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

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.