Category: San Diego
Mohdar Abdullah goes missing
Lennart Hultman-Boye, a reporter with Sweden’s largest nightly news show at TV4, contacted me about a post I’d written years ago about the strange case of Mohdar Abdullah.
Abdullah, the former San Diego man who befriended two 9/11 hijackers, now lives in Sweden. He was called as a witness there in an ongoing lawsuit filed by families of 9/11 victims against Saudi Arabia.
Abdullah has so far avoided Swedish police trying to serve him with a legal demand to testify. He did not show up for a hearing two weeks ago.
You see Hultman-Boye’s report here (in Swedish).
Abdullah has admitted helping Nawaf al-Hazmi and Khalid al-Midhar — two al-Qaida operatives who lived in San Diego in 2000. Abdullah helped the two Saudis obtain state identification, contacting flight schools on their behalf and translating for them. Abdullah knew the pair had extremist leanings and sympathized with them, according to the 9/11 Commission’s final report. After Hazmi left San Diego, Abdullah remained in contact with him.
The question that has frustrated investigators is whether Abdullah knew in advance of the 9/11 attacks.
On the morning of Sept. 10 at the Texaco station where Abdullah worked, an FBI source reporting hearing Abdullah saying something like, “It’s finally going to happen.” That night, Abdullah married a young woman he had met a few months earlier, according to FBI Special Agent Daniel Gonzales.
Ten days after the 9/11 attacks, Abdullah was arrested as a material witness. Prosecutors considered charging him along with Zacarias Moussaoui, who is serving life in prison for conspiring to kill Americans in the 9/11 attacks, but ultimately decided not to.
While he was being held in jail, Abdullah allegedly bragged to fellow inmates that he had advance knowledge of the attacks, but authorities couldn’t substantiate the reports.
Abdullah was subsequently convicted of visa fraud and deported to his native Yemen.
He denied knowing about the attacks in advance.
Also of interest was how Abdullah crossed paths with two men with close ties to the Saudi government who lawyers for the 9/11 families want to talk to. Saudi Arabia has repeatedly denied any connection to the 9/11 hijackers.
The person who gave Abdullah the job of taking care of Hazmi and Midhar in San Diego was a mysterious Saudi-linked figure named Omar al-Baymoumi. Al-Bayoumi helped the al-Qaida operatives find an apartment in San Diego and co-signed the lease. He may even have paid their first month’s rent and security deposit. After the two future hijackers moved in, al-Bayoumi threw a party to welcome them to San Diego.
A 28-page section of the 9/11 Commission’s report that was declassified in 2016 quotes testimony from a former San Diego FBI agent. According to the agent, al-Bayoumi “acted like a Saudi intelligence officer, in my opinion. And if he was involved with the hijackers, which it looks like he was, if he signed leases, if he provided some sort of financing or payment of some sort, then I would say that there’s a clear possibility that there might be a connection between Saudi intelligence and UBL [Osama bin Laden].”
Last year, ProPublica and The New York Times reported that Gonzales had reinterviewed Abdullah in October 2006.
Abdullah told agents about a car trip he took to Los Angeles in June 2000 to drop Mihdhar at the airport before he flew back to Yemen to see his wife and daughter.
They went to the King Fahad Mosque in Culver City, California for the evening prayer and met an imam — Fahad al-Thumairy — who also met privately that evening with the hijackers.
Thumairy reportedly led an extremist faction at the mosque, which had been built with funding providing provided by the former Saudi Crown Prince, Abdulaziz, according to the 9/11 Report.
“Thumairy was the primary point of contact for Hazmi and Mihdhar in Los Angeles,” Steven Moore, a former assistant special agent in charge in Los Angeles in a statement given in support of the 9/11 families in their lawsuit. “Thumairy was aware in advance of their arrival and, through the King Fahad Mosque, had already provided a place for them to stay in Los Angeles.”
In a 2012 FBI report, agents noted that there was evidence that Thumairy and al-Baymoumi had been tasked with helping the hijackers by a third man — Mussaed Ahmed al-Jarrah, a mid-level Saudi Foreign Ministry official who was assigned to the Saudi Embassy in Washington, D.C., in 1999 and 2000. Yahoo News reported that FBI agents were unable to provde at al-Jarrah knew Hazmi and Midhar were members of al-Qaida.
San Diego’s Spook Shop
Susan Lesch, own work, CC BY-SA 3.0 https://commmons.wikimedia.org/w/index.php?curid=14664040
Along Interstate 5 in San Diego just south of the airport, lies a hulking building with blacked out windows and a roof that looks like a long silver saw blade. The site of a former B-24 factory during World War II, this giant piece of corrugated metal is the home of the Space and Naval Warfare Systems Command or SPAWAR.
I’ve long been interested in SPAWAR (pronounced spā-wôr) mostly because exactly what it does is a bit of a mystery. Its mission is “enabling information warfare superiority” for our Naval and military forces. Operating with a $2.5 billion budget, SPAWAR employs more than 2,000 scientists, specializing in areas such as cyberwarfare, information warfare and space systems. SPAWAR’s chief technology officer holds over 100 patents. I have no idea what that all means, but it sounds like they do some very interesting stuff.
About three years ago, in the midst of Edward Snowden’s revelations about the National Security Agency, I learned that the Defense Department’s Inspector General had conducted a Top Secret investigation into allegations involving SPAWAR’s “access to U.S. persons data.”
That phrase “U.S. persons data” caught my eye. Under federal law, our intelligence agencies cannot spy on U.S. persons, i.e. American citizens. The misuse of “U.S. persons data” is intelspeak for spying on Americans so I filed a request under the Freedom of Information Act for the report.
The 37-page heavily redacted report I received began as a whistleblower complaint filed in December 2006 by an unnamed government employee. This employee claimed he was mistreated and ultimately reassigned after reporting that SPAWAR had misused classified information involving U.S. persons, which is forbidden under U.S. law.
Of the two main allegations cited in the report, one remains classified under a FOIA b(1) exemption, which involves matters of national security. The whistleblower’s second allegation was that SPAWAR personnel had been in the words of the report “photographing U.S. persons.”
There are several allegations involving misuse of imagery at SPAWAR in the report, most of which are completely or partially redacted.
The only one that is readable is a charge that SPAWAR had been collecting data without notice, warrant or authority “on U.S. persons in federal parks located at Point Loma,” a hilly peninsula in San Diego.
This allegation involved a camera is mounted on a tower at SPAWAR’s command HQ, located on the southern tip of Point Loma, adjacent to Cabrillo National Monument, which is operated by the National Parks Service. The camera, which can be rotated 360 degrees, is used for calibration purposes by pointing it at different government radars, the IG’s investigation found. The video feed from the camera goes to a laboratory and is not stored.
The IG also looked for inappropriate images on another imagery system, details of which remain classified on national security grounds. The system was tested at a site on Point Loma overlooking San Diego Harbor on the USS Dolphin, a research submarine, after it had been repaired for fire damage.
Other allegations involving satellite imagery or other technologies are heavily redacted.
The investigation by the DoD’s Inspector General did not substantiate the whistleblower’s complaints that SPAWAR was mishandling intelligence and possibly compromising U.S. persons information. The Inspector General did, however, partially substantiate the allegation that SPAWAR had failed to move quickly to correct deficiencies in its handling of intelligence information. The whistleblower had not been subject to reprisals, the IG’s investigation found.
What the report makes clear is that SPAWAR is a spook shop. It does R&D work for various components of the U.S. intelligence community. Some of the imagery allegations involved an R&D project for the Office of Naval Intelligence. Officials with the National Geospatial-Intelligence Agency (NGA), the National Reconnaissance Agency (NRO), which runs spy satellites, and one agency whose name was blacked out were interview for the IG’s report.
San Diego’s Biggest Investment Advisor Firms
The table that follows is derived from the latest SEC data:
| Name | City | AUM | Clients | |
|---|---|---|---|---|
| 1 | Brandes Investment Partners | San Diego | $25,945,405,178 | 19,800 |
| 2 | Torreycove Capital Partners | San Diego | $18,287,962,533 | 11-25 |
| 3 | Guided Choice Asset Management | San Diego | $12,317,410,631 | 500,000 |
| 4 | Stepstone Group | La Jolla | $11,926,414,601 | 100 |
| 5 | Gurtin Fixed Income Management | Solana Beach | $9,929,753,485 | 500 |
| 6 | Chandler Asset Management | San Diego | $8,893,810,490 | 800 |
| 7 | LM Capital Group | San Diego | $5,215,906,609 | 26-100 |
| 8 | First Allied Advisory Services | San Diego | $4,864,088,841 | 25,800 |
| 9 | Clarivest Asset Management | San Diego | $4,150,278,731 | 11-25 |
| 10 | Globeflex Capital | San Diego | $3,611,000,000 | 26-100 |
| 11 | Dowling & Yahnke | San Diego | $3,047,962,290 | 1,000 |
| 12 | Aletgris Advisors | La Jolla | $2,105,402,681 | 26-100 |
| 13 | Rice Hall James & Associates | San Diego | $1,955,115,330 | 300 |
| 14 | Nicholas Investment Partners | Rancho Santa Fe | $1,876,535,379 | 26-100 |
| 15 | American Assets Investment Management | San Diego | $1,661,745,223 | 26-100 |
| 16 | Independent Financial Group | San Diego | $1,647,108,373 | 5,700 |
| 17 | Cuso Financial Services | San Diego | $1,564,559,871 | 6,000 |
| 18 | EAM Investors | Cardiff | $1,266,828,504 | 26-100 |
| 19 | LM Advisors | San Diego | $1,256,305,636 | 600 |
| 20 | Pure Financial Advisors | San Diego | $1,196,742,924 | 1,400 |
| 21 | Dunham & Associates Investment Counsel | San Diego | $1,191,835,520 | 3,900 |
| 22 | Wall Street Associates | La Jolla | $1,075,551,757 | 11-25 |
| 23 | Cardiff Park Advisors | Carlsbad | $1,034,925,745 | 325 |
| 24 | IPG Investment Advisors | San Diego | $1,013,080,208 | 700 |
There are some interesting little stories in here.
Torreycove Capital, founded in 2011, manages $18 billion for fewer than 25 clients, mostly pension and profit sharing plans. Torreycove was named in June as private equity consultant for the $79.2 billion New Jersey Pension Fund.
Brandes has seen its assets under management plummet since 2007, when it had $111 billion under management. According to Pensions & Investments magazine, Brandes’ two largest strategies — international equity and global equity — have been hit hard in recent years. In 2008, Brandes’ AUM declined more than 50% to $52.9 billion.
Stepstone may be the most interesting of them all. StepStone, founded by Monte Brem and Thomas Keck, has grown into a self-described”global private markets firm.” It oversees $75 billion of private capital allocations in addition to its $11.9 billion under management. Stepstone serves as private equity advisor for the states of Connecticut and Wisconsin.
Last year, Stepstone leased the entire 17th floor at the Lipstick Building, the site where Bernie Madoff ran his $65 billion Ponzi scheme.
Mark Cuban files brief supporting … Ray Lucia?
What was I thinking?
Update: A federal appeals court denied Ray Lucia’s appeal to have his lifetime ban overturned in August 2016.
Mark Cuban, the outspoken Dallas Mavericks owner, is a regular on Shark Tank, a show where he’s regularly pitched by entrepreneurs seeking to expand their businesses.
Cuban and the other investors say “I’m in” or “I’m out” depending on whether they like the pitch or not.
Cuban is obviously a savvy investor, but he’s an explosive guy. He’s known in the sports world for his outbursts at NBA officials and referees that have cost him more than $1 million in fines.
Today, I learned that Cuban has filed a friend of the court brief on behalf of Ray Lucia, a former San Diego investment adviser who was permanently banned from trading by federal securities regulators. This legal brief is the courtroom equivalent of an angry outburst at NBA official.
Cuban filed his brief this month in Lucia’s appellate lawsuit against the U.S. Securities and Exchange Commission before the D.C. Circuit Court of Appeals. Lucia argued that his lifetime ban should be thrown out since his case was heard by an administrative law judge, instead of an appointed officer, as required by the U.S. Constitution.
His brief, filed Feb. 8, states, “As a first-hand witness to and victim of SEC overreach, Mr. Cuban has an interest in supporting petitioners’ appeal in this case, and in particular demonstrating that both statutory language and legislative history clearly show that Congress specifically intended that SEC hearings only be held before constitutional officers.”
Seems like weak stuff to me, but Mark Cuban is a vindictive fellow and he has an axe to grind.
The SEC accused Cuban of insider trading when he sold his stake in a Canadian Internet company to avoid a $750,000 loss. Cuban maintained his innocence, and was acquitted by a federal jury in Texas three years ago.
Cuban goes on to state, “When the laws are applied inconsistently or the process by which they are enforced is rigged to favor the government, capital formation is impeded because market participants do not have clear rules for understanding their investment risks.”
This is the point where I say “I’m out.” Ray Lucia wasn’t some bold entrepreneur chasing the next big thing. He was making millions fleecing retirees out of their nest eggs.
Ray Lucia addressing the crown at Sean Hannity’s Freedom Concert in 2010.
I started writing critically about Lucia in 2010 after his attorney threatened to sue me for $300,00 . I figured that if someone would bother with a bozo like me something must be seriously wrong. Turns out, I was right.
Back then, Lucia was at the height of his power. He had thousands of accounts and $300 million in assets under management. In the 12 months leading up to January 31, 2010, his family of companies reported $14.1 million in gross income, according to court records.
Lucia made money mainly by collecting commissions on those who fell for his “Buckets of Money” strategy. He pitched retirees at flashy seminars, often with the help of his buddy, actor Ben Stein.
Elderly clients were convinced to invest in non-traded real estate investment trusts (REITs) that locked away their money for years. That’s not a great position for an elderly person who needs liquidity, but when REITs are generating $8.7 milllion in gross commissions for Lucia’s companies in 2010, you might overlook such details.
Lucia assured his clients they could retire in comfort because he had backtested his “Buckets of Money” strategy and it was based on “science, not art.” The SEC called his bluff and today, Lucia says he is nearly bankrupt.
Someone, however, must be paying for Lucia’s legal team at Gibson, Dunn & Crutcher, one of the country’s top law firms. Is that you Mark?
Why Are Gas Prices So High in California? Part I
Gas is cheap these days. Since 2014, the average price of a gallon of gas in the US has been cut in half to $1.70 and is headed still lower.
Except in California. A gallon of gas is $2.42 on average here. That’s more than 70 cents above the US average.
People in California are so used to paying more that this is seen as good news. Gas prices topped $4 in Los Angeles in the summer of 2015. So Californians are celebrating, not realizing that they are still paying more than the rest of the country.
Expensive is now normal in California. In 2015, a gallon of gas sold at the pump cost 70 cents above the U.S. average, according to the California Energy Commission. And for the month of January 2016, gas prices were 80.1 cents above the national average. That’s huge.
A difference of 70 cents may not sound like much, but multiply that by the 14.9 billion gallons of gasoline consumed in 2015 by drivers in the nation’s most populous state.
The number gets a lot bigger.
California drivers paid a whopping $10.4 billion more for gasoline in 2015 than the US average. Wow.
Why is this so? The reason frequently given is the state’s higher taxes and strict environmental regulations drive gas prices higher.
- California requires the world’s cleanest burning gasoline, which is more expensive to refine. Cost: 10-15 cents more per gallon.
- Anti global warming regulations add a pollution tax on refineries. Cost: 10-15 cents more per gallon.
- Gas taxes are higher in California. Cost in 2016: 10-15 cents.
So taking the low and high of these estimates (which like most of the information used in this post come testimony before a state panel) we get either 10+10+10 or 30 cents or at the high end, 15+15+15 or 45 cents. That accounts for less than half to two-thirds of the 70 cent-per-gallon difference between the average U.S. gas price and California’s.
Where does the other 25-40 cents go?
This, it turns out, is a vexing question, one that a state panel, the Petroleum Market Advisory Committee, has been trying for two years to answer.
Simply put, there isn’t enough gas supply to meet demand, especially in Southern California where most of the state’s population lives. That drives the average price of a gallon of gas higher.
In a properly functioning market economy, scarcity of gasoline, a widely available commodity, should serve as a signal to competitors. There’s money to be made selling gas in California! Competitors arrive with gas to sell. The supply increases until prices gradually fall back to normal.
But that’s not happening. Gas isn’t pouring into California, so prices remain stubbornly high.
The reason why is a bit surprising: A lot of it has to do with geography.
In old 16th and 17th European maps California was depicted as an island. In terms of gasoline, California is an island.
Almost all of California’s gasoline supply is produced inside the state by 13 refineries. And this put the state’s drivers at a major competitive disadvantage.
When everything is working smoothly, these refineries can supply enough gas to meet demand. In fact, California exports gasoline to Nevada and Arizona.
However, things don’t always work smoothly. Refineries break down or catch fire and the sudden shortage can cause prices to shoot up.
Gas prices have remained persistently high in Southern California since an explosion shut down Exxon Mobil’s Torrance refinery in 2015. The Torrance refinery produced somewhere around 10 percent of the state’s gasoline supply.
An explosion at an Exxon Mobil refinery in Torrance in February 2015 has resulted in higher prices in Southern California. (Courtesy LA Times).
Outside California, when refineries hut down for routine maintenance or unplanned outages, drivers often don’t even realize it. Other refineries quickly make up the difference.
Take Florida. While California produces all its own gasoline, Florida is the opposite extreme. Florida has zero refineries. It is totally dependent on imported gas. So what does gas cost there? $1.75, a few pennies the national average.
Like most of the country, Florida gets its gasoline via pipeline from the Gulf region. The U.S. Gulf region is a giant gas exporting machine. Texas and Louisiana together account for half of the gasoline refining capacity for all of the United States.
Pipelines can move gas from Texas as far away as New York, but they don’t reach California. (Exactly why this is so is unclear, since a Gulf pipeline could reach Los Angeles through Arizona and New Mexico.)
Pipelines do link California to Nevada and Arizona, but the gas flows only in one direction: out of the state. Gas flows from the Bay Area to Northern Nevada and from Southern California to Las Vegas and Arizona.
If you look at the chart below, you’ll see that the arrows all point east. Also note there are no pipelines linking Northern and Southern California. This is another big problem.
Well, can’t ships bring gas to California to alleviate shortages? Why not ship gas from the Gulf to California in times of shortage?
California’s geography works against it. Outside California, there are only a few refineries in the world that produce gas known as CARB that meets the state’s strict standards. They are all far away.
The closest refinery that produces CARB gas is in the Gulf. It takes 10 days for a tanker from the Gulf to pass through the Panama Canal and reach California.
Due to a quirk of US law, it’s actually more expensive to ship gas to California from the Gulf than from refineries in Asia, even though the voyage from Asia is twice as long. It costs $10 per barrel to ship gas from the Gulf Coast to Los Angeles vs 6 a barrel from Asia.
Under a law known as the Jones Act, ships that sail from one U.S. port to another must be made in the USA and at least 75 percent of the crew has to be American citizens. There are very few Jones Act ships left.
It’s so hard to find a Jones Act ship that gas cannot easily move around even inside California. As noted earlier, there are no gasoline pipelines linking Northern California with Southern California.
At a hearing this month before the Petroleum Advisory Market Committee, an industry analyst noted that gas was 30 cents cheaper recently in Northern California than Southern California. But there was no way to move the gas south.
Few ships and no pipelines mean California’s gas market is isolated from the rest of the country. And this is the real reason why gas is much more expensive in California than the rest of the country.
We here in the Golden State are totally dependent on in-state refineries.
That doesn’t sit well with some people.
This concentration of power has given rise to charges that refiners are using market power to drive prices — and their profits — higher. We’ll take a look at this in our next post.
Is Net Energy Metering a Subsidy for the Rich?
Benjamin Zycher at Forbes thinks so.
So what’s the problem? First, the credit paid in California for the excess solar power is far higher than the cost of alternative electricity sources, usually from utilities or from the spot power market. Consumers without such solar installations have to finance that excessively expensive electricity, so that overall power prices are forced above the level that would prevail in the absence of the net metering system. This system, by the way, subsidizes the affluent (median income of those installing solar systems: $91,210) at the expense of all other power consumers (median of $67,821), an embarrassing reality from which the supporters of the net-metering system prefer to avert their eyes.
Second, reliability is a hugely valuable attribute of power systems; no one likes blackouts. Electricity bills reflect the cost of that reliability in the form of “capacity” charges, that is, the part of the bill covering the cost of the physical system and its spare capacity, before fuel expenses and other such generation costs. People who install solar systems benefit from the reliability provided by the grid–they consume conventional power at night and at other times that the sun fails to shine–but because they pay only for their “net” power consumption, they get a free ride on the cost of the generation equipment and other capital that yield the reliability upon which they depend. The problem is that the free ride is not free: Other consumers have to pay for it.
Let’s take those one by one.
The idea behind net energy metering is that my demand for electricity and the solar electricity I supply to the grid cancel each other out. During the day, the power generated by my rooftop panels that I don’t use flows into the grid. At night, I am given a credit for the electricity I supplied during the day.
Perhaps Dr. Zycher has forgotten that solar panels are a source of energy that the utility has paid nothing to produce. Here in San Diego, solar panels generate more than 500 megawatts of electricity. In all of California in 2014, solar generated 10,557 gigawatt hours of electricity.
Would Dr. Zycher have me pay for the privilege of supplying electricity into the grid?
If my solar panels generate more power than I consume, I am paid at the wholesale spot market electricity price. I fail to see how this is “excessively expensive” and drives up power prices, as Dr. Zycher asserts. If anything this power is significantly less expensive for the utility, since the power is instantly in the grid, and the utility does not have to haul this energy long distances as it does with other sources of power.
The second point Dr. Zycher makes about reliability is more grounded in fact. It is true that under net metering, solar users don’t pay the full costs of maintaining the grid. This cost is passed along to other non-solar customers. Dr. Zycher is correct in pointing out that is unfair, and the costs should be borne equally by all grid users. San Diego Gas & Electric has estimated these costs at $100 per year. It would be a simple matter to pass this fee along to solar users.
There are genuine subsidies in solar. The cost of installing solar panels is subsidized by U.S. taxpayers, and we can debate this all day. Do we really need solar subsidies? I believe that all subsidies distort price signals. Watch what happens to solar when the tax credit goes away.
Net metering, however, is no subsidy. Rather it is an accounting system that balances supply and demand. Solar may not work everywhere, but it sure makes sense in California. Doing away with it will unfairly doom a pollution-free source of energy that is delivering a reliable supply of power on sunny days when demand in the Golden State is at its peak.
How I Chose My Solar Installer
These are boom times for the solar industry. There are no shortage of choices for installers.
I wound up going with a company called Jamar Power Systems. I was very satisfied with the work they did for the price they charged.
Here are some lessons I learned in choosing them.
- Don’t pay for a company’s sales and marketing. Jamar relies almost exclusively on word-of-mouth. Companies with big marketing budgets like SolarCity charged more because customers have to pay for the advertising.
- Look closely at the cost per watt. You will get bids for slightly different size systems and cost per watt is a way to compare them. A fair price for a solar installation is $3.50 per watt for installing the panels and inverter (which coverts DC solar power into AC current that can be used in your home). This is what Jamar charged.
- A company that only does solar may not be around in a couple of years. Jamar has been around since 1984. They do a good business in commercial and residential electrical projects and they are likely to be around when the solar wave crashes.
- Think carefully about the upsell. Many installers recommended Sunpower panels, which are considered the best in the business, the Mercedes of solar panels. Like Mercedes, you pay more. I went with panels made by LG that carry a 25-year warranty. Sunpower panels would have cost 10 percent more, and I didn’t feel they were worth the cost.
- Optimize per panel power generation. A disadvantage to Sunpower panels is that they are often paired with Sunny Boy inverters. While Sunny Boys are well made, they are a bit behind the times. Newer technology allows solar panels to produce more by optimizing the panel when one or more of the panels is in shade. If you have big trees in your backyard like me, this is very helpful. My inverter is made by Solar Edge and it allows me to maximize the power my panels can generate.
Was there anything I didn’t like about Jamar?
They didn’t send someone out to my house until I signed a contract. This bothered me until I met the excellent who worked for them. I suppose they do this to keep costs down.
A final word: Do your homework. Check Solarreviews.com, yelp.com, and look up the contractor’s license in your state to check for any problems. For technical help, check www.solarpaneltalk.com
Going Solar, Part II
Another factor pushing me toward solar was net metering.
Net metering is a billing system that credits solar homes for the electricity they produce. If the solar system was properly designed the inflows and outflows will balance.
There is a misconception that people who install rooftop solar panels go “off the grid.” Unless you are willing to pay the extra expense for an array of massive batteries, that’s not true.
When the sun is up my solar panels generate electricity. They generate more power than I can use, and the excess is fed back in the electric grid.
At night, the situation is reversed. My solar panels generate no power. But I keep the lights on, cook dinner, watch TV, and so on. That power comes from the grid.
The catch is that, under California’s net metering law, solar homes are credited for excess power at the retail electricity rate. My average retail electricity rate in 2015, if you recall from the previous post, was 20 cents per kilowatt hour — among the most expensive in the United States.
The wholesale cost that my utility pays for power, according to the U.S. Energy Information Administration (side note: do we really need another government bureaucracy for this?), is around 4 cents per kilowatt hour.
That 16 cents per kilowatt hour difference covers San Diego Gas & Electric’s costs for generating electricity, transmitting it, distributing, and maintaining the grid. Some of it goes to SDG&E’s $500 million annual profit (in 2014).
This is a good deal for me. But it’s a bad deal for the utility’s non-solar customers. They are subsidizing my cost of maintaining the electric grid. SDG&E estimated that families without solar panels pay an extra $100 per year to cover the costs of solar homes.
California’s net metering law capped the number of solar homes at 5 percent of a utility’s aggregate peak demand. Here you can see how close we are to the cap in San Diego. The limit will probably be reached sometime this year.
What happens then? Right now it’s unclear. But my guess is that new rooftop solar customers will eventually have to buy solar at retail rates and sell it at wholesale rates. If you get in under cap you get a 1-to-1 credit for 20 years.
So there was another reason for going solar.
Going Solar, Part I
My wife had been urging us to go solar for years.
She saw it as a way to send a message to our community and ourselves that we care about the environment and the future of our planet. We live in sunny San Diego, so it made total sense.
Looking back, I can’t exactly say why I was reluctant to agree. We had the money. I don’t believe that global warming is some giant hoax. I was just … apathetic.
When panels started to pop up everywhere, I decided to run the numbers. As you can see below, I paid an average of 20 cents an hour per kilowatt/hour of electricity.
To put this in perspective, 20 cents per kilowatt hour is about as expensive as it gets for electricity in the United States.
How did this compare to solar?
First off, I wanted to buy my solar panels outright. We had the money to do this and it was a far better investment than leasing. Most people in California choose to lease, which is the most expensive way to go solar. Buying panels outright locks in electricity at a low price, while leasing panels leaves you vulnerable to rising rates, just like with your utility.
I was budgeting about $21,000 for my 4.73kw solar system (including a new electric panel). The U.S. government’s 30 percent tax credit brought the total cost down to around $14,700.
That’s a lot of money but buying a solar system is essentially paying for power up front.
Over 20 years at 20 cents/kWh I will hand over $24,820 to my utility, San Diego Gas & Electric. Running my solar system for 20 years would save me $10,000.
And that’s assuming that rates don’t change (unlikely) and my electric use remains the same (also unlikely).
Solar was starting to make sense.
Ray Lucia's SEC Response
Ray Lucia has posted a response to the SEC charges against him, which you can view on his website.
Lucia spends a minute or so explaining what the charges are (and what they are not) and then takes up the allegation he says is at the root of the charges filed by the U.S. Securities and Exchange Commission: his use of a 3 percent historical inflation rate in his retirement planning strategy.
Lucia notes that the 3 percent historical rate is “universally accepted by among others the AARP and the federal government, including the SEC.”
It’s an excellent strategy no doubt devised by Lucia’s lawyers at Locke Lord in Los Angeles. It puts gets him out quickly with a response that zeros in on the weakest link in the SEC allegations and attemps to spin the allegations as a dispute over statistics.
Of couse, it’s more than a dispute over statistics. Lucia goes out and tells people that his “Buckets of Money” strategy has been proven over time to allow them to retire in comfort. Lucia claims that he has “spent 20 years refinining” his “time-tested” strategy, which follows “science, not art.”
Well, sure that’s what everyone wants to hear. But when the SEC asked for proof, Lucia coughed up nothing more than a pair of two-page Excel spreadsheets put together by one of his employees in 2003.
And it’s the employee spreadsheets that use this hypothetical 3 percent inflation rate. The actual historical inflation rates available here show a wide fluctuation in inflation rates over time. In 1974, the year of the OPEC oil embargo, inflation zoomed to 11 percent. In 1980, after another oil shock and the Iran hostage crisis, it was 13.5 percent.
The SEC notes:
Lucia admittedly knew that using a lower inflation rate for the backtests would make the results look more favorable for the [Buckets of Money] strategy.
This is the heart of the issue: Lucia used the lazy, shorthand of 3 percent because it makes him look better. Those “Buckets of Money” don’t look quite so full when you use the actual (higher) historical inflation numbers. For the same reason, Lucia also didn’t include the massive fees his clients are charged. Apparently, the way to keep your bucket full is to pretend that inflation is less than it really is and ignore the high fees you’re paying.
As a radio host broadcasting his message over many radio stations, Lucia has a huge soapbox. As an SEC registered investment advisor, Lucia has a duty to do the math, to tell his clients the straight truth. So kudos to the SEC for calling his bluff.
SEC Charges Ray "Buckets of Money" Lucia with Peddling Buckets of Bullshit
This has restored my faith in government…
Washington, D.C., Sept. 5, 2012 – The Securities and Exchange Commission today charged a nationally syndicated radio personality and financial advice author for spreading misleading information about his “Buckets of Money” strategy at a series of investment seminars that he and his company hosted for potential clients.
The SEC’s Division of Enforcement alleges that investment adviser Ray Lucia, Sr. claimed that the wealth management strategy he promoted at the seminars had been empirically “backtested” over actual bear market periods. Backtesting is the process of evaluating a strategy, theory, or model by applying it to historical data and calculating how it would have performed had it actually been used in a prior time period.
“Lucia and RJL left their seminar attendees with a false sense of comfort about the Buckets of Money strategy,” said Michele Wein Layne, Regional Director of the SEC’s Los Angeles Regional Office. “The so-called backtests weren’t really backtests, and the strategy wasn’t proven as they claimed.”
According to the SEC’s order instituting administrative proceedings against Lucia and RJL, they held the seminars highlighting their Buckets of Money strategy in an effort to obtain advisory clients who would be charged fees in return for their advisory services. They promoted the seminars on Lucia’s radio show and on Lucia’s personal and company websites.
According to the SEC’s order, a backtest must utilize actual data from the time period in order to get an accurate result. Lucia and RJL have admitted during the SEC’s investigation that the only testing they actually performed were some calculations that Lucia made in the late 1990s – copies of which no longer exist – and two two-page spreadsheets.
According to the SEC’s order, the two cursory spreadsheets that Lucia claims were backtests used a hypothetical 3 percent inflation rate even though this was lower than actual historical rates. Lucia admittedly knew that using the lower hypothetical inflation rate would make the results look more favorable for the Buckets of Money strategy. These alleged backtests also failed to account for the negative effect that the deduction of advisory fees would have had on the backtesting of their investment strategy, and their “backtesting” did not even allocate in the manner called for by Lucia’s Buckets of Money strategy. The slideshow presentation that Lucia and RJL used during the seminars failed to disclose the flaws in their alleged backtests and was materially misleading.
San Diego FBI, Nidal Hasan, and the Webster Report
An independent commission headed by Judge William Webster, the former director of both the CIA and the FBI, has released its long-awaited report into the November 9, 2009 Fort Hood shootings. A copy of the report can be viewed here.
The report’s most damning is the refusal in May 2009, FBI officials in the Washington Field Office’s Joint Terrorism Task Force (JTTF) to interview the Fort Hood shooter, Major Nidal Hasan, who was communicating with terrorist Anwar al-Awlaqi. The DC JTTF officials also decided not to interview Maj. Hasan’s Army superiors because that “might harm Hasan’s military career.”
This infuriated the FBI agents in San Diego who were handling the Awlaqi-Hasan investigation. Even after San Diego complained, Washington still refused to get off its ass.
According to the report, the a Defense Criminal Investigative Service agent in San Diego handling the investigation told his Washington Field Office (WFO) counterpart that “upon receiving a lead like this one, San Diego would have conducted, at the least, an interview of the subject.” (See p. 60)
According to the San Diego DCIS agent, the JTTF agent in Washington replied something along the lines of: “This is not SD [San Diego], it’s DC and WFO doesn’t go out and interview every Muslim guy who visits extremist websites.”
The San Diego FBI agent also recalled that the Washington agent indicated that this subject is “politically sensitive for WFO.”
Not surprisingly, the JTTF agent in DC doesn’t recall this conversation. The report doesn’t reveal whether the FBI agent(s) in the Washington Field Office (WFO) who refused to interview Major Hasan ecause it would have been “politically sensitive” received any disciplinary actions.
