands are fragile and threatened by development,’ said White. ‘The truth appears to be just the opposite. The scattered railroad lands that could never be developed are to be consolidated into a single block of 226,000 acres so they can be developed by Chocolate Mountain Gunnery Range Land and Mining Development.’"

“It is alleged that JLB Realty Corp. based out of Chicago, is tied to Dick Blum, millionaire husband of Sen. Diane Feinstein and that JLB allegedly will stand to make a huge profit on this development. In the name of "re-wilding" millions of acres of desert, grave financial and environmental damage will occur once the land is closed to the public.”

<To read more on this fascinating story in context>

The Apropos Observations of one James Bond (007) …

According to James Bond: once is happenstance, twice is coincidence and three times it is definitely enemy action.

While there is little chance of a democrat-controlled Senate Ethics Committee investigation or hearing, the situation does provide yet another example of an appearance of impropriety that should be investigated on behalf of the taxpaying public.

In any event, it is not all that surprising to learn that a left-leaning liberal anti-war democrat was personally profiting from our war efforts and involved with the mistreatment of soldiers by her committee’s inattention to detail.

There is but one solution …

-- steve

Research Links …

Washington Times - Senator's husband cashes in on crisis

News & Culture in CA | Dianne Feinstein resigns

Catellus Development: The Octopus Reborn

Hunters Point Shipyard Affair

“In January of 2005, Ethics Commission investigator Richard Mo met with complainants and over the next two years received over 500 pages of hard copy and email documentation compiled by the editors of the San Francisco Bay View with assistance from Lynne Brown, Michael Boyd, Francisco Da Costa, Kevin Williams and Roland Sheppard detailing the extensive history of corruption surrounding the shipyard transfer.”

“In February of 2005, U.S. Attorney Andrew Cheng received documentation of violations of federal law involving Rep. Pelosi and Sen. Feinstein, whose husband, Richard Blum, has a financial interest in Catellus Developers, the master developer for the UCSF Mission Bay Campus, Lennar Corp. and numerous Bayview Hunters Point community non-profits.”

“Feinstein resigned from a seat on the U.S. Senate Military Construction Appropriations Committee due to conflicts of interest complaints involving her husband and has been reportedly investigated by the FBI, according to a former writer for the San Francisco Bay Guardian.”

“Cheng, in subsequent communications, referred the Hunters Point Shipyard redevelopment investigation to the Ethics Commission, the City Attorney’s division of governmental integrity and the San Francisco Division of the FBI but took no action at the level of the U.S. Department of Justice.”

“In March of 2005 the City’s Sunshine Ordinance Task Force concluded that violations of the Sunshine Act occurred during the Board of Supervisors’ enactment of the 14 measures approving development on Parcel A.”

“In March of 2005 the state’s Fair Political Practices Commission acknowledged receipt of complaints documenting financial conflicts of interest involving City officials and contractors. No action was taken.”

“In January of 2007 Congresswoman Nancy Pelosi became speaker of the U.S. House of Representatives. Her first act was a failed attempt to install Rep. John Murtha as the House majority whip in exchange for his help in the transfer of shipyard Parcel A.”

Resnick NAS 1/26/10

2014-02-05T15:53:00.000-08:00

http://cetehama.ucanr.edu/?blogstart=36&blogtag=Water&blogasset=6362

Delta environmental review underway at UC Davis

An independent panel appointed by the National Academy of Sciences is working this week at UC Davis to review Delta water allocations, according to yesterday's Sacramento Bee. The activity doesn't directly involve ANR scientists, but the implications for agriculture in California are huge.

Sen. Dianne Feinstein asked for the review in response to requests from San Joaquin Valley farmers, including Stewart Resnick, owner of Paramount Farms, according to the Bee. Resnick's Sept. 4 letter to Feinstein says "sloppy science" contributed to the new water and species protection rules.

Resnick and other farmers have sued and mounted public relations battles to avoid giving up water to help fish, the Bee reported.

Jeffrey Mount, a UC Davis geology professor, believes the academy was asked to get involved simply because "people of great influence" don't like the rules.

"It's not a wise use of the National Academy of Sciences, in my opinion," Mount was quoted in a Bee article published last week. "It will become a sideshow. We are setting a bad precedent that will stretch well beyond the Delta."

Perhaps to emphasize the political nature of the panel's review, Sacramento Bee reporter Matt Weiser pointed out in his story that conservative Democratic Congressman Jim Costa of Fresno was allotted 20 minutes to speak to the panel on Sunday but spoke for an hour. As a result, Mount, a nationally known expert on the Delta, was forced to squeeze his one-hour presentation into 30 minutes.

Costa told the panel the fish protections have harmed his constituents and are based on "flawed science."

Mount said he is concerned the NAS is not the right body to review the federal fish protections. NAS is a science entity, but the rules are somewhat political.

The panel will continue to meet in Davis through Thursday.

