Category: Politics

SBInet: "Can we Get a Refund?"

Two House subcommittees held a hearing today on the ongoing problems with the multi-billion dollar “virtual border fence” being built by Boeing Corp. along the U.S.-Mexico border.

Earlier this week, DHS Secretary Janet Napolitano froze funding out of concerns that the program, called SBInet, was plagued with problems. More than $1b has already been spent but the system has only been installed along 28 miles of the 2,000-mile border.

At the current rate of 28 miles every 4.5 years, it would take 320 years – or until the year 2330 – to deploy SBInet technology across the Southwest border.

The GAO’s latest findings reveal that 1) he number of problems in the program are outpacing those being fixed and 2) about 70 percent of SBInet testing procedures apparently were changed at the last minute to “pass the test” rather than qualify the system.

    Asked Chairman Chris Carney, D-Pa., “Can we get a refund?”

    DHS Halts Border Security Boondoggle

    The U.S. Department of Homeland Security has ordered an immediate freeze on all funding of an expensive “virtual fence” of tower-mounted cameras and sensors along the U.S.-Mexico border called SBInet.

    The program has been “plagued” with cost overruns and missed deadlines, DHS Homeland Secretary Janet Napolitano said today in a statement.

    The delays mean that Border Patrol agents have had to use existing cameras that don’t work well. Thanks mostly to the Senate ,the Border Patrol also has no leader, but that’s another story. 

    As of July, the government had given $1.1 billion to SBInet contractor Boeing Co. according to this GAO report.

    A 2006 DHS strategic plan estimated that installing the system along the Southwest border would cost $7.6 billion through fiscal 2011.

    SBInet is really another name for C3I or C4I (command, control, computers, communications, and intelligence) — an Orwellian integrated surveillance system that can cover a huge area.

    Greece hired a consortium led by SAIC to install a similar system for the 2004 Olympic games, but the system was delivered in time for the Beijing Olympics in 2008.

    The DHS says it is re-allocating $50 million of $100 million in Recovery Act funding slated for SBInet to off-the-shelf cameras, light detectors, radios, cameras, laptops.

    It’s unclear to me what prolonging a wasteful program has to do with economic recovery. Update: If you take a look at Recovery.gov, you’ll find one of the reasons — I’m not making this up — is helping the steel industry by building all those towers.

    The Boeing SBInet core team includes

    • Centech — Arlington, Va.
    • DRS Surveillance and Reconnaissance Group — Palm Bay, Fla.
    • Kollsman Inc. (an Elbit Systems of America company) — Merrimack, N.H.
    • L-3 Government Services Inc. — Washington, D.C.
    • L-3 Communication Systems West — Salt Lake City, Utah
    • Lucent Technologies — Murray Hill, N.J.
    • Perot Systems — Plano, Texas
    • Unisys Global Public Sector — Reston, Va.
    • USIS — Washington, D.C.

    What Happened At La Jolla Bank? Part II

    La Jolla Bank, which failed last week amid allegations of possible fraud, is the subject of a Nevada lawsuit that has a great cast of characters.

    It involves a Republican Senate candidate, a flamboyant San Diego real estate broker, a basketball coach known for chewing towels, a horse farm that once belonged to Don Drysdale, and allegations of fraud.

    The Tarkanian family sued La Jolla Bank in January to stop it from foreclosing on 13 acres of vacant land on south Las Vegas Boulevard. (See 1 and 2.)

    The Tarkanians are a prominent Las Vegas family: Danny Tarkanian is a Republican who’s trying to unseat Senate Majority Leader Harry Reid. His dad, Jerry, is the former towel-chewing men’s basketball coach at UNLV; his mom, Lois, is a Las Vegas councilwoman.

    La Jolla Bank lent $25.5 million in 2005 to the Tarkanians and their partners, with the Las Vegas land as security.

    The Tarkanians planned to loan some of that money to Solana Beach broker-turned-developer Robert A. Dyson Jr. for an “equestrian destination resort” in Anza, California on land once owned by Dodgers great Don Drysdale.