There is nothing about this in today’s print edition of The San Diego Union-Tribune, although Fred Willard’s porn theatre bust is there on p. 2. Remind me again why I subscribe to this newspaper?
A Professional’s View of Ray Lucia’s Nontraded REITs
I was recently contacted by Troy Sapp, a financial professional from Washington state, who had a client that invested in non-traded REITs with Ray Lucia Jr.’s RJL Wealth Management. Troy graciously agreed to do a Q&A to help others in similar straits.
Q. Hi, Mr. Sapp. Thanks for joining us. Tell us about your background.
A: I am a fee-only certified financial planner and CPA with the National Association of Personal Financial Advisors. I’ve been helping clients with tax, estate, investment, education, retirement, and insurance planning and compliance for over 16 years. For many years I also performed accounting, tax, and reporting compliance work for mutual funds, foundations, private equity partnerships, trusts, and corporations. As a side job I now also provide expert witness services in cases where financial advisors have potentially led their clients to make unsuitable investments, so in the past couple years I’ve become quite familiar with nontraded real estate investment trusts (REITs) and other complex property investment vehicles like Tenants-in-Common (TIC).
Q. How did you find out about this website?
A. I was poking around the Internet after I took on a client who used to be with RJL Wealth Management, headed by Ray Lucia, Jr., that purports to follow Ray Lucia, Sr.’s “bucket approach.” When I took on the former RJL client I noticed she had purchased three nontraded REITs. This client of mine is 75 years of age. For the life of me I can’t see how a 10-15 year “bucket” filed with nontraded REITs would have been suitable for her, but I digress.
At that time, my client’s REITs had yet to provide valuations other than the $10 per share purchase price. I informed my client of the high fees as well as the fact that the vast majority of her distributions to date were actually a return of capital, so the likelihood of the investments’ true value being anything close to $10 per share was slim. At any rate, two-thirds of her nontraded REITs have now provided updated valuations. One valuation is came in slightly higher than $10 per share (which is very tenuous even by the sponsors’ own admissions) and the other came in at $7.47 per share.
Q. Let’s back up a bit. Can you explain how a nontraded REIT differs from a traded REIT?
A. REITs traded on U.S. exchanges are governed by the rules of the Securities Exchange Act of 1934 (and the Securities Act of 1933 when initially issued) which helps insure efficient price discovery. That is, among other things, these rules help insure adequate disclosure and fair play so that the marketplace can properly assess a company’s true intrinsic value based on all information that has been made public. Once the market digests all the information which has been made public, the market collectively determines a “fair value” which is adjusted virtually each second that the market for the security is open. The massive number of market participants all digesting information simultaneously does a remarkable job of properly valuing the securities in which it trades.
Nontraded REITs, on the other hand, are not traded on the open market and thus they are not subject to the same level of efficient price discovery. Instead, the shares are generally carried at $10 each until the subscription period closes even though the actual value will be more or less than $10. Once the subscription period closes, the Financial Industry Regulatory Authority dictates that the sponsor of the nontraded REIT must provide an updated valuation within 18 months.
Q. So, these nontraded REITs provide their own share prices? That sounds fishy.
A. As with all private equity investments, this is necessarily the case since the investment is not traded on an open exchange. The internal valuations are made using numerous measures, and then a third party auditor approves the methodology as well as the disclosures associated with the valuation. This second part should not be underestimated as valuations can be highly sensitive to inputs. These disclosures are stated within the REIT’s SEC filings and should not be overlooked. To date, though, I’ve yet to meet one investor that actually understands much less reads the valuation disclosures, but I suppose they’re out there.
Q. How high are the fees associated with them?
A. This is a difficult question. The fees of all nontraded REITs I’ve looked at are all structured somewhat differently, but they tend to include upfront fees, management fees, deal fees, high water mark fees, lease signing fees, etc. At the end of the day, all nontraded REITs I’ve looked at extract fees at every possible turn.
Just looking at front-loads, though, the ones my client invested in charged 15%. This would mean that for every $10 she invested only $8.50 would be put to work. By my math, it would seem that her $10 investment was actually worth $8.50 the minute she wrote the check. Simply earning back that initial 15% fee is a very high threshold when one considers they could have purchased a basket of more transparent public REITs without incurring the 15% fee.
Q. You mentioned that these nontraded REITs have only provided your client a return of capital (ROC)? What do you mean? That sounds like a Ponzi scheme.
A. It’s not that nontraded REITs only provide a ROC; it’s that the vast majority of the distributions in the initial years tend to be. To back up, when a REIT distributes dividends to investors, they can do so out of net earnings, capital gains, and/or investor capital. When companies distribute an investor’s capital back to them, they are simply returning the original amount that they invested. Receiving your own capital back is basically like giving yourself a blood transfusion from one arm to the other while spilling 15% of your own blood in the process.
On a cash flow basis, however, most of the nontraded REITs are not actually returning the investor’s original capital, but instead use the proceeds from sales to later investors. Recently, this has been made clearer by many nontraded REITs reducing their distributions once funds have been closed to new investors. In my opinion, this does seem like a Ponzi scheme, but legally it’s not since this is all disclosed by the REIT sponsor. In other words, Madoff may not have been running a Ponzi scheme if he adequately disclosed what he was doing. Of course, he would have also been subject to different regulations, and would likely have needed to position himself in the private equity space.
Q. Ha! Are these things regulated? Why haven’t they been shut down?
A. Yes, nontraded REITs are regulated. Private equity is seen as an important part of our capitalistic system. Without risk taking by those with adequate capital to prudently take it on, there would not be the economic and technological advances we’ve seen. Congress recognizes this as well as the fact that heightened regulation causes higher costs which would probably cause less investment in the private equity space. Therefore, current regulations basically say that heightened regulations won’t be imposed if investors meet certain wealth and/or income thresholds.
Q. So there are less safeguards for unsophisticated retirees with a large nest egg to invest. Wouldn’t an advisor who makes these kinds of recommendations for clients be breaking the law?
A. As long as the investor meets minimum wealth and/or income requirements, there is full written disclosure, the advisor does not misrepresent the investment, and the investment is at least suitable; then no, the advisor is likely working within the regulations. This said, for advisors subject to the fiduciary standard, these investments may often be difficult for them to justify. The fiduciary standard means that advisors have to act in the best interests of clients.
The problem I’ve seen is that even if all the issues were properly disclosed in writing, clients generally listen to what their advisors tell them about the investment, and not what’s written in the complex and voluminous offering documents. In the case of nontraded REITs, clients generally hear that they are stable in price and provide a good dividend. These assumptions are flawed at best.
Q. Why so?
A. In my client’s case it’s clear to me that she thought the investments were more profitable, more liquid, less costly, less volatile, and less opaque than they are in actuality. Why would she have thought this if the advisor hadn’t steered her in this direction? Had she had the experience and knowledge necessary to dissect the private placement memorandums, she would not have come to the same understanding.
Q. So what’s the next step for your client?
A. My client is now faced with a difficult choice. She can redeem, but the redemption fees are steep. She can go to arbitration, but that route is both monetarily and emotionally expensive. She can hold onto her REITs, but her heirs will likely be stuck with these stinkers that will in all likelihood not pan out as well as their publicly-traded counterparts. She is at the age where she will likely not see the eventual outcome if she does hold onto them.
Q. What’s your advice for someone who’s considering an investment in nontraded REIT that RJL or some other advisor is strongly recommending?
A. First, remember there are no free lunches. If there is a deal in the private equity space that’s better than available publicly traded options, then investment banks, pension funds, endowments, sovereign wealth funds, hedge funds, and other institutional investors will have beaten you to it. Unfortunately, retail customers are left with the “scraps” that institutional investors leave behind.
I also recommend that they ask the following questions:
- Is the value really stable? How do we know that the value is stable if it isn’t regularly priced by the marketplace?
- How much of my investment will be put to work? That is, what are the front loaded and ongoing fees?
- How does management fund the distributions? What percentage of the distributions are likely to be ROC?
- Why should I invest in a nontraded REIT instead of a public fund with no loads and low ongoing fees? (Note that if the advisor says that nontraded REITs are more stable, then run.)
- What cost will there be if I need to get out early? Have there been any cases where management has frozen redemption requests?
- What are the conflicts of interest? If the fund sponsor is also the property manager and broker of the underlying properties how can I be assured that the best job is being done for the price?
- How have these investments and this particular manager performed in the past compared to publicly traded options? Be careful here, though, as time variance returns can vary greatly. That is, the initial investors could have wildly different returns than the latter ones. There are also issues with measuring private equity returns since their returns are generally calculated using an internal rate of return methodology, so if your due diligence allows you to make it this far, you will need to examine this issue further.
- What other risks are there? At this point ask that the advisor slowly walk you through the risks outlined in the offering documents.
Q. What do you suggest to those who’ve already purchased a nontraded REIT and are now worried about it?
A. Unfortunately there are few options. The first would be to request a redemption, but this will likely cause a major haircut if redemption requests have not been frozen altogether. Another might be to contact the advisor and ask that they purchase the investment back from you if you believe they were misrepresented and/or not suitable. Good luck with that route, though. A more formal route would be to contact an attorney specializing in securities law. Most provide free consultations and many will work on either an hourly or contingent basis. Again, this route can be both monetarily and emotionally expensive. Finally, the obvious route is to do nothing and chalk it up as an “education expense”. Many investors seem to prefer the do nothing route as they feel overly responsible for the bad investment. Remember, though, that the advisor was the “expert” and this “expertise” was relied upon before making a decision. At the very least, I would recommend the investor speak with a securities lawyer. One lawyer I’ve worked with is Richard Brady, but there are many good securities lawyers out there. If you take this route be sure to interview two or three before deciding on one.
Q. What’s your recommendation for someone who wants to invest in a REIT?
A. Currently, my primary recommendation for US REIT exposure is the Vanguard REIT Index Fund. I currently recommend the ETF class for most of my clients. No loads, expenses are 0.10%/year, very liquid, and underlying holding obviously highly transparent to the marketplace. For those that prefer an active management style, there are over 250 REIT mutual funds to choose from. For a very small annual fee, Morningstar has an excellent screening tool as well as provides excellent commentary and analysis for virtually every publicly traded REIT and REIT fund available.
I should also add that nontraded REITS are not unsuitable for every retail investor, just most of them.
Q. What’s the best way to get in touch with you?
A. My website has my contact info.
Q. Thanks very much for taking the time to explain nontraded REITs.
A. You’re welcome.
San Diego Island to Become ‘Battle Lab’
Via Defense News:
The HALO Corp., San Diego-based organization founded by former Special Operations, National Security, and Intelligence personnel, which is hosting its sixth annual Counter-Terrorism Summit at the end of October at the Paradise Point Resort & Spa in San Diego.
Strategic Operations of San Diego, will help conduct tactical training exercises on the island. This should include a recreated Middle Eastern village, battlefield effects, combat wounds and medical simulations. Participants can also expect a simulated Somali pirate invasion to grace the resort’s shores. Unmanned aerial vehicles are likely to be floating overhead as well.
Keynote speakers include former NSA and CIA Director Michael Hayden; Alejandro Romero, Mexico’s interior secretary and Michael Downing, the director of LAPD’s counter-terrorism and special ops bureau. Cool classes will be offered like Social Engineering: The Art of Human Hacking by Chris Hadnagy. (Highly recommend his book).
I’d love to go, but it’s $1000 a person.
Peak Oil
UCSD economics professor James Hamilton has an interesting post up on his Econbrowser blog about peak oil — the point at which world oil supplies go into irreversible decline.
Geologist M. King Hubbert predicted in the 1950s that oil supplies would peak and then follow a linear decline. Declining supplies could spark unrest across the globe, so the notion that peak oil has arrived and global supplies are being deliberately over reported tends to attract crackpots, conspiracy theorists, gold bugs, and survivalists. As a result, peak oil has been kind of ignored by many economists.
Hamilton cites an IMF working paper that proposes a more accurate model for future oil production that predicts a non-linear decline; after all, higher oil prices stimulate further production from increasingly difficult to reach places like the sea floor or difficult to extract sources like oil shale.
However, there is a cost for these increases, the IMF study finds: “small further increases in world oil production comes at the expense of a near doubling, permanently, of real oil prices over the coming decade.” (emphasis added).
Hamilton concludes:
We like to think that the reason we enjoy our high standards of living is because we have been so clever at figuring out how to use the world’s available resources. But we should not dismiss the possibility that there may also have been a nontrivial contribution of simply having been quite lucky to have found an incredibly valuable raw material that for a century and a half or so was relatively easy to obtain. Optimists may expect the next century and a half to look like the last. Benes and coauthors are suggesting that instead we should perhaps expect the next decade to look like the last.
Signs of Hubbert’s Peak?
U.S. Energy Information Administration forecasts of oil production have been revised downward for more than a decade
Brent Wilkes Is Unjailable
This week, a federal judge ordered Cunningham briber Brent “The Enigma” Wilkes to go to jail, but once again Wilkes remains a free man while he appeals his case.
At this point, it’s a pretty safe bet that Randy “Duke” Cunningham, sentenced to more than eight years in prison, will be released from prison later this year to begin his new life in a cabin in the Ozarks before Wilkes really has to make sure he never, ever drops the soap in the prison shower.
Judge Larry Burns sentenced Wilkes to 12 years in prison back in February 2008. He served a few months and then the 9th Circuit Court of Appeals freed him on bail so he go off and play poker and steal from his employee pension funds to pay his living expenses.
Enough is enough, prosecutors said. But for those who now how to manipulate it, the justice system serves to delay and mitigate punishment rather than deal it out.
So it’s become a sad, familiar pattern for Brent-o:
He gamed the system as a defense contractor sucking on the taxpayer’s teat and flying around in private jets with the help of Randy “Duke” Cunningham, a congressman he corrupted with hookers, lavish vacations, and Hawaii scuba trips.
Today, a team of court-appointed (read: taxpayer funded) team of attorneys are delaying his day of reckoning, essentially buying Wilkes freedom with money lifted from the pockets of his victims.
It’s really just another form of welfare, but Wilkes is the worst kind of welfare bitch: a man who espoused a Republican ideology that sneered at big government and “socialism” and wrapped itself red, white and blue fantasies of a country that no longer exists, if it ever did, where the playing field was level, the rules were fair and hard work and determination won the day.
Study Confirms Ray Lucia is Selling Snake Oil
Investment News reports on a study that finds that the non-tradeable REITs that Ray Lucia is so fond of have consistently underperformed the broad market of real estate investing for the past two decades.
Interestingly, the study notes that the industry is seeing more and more independent broker-dealers like the Lucias out there, raising money for these stinkers.
The reason why these non-tradeable REITs are such dogs will be familiar to readers of this blog: the high fees.
The fees on nontraded REITs, which can be as high as 12% to 15%, are particularly egregious, one industry executive said. “An investor gives $100,000 to a program, and he’s immediately at $85,000,” said Wes Tellie, director of operational risk due diligence and independent broker-dealer due diligence with Duff & Phelps Corp. “That’s a hell of a hurdle rate.”
The nontraded REIT industry had some $84 billion in assets under management at the end of 2011.
Remember, that just because everyone else is doing it doesn’t make it a reasonable investment. Valuations of non-tradeable REITs, the article concludes, are “at a point of comedy.”
I’m going to make some popcorn, sit back and enjoy watching the silver-tongued “guru” explain his way out of this one.
US: Brent Wilkes Is Still a Douchebag
In my last post on Cunningham briber Brent Wilkes, I noted that he has been playing poker and farting around while his team of court-appointed attorneys fights to keep him from serving a 12-year sentence for plying Duke with hookers, lavish trips to Hawaii in exchange for defense contracts.
In court papers filed ahead of a hearing granted by the 9th Circuit Court of Appeals, prosecutors say Wilkes has been doing more than that: Wilkes has been committing crimes by stealing more than $100,000 from the pension fund of his now defunct company to pay his living expenses.
Since Wilkes’s release from custody on January 5, 2009, Wilkes has engaged in additional fraudulent conduct: just as he once raided his children’s college funds to obtain operating cash, he has unabashedly raided the Wilkes’s Corporation’s employee benefit plan to obtain spending money for himself – while failing to reimburse the public for his taxpayer-funded attorneys.
Update: After a day-long hearing, Judge Larry Burns decided that Wilkes has to go to jail on Friday unless the 9th Circuit Court of Appeals saves his ass again. (U-T San Diego)
Narco-Grenades: Made in the USA
Via Wikileaks:
March 3, 2009 Consulate Monterrey
S E C R E T
SUBJECT: MEXICO: TRACKING NARCO-GRENADES CLASSIFIED
1. (SBU) During recent months Mexican narco-traffickers have directed a series of grenade attacks directed against, inter alia, Mexican law enforcement and military facilities, civilian crowds, and U.S. consular installations. The escalation in the strength and power of the weapons used by the narco-traffickers has not only cost lives, but has taken its toll in terms of the damage done to local civil society.
2. (S) AmConsulate General Monterrey’s ATF Office, the ATF Explosives Technology Branch, and AmEmbassy Mexico DAO have been working with Mexican law enforcement authorities to identify the origin of various grenades and other explosive devices recovered locally over the past few months, including the unexploded M26A2 fragmentation grenade hurled at the Consulate itself during the October 11, 2008 attack. Other ordnance recovered includes 21 grenades recovered by Mexican law enforcement on October 16, 2008 after a raid at a narco-warehouse in Guadalupe (a working class suburb of Monterrey), and twenty-five 40mm explosive projectiles, a U.S. M203 40mm grenade launcher, and three South Korean K400 fragmentation grenades recovered the same day in an abandoned armored vehicle that suspected narco-traffickers used to escape apprehension.
3. (S/NF) Local Mexican law enforcement has recovered a Grenade spoon and pull ring from an exploded hand grenade used in a January 6, 2009 attack on Televisa Monterrey, a Monterrey television station. Based upon ATF examination, it appears that the grenade used in the attack on the Consulate has the same lot number, and is of similar design and style, as the three of the grenades found at the narco-warehouse in Guadalupe. On January 7, 2009, the Mexican Army recovered 14 M-67 fragmentation grenades and 1 K400 fragmentation grenade in Durango City, Durango. Finally and perhaps most disturbing, on January 31, 2009 three men tossed a K-75 grenade into a night club near Pharr, Texas — an East Texas border town –but the grenade did not explode. The attackers may have been targeting three off-duty police officers who were in the club at the time.
4. (S) The lot numbers of some of the grenades recovered, including the grenade used in the attack on Televisa, indicate that previously ordnance with these same lot numbers may have been sold by the USG to the El Salvadoran military in the early 1990s via the Foreign Military Sales program. We would like to thank AmEmbassy San Salvador for its ongoing efforts to query the Government of El Salvador as whether any of its stocks of grenades and other munitions have been diverted or are otherwise unaccounted for.
1st Annual Conference of Screwed Ray Lucia Investors
I’ve recently been contacted by a few disgruntled Ray Lucia investors who found their way to my website and asked for my help. Short of recommending they file complaints the U.S. Securities and Exchange Commission and FINRA, there was little I could do.
However, since I’m one of the few people writing about Lucia, I’ve become a sort of clearing house for these people. One investor who recently contacted me on behalf of her 75-year-old father wants to organize a meeting and speak to others in the same situation. This person was able to get dad out of one of the non-tradeable REITs that Ray Lucia (senior, not junior) stuck him in and is willing to share with others how to do it themselves.
So, if you’re interested, let me know and I’ll pass along the details.
Brent Wilkes, enough is enough
Brent "The Enigma" Wilkes
Defense contractor Brent “the Enigma” Wilkes was convicted in 2007 and sentenced to 12 years in prison for bribing former Rep. Randy “Duke” Cunningham with hookers, lavish vacations and the like, but his court-appointed lawyers have done a phenomenal job of keeping the guy out of prison so he can play poker and fart around.
He’s due for a hearing in a few days and the government calls his bluff in this footnote to a motion:
The government tips its hat to defense counsel who have adopted clever stratagems designed to prolong Wilkes’ day of reckoning almost five years since his 2007 conviction. Nevertheless, this latest attempt to prolong and confuse what should be a rather simple conclusion to this lengthy end-game should not be countenanced by this Court. Enough is enough.
Who is Christopher Rusch?
Christopher Rusch
On his website, former San Diego attorney Christopher Rusch offers help to those who find themselves accused of tax evasion crimes by the U.S. government. “A criminal tax investigation is different than an audit,” Mr. Rusch writes. “In an audit, the IRS is attempting to collect money from you. In a criminal tax investigation, the government is preparing a case so they can can PROSECUTE you and put you in JAIL.”
These days, Rusch himself is the one federal prosecutors are trying to put in jail. Rusch and two of his clients, Stephen M. Kerr and Michael Quiel, are being prosecuted in Phoenix, Arizona in a scheme to hide millions of dollars in assets from U.S. tax authorities, including a Colorado golf course purchased with offshore funds. Rusch, 41, was arrested in January in Miami after he was kicked out of Panama at the request of the United States.
The University of San Diego School of Law graduate may not be making headlines in San Diego, but Rusch is getting a lot of attention from the Swiss banking community. Rusch is accused of maintaining secret offshore accounts at a bank identified in the indictment only as “Swiss Bank A” — revealed earlier this month to be one of Switzerland’s largest private banks, Pictet & Cie.
Pictet & Ciet, which is in the process of trying to get its North American business up and running, swiftly issued a statement saying the U.S. government had not accused it of wrongdoing.
According to these court documents, Rusch charged his clients $45,000 for what he described as “international business planning, to include international joint ventures in Europe and general corporate services.”
The indictment lays out in detail how the money got transferred to Switzerland and back tax-free through Swiss banks, Panamanian banks and Rusch’s own Interest on Lawyers Trust Account. Wikipedia defines these accounts as “a method of raising money for charitable purposes, primarily the provision of civil legal services to poor persons, through the use of interest earned on certain lawyer trust accounts.
About $2 million of this repatriated money was used to buy the Colorado National Golf Course in Erie, Colorado, the home course for CU Boulder’s men’s and women’s golf teams.
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Randy Duke Cunningham: I plan to live in a cabin in the Ozarks, hunt and write books
Yes it’s true: Randy “Duke” Cunningham has written another sad, revealing jailhouse letter to the judge who sentenced him to 100 months in federal prison for low behavior in high office.
The Vietnam war hero and disgraced ex-Congressman, who is now 70, writes that he’s set to leave prison as his sentence comes to an end later this year. He says he plans to live in a cabin near Greer’s Lake in the Ozarks and write books. He will be “away from the (San Diego) Union-Tribune,” the newspaper that exposed his corruption in 2005, and there won’t be many people around to bother him, “but they do have a lot of black bears, cougars, and history of rabies.”
In his letter, Cunningham is at turns whining, boastful and self-pitying as he asks Judge Burns to restore his second amendment rights. “I flew aircraft that could disintegrate your building with a half-second burst and now can’t carry a .22-cal,” he writes.
The Duke says he needs a gun “to earn a little money so he can eat.” He’s poor now and homeless — thanks to the government, he writes. “Don’t guess we can do to (sic) much for our veterans after all,” Cunningham whines.
He says he will use the gun for hunting and competition and then adds in a handwritten postscript, “I will also hunt to supliment (sic) my food.”
To this mess of a letter, this mess of a man, Judge Burns’ response is understated elegance. Burns says he has no authority to restore Duke’s gun rights; that authority with the Bureau of Alcohol, Tobacco and Firearms:
You should be aware, however, that every year since 1992, Congress has refused to provide funding to the ATF to review applications from the federal firearm ban. And the United States Supreme Court has ruled that inaction by the ATF does not amount to “denial” of the application within the meaning of section 925(c) United States v. Bean 537 US 71, 75 (2002). So unless Congress changes course and decides to fund ATF’s review of applications for relief, it appears you are stuck.
Duke’s letter:
Randy "Duke" Cunningham May 16 letter to judge// < 
Not Having a Good Day
CalPERS tried to forestall this airing of its dirty laundry, but a federal judge blocked the pension’s request to stop the deposition from taking place.
Villalobos was paid more than $47 million in commissions by private equity and real estate investment managers to help them win CalPERS contracts to manage about $4.8 billion worth of the fund’s securities from 2005 to 2009, according to a lawsuit filed by the California Attorney General’s office.
One of those private equity firms was Aurora Capital Group of Los Angeles, which hired Villalobos in 2008. Parsky is Aurora’s chairman. He’s also a former assistant Treasury secretary, a UC regent and was George W. Bush’s major doom in California.
So politically connected is Parsky that ARVCO allegedly intervened with CalPERS staff to obtain investment money for Aurora, pointing out the political juice that Parsky brought with him, according to an independent law firm investigation of the matter. CalPERS coughed up $400 million for Aurora Resurgence in 2008, earning Villalobos and his firm, ARVCO, a $4 million fee. Another $150 million CalPERS investment in a different Aurora fund, netted nearly $2 million for ARVCO.
Today, Parsky is being deposed in Los Angeles. Tomorrow, Aurora’s general counsel, Timothy Hart, will get his turn.
The Ben Stein-Ray Lucia Mutual Admiration Society
Actor and corporate pitchman Ben Stein charges more than $50,000 for a single speech, according to his page at the Keppler Speakers Bureau.
If that’s the case, I would love to know how much he charges Ray “Buckets of Money” Lucia for making numerous appearances each year at Lucia’s free seminars and lauding him in The New York Times as a “guru.”
Let’s face it: it’s Stein, not Lucia, who is the big draw at the seminars. Stein has made a career out of being a bow-tied smartypants ever since he famously played a dull economics teacher in the movie Ferris Bueller’s Day Off. He even sued over his signature look in this lawsuit in which he describes himself as “the most famous economics teacher in the world.” In the public’s mind, Ben Stein is what an economist looks like.
The public doesn’t know or care that Stein is a securities lawyer by trade whose credentials as an economist amount to a famous economist for a father and a bachelor’s degree in economics. Never mind that to the folks I know in the finance world think Lucia and his buckets are a joke. Never mind that anyone at Goldman Sachs who starts blabbing about buckets of money will be shot at dawn.
I doubt that Stein truly believes that the “genius” of Ray Lucia is his bucket strategy. His genius such as it is lies in his salesmanship. Lucia understands that regular people don’t want to read financial reports and SEC filings. They want to see a man who plays an economist on TV. They want to hear jokes get some free advice about what to do with their retirement nest eggs. They want a show.
So they come for a show and they leave with a new money manager, Lucia’s son, Ray Jr. It will take a while before these unsuspecting investors realize that Lucia Jr. has drilled holes in their buckets with his company’s high fees and questionable investments such as non-tradeable REITs that earn Lucia huge commissions.
Stein provides his pal Lucia an additional, equally valuable service — repeatedly dropping Lucia’s name in his business columns in The New York Times and elsewhere. Stein’s shilling got him canned from the Times, so now he name drops Lucia in his American Spectator diary.
Stein will say almost anything if you pay him. He served as an expert witness for lawyers at Milberg Weiss until the firm went down under federal indictment for bribery and fraud. He has pitched Comcast, eye drops, cars, office equipment. So it’s no surprise that Stein praises Lucia as a “guru” or a “genius” in the same breath as Warren Buffet.
But this is a particularly insidious form of advertising. If you repeat something enough times, goes the old saw, it becomes truth. Especially when you can repeat it in The New York Times.
I happened to be sitting at Morton’s restaurant in Beverly Hills a few days ago with Mr. [Phil] DeMuth and with another financial adviser for whom I have high esteem, Raymond J. Lucia (for whom – full disclosure – I am about to give a speech or two urging people to save for retirement).
Ray and Phil said something like this to me: “You know there are not a lot of shows on TV that actually teach the viewer how to be a better investor. There is a lot of stock picking and predicting what can’t be predicted, but there is not a lot that tells the ordinary Joe or Jane how to save for retirement.”
Ray and Phil were right. And they will keep being right.
~ The New York Times, Feb. 27, 2005
I was recently on a panel with the stock guru Ray Lucia, who offered overwhelming data about how impossible it was to pick stocks, trade in and out of them and fare as well as the market. His data was terrifying.
~ The New York Times, Oct. 14, 2007
I checked with my investment gurus, Phil DeMuth, Raymond J. Lucia and Kevin Hanley. None of us could see how Mr. Madoff could do what his friends said he could do.
~ The New York Times, Dec. 26, 2008
I am to give a speech at a huge gathering hosted by my pal Ray Lucia. It is about investing. He has an immense crowd of well over 1,000 people today and my job is not really to sell them anything, but to give them a general overview of the economy.
~The American Spectator, May 2010.
Now, to pack and prepare to go see my pal Ray Lucia. Ray is simply the best wealth manager I know of. He knows more about personal finance than any other person I have ever met. His advice — lots of liquidity and very wide diversification — is so sensible it has saved me from suicide many a night. This guy is a lifesaver where managing money is concerned. We are colleagues, so I am not disinterested, but even before we were colleagues, I was learning from him and being guided by him.
~The American Spectator, June 1, 2010.
I have done the best I can, with the help of some true geniuses of finance like Phil DeMuth, Chris DeMuth, Ray Lucia, Anil Vazirani, J.W. Roth and, supreme above all of them, John Bogle and Warren Buffett, to invest wisely.
~The American Spectator, Aug. 12, 2011
Ray Lucia Is Wrong on REITs
Ray Lucia speaking at Sean Hannity’s Freedom Concert in San Diego. Photo by Andi Hazelwood.
For more visit: A Professional’s View of Ray Lucia’s Non-Trade REITs
In 2010, radio talk show host Ray “Buckets of Money” Lucia threatened to sue me for $300,000 for defamation over a blog post on this website. My post pointed out Lucia’s relationship to a securities firm that paid $2 million to settle U.S. Securities and Exchange Commission charges.
Nothing ever came of the threats and, coincidentally, (or not?), Lucia shortly thereafter told the SEC that he would no longer register with them as investment adviser. Lucia still hosts his radio show and rounds up new clients at his free seminars with actor Ben Stein.
I was content to leave things alone until last week when I heard from a client of Lucia’s son, Ray Jr., who now runs the investment business started by his illustrious father.
This person, whom I’ll call Joe, is, runs a small home repair based business and is approaching retirement age. Joe attended one of Lucia Sr.’s “Buckets of Money” seminars 18 months ago and entrusted his money to Lucia Jr. He wishes he had read this blog beforehand.
Today, they are illiquid. About $80,000 of Joe’s money — 30 percent of his net worth — is locked away in real estate investment trusts (REITs) that aren’t traded on any exchange and therefore can’t be sold for years.
Joe’s wife is ill and may need to take early retirement, which leaves Joe wondering how he’s going to pay the bills.
For some retirees, REITs can be a good investment. REITs are required to repay at least 90 percent of taxable income to investors or the forfeit their tax exempt status. So, they are sort of function like bonds but with much better rates, something like 6 percent.
So what’s the catch? The REITs Joe is invested are non-traded REITs. This is an investment that can’t be sold for years — at least not without taking a big loss. FINRA, the financial industry self-regulatory body, last year issued an investor alert warning about the dangers of these non-traded REITs.
Both Ray Lucia Sr. and Jr. are big believers in these non-traded REITs. What they don’t tell you is that it’s a great deal for the folks at RJL Wealth Management. Brokers love non-traded REITs for the whopping commission a sale generates, which can range between 10 percent and 15 percent (!). If you really feel that you need a REIT in your portfolio, then buy a publicly traded one on Charles Schwab or some other online broker where the commissions run $8.95.
Joe never found out what the commissions were on his non-traded REITs including Behringer Harvard Multifamily I, which for years has combined high fees with poor performance. (For more, see reitwrecks.com’s Non-Traded REIT Forum.)
But that’s not all! For getting Joe in this predicament, RJL Wealth Management, Lucia Jr.’s company, collects a 1.9 percent fee — more salt on the wound. Buyer beware.
Brent "The Enigma" Wilkes Continues to Drain Taxpayers
Another Winning Hand for "The Enigma"
It’s been a long time since we heard from Brent “The Enigma” Wilkes. But the Enigma is back, baby!
Last week, the 9th U.S. Circuit Court of Appeals granted Wilkes a new hearing in his case in San Diego federal court.
Wilkes, you may recall, was the sleazy defense contractor at the center of the Randy “Duke” Cunningham bribery trial. Cunningham steered defense contracts to Wilkes, who used the money to live high on the hog. He was poker buddies with Kyle “Dusty” Foggo, once the No. 3 guy at the CIA.
In 2008, Wilkes was convicted of bribing Cunningham with prostitutes and other goodies and sentenced to 12 years prison. By all rights, he should be there. But Wilkes, the master manipulator, continues to game the system.
The 9th Circuit allowed Wilkes to go free on bond pending his appeal. While Cunningham, Foggo and others do time, Wilkes runs around playing poker at San Diego casinos (where he goes by the nickname “The Enigma”). Meanwhile, his taxpayer-funded attorneys bombard federal prosecutors with reams of paper on his behalf. What a fucking waste.
Now it looks like the legal maneuvering by Team Enigma will drag into a fourth year. Your taxpayer dollars bought Wilkes more time because The Enigma’s lawyers argued successfully that the judge presided over Wilkes jury trial failed to read the minds of the judges 9th Circuit Court of Appeals.