Posted on Tuesday, January 26, 2010 at 10:17 AM

How Limousine Liberals, Water Oligarchs and Even Sean Hannity Are Hijacking Our Water Supply - Reprint Yasha Levine Alternet.org

2014-02-04T16:40:00.001-08:00

How Limousine Liberals, Water Oligarchs and Even Sean Hannity Are Hijacking Our Water Supply

November 9, 2009 by Yasha Levine

http://www.alternet.org/story/144020/how_limousine_liberals%2C_water_oligarchs_and_even_sean_hannity_are_hijacking_our_water_supply?paging=off&current_page=1#bookmark

A group of water oligarchs in California have engineered a disastrous deregulation and privatization scheme. And they've pulled in hundreds of millions of taxpayer dollars without causing much public outrage. The amount of power and control they wield over California's most precious resource, water, should shock and frighten us -- and it would, if more people were aware of it. But here is the scary thing: They are plotting to gain an even larger share of California's increasingly-scarce, over-tapped water supply, which will surely lead to shortages, higher prices and untold destruction to California's environment.
California is in year three of a fairly nasty dry spell. And some very powerful forces are not letting this mini-crisis go to waste, fiercely lobbying Governor Schwarzenegger and Senator Dianne Feinstein, paying off corporate shills like Fox News' Sean Hannity and capitalizing on people's fear of drought to push a massive waterworks project that will pump more water, build more dams and keep sucking the state's rivers dry. The fearmongering schtick goes like this: California is on the brink of a water crisis of cataclysmic proportions, with a life-or-death struggle just around the corner, pitting small farmers who want to save their livelihood against big city elitists who care more about the environment than they do about American jobs. But in reality, this drought hysteria is nothing more than political theatrics, a scare tactic backed by big agribusiness to strong-arm California voters into building a multi-billion dollar system of dams and canals that would not really help small farmers -- of which there are very few anyway -- but would deliver more water to corporations, subsidize their landholdings, fuel real estate developmentand enable large-scale water privatization. At its core, it is a war waged for water by California's megarich on everyone else.

The leader of these recent water privatization efforts in California is a Beverly Hills billionaire named Stewart Resnick. Stewart and his wife, Lynda Resnick, own Roll International Corporation, a private umbrella company that controls the flowers-by-wire company Teleflora, Fiji Water, Pom Wonderful, pesticide manufacturer Suterra and Paramount Agribusiness, the largest farming company in America and the largest pistachio and almond producer in the world. Roll Corp. was ranked #246 on Forbes' list of America's largest private companies in 2008 and had an estimated revenue of $1.98 billion in 2007.

They are a limousine liberal power couple. Hyperactive in politics, business and philanthropy, the two raise huge amounts of cash for the Democratic party, donate to the arts, support education and hobnob with influential progressives like Arianna Huffington and the anti-global warming activist and producer of An Inconvenient Truth, Laurie David. Stewart Resnick gave over $350,000 to the Gray Davis campaign and various anti-recall groups between 2000 and 2003, a favor Governor Davis returned by appointing Resnick to co-chair his agriculture-water transition team. A shrewd businesswoman, Lynda is credited with single-handedly creating the pomegranate health fad to sell her Pom Wonderful and catapulted Fiji Water to its recent success, one that environmentalists love to hate as was recently documented inMother Jonesby Anna Lenzer.

But there is a gaping hole in most accounts of the jet-set Baby Boomer couple: their company, Roll International, is one of the largest, if not the largest, private water brokers in America. Through a series of subsidiary companies and organizations, Roll International is able to convert California's water from a public, shared resource into a private asset that can be sold on the market to the highest bidder.

It all comes down to Stewart Resnick's involvement in the creation of a powerful but little-known entity called the Kern County Water Bank -- an underground water storage facility at the center of a plan to bring deregulation to California's most important public utility: water.

According to a 2003 Public Citizen report titled "Water Heist," the Kern County Water Bank is an underground reservoir in the hottest, driest, southernmost edge of the Central Valley with a capacity of 1 million acre-feet, enough to convert the entire state of Rhode Island into a swampland one-foot deep or supply the City of Los Angeles with water for 1.7 years. The water bank was envisioned in the late '80s by the Department of Water Resources as a safeguard against prolonged drought. During wet years, it would serve as a repository for excess water coming in from Northern California and the Sierras, and pumped out in dry years. California spent nearly a hundred million dollars to develop the underground reservoir and connect it to the state's public canals and aqueducts, but in 1995, California's Department of Water Resources suddenly, and without any public debate, transferred it to a handful of corporate interests.

Here is how Los Angeles Times writer Mark Arax described it in 2003:

The story of how the state's largest water bank -- jump-started with $74 million in taxpayer money -- ended up as an integral piece of the private empire of Stewart Resnick begins with a lawsuit, or at least the threat of it.

A seven-year drought ending in the early 1990s pitted Southern California water contractors, such as the Metropolitan Water District, against agricultural contractors, such as the Kern County Water Agency. Each region made its case to the state, telling why it deserved to receive the water guaranteed by long-standing contracts. In the drought's worst years, urban users got 30% of the draw, while Kern farmers received less than 5%. (However, doesn't WWD's CVP contract specifically state it only gets excess water made available in excess or wet water years? Seems to me MWD should have insisted upon contractual enforcement in its senior water rights claim.)

In 1994, agricultural and urban interests threatened to sue the state for nondelivery. The main parties gathered in a closed-door meeting in Monterey to hash out a settlement. Public interest groups, environmentalists and smaller water contractors -- locked out of the meeting -- cried foul.

When it was over, the very flow of California water had been redirected.

Redirected, as in "privatized."

The details of the transfer are complicated and opaque, but, put simply, the State of California transformed a small number of corporate farmers into a de facto water oligarchy by signing over a massive water holding facility and the many billions of gallons of government-subsidized water that it could store. Arcane and trivial as it may seem, the transfer of the water bank circumvented the usual resale restrictions placed on subsidized water purchased from the state. After the water enters the Kern County Water Bank, it stops being a public resource that could otherwise be used to irrigate crops locally or sold on the free-market to the highest bidder. The transfer privatized water without actually needing to do so explicitly.

