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

 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.