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.
Original link: http://eldoradomagazine.com/
Paradise Lost? — Internet Series
Posted by Kris in Uncategorized on June 22nd, 2009
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.
Paradise Lost? — Internet Series -part two-
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.
Paradise Lost? — Internet Series -part three-
Posted by Kris in Uncategorized on June 26th, 2009
Governator Busts open the Broken Bay Bridge
On the first day of February, 2005 the Senate Transportation Committee convened for a hearing at the California State Capitol to discuss the Bay Bridge.
The Transportation Committee, then chaired by Antioch Democrat Tom Torlakson was meeting to decide whether or not they should proceed with the self-anchored-suspension (SAS) “signature span” that had been chosen in 1998, or whether they should finish the bridge as a “skyway.”
Schwarzenegger favored the latter option, citing it as being cheaper and easier to build than the self-anchored suspension tower.
In either case, the Bay Bridge is woefully over budget, at this point somewhere close to $6 billion before the bridge is finished in 2015. The original budget was pegged at $1.285 billion for the whole bridge, with the “signature span” on one end joining to a viaduct section at the other. The “skyway”, which was the preferred choice of Caltrans and the Pete Wilson administration in 1997, was only supposed to cost $1 billion.
Committee chairman Torlakson opened the hearing at 9:27 a.m. by asking the following question: “How did we get to this point and how did the costs on the Bay Bridge skyrocket so high, and what should we do now?”
Vice-chairman, Republican Tom McClintock of Thousand Oaks, was blunt. Referring to the ballooning budget on the Bay Bridge, he called it the “fiasco of the century. We need to get to the bottom of how these decisions were made, and we have an obligatory opportunity to correct them.”
There was a corrupt process that attended the Bay Bridge decision-making process when it occurred in 1997-98 and it attended it still. This hearing hinted at what that corrupt process involves, but didn’t reveal it entirely.
The first witness to testify in front of the committee was Will Kempton, the new director of Caltrans. Kempton was leading the charge to abandon the SAS for the skyway. “We looked at the SAS complexity and the risk, and we concluded that the skyway is easier to build. The skyway will result in $300-500 million in savings and the bridge would be finished in 2012,” said Kempton.
The SAS proponents, led by San Francisco bridge design winner Donald McDonald, said this isn’t so. Their bridge is completely designed and approved and ready to go. “There’s nothing new about this kind of bridge,” says McDonald. “The SAS is a buildable bridge and it can be completed on time.”
Ephraim Hirsch, an engineer on the panel of experts who made the bridge decision in May of 1998, and supports the SAS said: “The SAS should be built. It’s the most prudent and seismically sound bridge.” Hirsch also characterizes the bridge decision-making process as “an open process”, a claim disputed by many of the witnesses who were present during the 1997-98 Bay Bridge design competition.
All the McDonald team is waiting for is somebody to bid on the tower. The previous bid of $1.4 billion to build just the tower section—more than the original budget for the entire bridge—has expired, and new bids would have to be invited. The SAS tower section is now projected to cost somewhere in the $1.9 billion range. The state audit attributes much of that cost increase to the SAS’s complex tower design.
The inside favorite to build the “skyway” was Kiewit-Pacific, which already has the contract to build the 1.2 mile “skyway” section currently under construction. “Nobody other than Kiewit is going to bid that viaduct. They already have a leg up,” said Robert H. Luffy, the CEO of American Bridge. His company has the inside track to build the SAS, perhaps in partnership with the Fluor Corporation of Orange County. It should also be noted that before he became director of Caltrans, Kempton was a vice-president with Kiewit.
In the seven hours of hearings held that day, the Bay Bridge contenders fought a heated battle over what went wrong, and how best to fix it. “It’s actually criminal the way this thing has been handled,” said SAS proponent Paul H. Mueller, a friend and supporter of McDonald..
Those words spoken by Mueller, an engineer, were probably the most accurate assessment of the whole process since the project first got underway in early 1997.
During a break in the Assembly Transportation Committee hearing, when Torlakson and McClintock were asked by this reporter if they were serious about investigating possible conflicts of interest, they both said that they would if there was evidence to support the allegation.
As Caltrans director and former Kiewit executive Kempton put it: “This is my watch. I am in charge. I am accountable.”