But the secretive crew that met in Monterey did more than just privatize one underground water reservoir. California's water oligarchy hammered out a plan that put them at the controls of the state's water market and gave them the ability to create non-existent water out of thin air.

The Monterey Amendments, as the revisions that emerged from the closed meetings came to be called, established a legal framework that, for the first time in history, made unregulated water commerce in California possible by creating the concept of "paper water," which could be traded, transferred, divvied up and put on the books as easily as money in the bank or collateral on a loan without anyone having to transfer a drop. It proved to be a blessing for land speculators during the housing boom that was just around the corner.

Every large real estate development in California has to prove that a secure water source will be available for the project decades into the future. It was a requirement that, until "paper water" came along, posed a serious hurdle to developers building low-income suburban paradises in the Southern California desert. Water is not a easy resource to come by in the West. Underground sources are being depleted at a record pace and the state's aqueduct system, which pumps rainwater and snow that melts hundreds of miles south, does not have the capacity to support both exponentially growing sprawl and massive farming operations out in the desert. Even if there were an abundance of virgin rivers to dam and redirect, the hundreds of millions of dollars such projects would cost would eat into the fat profit margins of real estate developers and bring suburban sprawl expansion to a crawl. The "paper water" market banished this pesky problem once and for all. From the mid-90s on, real estate developers could satisfy all their hydration needs by shopping for "paper water," meaning that they were able to satisfy planning regulations simply by convincing a city or county to purchase virtual water rights. They weren't securing a real water supply, or even transferring a single ounce. But it didn't matter as long as the water was on their books.
Most urban dwellers would not be happy with the water even if it did arrive. Because private water storage facilities are not subject to public oversight, "paper water" merchants are not required to adhere to basic water quality requirements, or even to test it. Reports of polluted water being pumped out of private banks and contaminating clean water flowing in the aqueduct are rare only because no one cares to look. In 2008, water pumped out by one of the stakeholders in the Kern bank, Semitropic, had arsenic levels six times higher than federal EPA limits, which caused a plume of arsenic-tainted water to flow south down the state aqueduct towards Los Angeles County and surrounding districts, according to the Antelope Valley Press. (AND, Semitropic is the entity holding the permits for Delta Wetlands Project).

But development-crazed Southern California does not seem to care, and neither do the water merchants. Real estate development needed "paper water" as a person in a vegetative state needs their IV drip.

And so, with no warning and negligible media attention, the Monterey Agreements created the strange, new and unregulated "paper water" market, not unlike mortgage-backed securities and other exotic debt instruments dreamed up by Wall Street, if only because the "paper water" market trades in pure fantasy and is built on deception. For decades, California's water authorities have been in denial about the amount of water they can deliver to their customers. Contractually, the state is obligated to deliver 4 million acre-feet a year. (Los Angeles uses roughly 600,000 acre-feet a year). But in reality, the state can only deliver half the water it promises. Which means that half of the "paper water" being traded on the open market simply does not exist, and never has. And everyone who deals in water knows it, too. Naturally, this posed a problem. Why would anyone buy water that didn't exist?

The Monterey Amendments got around this problem by making a few legal alterations that made the state explicitly accountable for its original water contracts, regardless of whether there was water or not. This gave buyers the confidence to fuel real estate developments with non-existent water because the government was contractually obligated to bail them out, rain or shine. Where will the state get that water? Well, it could take it away from small farmers, rural communities and anyone else who is poor and politically unconnected.
California's newly established "paper water" market was a speculator's wet dream. It was a scam opportunity too promising for the deregulation con artists at Enron to pass up. A few years after the Monterey Amendments, Enron apparently took a cue from the Kern bank, set up a water division, bought up a huge chunk of land in the Central Valley that sat atop a natural underground reservoir and started working on a water bank of their own. But Enron's snake oil brain trust was scheming on a bigger, more global level. Still in the grips of the Dot Com Bubble, Enron wanted to spark an Internet-based water trading revolution and launched a site that they hoped would become the etrade.com of H20. Called Azurix, it would function as an "exchange on the Internet for buying, selling, storing and transporting water in the West, hoping to make water a traded commodity much like natural gas or electricity," the Wall Street Journal wrote in 2000.

An e-water market where people could buy, sell, trade and speculate on water like any other tradeable commodity? It was the kind of delusional that only people in the grips of a speculative boom centered on the limitless possibilities of a technological revolution could believe in. To think that you could wake up in Shanghai, check out a few weather forecasts and purchase a few million gallons of California water, aiming to buy wet and sell dry -- a scam built on insane dreams. A few years later, Azurix went belly up.
But while Enron's futuristic vision of water speculation may have come before its time, a more modest version of the water trade was thriving in the Golden State, and it apparently owed it all to one man: Stewart Resnick.

Public Citizen's "Water Heist" report uncovered evidence that the Beverly Hills farmer was instrumental in the privatization of the Kern Water Bank. Not surprisingly, Resnick's Paramount Farms emerged with a majority stake in the venture. In fact, Resnick's farm empire controls the Kern Water Bank so thoroughly that it is not easy to discern where Paramount ends and the Kern Water Bank begins. The Kern Water Bank Authority, which administers the bank, is located in Paramount's corporate office building outside of Bakersfield, California.

This has brought in massive profits to owners of the Kern bank at taxpayers' expense, and frequently involve nothing more than buying water at subsidized rates from the state, then turning around and selling it back to a different government agency for a tidy profit.