The trial judge, Larry Burns, declined to grant immunity to one of the government’s witnesses that Wilkes wanted to call for his defense. According to the 9th Circuit, this was a no-no because Burns failed to apply the 9th Circuit’s holding in a separate, unrelated case that was decided after Burns made his ruling. Wow. Just wow.
All of Wilkes other arguments were brushed aside, including one that I found particularly interesting: Why was Cunningham never called to testify. According to prosecutors, “one of the reasons the Government did not call Cunningham at trial was because prosecutors did not trust him to refrain from fabricating testimony that he believed would help the prosecution (and thus enhance his chances for a reduced sentence).”
Awlaki FBI FOIA Request
October 4, 2011
David M. Hardy
Section Chief, Record/Information Dissemination Section
Federal Bureau of Investigation
Attn: FOI/PA Request
170 Marcel Drive
Winchester, VA 22602-4843
Dear Mr. Hardy:
This letter constitutes a request (“Request”) pursuant to the Freedom of Information Act, 5 U.S.C. subsection 552.
I am requesting a copy of all records or information concerning ANWAR AL-AWLAKI (aka Anwar al-Aulaqi).
Mr. Awlaki was born in 1971 in Albuquerque, New Mexico. He was killed in Yemen on Sept. 30, 2011, according to a statement President Barack Obama made the same day. I trust the attached statement of the president will serve as the proof of death you require for this request.
Awlaki was a leader in al Qaida in the Arabian Peninsula (AQAP) and was one of the most wanted terrorists in the world. He was the subject of numerous investigations by the FBI for more than a decade.
If you deny all or any part of this request, please cite each specific exemption you think justifies your refusal to release the information and notify me of appeal procedures available under the law. I expect you to release all segregable portions of otherwise exempt material.
I look forward to your reply to this Request within twenty (20) business days as required by 5 U.S.C. 552(a)(6)(A)(i).
Thank you for your assistance.
Sincerely,
Seth Hettena
Anwar al-Awlaki's Death
The US is announcing the death of Anwar al-Awlaki, a U.S. citizen who moved to Yemen where he waged jihad against his former homeland. Assuming this is true — and not a repeat of what happened in 2009 when Awlaki was falsely reported as dead — it’s a major blow against one of al Qaida’s superstars.
What made Awlaki so dangerous wasn’t his so-called operational abilities, as the U.S. is now claiming, although no one is actually bothering to ask what that means. Awlaki was an intellectual, not a fighter. What made Awlaki so dangerous was his somewhat unique ability to inspire disaffected Muslims in the West to take up arms in the cause of jihad.
Awlaki may have rejected the West, but he knew how it worked. He spent many years here in San Diego and spoke both Arabic and English beautifully. Recordings of his sermons are very popular. He also knew how to use the Internet to reach people. I don’t think it’s a coincidence that U.S. counterterrorism officials started linking him to terrorism in the very same month that Awlaki started his now-defunct jihadist website.
What I always found fascinating about this so-called holy man got busted for prostitution twice in San Diego and was picked up by San Diego police for “hanging around a school.” Maybe that’s why he needed his martyrdom, so he could wash his sins away. (I’ve written about him before here. I also put together a comprehensive timeline.)
I won’t be shedding any tears for a man who plotted to kill Americans and praised the Fort Hood shooter Nidal Hasan as a “hero.” But Awlaki wasn’t Osama bin Laden. He wasn’t an Iraqi insurgent or a Taliban trying to kill U.S. troops. Awlaki a U.S. citizen.
He knew his death would point out the hypocrisy of a country with a constitution that guarantees its citizens due process of law and then goes out and assassinates them in Yemen with a drone strike. He knew we would succumb to our fears.
Like it or not, he was one of our own.
Reader haunted by encounter with man who attended San Diego mosque
I received this striking comment today from a reader who commented on my 2009 post on the San Diego connections to the Fort Hood shooting. I am reposting it here so hopefully more people will read it. He’s not sure whether the mosque he is referring to is the Rabat mosque in San Diego, where Anwar Aulaqi preached in the 1990s:
I am haunted by an encounter I had in 1996 with a man who attended that San Diego mosque. I was working at a military inpatient psychiatric hospital and the man was a patient of ours. He was with us long term because he was awaiting discharge from the military. There was not much notable about the patient until he started getting passes that allowed him to leave the hospital on weekends and certain evenings during the week. He did not have an Arabic name nor was he Arab, but at some point he began attending the mosque. Almost immediately there was a drastic change in he personality. He was constantly angry and confrontational. Our patients were not allowed in their rooms during the day (for their own safety.) We kept finding him in his room praying and kept having to re-direct him out onto the day area to do his prayers. (I couldn’t care less that he was praying, but we had to enforce the rules on everyone irregardless. This was a locked down, very acute care inpatient psychiatric unit that received patients via MEDI-VAC from all over the world) One day I had to go coax him out of the room again cause he had sneaked in there to pray. He instantly became confrontational, but it then took an unexpected turn. He began confronting me about being a Christian. (I didn’t tell him anything about my religious beliefs. He just assumed I was Christian.) Then he began yelling at me that one day I’ll have to stand in front of Allah for judgment and that he will be standing there with me laughing at me. He said something about Jesus being a fool and carried on about how he hates Christian’s & Jew’s and they will all burn in hell. I finally cut him off while laughing at him and I told him to get out of his room now I’ll he was going to have to spend some time in our isolation room. He stopped yelling and walked out into the day room to continue his prayers. I acted as though I had laughed it off, but truthfully it shook me up inside. I was not intimidated by him physically. I towered over this little man. I’m 6’4″ and weighed 250 pounds at the time. I had never seen anyone truly look at me with such hatred that there was murder in his eyes. I know if he had a weapon in his hand at the time, he would have used it. Knowing now what kind of people were coming and going from that mosque, my haunted, shook up feeling I experienced was justified.
Mark Fabiani, foreign agent
викгеоложки проучваниякухненско обзавеждане
Mark Fabiani
San Diego still isn’t quite sure what to make of the former Clinton White House lawyer and Gore’s deputy camapaign manager in 2000. He’s a creature that is rarely sighted in these parts: a real flesh-and-blood D.C. operator.
Fabiani is perhaps best known in San Diego as special counsel to the NFL’s San Diego Chargers. He’s also serving as media point person for seven-time Tour de France winner Lance Armstrong, the subject of a federal grand jury investigation into the cyclist’s alleged use of performance-enhancing drugs. Also on the Fabiani client list is the estranged wife of Dodgers owner Frank McCourt, Goldman Sachs the Alliance of Motion Picture and Television Producers in the midst of a costly Writers Guild strike.
The mere fact that Fabiani is representing someone often qualifies as news. But to me, the most of interesting of his clients, is one which is never publicly acknowledged: Sheikh Khalid bin Saqr al Qasimi.
According to this June 2009 filing with the US Justice Department, Fabiani and his business partner, Christopher Lehane, another Clinton White House veteran, are being paid $8,333 a month to represent the interests of Qasimi on a “part-time” basis.
Fabiani is part of Qasimi’s effort to return to power in Ras Al Khaimah, part of the United Arab Emirates. The 67-year-old sheikh was deposed in 2003 after 45 years as part of the emirate’s leadership, claims he is rightful heir to the throne.
Fabiani and Lehane’s work for Qasimi includes communicating with U.S. government officials, U.S. business leaders, providing logistical and operational support for Qasimi’s U.S. visits and developing new relationships with think tanks and and U.S. non-profit organizations.
Both men are working for Qasimi as subcontractors to California Strategies LLC. Documents obtained by Der Spiegel show that Qasimi paid California Strategies at least $3.7 million.
I’m not saying there’s anything nefarious about this. There are plenty of lawyers doing this kind of work back in DC. In San Diego, Fabiani is the big fish in the much smaller pond.
CalPERS fires Pacific Corporate Group
The Sacramento Bee’s Dale Kalser:
CalPERS today severed its ties with Pacific Corporate Group, a longstanding investment advisor that had close ties to the man accused of bribing CalPERS officials.
The big pension fund said Pacific Corporate Group, based in La Jolla, would no longer manage more than $1 billion worth of money for the California Public Employees’ Retirement System. Pacific Corporate Group has been working for CalPERS since 1990.
Pacific Corporate is being replaced by two firms, Aviva Capital LLC and Capital Dynamics.
Earlier this year, Pacific Corporate lost its job advising CalPERS on investments proposed by others. But until today the La Jolla firm was still managing several CalPERS portfolios, including one dedicated to clean-tech.
The pension fund wouldn’t explain its decision to fire Pacific Corporate. But the firm had close ties to Alfred Villalobos, the Nevada businessman accused in a lawsuit of bribing three former CalPERS officials in an effort to steer investments to his clients.
CalPERS is saying goodbye to PCG’s founder, Christopher Bower, but the giant California pension fund is sticking with PCG Corporate Partners, now known as KMCP Advisors, which was headed by Timothy Kelleher and Douglas Meltzer and ran private equity funds for PCG. Kelleher and Meltzer recently sued their boss, Christopher Bower, for withholding more than $2 million in pay:
Did an LA money man give up ex-NY Comptroller Alan Hevesi?
Broidy and Bibi
Broidy, former chairman of Markstone Capital Group, pleaded guilty in December to a felony and admitted showering officials at the New York state pension fund with nearly $1 million in exchange for a $250 million investment in Markstone. As part of his plea, Broidy agreed to cooperate with investigators with the New York State attorney general’s office.
The news today is that Alan Hevesi, the New York comptroller who oversaw the pension fund, reportedly intends to plead guilty apparently for taking Broidy’s “gifts.” Broidy paid $75,000 to send Hevesi and his relatives on five trips to Israel, including first-class airfare, luxury hotel accommodations and a security detail, according to several reports.
According to the Wall Street Journal:
A person familiar with the matter at the time said Mr. Hevesi had long expressed a desire to stay at the historic King David hotel, which overlooks Jerusalem’s Old City. Mr. Broidy paid for a stay there, this person said.
Readers of this blog might note how similar this is to the $63,000 trip CalPERS investment officer Leon Shahinian made to New York in 2007. Shahinian’s private jet and his lavish hotel suite were paid for by billionaire Leon Black. At the time, Black and his agent, Al Villalobos, CalPERS was considering investing $700 million Black’s Apollo Global Management. Guess Jerry Brown isn’t as determined to root out pension corruption as Cuomo.
But I digress.
Broidy used his New York connections to leverage an investment in CalPERS. At the time of Broidy’s guilty plea, the LA Times reported that:
In 2003, Broidy mounted a major selling effort to get CalPERS to invest in his firm, according to documents released by CalPERS that report meetings between investment pitchmen and board members. Letters from Broidy to board members indicate that Markstone sought to leverage the New York investment into business with CalPERS, which eventually agreed to invest $50 million in Markstone.
Broidy even brought New York state Comptroller Alan Hevesi with him to a meeting in Sacramento with CalPERS staff to pitch Markstone in 2003. One of those meetings was with then-state Treasurer and CalPERS board member Phil Angelides. Broidy offered to bring Angelides and other California officials to Israel to see its economic strength.
Broidy also cultivated another influential ally at CalPERS, then-state Controller Steve Westly, who also was on the CalPERS board. Broidy had met privately with Westly at least half a dozen times by October 2004, according to Westly’s desk calendar. One of those meetings was at Broidy’s office in Tel Aviv.
Broidy once hosted fundraisers for President Bush and other lavish parties in his Bel Air manse. Bush appointed him to the Kennedy Center’s board and U.S. Homeland Security Advisory Council. He was a trustee of the Los Angeles Fire and Police Pension fund from 2002 until he resigned in May 2009.
He also has ties to San Diego, serving in the 1980s as a money manager for Glen Bell, the late Taco Bell founder and Rancho Santa Fe resident. That a relationship that ended acrimoniously, with Bell accusing Broidy in court papers of cheating him while he suffered from Parkinson’s disease.
Not Funny, Your Honor
A San Diego judge has been charged with willful misconduct for allegedly videotaping courtroom proceedings to promote herself for a role on a TV show starring a judge.
The Commission on Judicial Performance cited dozens of remarks Judge DeAnn Salcido made, both on film and off, that suggest she was channeling an off-color Judge Judy.
According to the CJP, Salcido had her bailiff’s husband videotape her on the bench presiding over various matters for about an hour back in 2009.
The notice of formal proceedings against her cites an e-mail message from the judge to an entertainment lawyer saying she had been “setting my more interesting defendants and those with substance abuse issues” for a certain day she suggested would be best for filming. …
Salcido repeatedly got participation from her courtroom audience — once having them say “woo woo woo” after accusing a defendant of being high on marijuana.
When one woman admitted to an alcohol and drug use problem, specifically a penchant for vodka, the judge got laughs from the gallery by referencing the Jamie Foxx song by saying, “Blame it on the a-a-a-a-alcohol.”
She told another defendant “they might like your smile in jail,” and on another occasion, told a man she placed on probation: “What that means is don’t come before the court on another case … ’cause you will definitely be screwed and we don’t offer Vaseline for that.” …
RICO lawsuit filed in SD over NY pension corruption
Pacific Corporate Group of La Jolla, the long-time adviser to CalPERS and other big U.S. pension funds, is accusing one of its former employees “racketeering, illegal kickbacks, betrayal and deceit” for his role in a corruption scandal at the New York State Common Retirement Fund.
PCG and its former officer, Stephen J. Moseley, have locked horns in San Diego County Superior Court, trading charges and counter-charges in an unusually public spat in the staid world of pension management. I’ve posted the documents here.
Moseley fired the first shot by suing his former employer for refusing to pay the amounts he claims he is owed as a former officer. In his complaint, Moseley and his attorneys at Gordon & Rees accuse PCG and its founder, Christopher Bower, of misleading clients:
Defendants, through Christopher Bower, have engaged in a systematic scheme of hiding and concealing material facts from clients regarding investment opportunities which were sponsored by PCG. Once discovered, Defendants’ conduct contributed to the subsequent resignations of all partners in PCG Asset Management, including Plaintiff. In addition, Defendants, through Bower, have made a practice of misleading key PCG clients regarding staff size and turnover of PCG personnel, all in an effort to influence investment decisions in favor of PCG. Moreover, Defendants, through Bower, have fraudulently concealed Bowers’ interactions and relationships with various placement agents and intermediaries; fraudulently concealed Bowers’ interactions and relationships with current and former CalPERS board members including Alfred J. Villalobos; and denied and/or concealed the existence of material conflicts of interest. Defendants, through Bower, have used such acts to influence investment valuations and investment decisions, in order to advance the personal interests of Bower and certain unregistered placement agents in contravention of PCG’s fiduciary obligations.
PCG responded a few months later with guns blazing. It was Moseley, PCG says, who misled his employer by secretly paying kickbacks to officials at the New York state pension fund as a reward for in exchange for participating in a joint venture seeded in 2006 with $750 million from the New York State Common Retirement Fund. Moseley resigned shortly before the money was committed.
PCG last year settled with New York Attorney General Andrew Cuomo by forfeiting $2 million in fees that it earned from the New York state pension fund. The La Jolla money management firm says it settled because it can be held liable for an employee’s actions even if it was unaware of them.
Moseley’s allegations, PCG says, are the most recent example of a competitor seeking to do it harm by making false and defamatory allegations. According to PCG’s lawsuit, Moseley’s greed was the real reason he left the firm and if anything, he has been overpaid. Moseley threatened his former employer with “adverse publicity and injury to its reputation” if he wasn’t paid what he says he was owed.
PCG and its law firm, Sullivan, Hill, Lewin, Rez & Engel, filed its counter-claim under the Racketeering and Corrupt Organizations statute. The RICO statute carries the threat of treble damages, punitive damages and the right to recover attorney fees and litigation costs. Very few of these cases ever make it to trial because of the tremendous sums that are at stake for both sides.
Moseley’s conduct resulted in “tens of millions of dollars in damages,” and those damages would potentially be trebled under the RICO statute. In addition, PCG says it will seek punitive damages and attorney fees from Moseley.
You can decide for yourself by reading Moseley’s first amended complaint and PCG’s counterclaim:
A Good Dose of Schadenfreude
Subject: PCG / CalPERS
From: A Reader
To: seth@sethhettena.com
Just wanted to say keep up the good work. Not sure how many people are picking up on the coverage but it is good for a dose of schadenfreude for those of us that have dealt with these people.
The anonymous email saying you are on to more than you realize was not exaggerating. This behavior has gone on for years at PERS before Leon as well as plenty of other pension plans and their consultants.
Pacific Corporate Group Disclosure Letter to CalPERS
Cleaning House, CalPERS Dumps Pacific Corporate Group as Advisor
Dale Kasler reports in Sunday’s Sacramento Bee that CalPERS is “rethinking” its ties to Pacific Corporate Group of La Jolla, which screened private equity deals for the pension fund for the past 20 years.
For 20 years, when CalPERS needed advice on a big investment, it often called on Christopher Bower, founder and chief executive of a firm called Pacific Corporate Group.
Now this confidant from La Jolla might get pulled into the bribery scandal at the nation’s largest public pension fund.
Alfred Villalobos, the man at the heart of the scandal, worked on deals for Bower. And when CalPERS was thinking of firing Bower’s firm in early 2007, Villalobos – a former CalPERS board member – stepped in and negotiated a delicate agreement that saved the relationship.
Months later, Pacific Corporate advised CalPERS on two investments that earned Villalobos fees totaling $17 million.
Bower never hid his relationship with Villalobos. He sent CalPERS a letter about it before the investments with Villalobos’ clients were made. CalPERS concluded the arrangement was fine.
As of June 30, the firm no longer screens deals for CalPERS, ending a role it filled since 1990.
“Their contract expired and it was allowed to lapse,” said CalPERS spokesman Brad Pacheco.
Bower’s firm still directly manages about $1 billion of CalPERS’ money. But that’s being examined, too, as part of a larger review of CalPERS’ investment partners, said Joseph Dear, chief investment officer at the California Public Employees’ Retirement System.
Leon Shahinian's $63k Big Apple visit
“I believe you’re on to more than you realize.”
So reads an e-mail redirecting my attention to some of the CalPERS court documents I posted online last month.
My anonymous correspondent is a former advisor to the CalPERS board who points out some interesting details buried in the hotel bills from CalPERS senior investment official Leon Shahinian’s $63,000 trip to New York City in 2007.
California Attorney General Jerry Brown’s office has cited this trip as an example of the corrupt practices of Al Villalobos, a former CalPERS board member who went into business as a lobbyist for money managers seeking to do business with the giant California pension fund. One of Villalobos’ clients was Leon Black, the billionaire founder and controlling shareholder of Apollo Global Management.
In 2007, while Villalobos was trying to persuade CalPERS to purchase a 10 percent equity interest in Apollo Global Management for $700 million, Shahinian accepted Villalobos’ invitation to travel by private jet to New York City to attend a fund-raising event hosted by none other than Leon Black.
Apollo covered the $63,000 cost for Shahinian’s New York trip. The following month, Shahinian, who oversaw the CalPERS private equity portfolio, urged the pension board to approve the investment in Apollo, which it did.
When their private jet touched down in New York, Villalobos and Shahinian were met by a limousine arranged for by Aurora Capital, a private equity fund headed by Villalobos’ client, Gerry Parsky, a GOP heavyweight and Bush’s California majordomo.
The limousine ferried Shahinian and Villalobos to a ridiculously overpriced $7,000-a-night two-bedroom suite at the Mandarin Oriental hotel in New York.
Here’s what my sharp-eyed reader has called my attention to:
- The hotel bill shows that calls were placed from the $7000-a-night suite to the Dallas offices Unity Hunt Inc., the private investment firm of billionaire Lamar Hunt. These also were the offices of Barrett Wissman, a hedge fund manager, “classical music impresario” and friend of the Hunts and their fortune who pleaded guilty last year in a kickback scheme involving the New York state retirement fund.
- The Mandarin Oriental bill also shows that several calls were placed to the phone of another Villalobos client, Chris Bower at Pacific Corporate Group as well as a call to Bower’s staff. What’s troubling about this is that in 2007, CalPERS was relying on PCG to independently vet investments in Apollo and Aurora. Bower would go on to urge the CalPERS board to invest in Apollo the next month. Also in mid-2007, Bower and Villalobos were trying to get CalPERS to buy into Pacific Corporate Group.
- The day after meeting Black at the MOMA, a limousine (courtesy of Parsky) ferried Shahinian and Villalobos for lunch the next day to Dock’s Oyster Bar & Seafood Grill at 633 Third Ave. The location of this restaurant is worth noting, my source points out: It also happens to be in the lobby of the building housing the executive offices of New York State Comptroller who single-handedly oversaw the New York state retirement fund. The NY CRF has been a target of an ongoing pay-to-play investigation of former Comptroller Alan Hevesi.
In other words, the records of the Shahinian/Villalobos trip shows how the pension world truly operates:
- a) CalPERS staff were bribed with lavish, travel and perks paid for by the money managers seeking the pension’s money;
- b) CalPERS’ supposedly independent consultant, Pacific Corporate Group may have been pursuing its own self-interest instead of the pension’s; and
- c) if the links to Wissman/the Hunts and the New York pension fund are more than just coincidence, it places Shahinian or Villalobos in a corrupt nexus that extended from coast to coast.
Duke to Judge: "You can only push a man so far, your honor"
The gigantic ego that is former Rep. Randy “Duke” Cunningham has written an angry letter to his sentencing judge, complaining that the IRS is “killing” him and his family by seizing his remaining savings. Cunningham insists that as a highly decorated veteran, he deserves far better.
Writing from his minimum security Arizona prison, Cunningham tells Judge Larry Burns that he never would have pleaded guilty to taking bribes from a defense contractor and evading taxes in 2005 had he known the IRS — which he refers to at one point as the “KGB IRS” — would “renig” (sic) on the agreement and “keep me in poverty for the rest of my life.”
The IRS has taken everything I have worked for during my nearly 70 years. They have taken over or we have paid over 2.75 million dollars in assets, cash homes, cars, earnings and retirement. After 40 years teaching, my wife is living hand to mouth & staying in her 2-bedroom grandmother’s home. You can only push a man so far your honor. As one of the most highly decorated veterans in the history see note of this nation and a lifetime of service yes I made mistakes but that does not include killing me and my family.
Judge Burns responded to Cunningham in a letter dated Aug. 4, explaining that the money confiscated from Cunningham’s retirement and congressional pension was seized by the IRS to collect back taxes owed on the bribes he received in 2003 and 2004.
Duke’s defense attorney, K. Lee Blalack, had no comment.
The IRS found that Cunningham owed more than $1.13 million in back taxes, penalties and interest. The IRS is collecting this in 686 installments of $1,647 seized from Cunningham’s congressional and navy retirement benefits, his Social Security check, and his savings account, which contained $84,423.64.
Cunningham must also pay an additional $1.8 million in restitution to the IRS.
In the letter, Duke also accuses prosecutors in San Diego of lying over the reasons why he was never called to testify at the 2007 trial of defense contractor Brent Wilkes, who was convicted regardless of bribing Cunningham with cash, luxury travel and prostitutes. Wilkes is out on bond and playing poker while he appeals his 12-year sentence.
Duke’s missive to the judge follows his unsuccessful effort earlier this year to have his 100 month sentenced reduced for the “substantial assistance” he provided to the government. Defense lawyers say this assistance includes Duke’s willingness to phone to a co-conspirator, Thomas Kontogiannis, in calls that were recorded by the FBI and a willingness to testify at Wilkes’ trial.
In a July 28, 2008 letter to Blalack, U.S. Attorney Karen P. Hewitt acknowledged that Duke and his attorneys met repeatedly with federal authorities. Prosecutors say that they too did their best to extract substantial assistance from Cunningham. “Time and time again, however, he fell short of this goal,” prosecutors wrote.
Part of the problem was Cunningham’s inability to tell the truth without exaggerating, embellishing or minimizing his own conduct:
Moreover, Mr. Cunningham’s efforts were greatly tempered by the fact that many of our meetings with him were necessitated by his apparent retreat from the factual basis of his own plea agreement. See e.g., Letter to Wayne Winters, dated May 2, 2006, (“not all of what the press claimed was true or what I had to plead to — But [I] had to take the whole plea or nothing.”) At the opposite end of the spectrum, we were concerned that he would embellish facts if he thought doing so would improve his prospects for a sentencing reduction, as he did on at least one occasion…. In addition, his lack of candor before and after his plea (one example of which was the $50,000 in cash he left for his wife on the eve of his sentencing hearing) and the egregiousness of his crimes, presented the real risk that whichever side called him as a witness would be irreversibly tainted by such association. This may explain why Wilkes did not call him either, notwithstanding his counsel’s promise to do so.
Footnote:
Back to post This is yet another example of Cunningham’s well-known propensity to exaggerate his own accomplishments. He is NOT one of the most highly decorated veterans in U.S. history. He is not among the 3,446 recipients of the Medal of Honor, the highest award given for valor in combat. He received the Navy Cross, the second highest such honor.
Brent "The Enigma" Wilkes surfaces in attack ad
Free on bond, Brent “The Enigma” Wilkes is spending time at the poker table these days, but his scandalous past is featured in a new attack ad in Missouri’s Senate race.
Wilkes is referred to in the ad by Missouri Democrat Robin Carnahan he “defense contractor convicted of bribery” who provided private jet trips for her GOP opponent, Rep. Roy Blunt, the former House whip.
PoliticMo.com has the story here:
“One of the examples we touch on in the ad is the example of Brent Wilkes, the California defense contractor and lobbyist,” said Mindy Mazur, campaign manager for Robin Carnahan, in a conference call with journalists Wednesday. “Blunt – while he was there – helped whip the vote in favor of one of his companies.”
Mazur says, “Eight days later, Congressman Blunt received $14,000 from people associated with Brent Wilkes.”
While she says “he spent over 100,000 in legal fees related to the Wilkes case,” Mazur wasn’t sure if he had actually done anything illegal. “I would have to say the more we’ve learned about what congressman blunt’s been up to in washington, the more we’ve asked the same question [of legality].”
Wilkes was sentenced to 12 years in prison in 2008 following his conviction on charges of bribery, money laundering and fraud. He was freed while his case is being appealed to the 9th U.S. Circuit Court of Appeals.
Inside the CalPERS Sausage Factory
I’ve posted some court documents relating to a bribery investigation that involves some big names in the private equity world:
- CalPERS, the giant California pension;
- Leon Black’s Apollo Group
- Christopher Bower’s Pacific Corporate Group in La Jolla
- Gerry Parsky’s Aurora Capital Group.
Some background: California Attorney General Jerry Brown’s office in May sued former CalPERS CEO Federico Buenrostro Jr and placement agent and former Calpers board member Alfred Villalobos with fraudulent broker-dealer activities involving $4.8 billion in investments at the fund. (Read the lawsuit here.)
According to the lawsuit, Villalobos earned $47 million in commissions from clients including Black’s Apollo Management and Parsky’s Aurora Capital through corrupt relationships with individuals including CalPERS senior investment official Leon Shahinian, who recently left the pension:
When Villalobos was trying to persuade CalPERS to purchase a 10 percent equity interest in Apollo Global Management for $700 million in 2007 (as alleged in paragraphs 36-37 above), Shahinian accepted Villalobos’ invitation to travel by private jet to New York City to attend a fund-raising event on the evening of May 14, 2007 hosted by the Museum of Modern Art in honor of Leon Black (the “MOMA Event”), the founder and controlling shareholder of Apollo Global Management.
The trip include a private jet trip flight, a stay at the Mandarin Oriental Hotel and limousine service. Total cost: more than $63,000.
Villalobos’ firm ARVCO billed Apollo for the trip. I’ve posted the bill here.
One month later, at a closed door hearing of the CalPERS investment board, Shahanian recommended the board invest in Black’s fund.
Also at the meeting, Pacific Corporate Group’s Chris Bower admits at the meeting that he had a business relationship with Villalobos, but CalPERS general counsel Peter Mixon said the relationship didn’t pose a conflict of interest because PCG didn’t stand to benefit from the pension’s investment in Apollo.
Here is a transcript of the hearing:
CalPERS Closed Investment Hearing June 18, 2007
Finally, Leon Shahinian’s deposition, in which he denies being bribed, is here.
Shahinian said that sometime in 2006 he told Leon Black that he would like to have a “more direct” relationship with Apollo, meaning that if Apollo had investment opportunities they should show them to CalPERS directly.
Q. After you had this conversation with Leon Black, were you discussing with him a potential opportunity for CalPERS to invest in Apollo regarding a distressed market debt opportunity?
A. Yes
Q. And did you — were you hoping during that conversation, in exploring that investment opportunity, to deal directly with Apollo without need for a placement agent?
A. I had approached Apollo on the idea of CalPERS investing a substantial amount of money in a distressed debt type fund. And after I had that initial conversation with Leon Black expressing CalPERS’ interest to invest in a fund like that, I learned Apollo hired Arvco to be the placement agent.
Q. Did that surprise you?
A. It did.
Q. Why?
A: I guess I didn’t understand why Apollo felt like they needed to hire a placement agent on something where CalPERS had explicitly indicated an interest in investing in.
San Diego attorney on Roger Clemens defense team
Michael Attanasio
The Houston Chronicle is out with a profile of San Diego attorney Michael Attanasio who’s joining former pitcher Roger Clemens’ defense team.
Padres general manager Kevin Towers tells the Chronicle he “couldn’t be happier” for both Attanasio and Clemens, a seven-time Cy Young award winner who pleaded not guilty today to lying to Congress when he testified in 2008 that he never used performance-enhancing drugs. Attanasio helped the Padres GM through the Mitchell Commission’s investigation of performance-enhancing drugs in baseball.
The Chronicle reports:
Attanasio is well known in the Southern California community of baseball agents and executives because of friendships he built through his father, Tony, a trailblazing agent who represented Bobby Valentine, Dave Stewart, Davey Lopes and Ichiro Suzuki.
Moreover, he and his wife, former KPRC-TV reporter Susan Lennon, are close friends with Towers, baseball agent Barry Axelrod and their spouses.
In San Diego, federal prosecutors failed to convict for Attanasio’s client, Daniel Sulac, an Arthur Andersen accountant charged in the Peregrine Systems fraud when two trials in 2007 and 2008 both ended with deadlocked juries.
Attanasio served as a federal prosecutor in DC from 1991-1999.
Hat tip: WSJ law blog.
The Yacht Always Gets Them
A $1.8 million yacht purchased in Chula Vista figures in a U.S. bribery investigation of a senior official at Mexico’s state-run national electric utility.
The Mexican official, Nestor Moreno, received the yacht sold by the now-defunct South Shore Yacht Sales in Chula Vista.
South Shore Yacht Sales was registered to a Robin Goodman. County records show the business racked up tax liens in 2006 and 2008. An absentee judgement was recorded against Goodman and South Shore last year.
In addition to the yacht, Moreno allegedly received a $300,000 Ferrari Spider, and perhaps millions of dollars in cash in exchange for awarding a large contracts to firms in California and Texas, according to U.S. prosecutors.
Moreno’s name surfaced last week in U.S. District Court in Houston following the arrest of Angela Gomez Aguilar, a Mexican citizen.
Prosecutors say Gomez and her husband set up a company in Mexico that acted as an intermediary between Moreno and ABB Inc., the Swiss electrical engineering giant. Gomez also represented Lindsey Manufacturing of Azusa, California.
Moreno went on unpaid leave last week from Mexico’s national electricity monopoly, the Federal Electricity Commission, known as the CFE, after the allegations were published in the Houston Chronicle.
More Bank Failures
Pacific Western Bank of San Diego is picking up 11 new California branches north of LA and $770 million in fresh deposits following the failure of Los Padres Bank in Solvang, California.
As part of the deal, Pacific Western Bank has agreed to purchase essentially all of Los Padres’ assets (loans) of $870.4 million. The FDIC will assume up to 80 percent of the losses on most of Los Padres’ bad mortgages and commercial loans.
Also included in the acquisition was the Harrington Wealth Management subsidiary of Los Padres Bank, headquartered in Fishers, Indiana, which provides trust and investment management services to individuals and institutional clients.
Los Padres was another casualty of the bursting of the housing bubble and overleveraged mortgage-backed securities markets.
Federal bank regulators slapped Los Padres with a cease-and-desist order last year after the bank was deemed to be insufficiently capitalized.
The bank was a sinking ship, but it struggled to stay afloat by jettisoning bad loans and securities overboard and praying for better times ahead that never arrived.
Los Padres wasn’t the only victim of Friday’s bank failures. Rabobank, a Dutch bank that is one of the world’s biggest, is using its toehold in El Centro to expand even further into California by acquiring 23 branches and deposits totaling $777 million from two failed banks in Chico and Stockton.
Investoradio Interview
I’ll be on Investoradio this Saturday, Aug. 21, talking about Ray Lucia and high fees. You can listen online through this link. Just like Lucia, Investoradio hosts Tom Cock and Don McDonald run their own investment advisory, but their fees are less than 1 percent, compared to as much as 2.9 percent for RJL Wealth Management.
Here’s a link to the show.