Those words might come back to haunt Kempton, Governor Schwarzenegger and others involved in the Transcam schemes.
The Bay Bridge has been a process rife with corruption from the beginning, and has proven a veritable gold mine for insiders. The enabling Bay Bridge legislation was a means of making a fortune in stock options for insiders, through the publicly traded company that was first in line for the Bay Bridge contract in 1997.
In order to understand how this den of corruption and profiteering came into place we have to go back to 1997, when the Bay Bridge design “competition” was convened. In doing so we discover something that Senators Torlakson and McClintock and many other legislators, law enforcement agencies, and public watchdog groups have ignored for the past ten years.
Like the Bullet Train in 1981-83, The Bay Bridge brouhaha began as a story. This one floated up in the San Francisco Chronicle on January 9, 1997.
A short front-page story on the left-hand gutter, co-authored by Eric Ingram and the Chronicle’s Capitol Bureau chief correspondent Greg Lucas, previewed the idea that a “signature span” cable-stayed bridge would be cheaper to build than the “skyway” that Governor Pete Wilson favored.
The story previewed a new Bay Bridge design. It was a 650-foot single-masted, cable-stayed bridge, built out of concrete. A cable-stayed bridge is one whose deck is fastened to a tower or other anchorage by a series of cables up to the bridge deck.
The story went on to say that Caltrans was chasing some deadlines that required it to move forward quickly. ”The issue has taken on added urgency because deadlines are approaching for awarding several multi-million [dollar] retrofitting contracts,” they reported, and said the Chronicle had managed to obtain a copy of the report, which was supposed to have been kept sealed.
A little less than two months later, on March 10, 1997, another front-page story was published in the Chronicle.
This was a two-page feature by Alan Temko, the Chronicle’s Pulitzer Prize-winning architecture critic. Temko’s story profiled a bridge “designed” by the late T.Y. Lin. Temko derided the skyway proposed by the Wilson crew as “a freeway on stilts.” He went on to state: “That’s why the Chronicle asked the renowned structural engineer T.Y. Lin to create a true alternative.”
This new bridge was also a concrete structure, a 600 foot single-mast, cable-stayed bridge that seemed a mirror image of the bridge published in the Chronicle two months beforehand. But the price was now $1.2 billion, a half-billion-dollar increase in two months, despite the fact that the bridge tower was fifty-feet shorter.
At any rate, the Chronicle’s lobbying for a new signature span that could compare with the Golden Gate Bridge was effective. By signing off on the terms of the Quentin Kopp bill, SB 60 in the spring of 1997, Wilson took the decision-making power over the bridge away from Caltrans and handed it to the MTC. This agency would then choose the design and award the contract.
In mid March of 1997, the MTC selected a chairperson for the new Bay Bridge Task Force. The person they chose was Mary King, an Alameda County Supervisor.
On March 28, 1997, the EDAP committee selection was complete, with Joseph Nicoletti chosen as the EDAP chairman. Nicoletti was an engineer with URS Greiner.
Outsiders who tried to enter designs for a new Bay Bridge weren’t greeted warmly.
“We heard that they were going to be selecting a bridge and that the process was supposedly open,” Sacramento bridge design team member Rick Feher told me. “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, Feher’s partner] 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 convening two weeks later. 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.”
When I spoke to Denis Mulligan, then a spokesperson with Caltrans, he took issue with the Coman-Feher charge of an unfair process. So did MTC Bay Bridge Task Force chairwoman Mary King, and others.
It would be one thing if criticism of the decision-making process was coming only from the losers, designers like Coman-Feher, or Dr. Abolhassan Astaneh-Asl, an engineering professor at U.C. Berkeley. But much of the criticism regarding this process came from members of EDAP itself. Some said the process was a stacked deck that constituted a clear conflict of interest, because fellow EDAP members were judging their own designs.
“Nobody outside of the Caltrans loop was allowed onto the committee,” one EDAP member, a San Francisco architect named Jeffrey Heller, told me. “We said this process needs a whole lot of improvement. Some of us on the panel kept pressing for better designs and better concepts, but we were hopelessly outgunned by the insider, old boys club.”