Just as the Federal Reserve allows banks to borrow money from taxpayers so they can reap huge profits by lending it right back to the masses at a higher rate, the Kern bank allows a handful of corporate farmers to sell a public resource back to the public at markup. According to Public Citizen, in 2001, the Kern County Water Bank bought subsidized water from the State Water Project at $161 an acre-foot and flipped it back to the state's Environmental Water Account for $250 an acre-foot, making a cool $6.3 million for its owners -- just for having the right friends in the right places.

The Environmental Water Account (EWA) was set up in 2000 by the state of California to protect salmon populations in the Sacramento Delta. In dry periods, when Delta water levels would drop below a critical level and pumping stations would start slurping up too many fish and grinding them into mush, the state would slow down pumping and supplement water deliveries by buying back water from whoever had any to spare. The plan looked good on paper, but it turned into a very expensive and useless failure -- but only for us and the fish. For members of the Kern County Water Bank, who raked in nearly $40 million dollars by reselling water to the EWA from 2001 to 2004, it worked out pretty well.

As majority stakeholder, Resnick took the lion's share of the profits. A recent investigation by the Contra Costa Times revealed that even as its fish populations teetered on the brink of extinction, California pumped "unprecedented amounts of water out of the Delta only to effectively buy some of it back at taxpayers expense." From 2000 to 2007, California spent $200 million on buying water for the EWA, of which Stewart Resnick's subsidiary companies skimmed 20 cents of every dollar for a total profit of $40 million in seven years. With such gracious help from taxpayers, it is no wonder the Resnicks were able to build such a successful business empire.

"For a program that was supposed to benefit the environment, it apparently did two things -- it didn't benefit the environment and it appears to have enriched private individuals using public money," said Jonas Minton, a water policy expert with the Planning and Conservation League, a California environmental advocacy group, as quoted by the Contra Costa Times.

In a 2008 interview with the New Yorker, Stewart Resnick said he initially got into farming in 1978 as a hedge against inflation. Either he was feigning naivete, or he must have quickly realized that he stumbled upon the money-making opportunity of his life, one that helped grow Paramount Farms into an agribusiness empire.

While California's farming industry was steadily shedding land and farms all through the 90s, the Resnicks were expanding production and acreage, nearly doubling their cultivated land holdings just in the three years after the Monterey Agreements.

But the profiteering off California's environment-friendly water program by Resnick and the rest of the Kern Water Bank crew is chump change compared to the profits water merchants like him can make by selling paper water to real estate developers in the semi-desert wastelands of Southern California.

Take the deal that went down this summer between a farmer with a stake in the Kern bank and a McTractHome paradise in the Mojave Desert, 100 miles east of Los Angeles. For roughly $73 million, the Mojave Water Agency acquired permanent rights to 14,000 acre-feet of water pumped out of the Sacramento Delta and delivered via the State Aqueduct, enough water to flood an area the size of San Francisco six inches deep or hydrate up to 30,000 families for a whole year.

The farmer selling the water was not really a "farmer" in the poor, homesteading, buck-toothed sense of the word, but a private Bay Area-based company called Sandridge Partners owned by the Vidovich family. In addition to running a lucrative cotton and almond growing operation in the heart of the Central Valley, the Vidoviches also control a small real estate empire in the Silicon Valley, building and managing estate developments: office complexes, condominiums, mobile home parks, hotels and shopping centers.

John Vidovich, the current patriarch of the family business, and his wife Lydia live in an $11.4 million Los Altos Hills home. Hilly, wooded and overlooking the bay just south of San Francisco, it's one of the ritziest places to live in Northern California and the 8th most expensive zip code in America. (The president of Resnick's Paramount Farms, Joseph MacIlvane, rubs shoulders with the Vidovich family, sharing a post on the board of directors of the Dudley Ranch Water District, a private water district that owns 9.62% the Kern bank, along with John Vidovich.)

Despite -- or maybe because of -- the family's extreme wealth, Sandridge Partners is one of the top welfare queen-farmers in the country. In 2007, it received $1 million in federal farm subsidies, more than any other farmer that year, raking in an additional $6.8 million between 1995 and 2006, according to the Environmental Working Group. Known as "direct payments," the subsidies are made each year mostly to growers of corn, wheat, rice and cotton, with payout amounts based on past production, sometimes even regardless of whether the crops are still being grown.

But their $73-million water deal shows that farm subsidies aren't the only, or even the most, lucrative handout that has the Vidoviches living well. The money paid out via farm subsidies pale in comparison to the massive profits that can be reaped from simply reselling the heavily taxpayer subsidized water they receive from the state.

According one state water official, the Vidovich's $5,200 per acre-foot deal with the Mojave Water Agency was nearly double previous record price paid for water in California.

Just look at these profit margins: these days, Central Valley farmers buy water from California's Department of Water Resources for a heavily-subsidized $100 to $500 per acre-foot, while city slickers in San Francisco pay around $8,500 for the same water. With this kind of discount, Vidoviches could score a ten- to fifty-fold spread on their purchase-to-sale price. Even if they paid the maximum price of $500 per acre-foot, the water they sold to the Mojave Desert for $73 million would have only cost them $7 million. That's $66 million in pure profit, and all they have to do is let a couple of hundred acres of almond groves wither and let California taxpayers, their ritzy Los Altos Hills neighbors included, fill up their bank accounts.
Shocking as this textbook example of transfer of wealth is, it is neither an isolated incident nor a freak loophole. It was the intended effect of the deregulation and privatization of water hashed in Monterey almost 15 years ago, which transformed water into a truly liquid asset that could be traded with ease on the market. (In 2002, the Sacramento Bee estimated that members of the Kern County Water Bank made at least $128 million from water sales to other cities and counties, which the paper admitted was an incomplete and low-ball figure.)