Investoradio Interview
I’ll be on Investoradio this Saturday, Aug. 21, talking about Ray Lucia and high fees. You can listen online through this link. Just like Lucia, Investoradio hosts Tom Cock and Don McDonald run their own investment advisory, but their fees are less than 1 percent, compared to as much as 2.9 percent for RJL Wealth Management.
Here’s a link to the show.
Introducing Union-Tribune bathroom tissue…
One year into its new ownership under LA billionaire Tom Gores and his Platinum Equity, The San Diego Union-Tribune preparing to roll out its new re-design Tuesday.
Publisher Ed Moss has promised to do more with less. He’s making good on the latter, although he has yet to deliver on the former.
The paper that lands on your doorstep tomorrow will be a “bit” narrower, according to Publisher Moss, who assures us it will also be “more efficient” — newspaper doublespeak for less wordy.
Newspapers are shrinking across the country to save on the costs of newsprint, which is what they call the actual paper that lines birdcages and can be shaped into funny hats. The print of U.S. newsprint is up to 14 percent this year. That’s still well below what Canadian mills need to make a profit.
How narrow will the U-T get?
The Union-Tribune currently measures about 12 inches, the same width of the Wall Street Journal and other big newspapers.
It’s likely to follow the LA Times, and the North County Times which all shrank in February to 11 inches. Any smaller will invite mockery.
Unlike the LA Times, however, the Union-Tribune will be changing to a (presumably larger) typeface.
We all learned in grade school that shrinking margins and bigger writing is the way to make your paper seem longer than it actually is.
Consultants tell newspaper executives that readers don’t really care about the width of the page and some even like it. In the short run, that may be true. In the long run, it means there’s even less in the newspaper. Which means there’s more of a reason to look elsewhere for news.
But there’s … more. The U-T is promising more emphasis on graphics and photos, which will further crowd out all the refocused news and investigations they are promising us.
That’s the funny thing about doing more with less. The only thing you can do with less is less.
The "Buckets of Money" Seminars: Who Pays?
Ray “Buckets of Money” Lucia, the host of an investment radio talk show, has been going around the country hosting retirement seminars with actor Ben Stein.
The seminars are free to attend, but they’re not free. Someone is paying for them. If you’re considering investing with Lucia, it’s important to understand that the person who may wind up paying is you.
Money for the “Buckets of Money” seminars comes out of the pockets investors in RJL Wealth Management, according to Lucia’s own client disclosure.
In addition to being the main sponsor of Lucia’s seminars, RJL Wealth Management advertises on his radio show. It pays Lucia a fee for referring potential clients. It also pays him hourly consulting fees. The amount of this compensation is not disclosed.
RJL manages more than $300 million in assets in 4,880 accounts, according to its filing with federal regulators.
As I noted in an earlier post on Lucia’s fees, the RJL Wealth Management Program charges staggeringly high fees of as much as 2.9 percent annually.
Lucia’s SEC disclosure states that for his solicitation and consulting, he receives a portion of the fees collected by RJL Wealth Management that “shall not exceed 1 percent” annually. One percent of $300 million is $3 million a year.
You would be forgiven that Lucia is essentially paying himself. In fact, Lucia is being paid by his son, Ray Junior, who runs RJL Wealth Management. Dad is listed as a consultant and member of the advisory board (along with Ben Stein).
The arrangement between the Lucias leads inexorably to a conflict of interest.
Both Lucia junior and senior are SEC registered investment advisers. Registered investment advisers are considered fiduciaries, which means they have a legal duty to put their clients’ interests first. So whose interests come first clients or Lucia father and son?
I think the answer can be found in a complaint against Lucia Senior that was filed with the Financial Industry Regulatory Authority in December.
An unnamed client accused Lucia of breach of fiduciary duty for failure to execute stop loss orders in between June and December 2008 when markets plummeted in the depths of the financial crisis.
The client claimed $24,631 in damages. Lucia settled for $18,000 for “business considerations in order to avoid the cost of arbitration,” according to FINRA.
According to FINRA’s summary of the case:
Mr. Lucia was listed as a joint representative on the account for administrative purposes, but did not interact with the client and made no recommendations or representations, as those alleged or otherwise.
In other words, Lucia really had nothing to do with the account or the client. His name was on the account only “for administrative purposes.”
Caveat emptor.
Is Relational Investors' Ralph Whitworth Worth His Big Paycheck?
Do as I say, not as I do.
Ralph Whitworth of San Diego’s Relational Investors LLC is back in the news because he thinks Occidental Petroleum’s chief executive makes too much money.
Whitworth is teaming up with CalSTRS, the massive California State Teachers Retirement System, to boot out board members who approved paying CEO Ray Irani $857 million over the past 10 years.
Executive pay is an important issue. Irani sure does make a lot of money; but then again, he has made a lot of money for shareholders.
No one seems to be asking a fundamental question: Who is Ralph V. Whitworth. What qualifies him as an expert on excessive pay? How much does he make? What socially useful service does he perform? How does his business compare with the executives he criticizes?
Unlike publicly-traded Occidental Petroleum, Relational Investors is a private limited liability company organized in Delaware. It isn’t required to disclose salaries.
Judging by his assets and his lavish lifestyle, there’s an irony in Whitworth complaining about excessive pay: It’s the proverbial pot calling the kettle black.
Outside of the boardroom, Whitworth is perhaps best known for paying Paul McCartney $1 million to play at a 50th birthday bash in Rancho Santa Fe for his wife, Wendy, Larry King’s CNN producer.
Wendy filed for divorce less than a year later. In divorce papers, she described her and Ralph’s exceptional lifestyle:
“For the last four years of our marriage, we have enjoyed a very lavish lifestyle, including multiple luxurious residences, traveling exclusively on private planes, taking luxurious vacations, buying designer clothing, and essentially partaking of, and enjoying, the best of everything that life has to offer. We have had the good fortune of not having to consider the cost of goods and/or services as money has truly been no object in our daily lives.”
Relational Air
The Federal Aviation Administration’s database shows Relational Investors LLC has registered a pair of Falcon 2000 business jets. One of them flew Thursday from San Francisco to Sacramento, and recently flew from San Diego to Montana and back in a day, according to the flight tracking service, FlightAware.
San Diego County real estate records show Whitworth has indeed been keeping up with his superrich neighbors. His two homes in the San Diego area — one in posh Rancho Santa Fe and another along the La Jolla coast — have a combined assessed value of more than $16 million.
Then there’s Whitworth’s massive collection of dragsters, hot rods and funny cars. He had planned to open an automotive museum in his home state of Nevada, but changed his mind and auctioned some of them off for nearly $7 million last year. See if you can guess which one of the cars below sold for $550,000:
Finally, whatever Whitworth’s salary is, you can bet he pays a lower tax rate than Irani and most Americans do. Relational Investors, unlike Occidental Petroleum, is a partnership. Under a tax loophole, a managing partner like Whitworth is taxed at low 15% capital gains rates. Whitworth’s eight-figure income is considered a return on investment, not compensation for services, even though it is CalPERS and CalSTRS who have put up most of the money for Relational Investors.
Whitworth’s wealth derives from the $6 billion he manages for pensions in California, North Carolina and Alaska, among others — or more precisely the 20% “incentive fees” he is paid for beating the S&P 500, which he has done with some consistency, to his credit.
Relational’s strategy is to buy up a large position of underperforming companies and then force changes with the goal of unlocking unrealized value. In 2006, Relational locked horns with The Home Depot, leading the home improvement chain to dump its chief executive, who left with a $210 million “severance” package.
Relational Investors is headed by Whitworth and David Batchelder, who met while working in the 1980s for Texas oilman and corporate raider T. Boone Pickens.
CalPERS became Relational’s first big investor in March 1996 and remains its biggest backer today, with about $1.5 billion invested. Relational’s “activist” investing strategy has yielded annual returns of 10.77%, according to a March 31, 2001 study conducted by Wilshire Consulting on behalf of CalPERS. That means $100 invested in Relational in 1996 would be worth $415.02 today.
(By comparison, you could have doubled your money investing the same $100 in Occidental Petroleum over the past decade decade later).
Relational charges a 1.5 percent fee and receives an incentive fee of 20 percent for beating the S&P 500 Index.
The biggest problem with Relational, however, isn’t Whitworth’s personal spending or his fund’s fees or performance, but a deeper, more troubling conflict-of-interest:
Whitworth warns public corporations to avoid even the appearance of conflicts, but his investment firm doesn’t practice what it preaches.
Officials from CalPERS and other funds that invested in Relational wound up with jobs, consulting contracts and corporate directorships, courtesy of the San Diego fund. These ties give the appearance that Relational Investors offers rich rewards for those who help it secure investments.
Relational’s origins came under scrutiny earlier this year when documents posted by CalPERS revealed Relational paid nearly $17 million to a little-known New York firm called Tullig Inc. (formerly Donal J. Murphy Associates) to help secure an investment from CalPERS. The pension fund launched an investigation.
A review of public documents and interviews shows that Tullig Inc. isn’t the only one who has profited from Relational.
The San Diego money management firm has put several pension officials on its payroll and on corporate boards under sometimes questionable circumstances:
- Former treasurer of North Carolina Richard Moore steered $500 million in state retirement funds to Relational Investors in August 2008 and then joined the San Diego firm in April 2009 as a managing director. Whitworth has said that Moore’s hiring was unrelated to the pension’s investment. North Carolina paid Relational $6.6 million in fees last year under a generous fee agreement.
- In 2004, Relational hired James Hearty, the former executive director of the Massachusetts pension system who left after a high-profile battle with Treasurer Timothy Cahill. At the time, the $32 billion Massachusetts Pension Reserves Investment Management system (MassPRIM) was considering an investment in Relational. (The deal later fell through.)
- Beverly Benedict Thomas, a Los Angeles-area political consultant who also serves as a placement agent, received a fee of nearly $1 million for helping Relational land a $300 million investment in 2008 from CalSTRS, the California teachers’ retirement system. Thomas, a former assistant treasurer under California Treasurer Kathleen Brown served as a member of the board of CalPERS and CalSTRS from 1993 to 1995, according to regulatory filings with the SEC.
- Relational has also doled out board seats to former CalPERS officials. The firm tapped Thomas and Richard H. Koppes, former CalPERS general counsel, for board seats on Apria Healthcare Group. and installed Sheryl Pressler, another former CalPERS official, on the board of Nuevo Energy, another company in which Relational had a big stake.
None of these moves was illegal, but Relational’s questionable relations have been largely ignored here in California.
They deserve careful scrutiny. The pension world has been rocked by a “pay for play” bribery and kickback scandal that started in New York and prompted reforms at CalPERS, which has issued new rules and hired a law firm to review the activities of placement agents.
Change is coming to the pension world, but it doesn’t seem that Relational has gotten the message.
Relational Investors wants seats on Occidental's board
CalSTRS’ pay czar Ralph Whitworth wants to unseat the Occidental Petroleum board that made CEO Ray Irani one of the highest paid executives in the nation.
Irani made $857 million over the past decade, according to a Wall Street Journal analysis.
So Whitworth, who heads San Diego’s Relational Investors LLC, is teaming up with the California Teachers retirement system to knock some heads at OXY, according to the Journal.
The New York Times’ DealBook obtained CalSTRS and Relational’s letter, which you can read here.
Relational and Calstrs Letter to Occidental Petroleum
Whitworth tells DealBook that he senses “a palpable level of disgust among investor base here.”
Really? Where is “here?” Are we talking Ralph’s posh Rancho Santa Fe neighborhood?
Yes, Irani is overpaid. But Occidental shares returned 873 percent over the past decade.
What about Oracle? CalSTRS has 6.7 million shares in Oracle, whose CEO Larry Ellison, is the No. 1 most overpaid executive at a publicly-traded firm in the US, if not the world.
Ellison earned $1.85 billion in compensation over the past decade (more than double Irani’s pay), while Oracle’s shares returned far less. Why not kick up a fuss on the Oracle board?
Or what about Barry Diller who actually lost money for shareholders over the past decade (including CalSTRS) while taking home $1.1 billion in compensation.
And how about Whitworth, the man who paid Paul McCartney $1 million to sing at his now ex-wife’s Rancho Santa Fe birthday party? How much does he make? He won’t tell us, and since he works for a private company, he doesn’t have to.
Well, what about the money Whitworth paid to middlemen like Tullig Inc. to land CalPERS as his biggest investor?
And how much has this “activist” style of investing generated for CalSTRS?
Far, far less than Occidental Petroleum did.
The Enigma Impresses the Poker World
Poker writer Peter Sharkey is impressed by Brent “The Enigma” Wilkes’ power of concentration at the card table:
Brent Wilkes should exploit a gap in the market – for poker players’ benefit
Just how good are you at blanking everything out and concentrating fully upon your poker?
The level of concentration necessary to be successful is startling as you need to keep a constant eye on how play progresses and how individuals react to winning as well as to defeat. If you’re having problems away from the table and they begin to prey on your mind, it’s invariably curtains for your game.
Of course, there are short cuts to achieving a level of focus few other pursuits require. Switching on an mp3 player or donning those mirrored lens shades are two of the most popular – and effective, but there’s no substitute for heading to the felt with a clear mind.
So imagine you had been convicted for bribing a government official and received a 12-year prison sentence. That’s bad enough, but assume you’ve been free on bail for more than two years, pending an appeal against your sentence. Seems you would have your plate pretty full eh? And probably not much time to partake of a few hands of poker.
Not Mr Brent Wilkes, a 56 year-old former defence contractor who was convicted of conspiracy, bribery, money laundering and wire fraud in 2007. Mr Wilkes was freed from prison in February 2008 pending an appeal, which finally got under way on Monday.
Teddy Bear Collector Admits Stealing San Diego County Pension $
Paul Greenwood
Bow-tie wearing hedge fund founder Paul Greenwood has pleaded guilty to defrauding San Diego County’s pension and other big institutional investors of at least $331 million.
Greenwood and partner, Stephen Walsh, ran WG Trading, which collapsed with $78 million of San Diego County retirees’ money.
Out on Bail, Brent "The Enigma" Wilkes Plays His Cards Right
Brent "The Enigma" Wilkes
A “58-year-old retiree” is how Ultimatepoker.com described Brent “the Enigma” Wilkes after he won $10,900 in a March No-Limit Hold-’em poker tournament at Harrah’s Rincon Casino.
Sporting his new chin strap, Wilkes is a self-described “former executive consultant who is now retired and is spending much of his time writing and playing poker,” Ultimatepoker.com tells us.
He’s also a former defense contractor who was convicted of bribing former Rep. Randy “Duke” Cunningham with prostitutes, luxury vacations and other goodies.
Since he bailed out of prison while he appeals his conviction, The Enigma sure has been playing a lot of poker.
He made it to the finals at last year’s Rincon series, coming up just short of victory on each occasion.
Fans of the Randy “Duke” Cunningham scandal will recall that Wilkes was a life-long poker player. According to testimony at his trial, one of the ways Wilkes bribed Cunningham was by letting the old pilot win at poker.
Wilkes and his best friend, former CIA honcho Kyle “Dusty” Foggo, who’s now serving time in prison for fraud, hosted regular poker games at the Watergate Hotel that were the subject of much (mostly unfounded) speculation.
Irwin Jacobs one of decade's biggest earners
San Diego’s Irwin Mark Jacobs is No. 15 on the list of the decade’s top earners at publicly-traded companies, a Wall Street Journal analysis has found.
The Journal put the Qualcomm founder’s total realized compensation at $436.8 million for the period of 1999-2008. Jacobs served as Chairman of the Board of Directors from July 1985 to March 2009 and as Chief Executive Officer of the Company from July 1985 to June 2005.
For investors, Jacobs’ performance as CEO landed Qualcomm in the middle of the pack of the companies on the Journal’s list. An investor who bought $100 worth of Qualcomm shares wound up with $191.90 over that period.
The bulk of Jacobs’ compensation came in gains on stock options, which netted him $419.5 million.
Forbes estimates Jacobs’ total fortune at $1.6 billion, making him the 220th wealthiest American on the magazine’s annual ranking.
Topping the Journal’s list was the $1.84 billion realized by Oracle CEO Larry Ellison.
Life in the Downtown Market?
How much will a San Diego law school student pay in rent?
It’s a good question for Security Properties of Seattle, which made the first purchase of a complex with more than 100 units that downtown San Diego has seen in three years.
Security Properties of Seattle picked up the 172-unit Entrada Apartments on 13th street in the East Village, a few blocks from Petco Park, for $22 million. That’s about $127,000 per unit.
This seems like a steal. Up the block, the future home of the Thomas Jefferson School of Law is under construction (you can watch on their webcam).
But there’s work to do. Security Properties says performance needs improvement. The company says that will happen when the law school relocates to downtown in January. If this devastating review is a guide, the building’s management has had some problems.
SRM Development put up the building in 2004 with a $3.5 million loan from the Centre City Development Corporation, downtown redevelopment agency. The complex has 40 units set aside for low-income housing.
Under a deal with Security Properties, CCDC will receive $600,000 up front and annual payments of $145,000. The $2.9 million balance will be fully paid off in 2015.
A Goldline History: Glenn Beck, Spooks, Drugs
Following my recent post on Goldline, a precious metals coin dealer and sponsor of conservative gasbag Glenn Beck, I decided to poke around a bit in the company’s history, which is pretty fascinating.
As I wrote earlier, Goldline is drawing heat from its bait-and-switch pratices of selling rare gold coins like the 20 Swiss Franc. Beck is definitely taking notice of the attention he is bringing to Goldline following reports by ABC News and Media Matters:
It turns out that the company known today as Goldline has been a source of intrigue and controversy for years.
It was founded a half-century ago by Nicholas Deak, a spy-turned-banker, whom Time magazine called “the James Bond of the world of money.”
Born to a family of Transylvanian bankers, Deak joined the U.S. Army as a paratrooper and later became a senior intelligence officer in the Office of Strategic Services, the forerunner of the CIA. After the war, he helped launch an exchange firm that grew to 70 offices worldwide. By the late 1970s, Deak & Co. was handling 20 percent of all U.S. retail gold sales.
But there were persistent rumors that Deak’s work had a more sinister aspect. In his study of the infamous Nugan Hand bank of Australia, The Crimes of Patriots, journalist Jonathan Kwitny wrote:
For years, it was whispered that Deak had a close working relationship with the Central Intelligence Agency. Certainly the CIA would have been derelict not to try to keep tabs on Deak. And there would have been a lot for Deak to gain by trading off with the world’s biggest spy agency, because much of the company’s business involved speculation about the relative future value of the world’s currencies.
Deak & Co. had a hand in shady deals with shadowy figures, including its role as the conduit of Lockheed Corporation’s bribes to Japanese officials.
Federal prosecutors charged Deak & Co. of California with Bank Secrecy Act violations in 1977 for failing to report $11 million two Filipinos sent to the United States.
Ron Pulger-Frame, a courier who worked for both Deak and Nugan Hand, told the official bankruptcy receiver’s office in Hong Kong in 1981, “Deak’s had a system which was devised by me to circumvent Australian exchange regulations.”
Deak: The James Bond of money
President Reagan’s Commission on Organized Crime charged in 1984 that Deak & Co. had been involved in a multi-million dollar laundering operation for Colombian cocaine traffickers. Nearly $100 million was laundered through Deak by a single criminal. The company filed for bankruptcy before the year ended.
In 1985, a homeless woman from Seattle entered Deak’s Wall Street offices and opened fire with a .38-caliber revolver, killing the 80-year-old financier and a receptionist. (Time magazine on Deak’s slaying )
The Thomas Cook Group, best known for its brand of traveler’s checks, bought the company in 1988 and sold it three years later to A-Mark Precious Metals of Santa Monica, the largest private precious metals dealer in the United States and one of only a handful of companies authorized to purchase gold bullion coins directly from the U.S. Mint.
A-Mark was started in the 1960s by a California teenage coin buff named Steven C. Markoff, whose politics are the polar opposite of Glenn Beck’s. Markoff is a supporter of the ACLU, an avowed critic of U.S. marijuana policy, and a movie producer (all of which would make him a Hollywood leftist, in Beck’s view).
In 2005, Markoff sold A-Mark Precious Metals to its current owner, Irvine, California-based Spectrum Group International for $20 million cash.
The corporate history then gets very murky. In 2006, H.I.G. Capital in Miami, bought Goldline’s parent company, Goldline Holdings Inc., according to this Federal Trade Commission filing. This deal, as far as I can tell, received no other public announcement.
Goldline changed hands again in January 2009 when management and CIVC Partners, a Chicago-based private equity firm, acquired the firm in a transaction worth over $50 million. At the time, Goldline’s revenues were in excess of $300 million.
It’s the infusion of capital from CIVC that has apparently helped Goldline expand its presence through endorsements from conservative commentators and personalities like Glenn Beck and others.
Glenn Beck Fuels Gold Hysteria — And Profits
I heard the other day about a man who took all his money, bought gold and buried it in his backyard. The poor fellow probably listens to commentator Glenn Beck.
The incessant stream of end-of-the-world nonsense that Beck spews forth makes his incredibly popular radio and TV talk shows the ideal vehicle for gold advertisements.
An average of 9 million listeners a week makes Beck’s radio show the third most popular in America, behind Rush Limbaugh and Sean Hannity. Mercy Radio Arts, aka Glenn Beck Inc., took in $32 million in revenue in the past 12 months, according to Forbes magazine.
But this is not your traditional media advertising relationship:
Anyone who listens to conservative radio is getting bombarded with messages from Santa Monica-based Goldline, which boasts that it does half a billion in annual sales of gold coins and bullion
Others who offer testimonials on Goldline’s website are Laura Ingraham, Mark Levin, Mike Huckabee, Monica Crowley, Fred Thompson. You can listen to them shilling for Goldline here on the Goldline website.
It would seem to be a natural fit. Gold thrives on instability and chaos, and Beck is constantly hammering home the theme that the United States is highly unstable … ergo, we should buy gold. The problem is the gold that Goldline is selling often isn’t bullion, but rare coins, which are a different animal.
According to ABC News’ The Blotter, authorities in Los Angeles and Santa Monica are investigating complaints from Goldline customers say they were lied and misled in their purchases of gold coins and others who received something they didn’t order. The Santa Monica City Attorney’s office has set up a website to handle complaints.
The gold 20 Swiss Franc
Goldline customers are often sold gold 20 Swiss Franc and other European coins. The Missouri Secretary of State’s office found in 2006 that a Goldline agent violated state law by advising an elderly woman to sell her annuity to buy gold. The woman ultimately bought 153 Gold 20 Swiss Francs and other coins.
This is a classic bait-and-switch.
Buying a Swiss Franc coin is NOT the same as buying gold bullion or even gold American Eagles, South African Krugerrands or Canadian Maple Leafs, all of which are linked to the spot price of gold.
Gold 20 Swiss Francs, which are numismatic or rare coins, have less to do with gold spot prices and more to do with scarcity, condition and coin demand. In other words, if gold rises you still make not make any money.
Goldline charges a sizeable markup on numismatic coins. According to Goldline’s own disclosure on its website:
Our spread on semi-numismatic coins, rare or numismatic coins and rare currency currently ranges from 30% to 35%. Examples of coins which have a 30% to 35% spread include European gold coins such as the Swiss 20 Franc, the PCGS certified “First Strike®” coins, coins which have been encapsulated by a grading service such as PCGS or NGC, the Morgan and Peace silver dollars in all grades, and the Walking Liberty, Franklin and Kennedy silver half-dollars in all grades. Spreads may change based upon market conditions, availability and demand.
Here’s how this works. If the spread on a coin is 35%, then a coin Goldline is selling for $500 is really worth only $325. The coin must appreciate $175 before you earn a profit. Again the prices of these coins move independently from the price of gold.
According to a report issued in May Rep. Anthony D. Weiner, coins on the Goldline website were marked up an average of 90 percent compared to their melt values. But this is unfair: rare coins value has less to do with the price of gold and more to do with scarcity and other factors.
Mark Albarian, president and CEO of Goldline, is a coin collector. A coin collector knows what coins are worth. If you don’t, then caveat emptor — buyer beware — no matter what Glenn Beck says.
Glenn Beck Fuels Gold Hysteria — And Profits
I heard the other day about a man who took all his money, bought gold and buried it in his backyard. The poor fellow probably listens to commentator Glenn Beck.
The incessant stream of end-of-the-world nonsense that Beck spews forth makes his incredibly popular radio and TV talk shows the ideal vehicle for gold advertisements.
An average of 9 million listeners a week makes Beck’s radio show the third most popular in America, behind Rush Limbaugh and Sean Hannity. Mercy Radio Arts, aka Glenn Beck Inc., took in $32 million in revenue in the past 12 months, according to Forbes magazine.
But this is not your traditional media advertising relationship:
Anyone who listens to conservative radio is getting bombarded with messages from Santa Monica-based Goldline, which boasts that it does half a billion in annual sales of gold coins and bullion
Others who offer testimonials on Goldline’s website are Laura Ingraham, Mark Levin, Mike Huckabee, Monica Crowley, Fred Thompson. You can listen to them shilling for Goldline here on the Goldline website.
It would seem to be a natural fit. Gold thrives on instability and chaos, and Beck is constantly hammering home the theme that the United States is highly unstable … ergo, we should buy gold. The problem is the gold that Goldline is selling often isn’t bullion, but rare coins, which are a different animal.
According to ABC News’ The Blotter, authorities in Los Angeles and Santa Monica are investigating complaints from Goldline customers say they were lied and misled in their purchases of gold coins and others who received something they didn’t order. The Santa Monica City Attorney’s office has set up a website to handle complaints.
The gold 20 Swiss Franc
Goldline customers are often sold gold 20 Swiss Franc and other European coins. The Missouri Secretary of State’s office found in 2006 that a Goldline agent violated state law by advising an elderly woman to sell her annuity to buy gold. The woman ultimately bought 153 Gold 20 Swiss Francs and other coins.
This is a classic bait-and-switch.
Buying a Swiss Franc coin is NOT the same as buying gold bullion or even gold American Eagles, South African Krugerrands or Canadian Maple Leafs, all of which are linked to the spot price of gold.
Gold 20 Swiss Francs, which are numismatic or rare coins, have less to do with gold spot prices and more to do with scarcity, condition and coin demand. In other words, if gold rises you still make not make any money.
Goldline charges a sizeable markup on numismatic coins. According to Goldline’s own disclosure on its website:
Our spread on semi-numismatic coins, rare or numismatic coins and rare currency currently ranges from 30% to 35%. Examples of coins which have a 30% to 35% spread include European gold coins such as the Swiss 20 Franc, the PCGS certified “First Strike®” coins, coins which have been encapsulated by a grading service such as PCGS or NGC, the Morgan and Peace silver dollars in all grades, and the Walking Liberty, Franklin and Kennedy silver half-dollars in all grades. Spreads may change based upon market conditions, availability and demand.
Here’s how this works. If the spread on a coin is 35%, then a coin Goldline is selling for $500 is really worth only $325. The coin must appreciate $175 before you earn a profit. Again the prices of these coins move independently from the price of gold.
According to a report issued in May Rep. Anthony D. Weiner, coins on the Goldline website were marked up an average of 90 percent compared to their melt values. But this is unfair: rare coins value has less to do with the price of gold and more to do with scarcity and other factors.
Mark Albarian, president and CEO of Goldline, is a coin collector. A coin collector knows what coins are worth. If you don’t, then caveat emptor — buyer beware — no matter what Glenn Beck says.
Sunstone Walks Away from the W Hotel
Major Foreclosures and Defaults in Downtown San Diego
When homeowners owe more than their home is worth and walk away, it’s called a “strategic default.” Fannie Mae warned potential strategic defaulters last month that they would never again get another mortgage.
But no one seems bothered that Sunstone Sunstone Hotel Investors Inc. is walking away from a $65 million mortgage on the 258-room W Hotel in downtown San Diego.
The San Diego Union-Tribune’s Lori Weisberg reports that the W Hotel was auctioned on the courthouse steps on June 29. The property is now in the hands of Bank of America, the lender.
Sunstone was underwater on the W Hotel. The Aliso Viejo-based real estate investment trust, concluded that it owed far more than the W Hotel was worth. Sunstone bought the W for $96 million in 2006 from a group led by developer Gatehouse Capital Corp., the Wall Street Journal reported last month.
But Sunstone is coming out ahead. Chief financial officer Ken Cruse crows to the U-T about “a significant gain” on the W San Diego because the hotel was recorded on Sunstone’s books at $35 million.
Thanks, assholes.
WSJ's Latest Lerach Attack
Even though he has been driven from the practice of law, Bill Lerach, whom I recently profiled for Voice of San Diego, remains one of the conservative movement’s leading bogeymen.
Until he was sentenced to prison, Lerach struck fear in the heart of corporate America by extracting costly settlements from the nation’s biggest companies. He recently completed his sentenced and retired to his La Jolla mansion.
Today’s editorial “A Bill Lerach Tax Cut” finds the Journal in a lather over a report that the U.S. Treasury Department planned to give lawyers a tax break over contingency fee lawsuits.
Such a tax break would effectively subsidize the up-front costs of litigation for the the “zillionaire likes of felons Dickie Scruggs, Mel Weiss, and Bill Lerach,” the Journal writes.
These include San Diego firms such as Robbins Geller Rudman & Dowd, Lerach’s old firm, and Robbins Umeda that file shareholder derivative lawsuits and securities class actions. Firms that do this work on contingency, which means they are paid out of a settlement at the conclusion of the case.
The report Wednesday in LegalNewsline.com cited unnamed sources at a meeting of the trial lawyer’s association in Vancouver, Canada.
The Treasury Department declined comment “on speculation about any potential administrative rulings.”
Vantage Pointe: Who Holds the Note?
For San Diego, the troubled Vantage Pointe project is a huge deal. The 40-story tower is San Diego’s biggest condo. Construction was financed at a cost of $210 million — the biggest loan of its kind in city history.
Vantage Pointe now sits on the brink of foreclosure. Its loan is in default and most of its nearly 700 units sit empty.
For the lender, Caisse de Depot et Placement Quebec, Canada’s biggest pension fund, Vantage Pointe amounts to about 2 percent of its holdings of foreign real estate. If you include Canadian real estate, Vantage Pointe is 1 percent of the $19 billion portfolio.
Caisse has reorganized its real estate division in the wake of devastating losses and a $5 billion writedown last year. That has led to a confusing picture about who actually holds the note.
The Vantage Pointe notice of default identifies the lender as CDPQ Mortgage Corp. (since renamed CDPQ Mortgage Investment Corp.)
CDPQ Mortgage is the official name for Otera Capital Inc., Caisse’s commercial real estate lender with $22 billion in assets. (Canadian records list CDPQ’s mailing address as Otera Capital. CDPQ’s directors are Ross Brennan, Michel Deslauriers, and Marie Giguere are all managers of Otera Capital.)
Caisse’s agent on the deal was MCAP Inc., which manages the pension’s real estate debt.
Caisse has financed other major projects in San Diego. According to its 2009 annual report, the Canadian pension financed 820 W. Ash St. and Caisse holds a stake in a real estate investment trust with properties in San Diego. At one time it co-owned the First National Bank Center at at 4th & A streets, which sold in 2003 for $112 million.
Fannie Mae Has It Right on PACE
A decision by Fannie Mae and Freddie Mac to say no to a White House-backed solar energy program has a lot of people in California pretty upset. As much as I like solar power, I have to agree the regulators got this one right.
San Diego County Supervisors Pam Slater-Price and Dianne Jacob pleaded with President Obama and the region’s congressional delegation to save the program and called the Federal Housing Finance Agency’s statement on the matter “insulting.” Gov. Schwarzenegger was disappointed. California Sen. Barbara Boxer, NYC Mayor Mike Bloomberg and many others deluged the administration with letters.
The solar-financing program, known as “property assessed clean energy program” or PACE would have allowed homeowners in 13 San Diego County cities and unincorporated areas to write off the high up-front cost of solar panels — typically $25,000 or more — over 20 years.
The nascent program was dealt a major setback last week when the federal regulator overseeing Freddie Mac and Fannie Mae said that the federal mortgage giants will not buy or sell mortgages on homes enrolled in the program.
The Federal Housing Finance Agency said in a statement Tuesday that the liens created by the PACE program were senior to existing mortgages. FHFA said first liens “present significant risk to lenders .. and are not essential for successful programs to spur energy conservation.”
The second part of the statement is the one Jacob and Slater-Price found insulting. The first part of the statement — that first liens present significant risks — happens to be true.
San Diego County’s program was administered through the CaliforniaFIRST program. Here’s a sample Pace Agreement.
Homeowners who sign up for CaliforniaFIRST have a “contractual assessment lien” placed on each participating property covering the cost of installation plus interest.
A $25,000 solar panel retrofit would wind up costing $40,000 at 5% over 20 years. Assuming you pay $100 a month in electricity like I do, you wouldn’t save enough power to make it worthwhile.
The lien would be paid through property taxes, and liens would be bundled together and sold to investors as bonds. Communities often issue special tax assessments to cover the cost of infrastructure repairs or improvements, but PACE assessments uniquely cover improvements to a single residence.
For would-be buyers, a problem is that the lien follows the house, not the owner. It would have remained on the property even if the owner sold it.