    Unbeknownst to the Tarkanians, however, Dyson already owed money to La Jolla Bank for the Anza project. He paid off some of his La Jolla Bank loans with the money that the Tarkanians borrowed from the same bank.

    The North County Times reported last year that Dyson and his wife made a fortune selling high-end coastal real estate only to file for bankruptcy in 2008. Some juicy details:

    “The trustee supervising their bankruptcy recommended in December that the couple abandon the Rancho Santa Fe home that they bought in June 2005 because debt and liens account for nearly its entire $7 million value. A later filing by the trustee recommended they give up a $90,000 leased Porsche sports car and their $3.2 million home in Palm Desert, which is in foreclosure.”

    The Tarkanians’ lawsuit describes Dyson as friends with Rick Hall, La Jolla Bank’s president, and says he attended regular meetings and events at the bank.

    The bank’s “main owner,” Frank Warren, served as the landlord for several of Dyson’s real estate offices, according to the Tarkanians’ lawsuit.

    “Because of the close connection between Mr. Dyson and La Jolla Bank, La Jolla Bank was well aware of the perilous web created by Mr. Dyson in which it aided Mr. Dyson,” the suit states.

    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.

    Coughlin Stoia's Money Machine

    A move is underway to clamp down on the massive fees earned by plaintiffs lawyers suing behalf of public pension funds.

    Florida recently capped the fees its lawyers can earn at $50 million per case. Alabama, Iowa, Mississippi, and Oklahoma have introduced bills that would force states to disclose their contracts for legal services. Several states have already enacted similar measures.

    This movement could be bad for business at San Diego’s Coughlin Stoia Geller Rudman & Robbins LLP, a politically-connected firm that has extracted huge settlements in class-action corporate lawsuits.

    As I noted last week, Coughlin Stoia is cozy with Phil Angelides, the former California treasurer who is now leading a congressional inquiry into the causes of the financial crisis.

    Byron Georgiou, of counsel to Coughlin Stoia, is a member of the Angelides commission.

    For an excellent example of how the firm operates, there are few better examples than Coughlin Stoia’s 2006 lawsuit against UnitedHealth Group on behalf of CalPERS, the giant California pension fund.

    The firm — known then as Lerach Coughlin — sued UnitedHealth over the company’s practice of backdating stock options granted to its executives.

    A month after filing suit, Coughlin Stoia and its attorneys contributed $107,000 to Angelides’ gubernatorial campaign. Angelides was an influential member of the CalPERS board.

    CalPERS became lead plaintiff in the lawsuit and Coughlin Stoia became lead counsel.

    CalPERS’ general counsel, Peter Mixon, and Lerach Coughlin negotiated the firm’s compensation a year later.

    The deal anticipated a billion-dollar settlement. Lawyers on the case were to receive 11 percent of the first $250 million recovered; 12 percent of the next $250 million; and 13 percent of anything exceeding $750 million.

    Sure enough, UnitedHealth Group settled in 2008 for $925 million — the largest settlement ever in a stock options backdating case.

    Under its fee arrangement, CalPERS’ attorneys were entitled $110 million, most of which would have gone to Lerach Coughlin.

    Judge James S. Rosenbaum wouldn’t allow it. He  cut Lerach Coughlin’s golden egg nearly in half to $65 million.

    In his ruling, Judge Rosebaum said that while Lerach Coughlin may have been pursuing in its own interests, CalPERS was not. The judge found no signs that the pension had used its enormous leverage to shop around for another law firm. Nor had it tried to negotiate a lower fee before filing the complaint.

    Another problem was that the firm’s lead attorney, William Lerach, hadn’t bothered to tell the judge that he was under federal investigation. Lerach is serving two years in prison for paying kickbacks to his clients.

    In fact, Lerach’s firm told Judge Rosenbaum in 2006 that the government “has notified Mr. Lerach that it does not intend to take any action against him.” 

    “Had the truth been timely and fully disclosed to the Court, in all likelihood the Court would never have appointed his firm as lead counsel,” Judge Rosenbaum wrote.

    It could also be said that had the truth been fully disclosed, Lerach Coughlin/Coughlin Stoia wouldn’t have been able to bill $900 an hour for the services of prisoner Bill Lerach.