"Think of the Bank of America, the way it operates with dollars, that's the way we operate with water," said Jonathan Parker, general manager of the Kern Water Bank Authority. "What we do is provide a service. We store water at cost and then take water out of the ground, at cost. They pay us to provide that service in the least expensive manner."

Parker was quoted in 2003. With all the bank bailouts that happened since then, the money-bank to water-bank analogy works even better. The Kern Water Bank shifts the cost for its water onto taxpayers and shifts all of the profits it makes by selling the water to itself. As it turns out, the money-making ideology of "nationalizing losses, privatizing profits" is no longer limited to Wall Street, and hasn't been for a long time. It's all part of the business plan for California's corporate farmers, and a glimpse into the future of California's water trade.

This is the backdrop against which the hysterics and fearmongering of California's water debate are being played out. The drought has been getting increasing political and media attention in recent months. At the core of the discussions are plans for a multi-billion dollar Peripheral Canal, a huge aqueduct that would be constructed to bypass the dying Sacramento Delta and tap into fresh water further upstream with supposedly less harm. It sounds nice on paper. But in reality, the Peripheral Canal is a water privatization con that would move water over to Central Valley water bankers and balloon California’s already over-leveraged "paper water" market.

Governor Schwarzenegger has been trying to push the project through California's legislature for months, and has received ample support from both sides of the isle. In September, Democratic Senator Dianne Feinstein backed the governor and badgered the Obama administration to step in and help California's struggling farmers, going as far as including a letter personally written by Stewart Resnick in one of her communiques. In it Resnick went after Obama officials for siding with environmental interests over those "struggling" farmers. That same month, second-rate FOX news anchor Sean Hannity jetted to Fresno to lead an AstroTurf campaign -- complete with paid Latino "protesters" and funded by the PR firm Burson-Marsteller, which has done work for a wide range of evil clients, from the tobacco industry to Blackwater to the junta in Argentina -- and push for exactly the same thing. Hannity isn't losing any sleep for backing Resnick's "liberal" agenda. The Peripheral Canal is backed by powerful corporate interests regardless of party affiliation.

Of course, the profit drive of corporate America is relentless. And we, the people, have short lives and short memories. And that’s the funny thing: this isn't even a new scam. "The Peripheral Canal had been a top priority of the water interests for forty years," wrote the late and much admired Marc Reisner in 1986 in his book Cadillac Desert, one of the most eye-opening and sweeping histories of water use in the American West. It was part of Governor Pat Brown's original master plan for the California Aqueduct, the baby he pushed through in 1960. His son, Jerry Brown tried to finish what his dad started when he took the governor's seat in the mid-late 70s. But Gov. Brown's attempt to get it passed collapsed amid a worsening economy and a wet year.

Reisner chronicles the infighting, corruption, fraud and blatant media manipulation of public opinion that took place when corporate interests launched an all-out, yet ultimately unsuccessful, blitz to convince the Californian people that apocalypse would be at hand if the Peripheral Canal was not built 25 years ago.

Now, three decades later California's legislature is trying to hammer out exactly the same plan, which is as much about opening up more farm land as it is about securing more paper water to fuel suburban sprawl in the desert. And the corporate powers-that-be are using the exact same strategy -- fear -- to convince California taxpayers to finance their personal wealth.

The Great Gold Heist & How Gun Grabber Feinstein Stole $100's of Billions in Gold Reprint

2014-02-03T18:19:00.001-08:00

Originally written by Karen-lee Bixman 2/1999, reprinted by Video Rebel's Blog 12/31/12

(Comments by California Cornerstone and emphasis added)

How Gun Grabber Feinstein Stole $100s Of Billions In Gold

Posted on December 31, 2012by horse237

Diane Feinstein is Gun Grabber in Chief in the US Senate. We need to go on the offensive against her for her many acts of corruption. The alternative is unthinkable: We could go unarmed off that Fiscal Cliff into the Greatest Depression in 500 years with nationwide riots and martial law.

Senator Diane Feinstein: “The Modern Jesse James”

Congress should be convening a criminal investigation. On October 8, 1994, the biggest gold heist in history occurred, but this theft lacked the melodrama of a Jesse James’ holdup or the excitement of a Brink’s truck robbery. Nary a word was reported by the media even though this thievery was committed in the light of day. The citizens that were being robbed tried to cry out for help but the lawmen wouldn’t listen because unbeknownst to them, they were helping the bandits gain their booty.

The 103rd Congress managed to accommodate more than a gang of train robbers could achieve in a lifetime when they approved the Desert Wilderness Protection Act. “Instead of voting on the Desert Wilderness Protection Act, Congress should be convening a criminal investigation,” said Donald Fife, spokesman for the National Association of Mining Districts.

Fife was commenting on recent information that indicates tens of billions of dollars in gold deposits and huge real estate swindles may be the motivating factors behind the act.

Sponsored by Senator Diane Feinstein, the Desert Wilderness Protection Act and its companion bill known as the California Desert Protection Act created three new national parks and seventy- four new wilderness areas in the desert of California that total 8 million acres (an area the size of Maryland). This closes acreage to development, forces out private owners within the protected area and closes mines and ranches. It also expands the Death Valley and Joshua Tree national monuments and upgrades them to national parks.