EDAP member Steve Thompson, a Mill Valley architect, recalls the first EDAP meeting, held in May 1997. “When we first impaneled EDAP and polled the members of the group as to who had a potential conflict of interest regarding bridge designs that they had entered in the competition, at least two-thirds of the members raised their hands and said that they had a proposal in front of EDAP.”
Astaneh and Thompson told me they stumbled upon a private meeting which was indicative of how the competition was a closed shop to all but insiders. “The Caltrans Peer Review committee (a group within EDAP) was holding meetings with design team members without the rest of us on EDAP being present,” said Thompson. “These were people from the same companies as those putting forward proposals, and they were closed to any but those from the firms on the panel.”
Elihu Harris, who was then Mayor of Oakland and a Bay Bridge Task Force committee member, echoed Thompson’s comments. ”There was a definite conflict of interest. I wasn’t satisfied that there was an open process, and I felt at odds with this whole thing right from the beginning. It was a preordained conclusion we were being handed. This is a bridge to the past, not to the future,” Harris told me when I interviewed him at his office in 1998.
At that first EDAP meeting in May of 1997, the agenda alone told the tale. First the EDAP committee received a presentation on cable-stayed bridges. Then the Ventry team’s Mark Ketchum, who worked on the design previewed in the January 9, 1997 Chronicle float story, gave a presentation. Ketchum was followed by his mentor, T.Y. Lin, who was also a member of EDAP. The next witness was an engineer from Parsons-Brinckerhoff, followed by a representative from URS. At the end of the day, EDAP tossed Astaneh a bone and let him speak about his steel bridge retrofit. But as Heller told me: “It was clear that this panel was leaning towards a cable-stayed bridge.”
As on the bullet train in 1982, Calrans had been cut out of the loop. And like Bruce Young’s spot bill, AB 3547 in 1982, Quentin Kopp’s 1997 spot bill, SB 60, seems to have been the vehicle for a few sharp investors to make serious profits. The company that made these windfall profits was URS Greiner, an engineering & design company then controlled by Richard C. Blum, U.S. Senator Dianne Feinstein’s husband.
The language in SB 60 was amended to provide bridge toll surcharges for seismic retrofits. It also all but named the MTC/EDAP Bay Bridge, which was yet to be officially selected. As the bill itself states, “$80 million will be provided for a cable suspension design” on the Bay Bridge. In short, it named the two finalists in the MTC-EDAP design “competition”: the T. Y. Lin designed “cable”-stayed bridge and the Donald MacDonald designed self-anchored “suspension” bridge. It must also be remembered that URS was first in line for the no-bid Bay Bridge contract, # 59N770, if the bridge was contracted out to a private company.
Further underscoring the significance of the stock connections are the following points. (1) After the amendments were added to SB 60 in late spring of 1997, URS stock shot up from 10 to 18 1/2. (2) URS stock fluctuated according to changing legal perceptions as to whether “contracting out” was still in effect. When it was allowed, URS stock rose. When Sacramento Superior Court Judge James Ford prohibited the practice, in August 1998, URS fell. When Judge Ford exempted the Bay Bridge from his ruling, URS rose again.
During the Bay Bridge selection process, board members of URS Greiner issued themselves almost 5 million shares of stock in the form of 10K options, first in March of 1997, then again in March of 1998. As noted above, 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 stock issuance of URS stock were for 2,933,748 shares of penny stock issued to BK Capital Partners I, II, III and IV, four companies owned by Richard Blum and the billionaire Bass Brothers, from Fort Worth, Texas.
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 were issued the stock were acting as their own underwriters, and were entitled to all the profits derived from their sale.
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 issued themselves.
The companies 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 MTC/EDAP 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 Master’s $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.
Added to the BK Capital Partners’ $74 million profit and the $390 million increase in outstanding revenues of URS Greiner reported between 1998 and 1999, this demonstrates how a transportation infrastructure selection process can produce fantastic profits.
The Bay Bridge RFP’s stipulated that seismic safety was the number one priority for the new bridge design. It says precisely this in the RFP that came out in the spring of 1997. In the section titled “Design Criteria,” the second paragraph begins “Post-Earthquake performance of the new structure should be high.” One of the members on EDAP was the late Bruce Bolt, a U.C. Berkeley professor who specialized in seismology. Yet, I never once heard the EDAP committee fully address the seismological concerns raised by a number of critics during the hearings. Nor was any empirical evidence on post-earthquake performance ever presented to the public at the EDAP hearings I attended. “Seismic safety and proper design and engineering weren’t adequately examined,” said Elihu Harris. The attitude at EDAP, which I heard expressed numerous times, was that the engineers would work out the seismological problems later.