But the real problem lies in the liens’ “super senior” status, which means it takes precedence over all other debts, including mortgages. So you could lose your house if you can’t or won’t pay. Take a look at this clause in the CaliforniaFIRST agreement.
The Property Owner acknowledges that if any Assessment installment is not paid when due, the Authority has the right to have the delinquent installment and its associated penalties and interest stripped off the secured property tax roll and immediately enforced through a judicial foreclosure action that could result in a sale of the Property for the payment of the delinquent installments, associated penalties and interest, and all costs of suit, including attorneys’ fees. The Property Owner acknowledges that, if bonds are sold to finance the Improvements, the Authority may obligate itself, through a covenant with the owners of the bonds, to exercise its foreclosure rights with respect to delinquent Assessment installments under specified circumstances.
Another of the FHLA’s concerns that hasn’t gotten much attention bears noting. Homeowners who can’t afford solar panel will now become targets for shady lenders in a repeat of the whole interest-only mortgage debacle that helped fuel the housing bubble. I’m not saying that PACE will create another housing bubble, but do we really need to be adding to personal debt levels right now, especially for people struggling at the margins?
I’d love to end the burning of fossil fuels and dependence on foreign oil too. Increasing debt burdens to pay for it isn’t the way to go about it.
CalPERS: A Legal Ponzi Scheme
California’s lame-duck Gov. Arnold Schwarzenegger likes to remind us, as he did last week, that California is facing an “unsustainable path that has taxpayers on the hook for $500 billion.”
Exhibit A is SB 400 of 1999, which increased benefits for California state government employees between 20% and 50% — without the money to pay for them.
This is in essence a legal version of a Ponzi scheme where new investors pay old ones until the whole thing collapses.
Schwarzenegger aide David Crane has called SB 400 “the largest non-voter approved debt issuance in California history.”
The bill was signed during the dot-com boom and the legislature relied on vague promises that the investment wizards at California’s giant pension system would generate the money out of thin air.
Needless to say, that hasn’t exactly worked out.
On June 16th, Schwarzenegger struck a deal with four unions representing 23,000 of the state’s 170,00 unionized workers to roll back the benefits that were given away in SB 400. If similar agreements are reached with the state’s eight other employee unions, state savings in FY 2010-11 would total $2.2 billion, $1.2 billion General Fund.
Even with the cuts, Calpensions’ Ed Mendel notes, pension benefits for CHP officers are still more generous than the days before SB 400.
Democrats led by Gov. Gray Davis signed SB 400 as a thank-you to the unions that helped end 16 years of Republican rule in California the previous November.
Even though the legislature is controlled by Democrats. It needs to be said that the bill was supported by both parties. It passed unanimously in the Senate. Only seven members of the 80-member California Assembly voted against it.
The most notorious passage in the bill provided highway patrolmen with 3 percent of final pay for each year served at age 50, a significant improvement of the pre-SB 400 formula of “two at 50″ — 2 percent of final pay for each year served at age 50.
This is much, much more than 1 percent increase.
Before SB 400, a highway patrolman had to work 45 years before he could retire with 90 percent of pay. The bill shaved 15 years off that time, allowing them to retire with 90 percent of pay after 30 years on the job.
In 2008-2009, a full third of the payroll for all highway patrolman now goes into their retirement accounts.
CalPERS believed they could cover the additional costs through “continued excess returns” and said it expected that contributions from the state would hold steady at $350 million.
Instead, the compound annual growth rate of CalPERS investments grew a pathetic 1.6 percent from 1999 to the end of 2009. On June 16th, the same Schwarzenegger announced his deal with the unions, CalPERS announced that it was raising the state’s contribution to $3.9 billion.
CalPERS unfunded liability, the percentage of benefits promised that can be covered by the fund’s assets, has risen from $158 billion in 1999 to $238 billion last year.
With its myriad accounting trips, CalPERS can “smooth” (hide) losses for generations. Some day the bill will come due.
It’s looking increasingly doubtful that there will be anybody left to pay it.
The Scam Known as Title Insurance
“Ever feel like you’ve been cheated?” singer Johnny Rotten famously asked at the end of the Sex Pistols tour of America.
I sure did when I refinanced my home last year and I had to fork out $625 to Chicago Title for title insurance.
Title insurance for a refinanced home loan? This makes no sense.
I paid title insurance to ensure there were no issues when I first bought my home in 2002, so why was I paying for it again?
The answer is simple: Title insurance is a swindle. A scam. A shakedown, a hustle.
When Title Companies Compete, You Lose
Title insurance is less than 1 percent of the price of the home, so we tend to overlook it.
In economics, this is “inelastic” demand, meaning it is not sensitive to price.
Title insurers can virtually charge whatever they wants — even, as in my case, for doing nothing at all.
The result is an industry devoid of competition.
A 2005 report to California Insurance Commissioner John Garamendi found that competition for title insurance and escrow services in California “does not exist.”
A total of four companies control virtually the entire market for title insurance. Chicago Title is owned by Fidelity National Financial Inc., which is the nation’s biggest title company with more than 45 percent of the market.
In California — the big money maker for the industry — title insurance is marked by “reverse competition.” The title insurers don’t compete for business from homebuyers like me, the ones who actually pay for the service. Instead they pay illegal rebates and kickbacks to a real estate agent, a lender or homebuilder in exchange for business referrals.
The California Land Title Assocation’s Title Wizard service lets you compare prices for title insurers. Here is what the big four would have charged for my home refinance:
| Chicago Title | $625 |
| Old Republic | $645 |
| Stewart Title | $625 |
| First American | $605 |
This is a pretty clear cut picture of what collusion looks like.
A toll on the road to home ownership
Title insurers would do quite well in Afghanistan and Iraq or any place where nothing gets done unless certain people are paid.
You don’t get a mortgage without title insurance. It’s that simple. My title insurance “expired” when my first mortgage was paid off. If I wanted to refinance, I had to have title insurance.
Title insurers have managed to set up a toll booth at the entrance to the U.S. housing market, which at its peak was worth more than $20 trillion.
All those tolls add up: During the housing bubble, operating income for title insurers grew 270 percent, soaring $4.8 billion in 1995 to $17.8 billion in 2005.
The money pours in, but it doesn’t come back out. Do you know anyone who actually filed a title insurance claim?
Chicago Title paid out a meager 5 percent on nearly $4 billion worth of title premiums, according to the company’s SEC filing.
In the insurance world, this percentage is known as the “loss ratio.” The loss ratio for title insurance is among the very lowest in the insurance industry. Auto and home insurers pay 80 percent of premiums.
What is Chicago Title doing with my money? The biggest expense on Chicago Title’s 2009 income statement isn’t personnel costs. It’s the whopping $1.9 billion in commissions paid to agents who drum up business.
What you can do.
Title insurance is not required by law in California. However, it’s standard operating procedures as most lenders won’t fund a mortgage without it. But you can shop around.
One alternative is Entitle Direct, which sells title insurance direct to the consumer. Entitle Direct doesn’t pay agents so it is able to charge a third less than most of the big title firms.
I could have saved $268 if I had gone with Entitle Direct. If you don’t feel that it’s worth the trouble, well, I guess then Johnny Rotten had it right.
The State of San Diego's Pensions
In a little noticed report, two finance professors examined the true cost of state government pension underfunding.
Their findings are mind-boggling.
Robert Novy-Marx and Joshua Rauh found that collectively, the pensions of the 50 U.S. states are underfunded by $3.23 trillion. And that doesn’t even include local government pensions.
Most pensions calculate future obligations using a method that only an actuary could love: the “individual entry-age normal cost method.”
The exceedingly dull explanation of this is that a worker’s retirement benefits are funded over the course of his or her entire career.
But this measurement doesn’t show how much the pension owes right now.
Novy-Marx and Rauh ask how much would a pension plan owe if the entire workforce were laid off today.
They call this the “accumulated benefit obligation.” In San Diego, it’s known as the “present value of future benefits” They both refer to the same thing: the amount of money needed to pay off the entire plan if the workforce were laid off today:
For a pension plan to be considered fully funded, its assets should be at a minimum be equal to the accumulated benefit obligation.
The city of San Diego’s official unfunded liability stands at $2.1 billion using the entry-age normal method. The county’s is less than a billion.
When we look at what the plan would owe if it were terminated today, those figures rise considerably.
2010 Top San Diego Money Managers
The top San Diego money management firms with more than $1 billion in assets under management based on SEC regulatory filings as of June 12, 2010.
| Firm Name | Location | Assets Under Management |
|---|---|---|
| Brandes Investment Partners, LP | San Diego | $53,111,776,127 |
| Pacific Corporate Group LLC | La Jolla | $19,823,150,992 |
| Guided Choice Asset Management, Inc. | San Diego | $19,238,786,500 |
| PCG Asset Management, LLC | La Jolla | $19,203,420,729 |
| Nicholas-Applegate Capital Management LLC | San Diego | $9,916,244,833 |
| Gurtin Fixed Income Management, LLC | Solana Beach | $6,747,183,972 |
| Relational Investors LLC | San Diego | $6,033,534,431 |
| Chandler Asset Management Inc | San Diego | $5,005,221,338 |
| Globeflex Capital LP | San Diego | $4,182,000,000 |
| LM Capital Group, LLC | San Diego | $4,010,525,407 |
| Clarivest Asset Management LLC | San Diego | $1,800,000,000 |
| First Allied Securities, Inc. | San Diego | $1,654,019,937 |
| Stolper & Co., Inc. | San Diego | $1,574,982,908 |
| Wall Street Associates | La Jolla | $1,528,000,000 |
| Dowling & Yahnke, LLC | San Diego | $1,473,382,112 |
| Denali Advisors, LLC | La Jolla | $1,274,412,604 |
| Rice Hall James & Associates LLC | San Diego | $1,203,218,265 |
| Caywood-Scholl Capital Management LLC | San Diego | $1,094,183,050 |
| Independent Financial Group, LLC | San Diego | $1,043,692,374 |
| Macquarie Funds Management | Carlsbad | $1,005,232,323 |
@ 2010 Seth Hettena
Negative Equity in the San Diego Housing Market
San Diego’s housing market may have much further to fall.
So says a new report from the NY Federal Reserve that calculates how many homeowners will become renters over the next few years.
In San Diego, 16 percent of homeowners will become renters, according to the study
This measure assumes that homeowners who owe more than their homes are worth — i.e. negative equity — are in effect renters.
Since the homeownership gap reflects the extent of negative equity in the housing market, it is also a gauge of the potential downward pressure on the offcial homeownership rate. Assuming that house prices do not appreciate over the next several years, negative equity households will very likely convert to renters when they move out of their current homes because they will be unable to save enough to cover the negative equity, the transaction costs of selling their existing home, and a down payment on another home. As these transitions from owning to renting take place, the homeownership gap will narrow, with the offcial homeownership rate dropping toward the effective rate.
Consider, for example, that the Case-Shiller-based effective homeownership rates for … Detroit, New York City, San Diego, and San Francisco are all under 50 percent. That is, the median household in these areas is in a negative equity position and no longer has strong financial incentives to behave as an owner. While the effects will vary with the distribution of negative equity households across the municipalities within these metro areas, a high share of these households could result in reduced maintenance of the housing stock, an increased risk of housing vacancies, and less stable neighborhoods over time—developments that could have repercussions for local law enforcement. Moreover, the predominance of “non-homeowners” in these metropolitan areas could lead to a decline in citizen participation in local affairs, with a concomitant loss of vigilance over the quality and ef?ciency of public services and institutions.
San Diego County Pension Lowers Rate of Return
San Diego County’s pension fund just handed the county bill for more than $30 million a year yet no one seems to have noticed.
Every three years, San Diego County’s pension fund looks into its crystal ball and decides what it expects investments returns will be over the next 50 years.
It’s arguably the most important and difficult decision the board has to make. Even a small change can force the county to cough up millions of dollars each year.
Yesterday, the board of the San Diego County Employee Retirement Association lowered its assumed net rate of return from 8.25 percent to 8 percent effective July 1, 2011. (Watch the meeting online here.)
A quarter percent may not sound like much, but it’s a change that will force the county to pay 3 percent of payroll each year. Using last year’s payroll numbers, that works out to roughly $33.88 million.
The 8 percent assumed rate of return represents the pension’s best guess about how the fund will do in the future, so that the county can set aside money to ensure the plan is well funded.
The shift to an 8 percent assumed rate of return moves San Diego County’s pension more in line with other big state pension funds. CalPERS, the $200 billion retirement system, is reviewing its assumed 7.75 percent rate of return and will make a recommendation to the board whether to lower it later this year.
Three years ago, the pension’s actuarial consultant, Segal Group, recommended an assumed rate of return but the then chief investment officer, David Deutsch, promised that he could generate the additional 8.25 percent with his Alpha Engine.
Deutsch resigned under pressure shortly before the pension reported losses of $2.4 billion for the 2008-2009 fiscal year.
The assumed rate of return is perhaps the most important variable in calculating a key barometer of a pension’s health known as the funding ratio — the ratio of assets to liabilities. SDCERA’s funding ratio stands officially at 91.5 percent, but that’s only because of an accounting practice that defers losses over several years.
If last year’s $2.1 billion loss were to be recognized right away, San Diego County’s pension fund would only be 65 percent funded, according to a report by an independent consultant. That’s well below the 80 percent that pension experts regard as healthy.
What San Diego Cared About in May
SD Pension Says Alec Gores Carries Headline Risk
Updated to note pension’s conclusion that publicity has not affected returns.
Alec Gores
The board of the $7.3 billion San Diego County pension fund is slated to vote Thursday on a $50 million investment in billionaire Alec Gores’ latest private equity fund, Gores Capital Partners III.
In a memo to the board, SCDERA notes that Alec Gores carries some “headline risk” as he and his relatives have “attracted some media attention, possibly because of Mr. Gores’ being a successful businessman based in the Beverly Hills area.”
That’s a weak way of saying that Gores and his equally wealthy brother were involved in a love triangle that became embarrassingly public.
Even so, SDCERA found no evidence that media publicity affected investment performance of Gores’ funds.
Alec Gores is the older brother of Tom Gores, who owns the San Diego Union-Tribune through his separate private equity fund, Platinum Equity.
Tom Gores
In December 2000, Alec Gores grew suspicious that his then wife, Lisa, was having an affair with brother Tom and hired Los Angeles detective Anthony Pellicano to find out.
The detective staked out a tryst at the Beverly Hills Hotel and wiretapped a nervous phone call between the two lovers, which was played for jurors at Pellicano’s 2008 trial. Here’s Allison Hope Weiner’s Huffington Post coverage of the trial.
Gores reports no known investments with major operations in San Diego County. That’s true, in so far it goes. Gores sold off his holdings in Aonix, a San Diego software firm, a few years ago.
But kudos to the fund for making this information public ahead of time. A refreshing change.
Bersin: I shouldn't have lawyered it
Now it’s clear why even the Democratic controlled U.S. Senate had problems with the nomination of Alan Bersin, President Obama’s commissioner of Customs and Border Protection:
They caught him in a lie and he wriggled a fish to get out of it.
Bersin failed to file paperwork for household employees. That alone is excusable. It’s the rare American who fills out an I-9 form for every babysitter, nanny, gardener, or maid who works for them.
What’s inexcusable is that Bersin said that he didn’t know he was required to do so.
Preposterous. Bersin is a Harvard-educated Rhodes scholar as well as a former U.S. Attorney in San Diego and his wife under Clinton. Immigration was his signature issue: he served as “border czar” in two administrations.
If that wasn’t enough his wife, Lisa Foster, is a California judge.
Bersin employed 10 household employees since 1993 — the year he became U.S. attorney in San Diego — and didn’t fill out I-9 forms for any of them. A Senate memo wryly notes that Bersin “knew of the existence of the Form I-9” as it “came up” in his tenure as U.S. attorney.
Bersin tried to explain his screwup with Clintonian hair-splitting over the difference between employers and independent contractors.
The Senate Finance Committee, which received Bersin’s nomination in September, was clearly troubled by his explanation, or lack thereof. It seems that it dawned on Bersin that his nomination was in jeopardy in January when he began feverishly filling out his missing paperwork.
On March 19, Bersin and his wife, Judge Foster, met with committee staff. This meeting was described as a “due diligence” meeting, but “come to Jesus meeting” is more apt.
With much hand-wringing and kow-towing, Bersin apologized and fessed up.
Asked whether his legal hair-splitting was a rationalization for his failure to file the proper paperwork, Bersin responded “That could be.” He also said that he “should not have lawyered it.”
A week later, Obama used his executive power to install Bersin in office.
The president made it seem like Republicans were stalling his nominations to score political points.
In the case of Bersin, however, the Senate was merely doing its job.
Ray Lucia Defamation Threat
For more visit: A Professional’s View of Ray Lucia’s Non-Traded REITs
Investor and local radio talk show host Ray “Buckets of Money” Lucia has threatened to sue me for $300,000 for defamation over a blog post I wrote last month.
Robert K. Butterfield, a San Diego attorney, is outraged that I dared to besmirch the good name of Raymond J. Lucia, who dispenses financial wisdom on a daily radio show in several big media markets. This is after all the same man actor Ben Stein recently described in an opinion piece in The New York Times as a “stock guru.”
Attorney Butterfield insists that I must stop pointing out Lucia’s relationship to San Diego-based First Allied Securities, which recently agreed to pay nearly $2 million to settle U.S. Securities and Exchange Commission charges that it failed to supervise one of its employees.
He also demands that I never again repeat the blasphemy that fees for Lucia account run as high as 2 percent, paid quarterly in advance. (Lucia Defamation Threat Letter)
Your statement that Mr. Lucia’s company has never charged a management fee of 2% is completely false and another intentional malicious act. His company has never charged a management fee of over 1% even though they have the ability to charge up to 2% — but you did not bother to check this — did you?
Even though Lucia’s own SEC disclosure plainly states “The standard annual managed fees for RJL [Raymond J. Lucia] Adviser Directed accounts are 2 percent,” Attorney Butterfield has a point. Fees for one “wealth management” program pushed by Lucia actually run as high as 2.9 percent
That is an eye-popping number. It’s about half of the compound rate of return of the Dow Jones Industrial Average for the past 50 years. That fee is assessed on the entire value of whatever you invest with Lucia, even if he loses money. It makes me wonder whose wealth is really being “managed” here.
SD Co. pension responds to my story
Lee Partridge, the investment consultant for the $7.2 billion San Diego County retirement fund, responded at yesterday’s board meeting to my story that appeared April 4 in the Voice of San Diego about the fund’s $2.5 billion bet on leveraged Treasuries.
Lee and I spoke this morning and he sent along the written response that he presented to the board, which appears below. You can also watch his presentation at yesterday’s board meeting by clicking here.
Ex-UT Veteran Edits A Second Pulitzer Story
If they gave out Pulitzers for editing, Susan White, who left The San Diego Union-Tribune in 2007, would have collected her second yesterday.
Susan White
White is now in New York at ProPublica, the online investigative site, where she edited Sheri Fink’s story that claimed a Pulitzer for investigative reporting. This is the first time an online site has won journalism’s top honor.
Ex-NYMet Kevin Mitchell Owes $5m in Taxes
The San Diego Business Journal notes that outfielder Kevin D. Mitchell, the 1989 National League MVP, is No. 6 on the state’s list of the biggest tax debtors.
California says that Mitchell, a San Diego native, owes $5,184,641.51 in taxes.
Mitchell was drafted by the the Mets in the 1980s and was a member of the 1986 world championship team. He spent half a season with his hometown Padres before being traded to the Giants. In 1989, he made this legendary catch.
Mitchell was notorious for his off-the-field behavior. Mets pitcher Dwight Gooden wrote in his 1999 autobiography, Heat, that he witnessed Mitchell decapitate his girlfriend’s cat with a 12-inch knife. Mitchell denied it.
The Golden State (for Workers' Comp)
From an excellent story in The New York Times:
Retired N.F.L. players have flocked to California in recent years as word has spread about its workers’ compensation system. The state is believed to attract more football-related claims than all other states combined because of two quirks that suit them perfectly.
Most states require workers’ compensation claims to be filed within one to five years of the injury; California’s statute of limitations does not begin until the employer formally advises the injured worker of his or her right to workers’ compensation. N.F.L. teams have almost never brought up workers’ compensation — hoping to avoid even more claims, several lawyers said — so long-retired players can file for injuries sustained decades ago. Dozens of veterans from as far back as the 1960s and ’70s, including the star wide receiver Lance Alworth, who retired in 1972 and turns 70 in August, have California cases pending.
California’s other crucial wrinkle requires a professional athlete to have played only one game of his or her career within state borders to file a full claim for cumulative injuries. The law derives from California’s desire to protect outside workers who temporarily pass through the state, like truckers or flight attendants.
Leroy Thompson is an example of how the concept operates to athletes’ advantage. A reserve running back for four non-California teams from 1991 to 1996, Thompson qualified for California workers’ compensation because 4 of his 80 regular-season games were played there. In January, he accepted a $120,000 lump sum to settle his claim. His original 2008 filing asserted cumulative injuries to his “head, neck, back, spine, shoulder, hips, elbows, wrists, hands, legs, knees, ankles, feet” and other body parts.
Leveraging Your Retirement
You’ve probably heard of financial leverage. It’s the stuff that brought down once-mighty investment banks like Lehman Brothers and Bear Stearns.
But what is it? Why is it so dangerous?
And why is a San Diego County retirement fund using $2.5 billion worth of it?
You can read the answers here in my latest story on Voice of San Diego.
The Incredible Bread Machine
I read a lot of economics and finance blogs and one of my favorites is Tyler Cowen’s Marginal Revolution.
Cowen, a voracious reader, recently listed the books that have influenced him most.
Second on the list was The Incredible Bread Machine (available online) “This was the first book I ever read on economics and it got me excited about the topic,” Cowen wrote.
I had never heard of it before, so I ordered a copy online. It’s a libertarian manifesto of sorts, and while I don’t agree with everything in it — I don’t think that free markets are a panacea for everything, for one — the book is well-written and I can see how thought provoking it might be for a young reader.
Surprisingly, the book was published in 1974 right here in San Diego by the Campus Studies Institute of an organization with the vaguely cult-like name of World Research, Inc.
I had never heard of World Research before, so I tracked down Susan Love Brown, one of the authors of The Incredible Bread Machine, who is now an anthropology professor in Florida.
Brown told me that World Research was a non-profit educational foundation that promoted libertarian principles to high school and college students. It was founded by the late Ted Loeffler in San Diego’s Sorrento Valley.
Loeffler was an interesting character. The New York Times visited him in 1966 at the offices of his organization, then named Constructive Action, which the newspaper called “one of nation’s most aggressive, if little-known, conservative groups.” Loeffler was in the midst of a push on college campuses, distributing anti-Communist books like None Dare Call It Treason. He convinced that America was headed for totalitarianism.
The Times noted that Loeffler was a private man, who preferred to let the ideas and books he was promoting do the talking for him.
Loeffler founded World Research Inc. in 1969. Susan Love Brown went to work there in 1974, the year The Incredible Bread Machine came out. World Research acquired the rights to the original book by Richard Grant and updated it and shortened it. It was Grant who suggested that Brown and her five co-authors put their names on the book.
Brown was 26 at the time, which made her the oldest of the group (the youngest was 23). The goal was to engage young people on their own terms:
At the time that we wrote the book, I would say that two of us were libertarians, two conservatives, and two liberals, so we represented the spectrum. We were found by Mr. Loeffler in various ways and all came together to work in this very creative place. Since then, we have all gone our own ways, although some of us are still in touch. At the time that the book was written, I was a member of the Libertarian Party of California. I had founded the Libertarian Party of Kentucky back in 1972 and then moved to California. I don’t belong to any political party at the moment and haven’t for years. I still believe in freedom, both civil liberties and economic freedom, and I am a political and psychological anthropologist. But I didn’t become an anthropologist until many years after I worked at World Research, Inc.
In the preface, the authors said they were motivated by “global economic insecurity, a widespread decline in personal freedom and our own desire for job security.” Resumes were available on request.
The Incredible Bread Machine doesn’t condescend to its young target audience. It assumes they can understand concepts like taxes, monetary policy, and bank reserves if these things are clearly explained.
After the book came out, they also made a film. It’s available on YouTube and stars a young Susan Love Brown and her co-authors. She said the film was a success, and the money was plowed back into the foundation.
World Research no longer exists. It folded in the 1980s. Brown said her years there were a kind “golden age” in her life. She hated to leave work because it was so much fun to work there.
Among the other authors, one is engaged in property management, one is a writer of books on gardening, one became a lawyer, and the other two I have lost track of. I am the only one who became an academic. I don’t think any of us majored in economics; however, we learned a lot about economics from reading and hanging out with some of the best economists in the world. (At one point, we actually made a film with [Austrian economist] F. A. Hayek.)
No economists among them, but their lucid explanation of the “dismal science” inspired at least one future economics professor in a young Tyler Cowen, and probably others as well.
How many future anythings will the modern “defenders of freedom” like Glenn Beck, Rush Limbaugh, Michael Savage, or the rest inspire?
Loeffler saw that books, clear writing and ideas will have a much bigger impact on a young mind. Especially if it’s young people communicating with young people.
What a novel idea.
Bersin In
President Obama used a recess appointment to install Alan Bersin, a former U.S. Attorney in San Diego and schools chief, as commissioner of Customs and Border Protection.
Bersin was nominated for the post Sept. 29. His nomination was hung up in the Senate Finance Committee, which had been busy dealing with health care and hadn’t even scheduled a hearing.
Background here, here and here.
Update: Chuck Grassley, ranking member on the Senate Finance Committee, tells The New York Times that Bersin was answering questions about “what appeared to be conflicting information about his documentation and disclosure” of household employees — questions that, the senator said, were “directly relevant” to the positions they will hold.
Anwar al-Awlaki Timeline
Contents:
Early years in America
Busted for Prostitution
The 9/11 Plot
Yemen
Fort Hood
Christmas Day Bombing
Airstrike in Yemen
April 1971: Anwar al-Awlaki born in Cruces, N.M. while father is on diplomatic posting.
1978: Leaves U.S. for Yemen.
Jan. 13, 1988: Issued U.S. passport.
Awlaki
June 5, 1990: Enters U.S. in Chicago with Yemeni passport with J-1 exchange visitor U.S. visa issued in Sana’a.
June 6, 1990: Applies for Social Security card. Claims he was born in Sana’a, Yemen.
June 8, 1990: SSN 521-77-7121 issued to Awlaki.
Aug. 21, 1991: Enters U.S. in Chicago.
1991: Attends Colorado State University on a scholarship from Yemen.
Jan. 29, 1992: Enters U.S. in New York City.
Nov. 18, 1993: Applies for a U.S. passport in Fort Collins, Colo.
1994: Graduates from Colorado State with bachelor’s in civil engineering.
1996: Named imam of Masjid al-Rabat in San Diego.
1996: Busted for soliciting a prostitute in San Diego.
Time uncertain: Arrested by San Diego police “for hanging around a school.” (9/11 Commission MFR FBI Agent #59)
1997: Busted again for soliciting a prostitute in San Diego.
1998 & 1999: Serves as vice president of Charitable Society for Social Welfare Inc., the U.S. branch of a Yemeni charity headed by Abdul Majeed al-Zindani. Federal prosecutors in a New York terrorism-financing case later describe the charity as “a front organization” that was “used to support al-Qaeda and Osama bin Laden.”
January 1999: Enrolls in San Diego State University master’s in educational leadership program. SDSU spokesman says the school does not have records showing Awlaki earned a degree.
June 1999: FBI investigates Awlaki after learning that he may have been contacted by Ziyad Khaleel, who bought a satellite phone bin Laden used in the 1990s.
1999-2000: During its investigation, FBI learns that Awlaki knows individuals from the Holy Land Foundation and others involved in raising money for the Palestinian terrorist group Hamas. Sources alleged that Aulaqi had other extremist connections. (9/11 Commission Report)
February 2000: Four calls between Awlaki and Omar al-Bayoumi, a Saudi who helped Al-Hamzi and Almihdhar find an apartment in San Diego. An FBI agent tells 9/11 Commission staff he is “98 percent sure” that the two hijackers were using al-Bayoumi’s phone at this time. (9/11 Commission MFR FBI Agent #63)
Early 2000: Visited by a subject of a Los Angeles FBI investigation closely associated with Blind Sheikh [Omar Abdel] Rahman. (Congressional Joint Inquiry on 9/11)
Early 2000: Several sources tell FBI that Alwaki “had closed-door meetings in San Diego” with Alhazmi, al-Midhar and another unidentified person “whom al-Bayoumi had asked to help the hijackers.” (Congressional Joint Inquiry)
Feb. 3, 2000: FBI electronic communication, background searches re: Awlaki. (9/11 Commission report)
March 2000: FBI closes its investigation, stating “the imam … does not meet the criterion for [further] investigation.” (Congressional Joint Inquiry on 9/11)
July-August 2000: Resigns from San Diego mosque.
Summer-Fall 2000: Travels abroad to “various countries.” (SD Union-Tribune 10/1/01)
January 2001: Moves to Virginia. Employed at Dar Al-Hijra Islamic Center in Falls Church, Va., largest mosque in the country.
January 2001: Enrolls in George Washington University’s Graduate School of Education and Human Development, pursing a Ph.D in human resource development.
Unknown: Meets Nidal Hasan, future Fort Hood shooter.
Early 2001: Named Muslim chaplain at GWU.
April 2001: Al-Hazmi and Hani Hanjour arrive in Falls Church and attend Dar Al-Hijra mosque. Awlaki denies having contact with the men in Virginia. (9/11 Commission report)
July 20, 2001: Delivers sermon at Friday Jummah Prayer in U.S. Capitol.
Before Sept. 11, 2001: Awlaki returns briefly to San Diego (9/11 Commission MFR) “Reportedly acted suspiciously by declining help with boxes he was transporting in a rental car (driven only 37 miles) and by refusing to provide any local address to the rental agent.” (9/11 Commission MFR FBI Agent #59)
August 2001: According to NY Times, Awlaki tells neighbor Lincoln Higgie, “I don’t think you’ll be seeing me. I won’t be coming back to San Diego again. Later on you’ll find out why.”
Sept. 17, 2001: In comments published on IslamOnline, Alawki suggested that Israelis may have been responsible for the 9/11 attacks and that the FBI “went into the roster of the airplanes and whoever has a Muslim or Arab name became the hijacker by default.”
Sept. 15-19, 2001: Interviewed four times by FBI. Awlaki says he did not recognize Hazmi’s name but identifies his picture. Admitted meeting with Hazmi several times, he claimed not to remember any specifics of what they discussed. Describes Hazmi as a soft-spoken Saudi student who used to appear at the mosque with a companion but who did not have a large circle of friends. Does not identify Almihdhar.
September-November 2001: Interviewed numerous times by reporters, including National Geographic, Ray Suarez and The Washington Post.
2001-2002: Awlaki observed allegedly taking Washington-area prostitutes into Virginia. Authorities contemplate charging him under the Mann Act, reserved for nabbing pimps who transport prostitutes across state lines.
March 2002: Awlaki leaves for U.K.
March 31, 2002: Lectures at Quran Expo in London
April 2002: Employment with Dar Al-Hijra mosque ends.
2002: Federal prosecutors in Colorado receive information from Ray Fournier, a federal diplomatic security agent in San Diego who was investigating Awlaki for passport fraud.
June 2002: Figures in Operation Green Quest, a terrorism-related money-laundering investigation.
Mid-2002: Radwan Abu-Issa, the subject of a Houston Joint Terrorism Task Force investigation, sends money to Awlaki, according to a document in a restricted government database. Awlaki’s name was placed on an early version of what is now the federal terror watch list.
June 17, 2002: Federal magistrate in Colorado signs warrant for Awlaki’s arrest for passport fraud.
October 2002: A federal diplomatic special agent in Colorado began investigating in preparation to take the case to a grand jury learns Awlaki corrected the place of birth on his Social Security application to New Mexico.
Oct. 8, 2002: FBI electronic communication, interview re: Awlaki. (9/11 Commission Report)
Oct. 9, 2002: Arrest warrant rescinded.
Oct. 10, 2002: Arrives in New York on a Saudi Airlines flight from Riyadh. Briefly detained by INS.
Oct. 11, 2002: Criminal case terminated.
Late 2002: Visits Fairfax, Virginia home of Ali al-Timimi, a radical cleric, and asked him about recruiting young Muslims for “violent jihad.” Al-Timimi, is now serving a life sentence for inciting followers to fight with the Taliban against Americans.
Late 2002: Departs U.S. for London.
June 2003: Delivers lecture at Muslim Association of Britain symposium in London
December 2003: Islamic Forum of Europe lecture: “Stop police terror.”
Dec. 18, 2003: British MP Louise Ellman tells House of Commons calls Muslim Association of Britain is a branch of the Muslim Brotherhood; says Awlaki “is reportedly wanted for questioning by the FBI in connection with the 9/11 al-Qaeda terrorist attacks on New York and Washington.”
Early 2004: Moves to Yemen.
2004: Lectures at Imam University in Sana’a, Yemen, a school headed by Abdul Majeed al-Zindani.
Mid-2006: Awlaki arrested in Yemen. Claims he was held at the request of the U.S. government.