This is the largest wilderness land lock-up since the 1980 Alaska Lands Act; largest ever in the lower 48 states.

Senator Feinstein contends that the fragile ecosystem of the desert must be protected from development, but in reality the areas being placed into park and wilderness closures are not threatened. In 1980, the California DesertConservation Area Plan was enacted to protect the desert and it has been rigorously enforced by the U.S. Bureau of Land Management (BLM). Furthermore, the designated acreage mentioned in this bill have largely been for sale at bargain prices for over 100 years with no takers because there is absolutely no water or any prospect of water for development.

It seems that the real motivation for passage of this bill lies with the special interest groups that would benefit monetarily.

Through a complex series of land exchanges, Catellus Corporation, a subsidiary of Santa Fe Pacific, will receive land that contains some of the richest gold deposits in the world. (At that time, owned or controlling partner was Richard C. Blum, Mr. Mzzz Feinsetin or Mutt to her Jeff.)

In exchange, the public gets seventy-four widely scattered tracts of desert which have found no economic use in more than a century. These properties will be maintained at public expense; Secretary of Interior Bruce Babbitt claims resources within the National Park Service are available for this to be accomplished. In actuality, Congressional figures show that the National Park Service currently faces a 37-year back-log in construction funding, a 250-year back-log for land acquisition, and a short-fall of $400 million for existing park operation and maintenance. (And 'They' want us to trust the National Park Service, the Federal Government and outsiders with a National Heritage Area designation.) Catellus owns over 400,000 acres of worthless land in the California Mojave Desert.

This land was obtained by Santa Fe Pacific and its predecessor railroad companies as part of the “checkerboard” railroad lands awarded for the building of the transcontinental railroad. Santa Fe transferred these lands which have been for sale for over 100 years, over to its subsidiary, Catellus Corp. In the land swap, Catellus Corp. will receive land from decommissioned military bases. One of the bases will be the Chocolate Mountain gunnery range. Unbeknownst to the public, inside the range is the world’s richest gold rift zone. Geologists estimate that the gold contained in this zone is worth between $40 to $100 billion. These are surface gold deposits which are more profitable to mine than the one-mile deep gold deposits in South Africa.

In addition to controlling Catellus, Santa Fe owns and operates the Mesquite gold mine located on the Chocolate Mountain rift zone. The Mesquite gold mine is one of the top ten mines in the United States and has some of the most profitable gold deposits of any mine in the world. To the north is the Chocolate Mountain gunnery range. The Mesquite open pit gold mine literally stops at the fence that borders the gunnery range. (Yep...lock, stock and barrel.)

According to mining engineers who work at the Mesquite mine, the main gold ore body is north of the fence inside the gunnery range. Engineers allege that in 1981 and 1982, Consolidated Goldfields, which owned the mine at the time, illegally drilled into the gunnery range area to determine the composition of the ore body. The samples proved to be of high quality. According to these same engineers, beginning in the mid-1980s, military helicopters brought high ranking military officers, Congressmen and Senators to the area to examine these large gold deposits. Congressman Bruce Vento (D-Minn.) was one of several congressmen and senators who participated in these highly secretive trips. These same engineers state that the purpose of these tours was to come up with a way to hand these gold deposits to Consolidated Gold.

No legal mechanism was then available to transfer this land without alerting the public to the existence of the gold. Shortly after these tours began, the Sierra Club received large contributions earmarked toward the desert wilderness campaign. Not long after that, Senator Alan Cranston introduced the California Desert Protection Act into legislation.

In 1993, Santa Fe traded all of it’s coal mines for several Consolidated Goldfield mines, including the Mesquite. According to Donald Fife (spokesman for the National Association of Mining Districts), “This transaction effectively concealed a sales price that could have drawn attention to the real value of Mesquite mine and the riches north of the pit wall in the gunnery range.

If Catellus Corp. receives land from the Chocolate Mountain gunnery range, the Santa Fe would control the exclusive rights to mine the gold trend for nearly 50 miles to the north. This would bypass any possibility of any open appraisal of the gold deposits.

Senator Diane Feinstein used language in the original bill that specifically stated that Catellus Corp. should receive preferential treatment in the disbursement of original government properties. (Which she did the same thing in the NHA legislation, specifically calling out Catepillar, you guessed it, Dick owns controlling interest in Catepillar, too.

The National Association of Mining Districts voiced suspicions about continued back-room favoritism for Catellus, and as noted by the San Francisco Chronicle, Catellus has given $100,000 in political contributions to Senator Feinstein over the past four years. (Mind you, she was elected to the Senate in 1992...so she's only been on the job for one year at this time.)

Since evidence of the conspiracy emerged, rumors circulating the Beltway said that the Chocolate Mountain gunnery range could not be decommissioned because there was too much live ordnance on the ground. This, however, was not true. Millions of surrounding acres were in similar condition after George Patton and others trained their entire armies there between 1942 and 1945. In 1947 the entire region was made safe for civilian use. Furthermore, the decommissioning of Chocolate Mountain will be quite easy in comparison to the clearing of mine fields in Kuwait.

The original version of the bill, however, raised enough red flags in Congress that a few lawmakers, notably Rep. Michael Huffington (R-Calif.), got the Catellus provisions stricken.

The full House of Representatives then voted to grant the same exchange privileges to anybody whose land might be taken under the Desert Act.

“When that was made known,” remarked Rife, “opponents forced Feinstein to take it out of the bill. But Catellus, with all its land, still has more leverage for negotiations and acquiring the land it wants than any other private party in this whole deal.”

