What Happened At La Jolla Bank?

“Fraudulent activity was recently discovered” at La Jolla Bank, FDIC spokesman Greg Hernandez tells City News Service in a story today.

On Friday, the Office of Thrift Supervision shut the bank down and noted “deficient corporate oversight by the Board and management.”

Frank R. Warren established the bank in 1985. He remained chairman of La Jolla Bancorp, the parent holding company, which was controlled by Warren family trusts. The bank’s president and chief executive was Rick F. Hall.

La Jolla Bank grew incredibly fast in recent years. Assets (loans) had doubled in three years, rising from $1.6 billion in 2004 to $3.3 billion in 2007. This growth was concentrated in commercial and residential construction, land developing, and multi-family and commercial real estate lending, according to federal regulators.

The bank’s fall was even faster. Non-performing assets (90 days past due) increased from $71 million at year-end 2008, to $777 million at year-end 2009.

The Rancho Santa Fe-based bank had 124 employees, nine branches in Southern California and one in Dallas, Texas.

The bank was closed on Feb. 19 and deposits were transferred to OneWest Bank of Pasadena (formerly IndyMac). OneWorld investors include J. Christopher Flowers, George Soros and John Paulson.

(Quiet) Mideast Diplomacy via UCSD

Buried in the gargantuan defense bill signed by President Obama is a $2.4 million earmark for something called the Middle East Regional Security Program at the University of California, San Diego.

Although Congress has been directing money to this program for years, there’s no reference to this program on the UCSD website. But the obscurity is probably deliberate.

The earmarked money goes to the Institute on Global Conflict and Cooperation at UCSD, a 501 (c)(3) housed with the UCSD School of International Relations and Pacific Studies. (E-mails to a UCSD spokesman or the IGCC’s director, Susan Shirk, an expert on China, weren’t returned)

Rep. Howard Berman,  D-North Hollywood, who requested the funding, wrote in his earmark certification letter that the Middle East Regional Security Program facilitates “informal contacts among senior military and security officials and experts from the U.S., Israel, the Palestinian Authority, Arab states, and other countries in the region.”

This is what is known as Track II diplomacy, an informal back-channel dialogue between adversaries.

A 2007 RAND study (.pdf) on Track II diplomacy declares that the IGCC and another program run by UCLA’s Steven Spiegel  are “among the most prominent Track II processes in the Middle East.”

“These activities include a broad-based dialogue group currently meeting three times per year in Europe—involving up to 250 participants per meeting—as well as a smaller military-to-military dialogue meeting semi-annually, including, at times, in Middle East capitals when security and political considerations allow. The military dialogues include active-duty and retired generals from nearly every Arab country, Turkey, and Israel. (Iranian representatives participate in the broad-based meetings but not in the military dialogues.)…

The topics covered include military balances in the region, weapon effects, military doctrines, arms control, counter-proliferation measures, military ethics, and military education. Some meetings involve paper presentations, with participants sharing their country’s regional security perspectives and threat perceptions. Other meetings have focused on operational issues, such as a code of conduct for military behavior in the Middle East….

The first IGCC Track II workshop took place 10 days after the Iraqi invasion of Kuwait in 1990. The second occurred a week before the Arab-Israeli peace conference in Madrid the following years.

“Since many of the same regional elites left the IGCC conference to attend the formal Madrid talks, some considered the Track II conference a ‘trial run,'” RAND noted.

Wow. Sometimes, San Diego can surprise you.

Where's Alan?

Remember Alan Bersin, the former San Diego US attorney and schools chief, nominated by President Obama on Sept. 29 to be Commissioner of Customs and Border Protection?

Daniel J. Kaniewski , a former special assistant to President Bush for homeland security, gives his take on this unconscionable delay in Roll Call:

Unlike the troubled nomination of the Transportation Security Administration chief, there have been no concerns raised about the CBP nominee, Alan Bersin. So why, in the wake of an attempted terrorist attack, is the Senate not moving expeditiously to consider the CBP nominee? The answer is unfortunately a familiar theme of dysfunctional Congressional oversight.

In the case of CBP, like many of the 22 agencies merged into the Department of Homeland Security in 2003, oversight remains a vestige of its previous incarnation. The Senate Finance Committee, which had jurisdiction over the U.S. Customs Service in the Department of Treasury — before it was dissolved and folded into CBP — retained oversight of CBP in perpetuity.

The Senate Finance Committee, including Chairman Max Baucus of Montana and ranking member Chuck Grassley Iowa, has been at the center of the health care debate in the Senate. While health care was the committee’s priority, this important nomination disappeared from the committee’s radar. Since no hearing has yet been scheduled, Bersin cannot begin the journey down the long road that awaits him if he is to be confirmed. And while the committee has managed to squeeze in hearings for Health and Human Services and Treasury nominees during the health care debate, the DHS nominee has been afforded no such opportunity. In the meantime, even the acting CBP commissioner retired as planned, just days after the Christmas attack. Thus, one of the key agencies securing our nation against terrorism is now without a leadership team.

The CBP example is unfortunately not a unique one; 80 committees and subcommittees continue to exercise oversight over various components of DHS. Despite numerous calls for reform during the past decade, including from the 9/11 commission and other congressionally chartered commissions, consolidating Congressional oversight remains an abiding, but still elusive, necessity. As 9/11 commission Chairman Thomas Kean and Vice Chairman Lee Hamilton recently testified before the Senate Commerce, Science and Transportation Committee in reference to the Fort Hood and Christmas attacks, “Enduring fractured and overlapping committee jurisdictions on both sides of the Hill have left Congressional oversight in a unsatisfactory state.”