Oct. 17, 2006: Yemeni secret police raid swept up eight foreigners living in Sana’a, under surveillance by the CIA and British intelligence, and at least 12 other men across Yemen. Yemeni authorities insist they dismantled an al-Qa’ida cell and disrupted a gun-running ring to neighbouring Somalia, although no evidence is found. Awlaki (identified as “Abu Atiq”) said to be key to the raid.
September 2007: FBI agents interview Awlaki in prison. Ask about contacts with 9/11 hijackers.
December 2007: Awlaki released after 18 months confinement in Yemen, almost all of it in solitary confinement.
Anwar Awlaki in 2008
February 2008: Registers http://www.anwar-alawlaki.com
February 2008: U.S. counterterrorism officials link Awlaki to terrorism, The Washington Post reports. “There is good reason to believe Anwar Aulaqi has been involved in very serious terrorist activities since leaving the United States, including plotting attacks against America and our allies,” an anonymous U.S. counterterrorism official tells the Post.
Unknown: Awlaki leaves Sana’a and moves to remote Shabwa region.
Dec. 17, 2008: Maj. Nidal Hasan contacts Awlaki via e-mail. “Do you remember me? I used to pray with you at the Virginia mosque.” Awlaki tells Al-Jazeera: “He was asking about killing American soldiers and officers. [He asked] whether this is a religiously legitimate act or not.”
“…the first message was asking for an edict regarding the [possibility] of a Muslim soldier killing his colleagues who serve with him in the American army. In other messages, Nidal was clarifying his position regarding the killing of Israeli civilians. He was in support of this, and in his messages he mentioned the religious justifications for targeting the Jews with missiles. Then there were some messages in which he asked for a way through which he could transfer some funds to us [and by this] participate in charitable activities.”
December 2008: San Diego JTTF opens investigation into intercepted e-mails between Awlaki and Maj. Nidal Hasan. (FBI statement)
Jan. 1, 2009: Awlaki speaks via satellite link at London Muslim Centre. Event organized by Noor Pro Media.
January 2009: In blog post, Awlaki asks: “Today the world turns upside down when one Muslim performs a martyrdom operation. Can you imagine what would happen if that is done by seven hundred Muslims on the same day?!”
January 20, 2009: Al Qaida forces in Yemen unite under the umbrella of Al Qaida in the Arabian Pensinsula (AQAP).
February 2009: Awlaki blog post, “I pray that Allah destroys America and all its allies and the day that happens, and I assure you it will and sooner than you think, I will be very pleased.”
Early 2009: E-mail contacts continue between Awlaki and Hassan. FBI San Diego forwards two messages to Washington Field Office. Later e-mail described as “more serious” not shared.
March 15, 2009: AQAP claims credit for attacks that kills four South Korean tourists and their guide in in the city of Shibam in Hadramut; days later, a convoy of Korean officials sent to investigate is attacked.
July 2009: Awlaki praises insurgent attack on Yemeni troops in Marib.
Aug. 4: Umar Farouk Abdulmutallab, Nigerian suspected of trying to blow up Northwest Airlines Flight 253, attends Sana’a Institute for the Arabic Language, according to the Yemeni Foreign Ministry.
August: The U.S. National Security Agency intercepts al-Qaida conversations about an unidentified “Nigerian.”
Aug. 27: AQAP claims credit for an attack that narrowly missed Prince Mohammed bin Nayef, a senior member of Saudi Arabia’s ruling family and head of the kingdom’s counterterrorism operations. Suicide bomber detonated PETN bomb hidden in his underwear.
Sept. 21: Abdulmutallab leaves Sana’a Institute.
Fall: NSA intercepts “voice-to-voice communication” between Abdulmutallab and Awlaki indicating that Aulaqi “was in some way involved in facilitating this guy’s transportation or trip through Yemen.”
October: Abdulmutallab travels to Shabwa province. The 23-year-old engineering graduate probably met with al-Qaeda operatives in a house built by Awlaki.
October: CIA rebuffs Yemeni government request for help locating Awlaki for possible capture operation, according to The Washington Post’s David Ignatius. CIA concluded that it could not assist because the agency lacked specific evidence that he threatened the lives of Americans. A Yemeni request forU.S. Special Forces’ help on the ground in pursuing Awlaki also refused.
Fall: Awlaki tells Yemeni journalist that he met Abdulmutallab:
- “Umar Farouk is one of my students; I had communications with him,” Awlaki says
- Yemeni Foreign Minister Rashad Alimi states Abdulmutallab met Awlaki at a remote meeting place in Shabwa province.
- Abdulmutallab tells FBI that Alwaki personally blessed attack.
November: U.S. official tells David Ignatius Awlaki “didn’t go operational until November. It wasn’t a case of missed intelligence, not at all. The Yemenis didn’t even think he had assumed an operational role.” This official also notes that “there was an American policy decision not to put boots on the ground,” limiting any military action.
Nov. 5, 2009: Hasan allegedly kills 13 at Fort Hood.
Nov. 7, 2009: Post on Awlaki’s website praises Hasan as a “hero.”
After the Fort Hood shooting, FBI, CIA, NSA, NCTC conduct interagency “scrub” of Awlaki’s contacts to determine who poses a threat. (Michael Leiter, testimony 1/20/09 before Senate Commerce, Science and Transportation Committee.)
Dec. 7, 2009: Abdulmutallab leaves Yemen for Ethiopia.
Dec. 14, 2009: Secretary of State Hillary Clinton designates Al Qaeda in the Arabian Peninsula aka Al Qaeda in Yemen as a terrorist organization. Two AQAP leaders, Nasir al-Wahishi and Said Ali al-Shihri, also designated as terrorists
Dec. 23, 2009: Al-Jazeera broadcasts interview with Awlaki.
Dec. 24, 2009: Awlaki falsely reported as killed in Yemeni airstrike.
- On orders from President Barack Obama, ABC News reports, the U.S. military launched cruise missiles against two suspected al-Qaida sites: a suspected training camp north of Sanaa and a location where officials said “an imminent attack against a U.S. asset was being planned.”
- Yemen Embassy states Yemeni air forces targeted “scores of Yemeni and foreign al-Qaida operatives” at a remote location southeast of Sanaa. Awlaki “presumed to be at the site” along with Nasir al-Whaishi, senior leader of Al Qaida in the Arabian Pensinsula (AQAP) and his deputy, (former Guantanamo detainee) Said al-Shiri.
- Official Yemen state news agency, SABA, reports attack targeted an al-Qaida hideout in the Rafdh area of the al-Said district in Shabwa province.
Dec. 25, 2009: Rep. Pete Hoekstra, senior Republican on House Intelligence Committee, suggests there may be a link between Awlaki and Umar Farouk Abdulmutallab.
Dec. 29, 2009: Alwaki became “operational” sometime over past year, senior U.S. official tells Fox News.
“Late” 2009: Awlaki’s name added to separate lists of maintained “High Value Targets” and “High Value Individuals” maintained by U.S. Joint Special Operations Command’s list and the Central Intelligence Agency
Jan. 3, 2010: “Mr. Awlaki is a problem. He’s clearly a part of Al Qaida in Arabian Peninsula. He’s not just a cleric. He is in fact trying to instigate terrorism,” said John Brennan, deputy national security advisor for counterterrorism and homeland security.
Jan. 14: Ali Mohamed Al Anisi, the director of Yemen’s National Security Agency and a senior presidential adviser, said talks were under way with members of Mr. Awlaki’s tribe in an effort to convince the cleric to turn himself in.
Jan. 19: Awlaki tells Yemeni journalist he has no intention of surrendering and denies Yemeni government claims that negotiations were underway aiming at a surrender.
Jan. 20: Senate Foreign Relations Committee report: “Although Awlaki has not yet been accused of a crime, U.S. intelligence and military officials consider him to be a direct threat to U.S. interests.”
Jan. 25: ABC News reports, “White House lawyers are mulling the legality of proposed attempts to kill an American citizen, Anwar Awlaki … according to two people briefed by U.S. intelligence officials.”
Jan. 27: The Washington Post:
- “U.S. military teams and intelligence agencies are deeply involved in secret joint operations with Yemeni troops who in the past six weeks have killed scores of people….”
- “As part of the operations, Obama approved a Dec. 24 strike against a compound where a U.S. citizen, Anwar al-Aulaqi, was thought to be meeting with other regional al-Qaeda leaders. Although he was not the focus of the strike and was not killed, he has since been added to a shortlist of U.S. citizens specifically targeted for killing or capture by the JSOC, military officials said.”
- “Both the CIA and the JSOC maintain lists of individuals, called “High Value Targets” and “High Value Individuals,” whom they seek to kill or capture. The JSOC list includes three Americans, including Aulaqi, whose name was added late last year. As of several months ago, the CIA list included three U.S. citizens, and an intelligence official said that Aulaqi’s name has now been added.”
Jan. 31: LA Times: “While Awlaki has not yet been placed on the CIA list, the officials said it is all but certain that he will be added because of the threat he poses. … Awlaki is already on the military’s list, which is maintained by the U.S. Joint Special Operations Command.”
Feb. 2: Awlaki tells Al-Jazeera that he did not order the Christmas Day airliner bombing, but expresses support.
Feb. 3: Director of National Intelligence Dennis Blair says intelligence community may assassinate U.S. citizens involved in terrorism. “We take direct actions against terrorists in the intelligence community,” he said. “If we think that direct action will involve killing an American, we get specific permission to do that.”
Feb. 5: CBS News: “The suspect in a failed Christmas Day airliner bombing attempt told federal investigators that radical Yemeni cleric Anwar al-Awlaki directed him to carry out the attack, CBS News has learned”
March 19: Awlaki calls on American Muslims to take up Jihad against the United States.
March 26: CIA Director Leon Panetta tells WSJ Awlaki is “clearly” someone the agency is seeking. “There isn’t any question that he’s one of the individuals that we’re focusing on.”
May 23: Al-Qaeda in the Arabian Peninsula released a 45-minute interview with Awlaki, who justifies killing American civilians.
June 3: DOJ reveals that Awlaki had been in e-mail contact with 29-year-0ld Barry Walter Bujol in Texas. Awlaki provided Bujol with a document entitled “42 Ways of Supporting Jihad.” Bujol asked Awlaki for advice on how to provide money to the “mujahideen” overseas.
CIA Passed Up Chance To Catch Ex-SD Imam
Last October, the Yemeni government came to the CIA with a request: Could the agency collect intelligence that might help target the network of a U.S.-born al-Qaeda recruiter named Anwar al-Aulaqi?
What happened next is haunting, in light of subsequent events: The CIA concluded that it could not assist the Yemenis in locating Aulaqi for a possible capture operation. The primary reason was that the agency lacked specific evidence that he threatened the lives of Americans — which is the threshold for any capture-or-kill operation against a U.S. citizen. The Yemenis also wanted U.S. Special Forces’ help on the ground in pursuing Aulaqi; that, too, was refused.
Even if the CIA had obtained hard evidence in October that Aulaqi was a threat, and Special Forces had been authorized for a capture operation, permission from the National Security Council would have been needed. That’s because any use of lethal force against a “U.S. person,” such as Aulaqi, requires White House review.
The subsequent chain of events was a chilling demonstration of Aulaqi’s power as an al-Qaeda facilitator: On Nov. 5, U.S. Army Maj. Nidal Hasan killed 13 of his fellow soldiers at Fort Hood, Tex.; Hasan had exchanged 18 or more e-mails with Aulaqi in the months before the shootings, according to the Associated Press. Then, on Christmas Day, Umar Farouk Abdulmutallab, a Nigerian who had been living in Yemen, tried to blow up an airliner bound for Detroit; he is said to have confessed later that Aulaqi was one of his trainers for this mission.
SD's Bill Lerach
Fresh out of prison, San Diego’s Bill Lerach did a Q&A with me at Voice of San Diego.
Lerach ran the West Coast arm of Milberg Weiss and was once the foremost class-action securities lawyer in America.
He talks about the law, his conviction in a scheme to pay kickbacks to plaintiffs, and who he would like to sue now.
Plus, here’s my review of the revealing new book about Lerach, Circle of Greed.
Coughlin Stoia Still Dominates (For Now)
A new report out today shows that San Diego’s Coughlin Stoia, the law firm of attorney Bill Lerach, continues to dominate the field of class-action securities lawsuits even with its former superstar out of the picture.
Coughlin Stoia originated a quarter of all cases settled in 2009, according to this report by Cornerstone Research.
Class-action securities settlements last year totaled $3.829 billion.
The median settlement was $8 million. The study found that the presence of a “highly active” firm like Coughlin Stoia didn’t increase the chances of winning a big settlement.
Coughlin Stoia, formerly the West Coast offices of Milberg Weiss, was renamed after Lerach pleaded guilty to conspiring to conceal kickbacks to plaintiffs.
A separate Cornerstone Research study suggested that the glory days of big class-action settlements — like Coughlin Stoia’s $7.2 billion judgment against Enron Corp. — may be over.
These cases are no longer a race to the courthouse. New class-action filings in 2009 were marked by a much longer lag between the filing date and the end of the period covering the alleged fraud.
Coughlin Stoia was involved in a majority of the cases with long filing lags. Historically, cases with a longer filing lags are more likely to be dismissed.
Cornerstone concludes:
“The recent surge in filing lags potentially suggests that the pool of current litigation opportunities is shrinking and that plaintiff law firms are revisiting cases involving more distant price drops that were previously viewed as being lower in priority because, among other reasons, they are more likely to be dismissed.”
Brent Wilkes, Master of Delay
The appeal of Brent Wilkes, who was convicted in 2007 of bribing former Rep. Randy “Duke” Cunningham, has been delayed again.
The former defense contractor remains free on $2 million bail.
The 9th U.S. Circuit Court of Appeals said earlier this month that it won’t hear the appeal until the U.S. Supreme Court issues its rulings in the appeals of former Enron CEO Jeff Skilling and former Rep. Bruce Weyrauch.
Those cases involve the crime of depriving the public of the right to “honest services,” the same law federal prosecutors in San Diego used against Wilkes.
Wilkes’s briefing papers now are due before the 9th Circuit about a month after the Supreme Court issues its rulings in Skilling and Weyrauch. The earlier deadline was today.
With more arguing back and forth and the average wait of a year for a ruling from the court, it will be a long time before Wilkes sees the inside of prison again.
It’s a pretty sweet deal for Wilkes, who is being represented by the federal public defender’s office in San Diego.
Cunningham is due to be released in 2013, according to the U.S. Bureau of Prisons website.
Amazingly, it’s looking increasingly likely that Duke may finish serving his sentence before Wilkes starts serving his.
Former SD Imam Calls for Jihad on US
Partial transcript of remarks by former San Diego imam and SDSU grad student Anwar al-Awlaki, who’s holed up in Yemen and corresponded with Maj. Nidal Hasan before the Fort Hood shooting (Via Fox News):
… I for one was born in the U.S., I lived in the U.S. for 21 years. America was my home. I was a preacher of Islam involved in non-violent Islamic activism. However, with the American invasion of Iraq and continued U.S. aggression against Muslims I could not reconcile between living in the U.S. and being a Muslim.
And I eventually came to the conclusion that Jihad against America is binding upon myself just as it is binding on every other able Muslim. Nidal Hasan was not recruited by Al-Qaeda. Nidal Hasan was recruited by American crimes and this is what America refuses to admit. America refuses to admit that its foreign policies are the reason behind the man like Nidal Hasan — born and raised in the U.S. turning his guns against American soldiers. And the more crimes America commits the more mujahedeen will be recruited to fight against it. …
SD County Pension Boosts Leverage
This is probably not a good idea:
The San Diego County Employees Retirement Association has adopted a new asset allocation that adds leverage to the $7.2 billion fund, Pensions & Investments reports. The leverage brings the total target allocation to 135 percent.
Pension funds are supposed to be boring, long-term investors. Not SDCERA. Taking on leverage is not a sure, safe way to save money for retirement. It is an aggressive, high risk strategy. It means you are essentially wagering more money than you have. Ask Lehman Brothers how that feels.
Leverage is a way of boosting returns by taking on more risk. The net expected return from this new strategy is now 10 percent (up from 8.25 8.5 percent), which is supposed to add an additional $1 billion over the next 10 years. But that’s if — and it’s a big if — if everything goes as planned.
A few years ago, the flavor of the month was hedge funds. Investment guru David Deutsch plowed 20 percent of the fund into hedge funds, including winners like Amaranth, which imploded when a single trader lost $6 billion in a bad bet on natural gas prices, and WG Trading, whose managers were arrested for fraud.
Instead of taking its lumps, however, SDCERA has spent two and a half years suing to get its money back from Amaranth. A federal judge in New York threw out SDCERA’s lawsuit against Amaranth today, but the pension says it will appeal.
Well, they don’t have Deutsch to blame anymore. He got booted out last year when the fund lost 25 percent. The board decided to outsource his job to Lee Partridge, a guy who didn’t even apply for the job and who stands to earn as much as $1.2 million.
Did You Know…
Disneyland is part of the U.S.-Mexico border?
According to federal codes and regulations, it is.
Customs and Border Patrol agents searching for aliens can board any plane, vehicle, railway car, or conveyance a “reasonable distance” from the border.
The Fourth Amendment to the U.S. Constitution typically requires a warrant for such searches, but an exception is written into federal law. (See here.)
To find out how far that is is you have to look at US Code of Federal Regulations.
Turns out a “reasonable distance” is within 100 “air miles” from any external boundary of the United States.
That includes Huntington Beach, Newport Beach, Irvine, Costa Mesa and half of Catalina Island.
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?”
Laura Duffy, Salon Owner
I wonder how many U.S. attorney nominees are part owners of a hair salon.
Main Justice reports that Laura Duffy, President Obama’s nominee for U.S. Attorney in San Diego, reported receiving a $23,637.50 distribution in 2009-2010 from Gila Rut, an Aveda salon in Chula Vista. Duffy has a 45 percent ownership stake in Gila Rut in Chula Vista.
She also reported earning $35,400 from nine speaking engagements at the Aveda Business College Seminar.
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.
Partying With SD's Coughlin Stoia
“Paying Plaintiffs to Sue,” Forbes:
Conferences, at least, bear the patina of educational merit and an opportunity to curry favor with the officials who help pick legal counsel. Coughlin Stoia Geller Rudman & Robbins hired Bill Clinton (who reportedly charges $150,000 and up) to appear at a seaside event at San Diego’s Hotel del Coronado last September.
This forum on “The Future of Corporate Reform” had pension officials enjoying an oceanside clambake, closing day at Del Mar racetrack, a ride on an America’s Cup-winning vessel, balloon rides and a four-course French banquet. Coughlin Stoia’s conference partner: the Corporate Library, a for-profit governance watchdog. Coughlin Stoia insists clients hire it for its winning record. The Corporate Library characterizes the conference as “an intensive, engaging and informative event that combined many hours of speeches, panels and dialogue with opportunities for informal conversation.”
More on the Future of Corporate Reform
Meduse in SD
Docked along San Diego Harbor Drive today was the Meduse, a yacht owned by Microsoft co-founder Paul Allen. Unsure if he’s current owner.
Massa Party
Listen, Read, Watch
What it feels like spend 25 minutes in a runaway Toyota Prius on a San Diego interstate — KGTV (.mp3)
Stu Segall once made porn films like this. Now he trains U.S. troops at his studio in San Diego — WSJ
Laura Duffy, Obama’s nominee for U.S. Attorney in San Diego, is one tough lady — Main Justice.
Forget Elmo. Tickle me, ex-Rep. Massa! (A proud former San Diegan) — Gawker
Lerach is back — Reuters
Eric Massa's San Diego ties
The strange saga of former Rep. Eric J.J. Massa, now reportedly under investigation for allegedly groping male staffers, is being closely followed in San Diego’s Navy community.
His father, Emiddio “Mead” Massa and his father-in-law, Adolf “Jake” Jacobsen, are retired Navy captains. Eric married Jacobsen’s daughter, Beverly.
Eric Massa graduated in 1981 from the U.S. Naval Academy. He retired in 2003 when he was diagnosed with non-Hodgkins lymphoma.
“Massa and his family moved to San Diego to be near his and Beverly’s parents, and he spent six months undergoing surgery, radiation and chemotherapy. They bought a one-story house because Massa had trouble walking up stairs,” Money magazine wrote in a 2006 profile.
Diagnosed as cancer-free, Massa decided to run for Congress in upstate New York. The couple sold the San Diego home and plowed the proceeds into Massa’s campaign, according to Money.
Ray Lucia's brokerage settles SEC charges
*** Update: An attorney for Ray Lucia has threatened to sue me over this blog post. See his letter and my response here. ***
First Allied Securities, a San Diego-based brokerage firm, has agreed to pay nearly $2 million to settle charges that it failed to supervise one of its employees.
The SEC found that between 2005 and 2008, former First Allied broker Harold Jaschke engaged in unauthorized and unsuitable trading on behalf of two Florida municipalities, putting them at risk of losing millions of dollars while he reaped commissions of more than $14 million for himself.
The SEC administrative order issued Friday hasn’t attracted much interest locally, but it’s worth a look because of its relationship with investor/radio host Ray “Buckets of Money” Lucia.
First Allied is owned by FAS Holdings, which is in turn owned by Chicago-based Advanced Equities Financial Corp. A 2008 story in Forbes magazine on Advanced Equities quoted an anonymous broker for the company as saying, “This place is a stereotypical bucket shop.”
Advanced Equities is also the subject of a series of complaints filed with financial industry regulators by San Diego’s Mirch Law Firm that mention Lucia, who hosts a radio and TV show in major media markets.
Lucia offers investment advice, including his trademarked “Buckets of Money” strategy through his show and at seminars, like this one in San Diego March 20 with actor Ben Stein.
According to SEC filings, Lucia solicits business for First Allied, and receives a cut of some of the fees in return. Fees for a Ray Lucia account run as high as 2 percent, paid quarterly in advance.
Buckets of money, indeed.
Toyota sudden acceleration lawsuit in SD
Toyota would be crazy if it ever let this lawsuit filed by relatives of CHP Officer Mark Saylor get anywhere near a San Diego jury.
Saylor and three family members were killed last year when a Lexus ES 350 accelerated out of control in Santee, east of San Diego.
This horrific 911 call recorded the family’s final minutes as they sped into an intersection on northbound SR-125. The final words heard from the vehicle were “hold on” and “pray.”
The 272-horsepower Lexus was moving at between 112 and 150 (!) miles per hour when it crashed and burst into flames, likely due to overheated brakes, according to the crash report.
Bob Baker Lexus of El Cajon better have good lawyers too.
The crash vehicle was a loaner from Bob Baker. Investigators found that the dealership installed the wrong floor mats, causing the accelerator to become stuck.
Another customer who had borrowed the crash vehicle four days earlier told Sheriff’s investigators that the accelerator had gotten stuck under the floor mat, a fact he reported to the Bob Baker receptionist.
The crash report also noted that electronic or computer-generated malfunction “should not be ruled out.”
The lawsuit was filed Tuesday in San Diego Superior Court by Jim Gomez and Tim Pestotnik, a pair of local attorneys. Pestotnik declined to tell the Wall Street Journal whether settlement talks with Toyota had already occurred.
Where's Alan?
Three former directors of the nation’s customs and border patrol agency say the Senate is taking far too long to confirm Alan Bersin as commissioner.
Obama nominated Bersin, a former U.S. Attorney and schools chief in San Diego, in September.
The nomination is stalled in the Senate Finance Committee, which hasn’t even scheduled a hearing. A staffer tells Government Executive that the committee is “reviewing Bersin’s paperwork.”
Raymond Kelly, Robert Bonner and W. Ralph Basham, who led the agency from 1998 to 2009, have written letters urging senators to get a move on.
Having experienced the nomination process ourselves, we would hope that the “forest” of filling this critical position expeditiously is not getting lost in the “trees” of pre-hearing questions designed to elicit policy positions or parochial commitments from the nominee before he even has the benefit of knowing the agency from the inside.
Parochial commitments? What’s up with that?
San Diego a mecca for gay prosecutors?
Human Rights Campaign, a gay rights group, praised President Obama today for nominating Laura E. Duffy, an out lesbian, for U.S. Attorney for San Diego.
If confirmed by the Senate, Duffy would be the second openly gay person to serve as a U.S. attorney, DC Agenda reported last week. The Senate confirmed Jenny Durkan last year as U.S. attorney for the Western District of Washington.
San Diego’s District Attorney Bonnie Dumanis made national headlines in 2002 when she became the first openly gay district attorney elected in the United States. Her sexuality hasn’t been much of an issue.
Duffy, who has earned high marks for her prosecution of the Arellano-Felix drug cartel, would have been disqualified during the Bush administration. The DOJ’s Inspector General found that two former aides to Attorney General Alberto Gonzales had used sexual orientation as a litmus test in personnel decisions.
AG Subpoenas Encore Capital Group
Haven’t seen this anywhere.
San Diego-based Encore Capital Group, which collects on bad credit card debts, has disclosed that it is the subject of a state investigation:
On January 6, 2010, the Office of the Attorney General of the State of California, the “California Attorney General,” issued a subpoena to us to answer interrogatories and to produce documents in a proceeding entitled “In the Matter of the Investigation of Encore Capital Group, Inc., Midland Credit Management, Inc. [an Encore subsidiary] and Affiliated Persons and Entities” concerning our debt collection practices and related topics. We intend to cooperate fully with the California Attorney General in response to this subpoena, subject to applicable law.
The Federal Trade Commission has also ordered Encore to submit information about its practices. “Consumers have reported that debt collectors frequently try to collect from the wrong consumers or the wrong amounts, or both,” the FTC reports. Encore is one of the nine biggest consumer debt buyers that collectively buy 75 percent of all consumer debt sold in the United States.
Business at Encore, as you might expect, is good. Net income in 2009 was $33 million up 238 percent from $13 million the previous year.
Encore has several strategies to collect on bad credit card debts, relying principally on a network of lawyers in the United States and a call center in Gurgaon, India and elsewhere.
It costs Encore about 50 cents for every dollar it recovers. Last year it collected nearly half a billion dollars.
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.
(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:
- China Petroleum & Chemical Company (Sinopec), Asia’s biggest oil refiner, which signed four exploration contracts in Iran.
- CNPC Hong Kong Ltd., which has a service contract for the Masjed Soleiman oilfields and is developing gas fields.
- 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.
Washington Post Corrects Awlaki Story
The Washington Post has corrected its blockbuster Jan. 27 front-page story that reported that three U.S. citizens, including former San Diego imam Anwar Awlaki, were on the CIA’s “kill or capture” list.
Awlaki, a U.S. citizen who lived in San Diego in the 1990s and attended graduate school, is now living in a remote area in Yemen.
U.S. authorities believe he served as a “spiritual advisor” to some of the 9/11 hijackers and he corresponded with Maj. Nidal Hasan, the alleged Fort Hood shooter. There are also reports, which Awlaki has denied, that he directed the attempted Christmas Day jetliner bombing.
Even though he’s apparently not on a CIA list, Awlaki may still be marked for death. The military’s Joint Special Operations Command also maintains a separate list of high-value targets (HVTs) targeted for kill or capture. The Post is sticking by its original reporting that “several” Americans are on it.
Still it’s an embarrassing correction. ProPublica’s Stephen Engleberg sympathizes with the Post reporter, Dana Priest, and compares covering the intelligence community like fumbling around in a dark room.
He also notes some of the discrepancies that I pointed out earlier between Priest’s story and a Jan. 31 follow by the LA Times’ Greg Miller.
I still have doubts about this whole assassination story. As a U.S. citizen, Awlaki is protected under the Fifth Amendment to the Constitution. Like it or not, even traitors have rights in our country.
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.
Former Rep. Charlie Wilson Dead at 76
First John Murtha. Now former Texas Rep. Charlie Wilson has died at 76.
The ethically-challenged Wilson was made famous by the excellent book by the late George Crile (and the movie) Charlie Wilson’s War, which revealed how he secretly supplied the funds for the CIA’s covert war in Afghanistan in the 1980s.
He appears a couple of times in my book, Feasting on the Spoils, most memorably in a a scene at a poker game at the Watergate Hotel. The Watergate was a home away from home for San Diego defense contractor Brent Wilkes and his CIA buddy, Kyle “Dusty” Foggo.
Wilkes and Foggo continued their long-standing tradition of weekly card games in Washington. Foggo would invite along friends from the CIA, and Wilkes would bring the congressmen. One of the congressional guests was Charlie Wilson, who had in 1993 received the CIA’s Honored Colleague Award, the first time it was ever awarded to anyone outside the agency. At one game, Wilson invited along his friend from Texas Joe Murray, a columnist for The Atlanta-Journal Constitution. Murray met Wilson in the hotel lobby. “I’m not sure how they chose the Watergate,” Murray wrote in a May 20, 1994 column, a few days after the poker game. “Perhaps because a sense of history. Either that or a sense of humor.”Murray followed Wilson into the suite, which was filled with cigar smoke. Wilson knew a few of the CIA personnel at the game. One was Brant Bassett, a well-regarded officer who spoke fluent Russian, German, and Hungarian. Bassett was known as Nine Fingers after a motorcycle accident had cost him a finger. Wilson brought gifts, a sack full of guns that included a Soviet automatic used by Russian paratroopers. Wilson had a special pen for everyone, one that with a click fired a .32-caliber bullet. Everyone in the room started clicking his pen.
“Boy, I wish I’d had it this afternoon,” someone said.
“If only Aldrich Ames were here.”
Murray and Wilson stayed only a short while, and as they were leaving, one of the agents offered Murry one of his cigars, a Dominican. Murray offered the agent one of his, a Cuban. The agent told him, “You know, of course, this is considered contraband. But you’ve done the right thing as a good citizen. You’ve turned it in to the proper authorities. Be assured that very shortly it will be destroyed by fire.”
Wilson insisted there was no hanky-panky the night he was there. “The only activities that took place there that would be considered illegal and unlawful was cigar smoking on a nonsmoking floor,” Wilson said. Cunningham was the only other congressman who ever attended the poker games, according to Wilkes.
The “hanky-panky” Wilson is referring to were the rumors that flew around Washington that congressmen were supplied with prostitutes at these games. The FBI never found any evidence of this (the government certainly would have used it against Wilkes if they had) but people still think it’s what happened anyway.
After my book came out, Wilkes’ nephew and right-hand man, Joel Combs, testified that Wilkes told his employees to lose to Duke at poker and he yelled at one man who wasn’t losing enough.
Wilkes was sentenced to 12 years for bribing Cunningham; Foggo is serving time in prison for steering CIA contracts to Wilkes.
As for Charlie Wilson, he didn’t remember Wilkes; Foggo, however, he remembered well when I interviewed him in 2006.
When I told Wilson that Foggo had a rather unsavory reputation, Wilson said that the CIA sometimes had need of people like that in the CIA to do the dirty work against the KGB. (Foggo was no James Bond, however; he was a logistics officer.)
Ah, well, I’m sorry Charlie is gone. He made Congress fun.
Al-Jazeera Speaks to Ex-SD Imam
Excerpts of Al-Jazeera interview with Anwar Awlaki on Feb. 2, 2010. Translated and released by NEFA Foundation. Awlaki lived in San Diego in the 1990s.
Q. What is the truth about you meeting with Omar Farooq [the suspect in the attempted Christmas Day airline bombing] or that you announced a Fatwa about the legitimacy of the operation?A. The mujahid brother Omar al-Farooq—may Allah release him—is one of my students; yes, we were in correspondence, but I did not give Omar Farooq a Fatwa in regards to this operation.
Q. You envision him as a mujahid; meaning, do you back him up?
A. I support what Omar Farooq has done after I witnessed my brothers in Palestine for more than 60 years being killed, and in Iraq they are being killed, and in Afghanistan they are being killed, and the American missiles and raids killed 17 women and 23 children in my tribe; thus, don’t ask me whether al-Qaeda killed, or if it bombed an American civil jet after all of that, as three hundred Americans are nothing before the thousands of Muslims they killed.
Q. You supported [alleged Fort Hood shooter] Nidal Hasan and you justified it that the target is military and not civic. In regards to the jet [incident] of Omar Farooq it is a civic jet; meaning, the targets are the American public?
A. If the jet was military or the target was for the American army, it would be better. And, al-Qaeda Organization has its choices, and in regards to the public, the American populace is living within a democratic regime and they hold the responsibility of its policies; the American populace elected the criminal Bush for two presidential runs, and they elected Obama who’s not different from Bush, and one of his first declarations were that he will not abandon Israel despite that there were other candidates in the American elections who oppose the foreign American wars and those only received low percentages of the total votes. The American populace is a participant in all the crimes of their government, but if they weren’t supportive of that then they should change their government; they are the ones who pay taxes that are being spent on the army and they are who send their children to the army; they carry the responsibility.
Q. Do you believe that the Yemeni Government is facilitating your assassination?
A. The Yemeni government sells its own citizens to America in order to eat bloody money it received from the west, with their blood. The Yemeni officials say to the Americans: attack whatever you desire but do not adopt the actions thereof in order to not have people revolt against us, and with total impertinence the Yemeni government adopts it. For example, the Cruise Missiles were seen by the people in the region in Shabwa and Abeen and Arhab, and the some of the Cluster Bombs remained undetonated and people saw them. The state is lying in its claims, and the state adopted the operation in order to refute the accusation of being a cooperative. The American surveillance jets always revolve in the Yemeni sphere; so what is this country that allows its enemy to eavesdrop on its people and invade their privacies, then considers this cooperation accepted?