Additionally, Santa Fe has enormous political clout in California and Washington. In addition to having Senator Diane Feinstein as their champion in Washington, former California Governor George Deukmejian is one of the company’s directors. Under these circumstances, the Desert Wilderness Protection Act is the perfect vehicle to achieve this land exchange.

Santa Fe however, could actually obtain the bulk of the gold even before the Chocolate Mountain gunnery range is decommissioned.

A careful reading of the bill suggests that the map of the range was altered in July 1993, (Again, sound familiar??) to exclude a rectangular parcel along the south end of the range. This land comprises the immediate area north of the Mesquite gold mine and included the bulk of the gold deposits and can only be accessed through the private holdings of the Mesquite mine. Now that the bill has become law, a new map of the gunnery range will allow Mesquite to claim public land adjoining it that could hold a billion to several billion in gold.

A source presently employed at Santa Fe states that everyone at the company expects Santa Fe to be given this land. He further claims that Santa Fe is presently carrying out extensive exploration of these areas inside the gunnery range. This includes the drilling and the mapping of the gold deposits. These activities inside the gunnery range are illegal. Therefore, Santa Fe Pacific must have obtained permission from the Navy and the Bureau of Land Management (BLM) in order to carry out their present activities. It is unknown who granted permission for such activity on the part of the Navy, but it is known that no one in the BLM has the authority to grant such permission. The only individual allowed to grant such authority is Secretary of the Interior Bruce Babbitt.

Therefore, even with the Catellus provision stricken from the bill, the money would still be routed to the same beneficiaries.

The California Public Employees Retirement System, (CALPERS) is a nearly $80 billion pension fund whose investment clout is heavily influenced by California leadership which includes Sen. Diane Feinstein. Several years ago, CALPERS made a $400 million investment in Catellus. Shortly after CALPERS made its investment in Catellus, the value of the stock collapsed 82%. Dehnert Queen, a San Francisco businessman, filed a criminal complaint in regards to this investment to U.S. Attorney Michael J. Yamaguchi and Ms. Sylvia Scott of the U.S. Securities and Exchange Commission.

(Blum is currently one of the investment companies used by CalPERS...and they are losing $$ on very bad investments, Blum still gets his commissions and the public sees their annuity funds decimated to make up the loss, ala Carpenter's Health and Welfare Trust Fund in 2003, then the largest investment portfolio in the nation, I know...that's how my annuity was stolen in 2003, the bastard.)

Queen states, in his complaint, that Sen. Feinstein “misrepresented facts to defraud a public corporation (CALPERS), abused power and conflicts of interest to defraud State and U.S. taxpayers. In early 1993, CALPERS doubled its investment in Catellus to 41 percent…Queen contends “that both former Senator Cranston and Senator Feinstein acted to sponsor the Desert Protection Act in order to preserve and protect the formal agreement that then Mayor Feinstein signed with Catellus to build the Mission Bay Project in 1984, updated in 1986 and shepherded same through the City’s (San Francisco) departments and commissions.” (And y'all thought I was making all this up...I wouldn't drive on that new bridge if I had to.)

The land swap as purposed in The Wilderness Act “will generate the monetary value (approximately $500 million) necessary to execute Catellus’ large scale development project located throughout the Bay Area.”

According to public records, CALPERS investment in Catellus was through Bay Area Partnership, subsequently changed to Bay Area Real Estate Associates, which is itself comprised of JMB Realty and CALPERS. Efforts to determine all of the participants in the investors’ group behind JMB Realty and Bay Area Real Estate Associates so far have been unsuccessful, but at least some appear to have business ties with Senator Feinstein’s husband.

None-the-less, allegations continue that Senator Feinstein as well as California Speaker of the House Willie Brown and a wide variety of San Francisco special interest groups would therefore benefit financially.

More directly, does Diane Feinstein, as a former employee of the City of San Francisco, Willie Brown and other California politicians maintain a CALPERS retirement account? (Hmmmm, I didn't think about THAT one!)

Repeated requests to Senator Feinstein’s office for the disclosure or denial of any direct relationship between the senator and her husband and CALPERS, JMB Reality, Bay Area Real Estate Associates and Cattelus Development Corporation have been met with evasions and non-answers.

The land swap will give Catellus Corp. thousands of contiguous acres bordering the Salton Sea which lies west of the gunnery range. Developing the arid hills and cleaning up the polluted Salton Sea would require billions of acre-feet of water. By coincidence, the Coachella Canal runs right between the Salton Sea and the range, which is about 20 miles wide and 60 miles long. Developers with such a prize could readily bid water away from owners of irrigated farms in the Brawley and El Centro areas.

Ed White, who owns a family mining business in the area is one of many whose business will now be destroyed. “The Sierra Club was just used, in my opinion, by Feinstein’s bankers friends and the railroad or their land company Catellus, to create the public perception that these lands are fragile and threatened by development,” said White.

“The truth appears to be just the opposite. The scattered railroad lands that could never be developed are to be consolidated into a single block of 226,000 acres so they can be developed.

JMB Realty stands to make a huge profit on this development. In the name of “rewilding” millions of acres of desert, grave financial and environmental damage will occur once the land is closed to the public.

Ninety-seven the U.S. rare earth mineral production comes from the California desert. These minerals are used in high technology and are essential to the production of lasers, high-power magnets, super conductivity and pollution free cars. The United States will now be forced to obtain these minerals from foreign mineral cartels.

One hundred percent of the U.S. production of boron is from the California desert and this production which generates $500 million a year to the economy will now be lost.