While the Homeland Security and Governmental Affairs panel and the Intelligence Committee continue to hold hearings investigating the Obama administration and chastising it for its Christmas bombing failures, Congressional leaders stand on the sidelines either unconcerned or unaware that such a critical nomination languishes.

USS Nimitz in China

“Anchored in Hong Kong Harbor. Just a couple days late for Chinese New Year, Gung hay fat choy!”

So reads the Twitter page of the USS Nimitz, the San Diego-based aircraft carrier.

The Nimitz has been in Hong Kong before. This, however, is no ordinary visit.

The arrival of the carrier and its battle group for a four-day visit comes amid what the government’s China Daily calls “heightened tensions between Washington and Beijing.”

President Obama met today with the Dalai Lama and his administration plans to sell $6 billion in arms to Taiwan. Both are objectionable to China, which has threatened to sever military contacts.

A Beijing-based expert on international studies tells China Daily said that the fact that the Nimitz is in Hong Kong is evidence of “a strong signal” sent by China to the US of its sincerity in developing bilateral relations.

Iran’s PressTV sees the Nimitz visit as a sign that tensions between US and China may be easing.

Others still sense tension.

US Navy brass typically honor their hosts at parties during port calls, but The South China Morning Post reported that the chiefs at the local garrison of the People’s Liberation Army are largely ditching the ceremonial tours and parties in an “apparent snub.”

To protest missile sales to Taiwan, China abruptly withdrew permission for a 2007 visit from the USS Kitty Hawk.

Five months in the Persian Gulf apparently make for thirsty sailors. Some 5,000 crew from the Nimitz, USS Pickney, USS Chosin, USS Sampson and USS Rentz are expected to drop $1 million at local bars and restaurants, according to the Hong Kong Standard.

Editorial Writing At Its Most Pathetic

It might seem incongruous for the conservative San Diego Union-Tribune to advocate putting public pension dollars in Iran.

But that’s exactly what it called for in this overheated editorial in today’s newspaper.

The subject of the newspaper’s ire is a 2007 California law that prohibits CalPERS and CalSTRS, the giant state pension funds, from investing in a company with business operations in Iran.

The fact that CalPERS hasn’t complied with the law was brought to the public’s attention through the efforts of Dave Maass in San Diego CityBeat.

The U-T calls the California Public Divest from Iran Act “political posturing, pure and simple.” The stated goal of the bill’s author La Mesa Assemblyman Joel Anderson — punishing Iran for its support of international terrorism — is dismissed as “nonsense.”

The real targets of the editorial are Jerry Brown and Steve Poizner, two state officials who are running for governor. Brown is guilty of “unadulterated folly” for demanding the giant state pensions comply with state law.

The U-T is entitled to its opinion, but the editorial is misleading, distorting, and just plain wrong on a number of fronts:

The California Public Divest from Iran Act requires CalPERS and CalSTRS “to sell stock holdings in international companies that did business with Iran.”

Not quite. The law bars companies that invest or operate in Iran’s defense and nuclear sectors or develop oil and natural gas resources.

You can still sell soap and medical equipment to Iran.

Is this really so unreasonable?

“And if we believe that the state government should deter investments in nations that are at geopolitical risk, why would Iran be the only nation on the list?”

Well, it’s not.

Current law also requires CalPERS and CalSTRS to sell or transfer investments in Sudan. In the 1980s, the state approved similar measures to allow state entities to divest in South Africa in order to protest its apartheid policies.

“The professionals advising CalPERS and CalSTRS on portfolio strategies were obviously better qualified to evaluate investment danger.”

What professionals are they referring to?

The professionals who lost $1 billion by investing CalPERS assets in LandSource Communities, a bankrupt company that owns raw land in California. Or the professionals who advised the pension fund to put $500 million in Peter Cooper Village in New York, now in foreclosure?

Perhaps they mean the shady, unregistered professional placement agents who collected millions of dollars in payments from fund managers seeking business from CalPERS?

“Among the many respected international firms whose affiliates do business with Iran are Royal Dutch Shell, Siemens AG, Hyundai and Alcatel. Their operations are perfectly legal under U.S. and international law.”

First off, Hyundai no longer has active business operations in Iran, as CalPERS notes in its 2009 report on its Iran investments. Siemens recently announced it is pulling out by mid-2010.

Second, “respected” Siemens AG settled a U.S. Justice Department investigation into the company’s bribery of foreign officials by paying a record fine and admitting systemic violations of the Foreign Corrupt Practices Act.

Third, thanks to the Iran divestment act, we now know about CalPERS’ investments in Chinese state-owned firms:

  1. China Petroleum & Chemical Company (Sinopec), Asia’s biggest oil refiner, which signed four exploration contracts in Iran. 
  2. CNPC Hong Kong Ltd., which has a service contract for the Masjed Soleiman oilfields and is developing gas fields.
  3. CNOOC Ltd., the state-owned Chinese oil firm that was thwarted in its 2005 effort to buy Unocal.

These companies are investing in Iran (and Sudan) to secure reliable energy supplies for China, now the world’s second biggest oil consumer. Sooner or later, that will put them directly at odds with U.S. interests.

If, as the U-T maintains, CalPERS’ investments in these firms aren’t all that significant, then why should we support them with public pension dollars?

Update: CityBeat‘s latest report finds CalPERS is correcting its annual report as it has no holdings in Sinopec.