Coughlin Stoia and the Angelides Commission (Updated)
You scratch my back, I’ll scratch yours.
Buried at the end of a WSJ story today are more revelations about the close ties between a San Diego law firm and former California Treasurer Phil Angelides, who chairs the U.S. Financial Crisis Inquiry Commission.
Coughlin Stoia Geller Rudman & Robbins’ filed suit in July 2006 against UnitedHealth Group on behalf of CalPERS, the giant California pension fund.
A month later, Coughlin Stoia and its attorneys contributed $107,000 to the gubernatorial campaign of Phil Angelides, who was a member of Calpers’s board.
Asked whether the donations were related to the hiring of the law firm, a spokeswoman for Mr. Angelides declined to say, but said that Mr. Angelides “was one of a number of members of the Calpers board and he had tens of thousands of donations during the eight years he was treasurer.”
The UnitedHealth suit was settled in August for $925 million. Calpers’s share of that came to $3.2 million.
The legal fee was $65 million. Most of it went to Coughlin Stoia.
Angelides received about $250,000 in total contributions for his failed gubernatorial campaign in 2006 from Coughlin Stoia lawyers:
- Byron Georgiou, a commissioner on the Angelides panel, is of counsel to Coughlin Stoia, serving as the “primary liaison” with a number of the firm’s main institutional clients.
- Georgiou, who’s based in Las Vegas, gave $44,600 to Angelides for Governor, according to campaign finance records.
- Nearly half of that came after Coughlin Stoia was picked to represent CalPERS in the UnitedHealthcare lawsuit.
Christopher Seefer, a Coughlin Stoia partner, was appointed by Angelides to serve as the Financial Crisis Inquiry Commission’s assistant director and deputy general counsel.
Coughlin Stoia was formed in 2004 when the high-profile securities-litigation firm Milberg Weiss Bershad Hynes & Lerach split up.
Bill Lerach was sentenced to two years in prison for paying cash kickbacks to plaintiffs in an effort to gain control of big lawsuits and win larger fees in 150 cases over 20 years. His partner in crime, Melvyn Weiss, got two and a half years.
The James S. Copley "Library"
Kudos to David Copley for selling the private $15 million rare book and manuscript collection his parents amassed.
The James S. Copley Library served virtually no one in San Diego.
It was a world-class collection locked away inside the headquarters of the Copley Press, the private company that published The San Diego Union-Tribune and other newspapers.
It could have and should have been used to inspire and educate future newspaper readers.
That, apparently, wasn’t in keeping with the spirit of David’s mother, Helen Copley, who commissioned the library as a monument for her late husband.
Only now is it becoming clear just how incredible a collection it was:
- One of a few surviving broadside Declarations of Independence printed in the weeks after July 4, 1776 (estimated value $600,000-$800,000)
- A significant collection of papers and correspondence belonging to Henry Strachey, Secretary to the British Commission for Restoring Peace in America (est. $700,000/1.2 million)
- Abraham Lincoln instructing General McClellan to either attack Richmond or come back to defend Washington (est. $500/700,000)
- A listing by Father Junipero Serra on March 1, 1777 of all of the missions he founded in Alta California (est. $250/350,000)
- Walt Whitman writing his mother in 1864 about Grant, Lee and the Battle of the Wilderness (est.
$18/25,000) - Mark Twain’s unpublished manuscript, “A Family Sketch”; an intimate and introspective memoir of his family and his own boyhood days (est. $120/160,000)
- Albert Einstein’s autograph speech delivered to the California Institute Associates on 25 January 1932 (est.
$40/60,000)
Here’s hoping that the future owners of this incredible collection are more public-minded.
Where's Alan?
The nomination of Alan D. Bersin, a former U.S. Attorney and schools chief in San Diego, seems to have gotten hung up in the Senate.
President Obama nominated Bersin to be Commissioner of Customs and Border Protection back on Sept. 29th. There’s been no action since then.
Bersin’s nomination was received by the Senate Finance Committee, which oversees Customs.
Sen. Max Baucus of Montana, the committee chairman, apparently sees no urgency in scheduling a hearing for the head of an agency with a priority mission of preventing terrorists and terrorist weapons from entering the United States.
Meanwhile, Bersin continues to serve as DHS Assistant Secretary for International Affairs and Special Representative for Border Affairs. He held virtually the same job in the Clinton administration while serving as U.S. Attorney for San Diego.
Before joining DHS, Bersin was California’s education secretary.
How Ex-SD Imam Will Be Marked For Death
The LATimes follows up today with an excellent story on how the bullseye will be planted on Anwar Awlaki, the former San Diego imam who U.S. counterterrorism officials believe has joined al Qaida’s forces in Yemen.
First, ABC News and then The Washington Post reported last week that the Obama administration is considering whether to order a Predator strike on Awlaki, a case that’s complicated by the fact that he’s a U.S. citizen.
The LATimes’ Greg Miller provides more detail on the process of how the CIA marks suspected terrorists for death in its “targeted killing” program:
- Memos proposing new targets are drafted by analysts in the CIA’s Counter-Terrorism Center.
- CTC analysts typically submit several new names each month to high-level officials, including the CIA General Counsel, Stephen W. Preston, and sometimes Director Leon E. Panetta.
- The list is scrutinized every six months; some names are scrubbed if the intelligence grows stale.
- The program is overseen by the National Security Council.
- The CIA does not need White House approval when adding names to the target list, unless the individual is a U.S. citizen.
Miller’s story contradicts a Jan. 27 story by Dana Priest at The Washington Post on a key point:
Miller: “No U.S. citizen has ever been on the CIA’s target list, which mainly names Al Qaeda leaders, including Osama bin Laden, according to current and former U.S. officials. But that is expected to change as CIA analysts compile a case against a Muslim cleric who was born in New Mexico but now resides in Yemen.”
Priest: “As of several months ago, the CIA list included three U.S. citizens, and an intelligence official said that Aulaqi’s name has now been added.”
Also are targeting decisions based on whether on an individual is “deemed to be a continuing threat to U.S. persons or interests,” as Miller reported. That appears to be a slightly lower threshold that what Priest describes as an individual who presents “a continuing and imminent threat to U.S. persons and interests.”
Semantics, perhaps, but we are talking about executing a U.S. citizen without due process.
San Diego Is A Union Town
Woe to the San Diego public official who dares cross the police unions.
Police unions are in the midst of contract negotiations with San Diego and surrounding communities.
The police union in La Mesa, a suburb east of San Diego, flexed its muscles when Mayor Art Madrid dared to point out that there isn’t a heck of a lot of crime (0 murders in 2009) in the city of 57,000.
“Our employees aren’t getting shot at,” Madrid said during a City Council meeting.
Jeff Raybould, the city’s police union president, called that comment “slap in the face to every police officer in this fine city,” in a letter to Madrid that was obtained by The San Diego Union-Tribune
Came then the hammer:
“Contrary to what you might believe, we don’t spend all of our time scooping up inebriated public officials,” Raybould wrote.
That’s a nasty shot at Madrid, whom police found lying on the sidewalk in 2008.
And for the San Diego Police Officers Association a drop in crime is apparently bad news. The SD police union urged “restraint” this week over FBI crime statistics that show overall crime plunged by 18 percent.
San Diego Mayor Jerry Sanders, a former police chief, has proposed $12 million in cuts — but no layoffs of sworn officers — for the SDPD, which is in the midst of contract negotiations with the city.
Issa Wants Those Fed Memos
Congressman Darryl Issa has been on the warpath lately over the Fed’s September 2008 bailout of AIG.
In a letter to Congressman Edolphus Towns, chairman of the Committee on Oversight and Government Reform, Issa requests a subpoena based on information from an anonymous whistleblower:
According to the whistleblower, the documents reveal troubling details of Fed Chairman Ben Bernanke’s personal involvement in the decision to bail out AIG. These documents date to September 15, 2008 and are identified by the following electronic labels: sb-aig-01000092 to sb-aig-010000125 and “Draft Memo on AIG.pdf.”
Issa’s staff tried to get the documents, but the Fed never returned their calls.
The documents have not been released, although Bernanke responded in writing to some questions from Issa.
As Ken Silverstein of Harper’s notes, how bad must things be when Issa holds the moral high ground?
The Embarrassing Case of Jesus Navarro (Updated)
(Note: I updated this post after a reader pointed out that the Border Patrol didn’t let Navarro go in 2007. What actually happened is even worse)
Now that a Mexican smuggler suspected in the murder of a U.S. Border Patrol agent is on his way to San Diego, maybe we can finally get some answers as to how and why the case went so horribly wrong.
The U.S. government’s bungling allowed the suspect, Jesus Albino Navarro-Montes, to get out of a Mexican jail. That part is well known, but what hasn’t gotten much attention is that U.S. officials let Navarro slip away not once, but twice.
Not long before the death of Border Patrol Agent Luis Aguilar, Navarro was caught by the Border Patrol with a half-ton of pot.
But he got away.
How?
According to a federal complaint, Navarro and his female passenger stole a Border Patrol vehicle and drove it back to Mexico.
This would laughable if the results weren’t so tragic.
A few months later, Navarro was allegedly behind the wheel of a Hummer H2 on Jan. 19, 2008 that illegally crossed the border near Yuma, Arizon.
Agent Aguilar, 32, was run over while trying to throw down a spike strip. The Hummer got away, but Navarro was arrested on January 28, 2008.
On June 18, 2008, he was released from jail by a Mexican judge.
Why?
The U.S. government never sought Navarro’s extradition. It never presented an arrest warrant. Without any evidence of a crime, Navarro had to be released.
“Although we had asked the U.S. government a couple of times before his release to help us deal with the matter so we could hold Mr. Navarro, we got nothing whatsoever,” embassy spokesman Ricardo Alday told a reporter for The Washington Times. “The U.S. response never came.”
Congress Brian Bilbray, a San Diego-area Republican, asked Attorney General Michael B. Mukasey and the White House for an explanation.
He got the brush off.
Disclosure would “inevitably compromise highly sensitive law enforcement investigative information,” Deputy Assistant Attorney General Keith B. Nelson wrote in a letter to Bilbray.
Navarro was re-captured near Zihuatanejo on Feb. 11, 2009 by Mexico’s Agencia Federal de Investigacion in an operation coordinated with the FBI and U.S. Marshal’s Service.
After Navarro’s re-arrest, authorities in San Diego unsealed a criminal complaint that showed that Border Patrol agents had captured Navarro on Sept. 23, 2007 following a chase east of San Diego.
(Click here to read the complaint and accompanying statement of facts.)
Border Patrol agents used a spike strip to successfully slow him down. Navarro ditched his pickup in the desert and fled on foot with an unidentified female passenger.
Border Patrol agents caught the pair and put them in their vehicle.
According to the statement of facts, “The female passenger was able to take control of the Border Patrol vehicle, and both the female passenger and NAVARRO-Montes absconded to Mexico in the Border Patrol.”
The agents were stuck in the desert with a Toyota pickup with three blown out tires and 979.7 pounds of marijuana inside.
Report: US Mulls Killing Former SD Imam
Can the president target an American citizen in a lethal attack?
White House lawyers are struggling with that question in the case of Anwar Awlaki, a former San Diego imam and SDSU graduate student, according to an ABC News report.
The Senate Foreign Relations Committee noted last week that U.S. intelligence and military officials consider Anwar Awlaki, a former San Diego imam and U.S. citizen, to be “a direct threat to U.S. interests” although he has not yet been accused of a crime.
Awlaki corresponded with alleged Fort Hood shooter Maj. Nidal Hasan before the attack that killed 12 soldiers, and investigators believe he also met with accused “underwear bomber” Umar Farouk Abdulmutallab.
- For more see my Awlaki timeline.
ABC’s Matthew Cole, Richard Esposito and Brian Ross are reporting:
According to the people who were briefed on the issue, American officials fear the possibility of criminal prosecution without approval in advance from the White House for a targeted strike against Awlaki.
The former imam at the Masjid al-Rabat al-Islami in San Diego was said to be in the Predator’s sights after the Fort Hood attack, but the strike wasn’t authorized because of questions over the citizenship of the New Mexico-born Awlaki.
President Reagan signed an an executive order in 1981 that forbid anyone employed by or acting on behalf of the U.S. government from engaging in or conspiring to engaging in assassination. That order remains in effect today.
However, we can kill those who are trying to kill us. After the Sept. 11 attacks, Congress gave the president the authority to use “all necessary and appropriate force” to prevent future acts of terrorism against the United States. The specifics are said to be set out in a secret presidential “finding” signed by President Bush after the attacks.
In 2002, a CIA drone attack in Yemen killed a carload of suspected terrorists, including the target of the operation, the top al-Qaida leader in the country. U.S. officials weren’t troubled that the strike killed Yemeni-American Kamal Derwish, a U.S. citizen. “No constitutional questions are raised here,” said National Security Adviser Condoleezza Rice.
Putting the bullseye on Awlaki and pulling the trigger would break new legal ground and raise fresh questions about the limits of presidential power.
At the very least, the U.S. government should make plainly clear what Awlaki has done to earn the wrath of a Hellfire missile. Meeting, corresponding and, odious as it may be, enouraging jihadists, doesn’t cut it.
Long slog for US Marines in Afghanistan
Afghan General Mahaiuddin Ghori visited Camp Pendleton and held a press conference today thanking Marines and their families.
Ghori commands the British-trained Afghan National Army’s 3rd Kandak, 205 Hero Corps (3/205) brigade in Afghanistan’s Helmand province — the world’s largest poppy growing region.
By April, Camp Pendleton units are expected to lead about 20,000 Marines serving in Helmand, and Ghori and his men are here to help the U.S. troops train them. Here they are at the Marine’s “combat town”
Ghori has been fighting for years. He was a former officer in the 1980s pro-Soviet Afghan army fighting the mujehadin. His 3/205 brigade fires Soviet D-30s, 122mm howitzers. Ghori himself trained at Moscow’s Frunze Academy.
Asked about President Barack Obama’s timeline for withdrawing American forces from Afghanistan starting around July 2011, Ghori said his army needs a longer partnership: “I’m hoping for more time in order to properly train our forces.”
How much time?
Last month, Ghori said he expected it would take 5-6 years for Afghan troops to take over the country’s security, and they would need to depend on foreigners for many years after. He said “a long time, 10-15 years are needed for mentoring in new equipment, new airplanes, education, pilots engineers and commanders..”
More on San Diego's Relational Investors
A friend who works for a placement firm called me up to point out that I managed to malign the entire placement agent industry in my last post.
There are placement agents who register and disclose everything to regulators — only to see their reputations undermined by folks who don’t play by the same rules.
A company in Yorktown Heights, N.Y. called Tullig Inc. was paid nearly $17 million for helping San Diego’s Relational Investors LLC line up a big investment from CalPERS, the giant California pension fund.
What magic strings did Tullig pull on from Yorktown Heights? What’s the connection between Relational and Tullig? And why is it so hard to get answers to these questions?
Neither Tullig nor its head, Donal J. Murphy is registered with the SEC or the industry’s own regulatory body, FINRA.
Neither is another of Murphy’s companies, DJ Murphy Associates Inc., described as a company that sells investment services to public pension funds in this 1998 story in The New York Times.
Murphy, a native of Queens, New York, spent two decades at Bankers Trust before branching out on his own in 1992. Relational hired him the following year, according to the Wall Street Journal.
In 2003, DJ Murphy Associates was fined $400 by the California Fair Political Practices Commission for failing to register as a major donor. (.pdf)
Mount Kisco, NY-based DJ Murphy wrote a check for $10,000 to Democrat Steve Westly’s campaign for California controller on Aug. 14, 2002.
The same day, Aug. 14, 2002, something called the E-Celerator Fund LLC wrote Westly a $12,500 check. E-Celerator is a little-known private fund that’s run by Whitworth and his partner, David Batchelder.
E-Celerator gave another $15,000 to Westly’s campaign on Dec. 6, 2002, more than a month after his close election victory.
Perhaps these contributions had something to do with the seat California’s controller automatically holds on CalPERS’ board.
On the CalPERS board, Westly took up the cause excessive executive compensation, which happened to be Whitworth’s signature issue as well, and the pension fund nominated Whitworth for a spot on the New York Stock Exchange.
Not bad for a guy from Winnemucca, Nevada who started out as an aide to hometown Sen. Paul Laxalt. Laxalt is now a $20,000-a-month lobbyist who worked for Whitworth on issues such as “Legislation/policies relating to the tax treatment of carried interest received by investment fund managers.”
This is in the same vein as the top CalPERS middleman ARVCO Financial Venture’s Al Villalobos, a former member of the pension fund’s board who grossed nearly $60 million in fees. Villalobos chose to incorporate in tax-free Nevada.
Middlemen, however, are stuck in the middle. The real money is with investment managers like Whitworth, who made $16 million in a single year, according to court documents filed by his ex-wife.
Whitworth owes his wealth in part to the corporate public disclosures that Relational’s team scours to find undervalued companies like Mattel and J.C. Penney. Relational then buys up a stake in the company and tries to turn things around.
Fair enough, but Whitworth is throwing his weight around the corporate boardroom courtesy of giant pension funds like CalPERS, which has put $1.5 billion in Relational to date.
If only Whitworth were as transparent as he expects corporate executives to be.
San Diego's Relational Investors and CalPERS
CalPERS, the giant California state pension fund, is taking a close look at its investment with Ralph Whitworth, who heads Relational Investors, a shareholder activist firm based in San Diego.
A law firm hired by CalPERS is examining the nearly $17 million Relational paid an obscure middleman who helped secure business from the pension fund, The Wall Street Journal reports today.
Relational Investors is headed by Ralph V. Whitworth and David Batchelder, who met while working in the 1980s for Texas oilman and corporate raider T. Boone Pickens.
Relational buys up stakes in underperforming companies like Mattel and J.C. Penney for a turnaround directed by Whitworth.
CalPERS is Relational’s biggest investor. The pension fund has about $1.5 billion in Relational.
Huge fees are standard for middlemen who successfully line up investments from CalPERS, but Relational’s payment to Tullig Inc. stands out. No one earned more from a single client.
Tullig Inc. is an obscure New York firm headed by an obscure man named Donal Murphy. What he did to earn his rich paycheck is as clear as mud.
Essentially, these middlemen are lobbyists and operators. It’s a shady business — money buying more money — that is finally getting some attention following a massive kickback and bribery scheme at New York State’s public pension fund.
Whitworth is perhaps best known for paying Paul McCartney $1 million in 2003 to perform at his wife’s private birthday party at a restaurant Rancho Santa Fe. The couple filed for divorce less than a year later.
The Arrest of El Teo
In The Politics of Heroin, Alfred McCoy notes that we capture a drug lord only when he is no longer a drug lord.
So it is with news of the arrest of El Teo, a vicious Tijuana drug baron who is accused of having the bodies of his enemies beheaded or dissolved in caustic soda.
McCoy reminds us that a man like El Teo, or rather, the man authorities accuse him of being, can only be arrested when the drug traffic shifts, stripping him of the power, profits and protection he needs to stay in business. In other words, the arrest of El Teo was only possible because he was already irrelevant.
While the bloodbath in Tijuana attracts the attention, the Sinaloa carter and its leader, Joaquin El Chapo (“Shorty”) Guzman, quietly prospers, as The Economist noted this week:
Sinaloa, by contrast, has stuck to drugs and money laundering and is smarter and more sophisticated. It prefers anonymity to the ostentation of others (Mr Beltrán was undone by inviting a famous accordionist to play at a Christmas party). It eschews jobless teenagers, its rivals’ rank and file, in favour of graduates, infiltration and intelligence. Although all the gangs have penetrated local governments, only Sinaloa and the Beltráns have been discovered to have bribed senior officials. Officials complain that Sinaloa operatives receive warning of pending raids. Sceptics wonder whether success against other gangs comes from tip-offs from Sinaloa.
Forbes reckons that Guzman, who bribed his way out of prison in 2001, is now the 701st richest man in the world.
Forbes on Tom Gores and the U-T
From the Forbes 400 issue I picked up last week:
Gores has his hands full with the San Diego Union-Tribune, which he bought in May for an estimated $30 million, based on current industry multiples. Three days after the deal closed, Platinum laid off 192 people; 112 additional cuts came in August. Gores saw no other way: The newspaper (average daily circulation: 300,000) had less than $10 million in EBITDA [earnings before taxes, depreciation, amortization] on revenue of less than $255 million, down from $100 million on revenue of roughly $360 million in 2005. “The outlook was for an unprofitable 2009,” says a Platinum spokesman.
What makes Gores think he can revive a near-dead enterprise? He likes the market. San Diego is still relatively affluent and culturally conservative; few denizens read the Los Angeles Times. He also prizes the assets — a 500,000 square-foot headquarters and warehouse in Mission Valley, plus 50,000 square feet of offices in La Jolla, San Marcos and Carlsbad.
But, oh, the challenges. The U-T was perhaps the last paper in the U.S. that relied on cut-and-paste layouts; Platinum has spent several million dollars on new publication software. To replace the loss of national advertisers, especially retailers and real estate firms, and classifieds, the paper is refocusing on small businesses. Gores has also updated the Web site with more social media, blogs and podcasts. He has reinstated 401(k) matching and reversed pay cuts by the previous owners, the Copley family. He expects a slight operating profit this year.
Gores plans to buy more distressed media companies. Lately his name has surfaced among potential buyers of the Boston Globe and BusinessWeek. Platinum’s response: “Don’t believe everything you read in the papers.”
For those keeping score at home, Gores is No. 147 with a $2.2 billion fortune.
Was former San Diego imam in the Predator's sights?
Spotted this in the WSJ:
Who gets on the drone approved “kill lists” is decided by a complex interagency process involving the CIA, Pentagon and White House. We hear the U.S. could have taken out the radical cleric Anwar al-Awlaki after his contacts with Fort Hood shooter Major Nidal Hassan came to light in November, missing the chance by not authorizing the strike. Perhaps al-Awlaki’s U.S. citizenship gave U.S. officials pause, but after he joined the jihad he became an enemy and his passport irrelevant. (emphasis added)
So the U.S. had a bead on former San Diego imam/grad student/FBI investigative subject? Might this explain the confused initial reports from the Embassy of Yemen that Awlaki had been at the site of a Dec. 24 airstrike?
Pentagon blames FBI in DC for al-Awlaki mixup
Remember the public back-and-forth between the FBI in San Diego and Washington over who dropped the ball on the Fort Hood shooter’s e-mails to a radical cleric in Yemen? CBS’ David Martin (author of the best CIA book evah) has this:
(CBS) Less than a month after major Nidal Hasan allegedly killed 13 people at Fort Hood, Texas, the Pentagon’s top intelligence officer sent the White House a report detailing an earlier failure to connect the dots. It reads like a dress rehearsal for the Detroit bomber case, reports CBS News chief national security correspondent David Martin.
According to that still-classified report, the terrorism task force responsible for determining whether Hasan posed a threat never saw all 18 e-mails he exchanged with that radical Yemeni cleric Awlaki whose communications were being monitored under a court ordered wiretap.
After the Washington task force decided Hasan was not dangerous, it never asked to see his subsequent communications with Alwaki….
None of the e-mails specifically mentioned Hasan’s plans for a shooting rampage at Fort Hood, but because he was a member of the military the FBI showed them to a Pentagon investigator with the note “comm” written on it. To the FBI that meant “commissioned officer.” The Pentagon investigator thought it meant “communication.”
As a result, there were no red flags that an army officer was e-mailing a radical cleric suspected of being a talent spotter for al Qaeda.
Bottom line: the lessons of the Fort Hood shootings were not learned in time to avert the near disaster on Christmas day.
Bottom line No. 2: The FBI and Pentagon aren’t speaking the language.
The story doesn’t say it but the report is by the Pentagon’s top spook, USDI James R. Clapper.
FBI on Aryan Skinheads in San Diego
Via Public Intelligence:
(U) United Society of Aryan Skinheads Activity in San Diego
(U) The United Society of Aryan Skinheads (USAS) is seeking to increase their visibility in San Diego in an effort to become the premier Skinhead organization in California. The San Diego Field Intelligence Group is seeking the assistance of local law enforcement partners to identify the location USAS members and groups in the San Diego area.
(U) USAS is a racist skinhead group originally formed in Portland, Oregon, in 1987, by skinheads who were concerned about the lack of unity in the racist skinhead community. In the early 1990s, members of the Portland group relocated to Riverside County, California, after the original group disbanded. In 1993, USAS reorganized itself to combat infighting and drug abuse that were present in the California skinhead community. According to a recovered USAS handbook, dated September 2005, the purpose of USAS is to “unite all members of the White race who can see the threat facing our people (White people who have the quality of character so that they are willing to stand up and do something about it) into a united fighting force of Skinheads who are ready to battle our enemies, on all fronts, and with every possible means, until we are victorious in fulfilling the 14 words.” [NOTE: 14 Words refers to the statement “We must secure the existence of our people and a future for white children.” This phrase was coined by wellknown and recently deceased white supremacist David Lane.]
(U//LES) USAS is comprised of two main components: chapters that are organized on a geographic basis and a general membership within the California Department of Corrections and Rehabilitation (CDCR). Information recovered from inmates in the CDCR system revealed USAS is a structured organization, with defined leadership roles. The non-incarcerated membership of USAS is divided into five chapters covering a specified geographic location in California.
- Wolfpack Skinheads (Northern California)
- American Frontline Skinheads (Northern California)
- Tri-Counties Chapter (Location Unknown)
- Orange County Chapter
- San Diego Chapter
(U//LES) Each chapter is controlled by a five-man Chapter Council that reports directly to a five member High Council that oversees USAS.
(U//LES) Corroborated source reporting indicates USAS is attempting to become the premier skinhead organization in California. As part of its strategy, USAS is actively recruiting new members both inside and outside of the CDCR. Additionally, USAS is attempting to absorb other skinhead groups under the USAS banner. Although numerous white supremacist groups desire to unite various factions within the movement, attempts to unite these groups have failed because the groups are reluctant to give up their individual identities. USAS has differentiated themselves from other white supremacist organizations through its demonstrated ability to recruit other skinhead organizations, most notably the Wolfpack Skinheads, American Frontline Skinheads, and the Warrior Skins. Further source reporting indicates USAS is currently attempting to absorb other skinhead organizations within San Diego County.
(U) San Diego Territory
(U//LES) The San Diego Field Intelligence Group (FIG) has obtained corroborated information indicating that USAS has designated the San Diego Chapter as their “flagship” chapter. However, current available intelligence also indicates a rift within
the leadership of the San Diego Chapter. San Diego FIG assesses that the San Diego Chapter of USAS has a current strength of approximately 50 members and prospective members. A review of criminal records of identified USAS members in San Diego
County shows a significant pattern of criminal violence. Law enforcement personnel should use caution when contacting USAS members or associates.
(U) Identifying USAS Members
(U) There are various groups within the white supremacy movement in the San Diego territory, including multiple skinhead organizations. Skinheads can usually be identified by their dress, typically wearing combat boots (frequently Doc Marten’s), straight leg jeans, suspenders (referred to as braces), flight jackets, and short hair cuts. It is important to recognize that there are several non-racist factions within the skinhead community who also dress in a similar fashion.
(U) In an effort to avoid classification as gang members, skinheads typically claim “independent” when asked for a gang association. While independent skinheads exist, they are the exception rather than the rule. Close observation of the pins and patches on their flight jackets, and a close examination of their tattoos will typically identify which “crew” a particular skinhead associates with.
Super Yacht Attessa in San Diego
This is Dennis Washington’s super yacht, the 225-foot Attessa III.
Found it docked today behind the San Diego Convention Center and got curious about the owner.
Forbes estimates Washington’s fortune at $4.2 billion, most of it held in Montana Rail Link railroad, Montana Resources copper and molybdenum mine—and cash.
His boat, the Attessa, comes with a crew of 15 and accomodates 10, according to Yachtspecs. It’s flying the flag of the Cayman Islands, said to be the world’s leading “super yacht” registry.
Anwar al-Awlaki Reported Killed in Airstrike
An airstrike in Yemen reportedly killed and “targeted” former San Diego imam Anwar al-Awlaki, the man who served as a “spiritual advisor” to 9/11 hijackers and praised Fort Hood shooter Maj. Nidal Hasan as a “hero.” Background: Al-Awlaki timeline.
UPDATE: Al Jazeera reports that Awlaki is alive.
SANAA (Reuters) – “Anwar al-Awlaki is suspected to be dead,” the official said of the cleric who was on the run in Yemen, where he was on the government’s most-wanted list of terrorist suspects.
Yemen Observer: “The house of the US Fort Hood shooter’s mentor, Sheikh Anwar al-Awlaki, was raided and demolished….
Fox News.com: U.S. officials believe radical cleric Anwar Awlaki was “probably” one of dozens of militants killed in the strike, a source confirmed to FOX News.
Embassy of Yemen: Today, Yemeni fighter jets launched an aerial assault at 4:30 AM, on a remote location in the province of Shabwa. The assault targeted a meeting of senior Al-Qaeda operatives, 403 miles south east of Sana’a, the capital of Yemen. Preliminary reports suggest that the strike targeted scores of Yemeni and foreign Al-Qaeda operatives. Nasser Al-Wuhayshi, the regional Al-Qaeda leader and his deputy, Saeed Al-Shihri, alongside Anwar Al-Awlaki were presumed to be at the site. Among those targeted was Mohammed Saleh Oumair who publicly spoke couple of days ago at a rally in the province of Abyan. Reports added that the purpose of the above mentioned meeting was to plan a retaliation operation after government forces raided their hideouts last week. Less than a week ago, Yemeni forces carried out simultaneous raids killing and detaining militants in an Al-Qaeda hideouts in the provinces of Abyan and Sana’a.
SANA’A, Dec. 24 (Saba) – Yemeni Air forces carried out early on Thursday an air strike in Rafdh area of al-Said districts in Shabwa governorate killing about 30 al-Qaeda suspects from Yemeni and foreign nationalities.
An official source in the Supreme Security Committee said that the strike targeted a hideout of al-Qaeda, in which the al-Qaeda members have been holding a meeting attended by the terrorists Nasir al-Whaishi and Said al-Shihri, Saudi national.
According to the source, al-Qaeda meeting was to plan implementing a number of terrorist operations against Yemeni and foreign interests, including important economic facilities.
AFP: “Saudis and Iranians at the Wadi Rafadh meeting were also among the dead,” said the source, without going into detail.
A second security source told AFP the raid had been launched after residents had tipped the authorities off about the meeting.
The New York Times says the early morning raids were carried out with “intelligence provided in part by the United States,” while AP reports that U.S. and Saudi intelligence provided help.
END
The reports follow an interview with Awlaki broadcast by Al-Jazeera. Awlaki said that Maj. Nidal Hasan contacted him in December 2007 asking whether killing American soldiers and officers was a “religiously legitimate act.”
Q: “So he asked you that question about a year before the operation was carried out?”
A: “Yes. And I wondered how the American security agencies, who claim to be able to read car license plate numbers from space, everywhere in the world, I wondered how [they did not reveal this].”
Awlaki provided copies of the e-mails to Al-Jazeera.
FBI Finger-Pointing over Anwar Awlaki
Intelligence sharing is a bit like a game of hot potato: If you get stuck with it, you’ll get burned.
FBI officials in San Diego recently caught just such a hot potato when they intercepted e-mails between Maj. Nidal Hasan, the accused Fort Hood shooter, and a radical former San Diego imam named Anwar al-Awlaki.
These intercepts are among the government’s biggest secrets. Yet, at the same time, it would be surprising if Hasan and Nidal didn’t know that their communications were likely to be intercepted.
Awlaki had been an FBI counter-terrorism target for years. As an imam in San Diego in 2000, Awlaki served as a “spiritual advisor” to three 9/11 hijackers.
The FBI has asked him numerous times about his contacts with the hijackers, including when agents visited him in 2007 in a Yemeni prison. The intercepts were made about a year after he got out of prison. Today, he is said to be hiding in Yemen.
As for Hasan, he was a psychiatrist in the military. His contacts with Awlaki were viewed as consistent with some research he was conducting as a psychiatric resident at the U.S. Army’s Walter Reed Medical Center. A 2007 slideshow he gave at Walter Reed was titled “The Koranic World View As It Relates to Muslims in the U.S. Military.”
As many as 20 e-mails between Hasan and Awlaki were intercepted by the San Diego Joint Terrorism Task Force (JTTF) between December 2008 and May 2009. The communications were deemed “consistent with research being conducted by Major Hasan in his position as a psychiatrist at the Walter Reed Medical Center,” the FBI says.
After the shooting that killed 13 people, a blog post on Aulaki’s website praised Hasan as a “hero.”
The communications between Awlaki and Hasan were never shared with the Defense Department, even though a member of the Defense Criminal Investigative Service was on the multi-agency San Diego JTTF.