Several pension and health insurance funds have large holdings in the area that now will be at risk. These include the AFL-CIO, United Steel Workers, and California State Teachers Pension Fund.

The Wilderness Act includes 140,000 acres of National Forest found unsuitable for wilderness by then California Senators Alan Cranston (D) and Pete Wilson (R) in the 1983 California National Forest Wilderness Act, including 12,500 acres of the Bighorn Mountain Wilderness in the San Bernardino National Forest that impact the AFL-CIO trust properties.

The greatest damage to union trust assets is the expansion of the Joshua Tree National Park by 234,000 acres to surround their Eagle Mountain Iron Mine on three sides with National Park Wilderness. This will prevent the mine from ever producing again.

The steel workers health and pension assets are the mines and highly mineralized lands acquired when the Kaiser Steel’s Fontana, California steel mill was forced into bankruptcy by overzealous environmental regulations and Japanese dumping of steel in the late 1970′s.

The 300,000 acres of Teachers Pension funds are the unsold state school sections that were given by the Federal government to the state more than 100 years ago. They have been for sale for 100 years and because there is no water they are not threatened with development.

Unlike the AFL-CIO pension and health insurance funds, the State Legislature and the State Lands Commission discouraged exploration on those lands for energy and mineral resources. Their mineral value is unknown, but it is not uncommon in that area that a single deposit of gold, silver, boron or other minerals could exceed several billion dollars in value.

The closure of the lands will generate a loss of 20,000 jobs and billions of dollars of economic activity will be lost annually. (Again, sound eerily familiar?)

Over two hundred homes and private businesses worth millions of dollars that will be taken and destroyed will result in claims, lawsuits and payments of 5th Amendment compensation. (Hauntingly familiary??)

One of the most insidious provisions of the act is the creation of “Reserved Federal Water Rights.” The Wilderness Act will reserve federal water rights for 74 desert wilderness acres and three new national parks totaling 8 million acres. (I did NOT know this, makes draining Northern California dry make more sense.) This will create a precedent, usurping state supremacy and local control of the Western States precious water rights. This will be the “camel’s nose under the tent” because, although the Wilderness Act applies only to the California desert, it gives special standing to the Federal government in the adjudication of any water rights where wilderness is involved. It could affect all neighboring states that share watershed with California: Arizona, Nevada, Oregon, even including all of the states that share the Colorado River.

The California Wildlife Federation and the Society for Bighorn Sheep have headed the opposition to the act because they say that thousands of animals will die now that the bill has been enacted. In this arid, rocky region private individuals developed and maintain water holes for the Bighorn Sheep and other wildlife: now they will be prohibited from doing so.

While the roots of this scandal herald back to the days of Senator Alan Cranston, it is obvious that the special interest groups in collusion with the government have systematically worked toward closing off mass acreage from public as well as private usage. (Nightmarish-ly familiar???)

The September 1993 issue of the Holcomb Balley Argonaut reported that a systematic plan of “manufactured wilderness” has been occurring in areas of California for years.

In August of 1991, a joint force made up of Forest Service and U.S. Military personnel entered a road leading to a historic cabin located in Horse-Thief Flats, California.

Within this hidden valley, where renegade Indians hid horses from pursuing California rancheros during the early 1800′s, was located the last historic miner’s cabin in the northeast San Bernadino Mountains.

Shortly after government personnel entered the valley, the area reverberated with a half dozen giant explosions. The Big Bear Ranger District personnel alleged that the Horse-Thief Flats area was used by marijuana growers. They claimed the historic cabin and road were blown up in several places by military experts under recent authorization to interdict drug traffic.

The explosives were carelessly handled. They apparently used old style detonating cord, normally not permitted in the forest and their fourth blast in the road sprayed fire out over several acres starting a wildland fire. This portion of the National Forest has been parched from the California drought. In historical times only a few wildland fires ever occurred.

Dave Fisher, who has the grazing lease adjoining Horse-Thief Flats, said, ” In my opinion, the real reason for this operation had more to do with ‘manufacturing wilderness’ for the desert bill than fighting crime.”

“They have quietly and systematically bulldozed or burned these structures for years,” says Ed White, member of the historic Lone Valley Mining District. “The real reason for use of military was eliminating all evidence of human occupation so the Sierra Club could reclaim the area as wilderness. Blowing up the orad is counter productive, now the marijuana growers have a secure place to farm”.

On October 7, 1994 at 2:00 a.m., Representative George Miller (D-Calif.), representing the East San Francisco Bay area, led the charge to ram the wilderness bill through the House where it was passed by a voice vote. The bill was passed despite a huge grass-roots mobilization which sent out a fax alert on the bill. One Congressman who received the alert distributed hundreds of copies on the floor of the house. This Congressman stated that the critical issue was the massive corruption surrounding the theft of the gold in the Chocolate Mountains.

The next day, Senator Malcolm Wallop (R-Wyo.) valiantly filibustered the Senate in an attempt to keep the bill from passing, but his efforts failed. As the Wilderness Bill was actively being filibustered, Secretary Babbitt was lobbying senators for their vote; he was ultimately ejected from the upper chamber.

The Alliance of America, a coalition of property rights groups, says that a criminal investigation should focus on the roles of corrupt politicians and environmental racketeers in the biggest gold heist in history.

If Jesse James were alive today, he’d realize that profit is gained not by robbing banks but by being a politician.”

This was written by Karen Bixman and originally appeared here:

http://www.uhuh.com/1calfraud/stacks/bixman.htm