What’s important to understand regarding the seismic issue is the joining of one bridge typology to another. The eastern span of the existing Bay Bridge was a cantilevered truss section, which joined a viaduct section at an angle. This is where the bridge failed during the Loma Prieta quake in 1989, at a juncture called E-9. Now EDAP was in the process of doing the same thing, by picking another bridge that was really two bridges—a cable-stayed bridge joining a viaduct, which would join at an even greater angle than the original one. “That’s where the transfer point in an earthquake would be,” EDAP chairman Joseph Nicoletti admitted to me when I interviewed him at URS’ California Street office on June 26, 1998. “The tower is the thing that will take the seismic jolt.” Bridge designer Donald McDonald admitted the same thing when I interviewed him at his San Francisco office in the spring of 1999. “The transfer point is where the greatest impact would take place, that’s true, but this bridge will withstand the greatest seismic event foreseeable. We’re working that out with further design improvements,” McDonald told me.
But the design eventually chosen by EDAP was never submitted for shaker-table testing or computer modeling to show its expected seismic performance. Not until the selection was made was the modeling done, and it wasn’t shown to the public. It was shown only to the members of EDAP and the Bay Bridge Task Force on a private plane, as they cruised above the Bay Bridge, a source on EDAP told me.
During the rest of the Bay Bridge EDAP hearings, through May of 1998, I watched EDAP try to shoehorn the cable-stayed and viaduct Bay Bridge through, using the Chronicle to apply pressure whenever it was needed. As EDAP vice-chairman John Kriken admitted: “There were a lot of institutional forces driving this and the San Francisco Chronicle was very much in the forefront of this process.”
The new Bay Bridge has so far cost Californians over $5 billion, quadruple the original projected cost of the “skyway” that Alan Temko dismissed as a “freeway on stilts.” The construction has been funded out of bridge toll surcharges created by passage of the Bay Bridge bill, SB 60, whose legality is also questionable. Passed in 1997, it allows the MTC to impose bridge toll surcharges on the seven Bay Area bridges under its authority.
But Proposition 192, passed by the California electorate a few months earlier in November, 1996, specifically forbade bridge toll surcharges and mandated that seismic retrofits of 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.
Strangely, 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.”
Six months after the Bay Bridge show officially concluded in June of 1998, there was some new action. 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 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 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.
Signed by Senators Barbara Boxer and Dianne Feinstein, and Representatives Nancy Pelosi, Ellen Tauscher and Congressman George Miller, the letter 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 using the southern alignment that San Francisco Mayor Willie Brown then said he favored… again. On the day scheduled, not one of them bothered to show up for the meeting they had requested.
Paradise Lost? — Internet Series -part four-
Posted by Kris in Uncategorized on July 1st, 2009
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.
—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.”
Paradise Lost? — Internet Series -part five-
Posted by Trainor in Uncategorized on July 6th, 2009
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:
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.
Paradise Lost? — Internet Series -part six-
Posted by Trainor in Uncategorized on July 8th, 2009
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?
Paradise Lost? — Internet Series -part seven-
Posted by admin in Uncategorized on July 14th, 2009
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.
Paradise Lost? — Internet Series -part eight-
Posted by admin in Uncategorized on July 14th, 2009
More Gold, & 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.
Paradise Lost? — Internet Series -part nine-
Posted by Trainor in Uncategorized on July 22nd, 2009
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.
Posted by Trainor in Uncategorized on July 28th, 2009
“Who’s Minding the Store?
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.
Doing this kind of investigative work alone without the aid of vigilant law enforcement backing, while being ignored by the “free” press and denied support by every public interest group in the land, proved to be a very costly proposition. I’m not going to whine about it or make excuses. Maybe I had it coming. As Tim Robbins’ character Andy Dufresne says in The Shawshank Redemption, “Whatever I did that was wrong, I think I paid for it and then some.”
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