CIA Director William Webster is conducting a review to find out what happened. According to The Washington Post, Webster will have the authority to make recommendations about possible changes to the Foreign Intelligence Surveillance Act, which governs the highly sensitive communications intercepts at issue.
Awlaki is particularly troublesome for investigators because he is a U.S. citizen, born in New Mexico in 1971. As a result of that circumstance, the Foreign Intelligence Surveillance Act required the JTTF to apply for a court order of surveillance at the secret FISA court or a certification from the U.S. attorney general. Investigators were required to present evidence that Awlaki was “an agent of a foreign power, or an officer or employee of a foreign power.”
Al-Qaida qualifies as a foreign power, and Charles Allen, a former CIA official and US Undersecretary of Homeland Security for Intelligence and Analysis, declared last year that Awlaki was part of al-Qaida’s reach into the U.S. homeland.
So, they got a warrant. Great. What good is such intelligence if you don’t use it?
In Hasan’s case, an investigator and a supervisor concluded that Hasan was not involved in terrorist activities or planning.
Further dissemination of the information “was neither sought nor authorized.” In plain English, the JTTF FBI supervisor wouldn’t let the folks from the Defense Department on his task force tell their commanders about the e-mails.
Officials in San Diego told Voice of San Diego’s Kelly Thornton that their counterparts in Washington are to blame:
One federal source described the probe this way: “Webster is going to investigate the Fort Hood guy and al-Aulaqi and whether the FBI screwed up. They’re saying San Diego failed to communicate the e-mails — but San Diego pestered the shit out of them, sending e-mails multiple times. The Washington field office didn’t do anything on it.”
The Washington Post reported Dec. 1 that members of Congress have identified “at least two troubling e-mails” that were intercepted by the San Diego FBI but not shared with Washington.
In a tit-for-tat battle, Thornton’s anonymous San Diego sources responded by saying that everything was fully communicated to Washington, which had “computer access” to everything San Diego had.
The Voice of San Diego, however, leaves out crucial background found in reports by the 9/11 Commission and Congressional Joint Inquiry on 9/11:
In June 1999, the FBI in San Diego investigated Awlaki after learning that he may have been contacted by a man who bought a satellite phone bin Laden used in the 1990s.
During its investigation, FBI learned that Awlaki knew individuals from the Holy Land Foundation and others involved in raising money for the Palestinian terrorist group Hamas. Sources alleged that Awlaki had other extremist connections.
In early 2000, Awlaki was visited by a subject of a Los Angeles FBI investigation closely associated with Blind Sheikh [Omar Abdel] Rahman.
Around the time Awlaki was holding closed door meetings in San Diego with two of the hijackers, the FBI closed its investigation, stating “the imam … does not meet the criterion for [further] investigation.”
It wouldn’t be the first time that the FBI in San Diego misjudged Awlaki. Then again, no one bothered to tell the FBI in San Diego about two of the 9/11 hijackers whom the CIA had tracked from Bangkok to Los Angeles in 2000 until it was too late.
Anwar Al-Awlaki Timeline
Former CIA Director William Webster is taking a close look at how the FBI handled its investigation of a radical imam named Anwar al-Awlaki who had several e-mail exchanges with the suspected Fort Hood shooter, Maj. Nidal Hasan.
April 1971: Anwar al-Awlaki born in Cruces, N.M. while father is on diplomatic posting.
1978: Leaves U.S. for Yemen.
Jan. 13, 1988: Issued U.S. passport.
June 5, 1990: Enters U.S. in Chicago with Yemeni passport with J-1 exchange visitor U.S. visa issued in Sana’a.
June 6, 1990: Applies for Social Security card. Claims he was born in Sana’a, Yemen.
June 8, 1990: SSN 521-77-7121 issued to Awlaki.
Aug. 21, 1991: Enters U.S. in Chicago.
1991: Attends Colorado State University on a scholarship from Yemen.
Jan. 29, 1992: Enters U.S. in New York City.
Nov. 18, 1993: Applies for a U.S. passport in Fort Collins, Colo.
1994: Graduates from Colorado State with bachelor’s in civil engineering.
1996: Named imam of Masjid al-Rabat in San Diego.
1996: Busted for soliciting a prostitute in San Diego.
Time uncertain: Arrested by San Diego police “for hanging around a school.” (9/11 Commission MFR FBI Agent #59)
1997: Busted again for soliciting a prostitute in San Diego.
1998 & 1999: Serves as vice president of Charitable Society for Social Welfare Inc., the U.S. branch of a Yemeni charity headed by Abdul Majeed al-Zindani. Federal prosecutors in a New York terrorism-financing case later describe the charity as “a front organization” that was “used to support al-Qaeda and Osama bin Laden.”
January 1999: Enrolls in San Diego State University master’s in educational leadership program. SDSU spokesman says the school does not have records showing Awlaki earned a degree.
June 1999: FBI investigates Awlaki after learning that he may have been contacted by Ziyad Khaleel, who bought a satellite phone bin Laden used in the 1990s.
1999-2000: During its investigation, FBI learns that Awlaki knows individuals from the Holy Land Foundation and others involved in raising money for the Palestinian terrorist group Hamas. Sources alleged that Aulaqi had other extremist connections. (9/11 Commission Report)
February 2000: Four calls between Awlaki and Omar al-Bayoumi, a Saudi who helped Al-Hamzi and Almihdhar find an apartment in San Diego. An FBI agent tells 9/11 Commission staff he is “98 percent sure” that the two hijackers were using al-Bayoumi’s phone at this time. (9/11 Commission MFR FBI Agent #63)
Early 2000: Visited by a subject of a Los Angeles FBI investigation closely associated with Blind Sheikh [Omar Abdel] Rahman. (Congressional Joint Inquiry on 9/11)
Early 2000: Several sources tell FBI that Alwaki “had closed-door meetings in San Diego” with Alhazmi, al-Midhar and another unidentified person “whom al-Bayoumi had asked to help the hijackers.” (Congressional Joint Inquiry)
Feb. 3, 2000: FBI electronic communication, background searches re: Awlaki. (9/11 Commission report)
March 2000: FBI closes its investigation, stating “the imam … does not meet the criterion for [further] investigation.” (Congressional Joint Inquiry on 9/11)
July-August 2000: Resigns from San Diego mosque.
Summer-Fall 2000: Travels abroad to “various countries.” (SD Union-Tribune 10/1/01)
January 2001: Moves to Virginia. Employed at Dar Al-Hijra Islamic Center in Falls Church, Va., largest mosque in the country.
January 2001: Enrolls in George Washington University’s Graduate School of Education and Human Development, pursing a Ph.D in human resource development.
Unknown: Meets Nidal Hasan, future Fort Hood shooter.
Early 2001: Named Muslim chaplain at GWU.
April 2001: Al-Hazmi and Hani Hanjour arrive in Falls Church and attend Dar Al-Hijra mosque. Awlaki denies having contact with the men in Virginia. (9/11 Commission report)
Before Sept. 11, 2001: Awlaki returns briefly to San Diego (9/11 Commission MFR) “Reportedly acted suspiciously by declining help with boxes he was transporting in a rental car (driven only 37 miles) and by refusing to provide any local address to the rental agent.” (9/11 Commission MFR FBI Agent #59)
Sept. 17, 2001: In comments published on IslamOnline, Alawki suggested that Israelis may have been responsible for the 9/11 attacks and that the FBI “went into the roster of the airplanes and whoever has a Muslim or Arab name became the hijacker by default.”
Sept. 15-19, 2001: Interviewed four times by FBI. Awlaki says he did not recognize Hazmi’s name but identifies his picture. Admitted meeting with Hazmi several times, he claimed not to remember any specifics of what they discussed. Describes Hazmi as a soft-spoken Saudi student who used to appear at the mosque with a companion but who did not have a large circle of friends. Does not identify Almihdhar.
September-November 2001: Interviewed numerous times by reporters, including National Geographic, Ray Suarez and The Washington Post.
2001-2002: Awlaki observed allegedly taking Washington-area prostitutes into Virginia. Authorities contemplate charging him under the Mann Act, reserved for nabbing pimps who transport prostitutes across state lines.
March 2002: Awlaki leaves for U.K.
March 31, 2002: Lectures at Quran Expo in London
April 2002: Employment with Dar Al-Hijra mosque ends.
2002: Federal prosecutors in Colorado receive information from Ray Fournier, a federal diplomatic security agent in San Diego who was investigating Awlaki for passport fraud.
June 2002: Figures in Operation Green Quest, a terrorism-related money-laundering investigation.
Mid-2002: Radwan Abu-Issa, the subject of a Houston Joint Terrorism Task Force investigation, sends money to Awlaki, according to a document in a restricted government database. Awlaki’s name was placed on an early version of what is now the federal terror watch list.
June 17, 2002: Federal magistrate in Colorado signs warrant for Awlaki’s arrest for passport fraud.
October 2002: A federal diplomatic special agent in Colorado began investigating in preparation to take the case to a grand jury learns Awlaki corrected the place of birth on his Social Security application to New Mexico.
Oct. 8, 2002: FBI electronic communication, interview re: Awlaki. (9/11 Commission Report)
Oct. 9, 2002: Arrest warrant rescinded.
Oct. 10, 2002: Arrives in New York on a Saudi Airlines flight from Riyadh. Briefly detained by INS.
Oct. 11, 2002: Criminal case terminated.
Late 2002: Visits Fairfax, Virginia home of Ali al-Timimi, a radical cleric, and asked him about recruiting young Muslims for “violent jihad.” Al-Timimi, is now serving a life sentence for inciting followers to fight with the Taliban against Americans.
Late 2002: Departs U.S. for London.
June 2003: Delivers lecture at Muslim Association of Britain symposium in London
December 2003: Islamic Forum of Europe lecture: “Stop police terror.”
Dec. 18, 2003: British MP Louise Ellman tells House of Commons calls Muslim Association of Britain is a branch of the Muslim Brotherhood; says Awlaki “is reportedly wanted for questioning by the FBI in connection with the 9/11 al-Qaeda terrorist attacks on New York and Washington.”
Early 2004: Moves to Yemen.
2004: Lectures at Imam University in Sana’a, Yemen, a school headed by Abdul Majeed al-Zindani.
Mid-2006: Awlaki arrested in Yemen. Claims he was held at the request of the U.S. government.
Oct. 17, 2006: Yemeni secret police raid swept up eight foreigners living in Sana’a, under surveillance by the CIA and British intelligence, and at least 12 other men across Yemen. Yemeni authorities insist they dismantled an al-Qa’ida cell and disrupted a gun-running ring to neighbouring Somalia, although no evidence is found. Awlaki (identified as “Abu Atiq”) said to be key to the raid.
September 2007: FBI agents interview Awlaki in prison. Ask about contacts with 9/11 hijackers.
December 2007: Awlaki released after 18 months confinement in Yemen, almost all of it in solitary confinement.
February 2008: Registers http://www.anwar-alawlaki.com
February 2008: U.S. counterterrorism officials link Awlaki to terrorism, The Washington Post reports. “There is good reason to believe Anwar Aulaqi has been involved in very serious terrorist activities since leaving the United States, including plotting attacks against America and our allies,” an anonymous U.S. counterterrorism official tells the Post.
Unknown: Awlaki leaves Sana’a and moves to remote Shabwa region.
Dec. 17, 2008: Maj. Nidal Hasan contacts Awlaki via e-mail. “Do you remember me? I used to pray with you at the Virginia mosque.” Awlaki tells Al-Jazeera: “He was asking about killing American soldiers and officers. [He asked] whether this is a religiously legitimate act or not.”
“…the first message was asking for an edict regarding the [possibility] of a Muslim soldier killing his colleagues who serve with him in the American army. In other messages, Nidal was clarifying his position regarding the killing of Israeli civilians. He was in support of this, and in his messages he mentioned the religious justifications for targeting the Jews with missiles. Then there were some messages in which he asked for a way through which he could transfer some funds to us [and by this] participate in charitable activities.”
December 2008: San Diego JTTF opens investigation into intercepted e-mails between Awlaki and Maj. Nidal Hasan. (FBI statement)
Jan. 1, 2009: Awlaki speaks via satellite link at London Muslim Centre. Event organized by Noor Pro Media.
January 2009: In blog post, Awlaki asks: “Today the world turns upside down when one Muslim performs a martyrdom operation. Can you imagine what would happen if that is done by seven hundred Muslims on the same day?!”
February 2009: Awlaki blog post, “I pray that Allah destroys America and all its allies and the day that happens, and I assure you it will and sooner than you think, I will be very pleased.”
Early 2009: E-mail contacts continue between Awlaki and Hassan. FBI San Diego forwards two messages to Washington Field Office. Later e-mail described as “more serious” not shared.
July 2009: Awlaki praises insurgent attack on Yemeni troops in Marib.
Aug. 4: Umar Farouk Abdulmutallab, Nigerian suspected of trying to blow up Northwest Airlines Flight 253, attends Sana’a Institute for the Arabic Language, according to the Yemeni Foreign Ministry.
August: The U.S. National Security Agency intercepts al-Qaida conversations about an unidentified “Nigerian.”
Sept. 21: Abdulmutallab leaves Sana’a Institute.
Fall: NSA intercepts “voice-to-voice communication” between Abdulmutallab and Awlaki indicating that Aulaqi “was in some way involved in facilitating this guy’s transportation or trip through Yemen.”
October: Abdulmutallab travels to Shabwa province. The 23-year-old engineering graduate probably met with al-Qaeda operatives in a house built by Awlaki.
Fall: Yemeni Foreign Minister Rashad Alimi states Abdulmutallab meets Awlaki at a remote meeting place in Shabwa province. Abdulmutallab tells FBI that Alwaki personally blessed attack.
Nov. 5, 2009: Hasan allegedly kills 13 at Fort Hood.
Nov. 7, 2009: Post on Awlaki’s website praises Hasan as a “hero.”
Dec. 7, 2009: Abdulmutallab leaves Yemen for Ethiopia.
Dec. 23, 2009: Al-Jazeera broadcasts interview with Awlaki.
Dec. 24, 2009: Awlaki falsely reported as killed in Yemeni airstrike. The strike by Yemeni air forces targeted a meeting attended by Nasir al-Whaishi and (former Guantanamo detainee) Said al-Shiri at a hideout of al-Qaida in the Rafdh area of the al-Said districts in Shabwa governorate Yemen. U.S. and Saudi intelligence reportedly provide assistance.
Dec. 25, 2009: Rep. Pete Hoekstra, senior Republican on House Intelligence Committee, suggests there may be a link between Awlaki and Umar Farouk Abdulmutallab.
Dec. 29, 2009: Alwaki became “operational” sometime over past year, senior U.S. official tells Fox News.
Jan. 3, 2010: “Mr. Awlaki is a problem. He’s clearly a part of Al Qaida in Arabian Peninsula. He’s not just a cleric. He is in fact trying to instigate terrorism,” said John Brennan, deputy national security advisor for counterterrorism and homeland security.
Jan. 14: Ali Mohamed Al Anisi, the director of Yemen’s National Security Agency and a senior presidential adviser, said talks were under way with members of Mr. Awlaki’s tribe in an effort to convince the cleric to turn himself in.
Detecting Border Tunnels
Authorities in San Diego have found a tunnel under construction beneath the U.S.-Mexico border:
SAN DIEGO – Mexican authorities, acting on information provided by federal investigators from the multi-agency San Diego Tunnel Task Force, conducted enforcement actions Wednesday targeting a sophisticated, but still incomplete underground passageway that originates in Tijuana, Mexico, and extends more than 860 feet into the United States.
The tunnel, which measures just under 1,000 feet in length overall and reaches a depth of 90 to 100 feet, did not have an entry point in the United States. The passageway has lighting, electrical and ventilation systems and is equipped with an elevator. When Mexican authorities entered the passageway Wednesday morning on the Mexican side, they encountered more than a dozen individuals who were subsequently taken into custody. All of those arrested are believed to be Mexican citizens.
Initial reports indicate the tunnel has been under construction for approximately two years. So far, there have been no arrests in the United States, but the investigation is ongoing.
The press release credits the inter-agency San Diego Tunnel Task Force, which “uses an array of high-tech equipment and intelligence information to pinpoint the location of underground passageways along the border in the region.”
To date, federal authorities have discovered more than 120 cross-border tunnels along the Southwest border. (The photo above is from 2007)
Truth is, these discoveries are typically the result of good, old-fashioned police work, not technology, according to a recent Science Daily story:
“All of them have been found by accident or human intelligence,” said Ed Turner, a project manager with the U.S. Department of Homeland Security (DHS) Science and Technology Directorate (S&T). “None by technology.”
The problem of detecting underground tunnels has frustrated geologists since the 1960s when the Vietcong used them to devastating effect during the Vietnam War. In the 1970s, tunnels were discovered (through intelligence) in Korea’s DMZ. In the 1990s, the Southwest border kept the problem alive, although not a priority.
The terrorist threat, however, has opened the floodgates of money for tunnel detection.
Among the groups at work today on the problem include major defense contractors, the intelligence community, the Department of Homeland Security, numerous components of the Defense Department and unspecified “international partners.”
Technologies under development include a seismic acoustic sensors, infrared sensors and robotics. Tunnel detection systems are being tested on the ground and the air — aboard helicopters and unmanned drones.
The military’s Joint Task Force North conducted nine tactical missions last year to find underground tunnels using some of these technologies.
Sandia National Laboratories in New Mexico and NORTHCOM worked with the San Diego Tunnel Task Force to test advanced acoustic technologies in Otay Mesa in 2006 and 2007, according to this PowerPoint presentation.
As even a cursory look at PowerPoint makes clear, the sensor data is extremely difficult for the layperson to understand, a problem that was underscored last year when the Department of Homeland Security put out a call for a tunnel detection system that is “simple to understand.”
Lockheed Martin is testing ground-penetrating radar in a trailer towed by a truck as part of DHS’ Tunnel Technologies Detection Project.
DARPA, the Defense Advanced Research Projects Agency, has a Cross-Border Tunnel program to root out underground hiding places that can be exploited by terrorists.
An even spook-ier effort is the Counter Tunnel Operations Working Group, which included the Joint Chiefs of Staff, the Office of the Secretary of Defense, and intelligence community. The group is under the rubric of the inter-agency, anti-terrorism Technical Support Working Group.
At a 2006 Army seminar on tunnel detention, one researcher summed up the state of affairs:
Despite the longstanding effort in the geophysical community under heavy public funding, there is a dearth of success stories where geophysicists can actually claim to have found hitherto unknown tunnels.
Anwar al-Awlaki, infidel
An insightful post on Jihadica reveals that Anwar al-Awlaki, a former San Diego imam who ministered to two of the Sept. 11 hijackers, was once denounced as an infidel (kafir) and part of a CIA plot.
Awlaki, a U.S. citizen who is said to live in Yemen, has been in the news lately because he was in e-mail contact with suspected Fort Hood shooter Maj. Nidal Hasan, whom he recently praised as a “hero.”
As I wrote earlier, Awlaki was the imam at the Rabat mosque in San Diego until mid-2000. Two future hijackers also attended the Rabat mosque. The Sept. 11 Commission reported the two hijackers “reportedly respected Awlaki as a religious figure and developed a close relationship with him.”
One of Awlaki’s sermons at the Rabat mosque came to the attention of London-based jihadi Sheikh Abdullah al-Faisal, a radical imam who was imprisoned in 2003 for soliciting murder and eventually deported from the UK for his links to one of the London Tube bombers.
This San Diego sermon so outraged al-Faisal that he devoted an entire sermon to it and ultimately declared Awlaki an infidel. One of al-Faisal’s followers can be heard in the recording suggesting that Awlaki should be killed.
Al-Faisal’s complaint about al-Awlaki is basically twofold: First, that al-Awlaki’s criteria for declaring takfir (unbeliever) was overly restrictive—someone would have to directly refute the Quran or blatantly denounce central tenets of Islam in order to receive that designation. And, second, that al-Awlaki argued that only God should judge Muslims. Al-Faisal argues that this non-judgmental understanding of Islam is pushed by the CIA in order to limit violent activism.
Al-Faisal’s sermon is titled “CIA Islam – Sheikh Faisal’s Takfeer of Anwar Awlaki.” It’s available here.
For a would-be jihadi, this sermon should been a devastating blow. Yet, today it’s Awlaki who’s seen as the dangerous radical warping Muslim winds.
The lesson, Brian Fishman says, is not that Awlaki is a moderate but that “the world of jihadi ideologues is never as simple as it seems.”
Imam Aulaqi and Yemen's image problem (Updated)
Anwar al-Aulaqi’s website and his statement praising the suspected Fort Hood shooter as a “hero” has vanished from the Internet. (For those who are interested, the statement in its entirety can be found at the end of this post.)
The words of the former San Diego imam — now said to be living hiding in Yemen — have received wide distribution. The timing of his Nov. 8 statement of support for Maj. Nidal Hasan, however, has escaped notice.
While Aulaqi’s name and his links to Maj. Hasan were being leaked to the Western press, U.S. military officials were quietly holding two days of talks on terrorism and other issues with their counterparts in Yemen, according to Saba, Yemen’s official state news agency.
Brig. Gen. Jefforey A. Smith, recently named deputy director for politico-military affairs in the Middle East (J5) for the U.S. Joint Chiefs of Staff, signed a joint cooperation agreement today, confirming U.S. support for Yemen’s shaky government.
Update: The US embassy declined to comment on whether an agreement had been signed, but tells AFP that talks involving Smith had taken place and said they focused on counterterrorism efforts against groups operating in Yemen. (The AFP misidentified Smith.)
This week’s talks in Sana’a have attracted no attention in the United States. But Yemen’s Chief of the General Staff Ahmed al-Ashwal said the talks were of great concern to the government of President Ali Abdullah Salih, which is battling al-Qaida in the east and tribal rebels in the north backed by Iran.
The Economist reported this week:
Yemen’s increasing lawlessness outside shrinking zones of state control around the main cities is one reason why, earlier this year, al-Qaeda’s Saudi branch announced it was moving across the border and merging forces with its brethren in Yemen. The joint operation, calling itself “al-Qaeda in the Arabian Peninsula”, known in intelligence circles as AQAP, has carried out sporadic attacks inside Yemen, where tacit agreements with the government appear to have broken down. But its main target still appears to be Saudi Arabia.
The most recent State Department report on terrorism described Yemen’s efforts as “mixed.” While it took action against al-Qaida, Yemen, despite pressure from the U.S., continued a surrender program for terrorists it could not apprehend and released all returned Guantanamo detainees.
All of which makes the timing of Aulaqi’s statement even more interesting:
Nidal Hassan Did The Right Thing
Nidal Hassan is a hero.
He is a man of conscience who could not bear living the contradiction of being a Muslim and serving in an army that is fighting against his own people. This is a contradiction that many Muslims brush aside and just pretend that it doesn’t exist. Any decent Muslim cannot live, understanding properly his duties towards his Creator and his fellow Muslims, and yet serve as a US soldier. The US is leading the war against terrorism which in reality is a war against Islam. Its army is directly invading two Muslim countries and indirectly occupying the rest through its stooges.
Nidal opened fire on soldiers who were on their way to be deployed to Iraq and Afghanistan. How can there be any dispute about the virtue of what he has done? In fact the only way a Muslim could Islamically justify serving as a soldier in the US army is if his intention is to follow the footsteps of men like Nidal.
The heroic act of brother Nidal also shows the dilemma of the Muslim American community. Increasingly they are being cornered into taking stances that would either make them betray Islam or betray their nation. Many amongst them are choosing the former. The Muslim organizations in America came out in a pitiful chorus condemning Nidal’s operation.
The fact that fighting against the US army is an Islamic duty today cannot be disputed. No scholar with a grain of Islamic knowledge can defy the clear cut proofs that Muslims today have the right — rather the duty — to fight against American tyranny. Nidal has killed soldiers who were about to be deployed to Iraq and Afghanistan in order to kill Muslims. The American Muslims who condemned his actions have committed treason against the Muslim Ummah and have fallen into hypocrisy.
Allah(swt) says: Give tidings to the hypocrites that there is for them a painful punishment – Those who take disbelievers as allies instead of the believers. Do they seek with them honor [through power]? But indeed, honor belongs to Allah entirely. (al-Nisa 136-137)
The inconsistency of being a Muslim today and living in America and the West in general reveals the wisdom behind the opinions that call for migration from the West. It is becoming more and more difficult to hold on to Islam in an environment that is becoming more hostile towards Muslims.
May Allah grant our brother Nidal patience, perseverance and steadfastness and we ask Allah to accept from him his great heroic act. Ameen.
Fort Hood and the San Diego 9/11 hijacking connection (Updated)
Investigators are examining connections between the suspected Fort Hood shooter and an imam named Anwar Aulaqi.
On his blog yesterday (yes, his blog), Aulaqi called Maj. Nadal Hasan “a hero.”
Nidal opened fire on soldiers who were on their way to be deployed to Iraq and Afghanistan. How can there be any dispute about the virtue of what he has done? In fact the only way a Muslim could Islamically justify serving as a soldier in the US army is if his intention is to follow the footsteps of men like Nidal.
The heroic act of brother Nidal also shows the dilemma of the Muslim American community. Increasingly they are being cornered into taking stances that would either make them betray Islam or betray their nation. Many amongst them are choosing the former. The Muslim organizations in America came out in a pitiful chorus condemning Nidal’s operation.
The man who calls on fellow Muslim soldiers to kill their brothers in arms is a U.S. citizen who broadcasts his message of jihad (in English) from Yemen where he has lived since 2004. He not only has a website, but can be found on Facebook.
Before Yemen, Aulaqi had preached in Denver, San Diego, and Falls Church, Virginia.
It was in Virginia that Aulaqi may have met “brother Nidal.” Hasan attended a mosque in Falls Church in 2001 where Aulaqi was serving as imam, according to The Washington Post. Update: The Dar Al Hijrah mosque says Aulaqi was employed there from January 2001 through April 2002.
Also attending the Falls Church mosque were two Sept. 11 hijackers, Nawaf al Hazmi and Khalid Almidhar.
According to the Sept. 11 Commission’s report, the two hijackers “reportedly respected Aulaqi as a religious figure and developed a close relationship with him.”
Before moving to Virginia, Aulaqi was imam at the Rabat mosque in San Diego until mid-2000. The two hijackers also attended the Rabat mosque. They may even have met or at least talked to Aulaqi on their first day in San Diego.
According to his online biography, Aulaqi received a master’s degree in educational leadership from San Diego State University.
Aulaqi had connections to others of interest to the San Diego FBI, including Mohdar Abdullah (see my earlier post) and Omar al Bayoumi, a man believed to be a Saudi agent who helped the hijackers settle in San Diego.
From a footnote in the Sept. 11 Commission report:
The FBI investigated Aulaqi in 1999 and 2000 after learning that he may have been contacted by a possible procurement agent for Bin Ladin. During the investigation, the FBI learned that Aulaqi knew individuals from the Holy Land Foundation and others involved in raising money for the Palestinian terrorist group Hamas. Sources alleged that Aulaqi had other extremist connections.
None of this information was considered strong enough to support a criminal prosecution.
The Congressional Joint Inquiry on 9/11 notes that Aulaqi was visited by a “subject of a Los Angeles investigation closely associated with Blind Sheikh [Omar Abdel] Rahman,” who was convicted in a 1993 New York City bomb plot.
In mid-2006, Aulaqi was arrested in Yemen and spent 18 months behind bars, almost all of it in solitary confinement. In this interview with a former Guantanamo detainee, Aulaqi says he was held at the request of the U.S. government and was interviewed in custody by FBI agents.
Update: TPM Muckracker’s Justin Elliott has a comprehensive post on Nidal, including The New York Times report that “intelligence agencies” intercepted 10 to 20 communications last year and this year between Aulaqi and Hasan. The messages reportedly did not suggest any threat of violence.
Homeland Security Undersecretary for Intelligence Charles E. Allen last year described Aulaqi as an al-Qaida supporter and a former “spiritual leader” to three of the Sept. 11 hijackers.
And finally, judging from these recent comments on his website here, here and here, Aulaqi is deeply missed in San Diego.
Second Update: The Falls Church, Virginia mosque where Aulaqi served as imam has openly denounced his statement of praise for Hasan:
During Mr. Al-Awlaki’s short employment at our center, his public speech was consistent with the values of tolerance and cooperation. After returning to Yemen, Mr. Awlaki now claims that the American Muslims who have condemned the violent acts of Major Hasan have committed treason against the Muslim Umaah [community] and have fallen into hypocrisy. With this reversal, Mr. Al-Awlaki has clearly set himself apart from Muslims in America.
Brent Wilkes: Justice Delayed
Remember Brent Wilkes? The formerly high-flying San Diego defense contractor was sentenced to 12 years in prison for bribing former Congressman Randy “Duke” Cunningham, but it will be a long time before Wilkes is behind bars.
Wilkes has been free since January on $2 million bail while he appeals his conviction.
The 9th U.S. Circuit Court of Appeals recently delayed the appeal for the third time this year after Wilkes’ court-appointed attorneys argued that they needed more time.
All the paperwork in the case is now due April 9, 2010. Unless there’s another delay.
According to the court, it takes on average 4-5 months for the 9th Circuit to hear oral arguments, and then three months to a year for the court to decide, so Wilkes likely won’t have a decision before 2011.
By then, Wilkes’ former consultant and fellow convicted Cunningham briber, Mitch Wade, will be nearing the end of his sentence, as will Wilkes lifelong best friend, Kyle “Dusty” Foggo, the CIA’s former executive director.
Cunningham has a 2013 release date.
How defense giant SAIC made $3.5b in 5 years
In the Hall of Fame of missed business opportunities, a special place is reserved for Emmit McHenry.
In 1995, McHenry sold his small company called Network Solutions for $4.7 million to the secretive and powerful San Diego defense giant SAIC.
Five years later, McHenry’s business sold again for $3.5 billion.
Network Solutions (known today as VeriSign) administers a database of 90 million domain names that includes all the dot-coms on the Internet (including this one). This database told your computer where to find the page you are now reading. Without it, there would be no Internet as we know it. No Google. No Amazon.
If you haven’t heard the full story of SAIC and Network Solutions it’s because the full story hasn’t really been told before. SAIC hasn’t exactly tooted its own horn on the whole the Network Solutions saga. Many were outraged that the government had granted the employee-owned company what amounted to a license to print money.
In this 2-part piece by my friend Bruce Bigelow at Xconomy, a local San Diego business website that I have done some work for in the past, got SAIC founder Robert Beyster to tell the story.
In SAIC’s hands, McHenry’s small company turned out to be “unbelievably profitable,” says Robert Beyster, the scientist who founded and ran SAIC until his ouster from the company in 2004. In fact, thanks to Network Solutions, SAIC may have been making too much money:
X: Why did SAIC decide to do the partial IPO in 1997? Did that turn out to be a smart thing to do? SAIC sold 3.3 million common shares, or a 21 percent-stake in Network Solutions, raising more than $59 million. SAIC retained almost 12 million shares of the stock, which carried preferential rights that basically preserved 96 percent control of the company.
JRB: The value of NSI was becoming so great that we wanted to take some of the profits we had made off the table in case of difficulties later on. (emphasis added)
There were — and still are — many people who think this never should have been allowed. The Internet had its origins in a network created by a research unit at the Pentagon and thus belonged to no one. The National Science Foundation oversaw the domain name registration database, a job that it contracted out to Network Solutions.
If McHenry didn’t realize what he had, SAIC sure did. A few months after SAIC acquired the company, the government amended the terms of Network Solutions’ contract. The amendment allowed SAIC to charge $100 to register a domain name (subsequently lowered). Equally important, the contract amendment allowed SAIC to keep 70 percent of the revenue, and gave the company a monopoly over the business.
This monopoly began to rub people the wrong way, and a spate of lawsuits were filed. So SAIC turned to its friends in Washington, says Mitch Daniels, who engineered the Network Solutions deal:
MD: We spent significant amounts of time and money at NSI educating the public, Congress, and senior government officials about aspects of the business that were really important: the Internet, domain names, Internet security, major policy questions involved with domain names, and keeping the “A” server and the other domain names servers running and secure. From 1995 until 2000, we brought at least one-half of the entire United States Senate and House members as well as senior White House and cabinet-level officials to tour our facilities in Herndon, VA.
Even if McHenry had hung on to the company, he would have been unable to marshal the kind of firepower that SAIC had in Washington. After a court held that Network Solutions was assessing an illegal tax, Congress in 1998 slipped language into an appropriations bill that retroactively made this “fee” legal. (See Thomas v. Network Solutions.) One of SAIC’s lobbyists in 1998, incidentally, was the ethically challenged former San Diego congressman Bill Lowery.
Last month, SAIC moved its headquarters to McLean, Va. At last report, it had annual revenues of more than $10 billion.
As for McHenry, he’s moved on and tries not to dwell on what could have been.
The Strange Case of Mohdar Abdullah
Did the U.S. government consider designating San Diego college student Mohdar Abdullah (left) as an enemy combatant after the 9/11 attacks?
The suggestion appears in one of several 9/11 Commission memoranda that were recently released by the National Archives and that make it clear that U.S. authorities viewed Abdullah as a major threat. An enemy combatant designation would have allowed President Bush to order Abdullah detained indefinitely in Guantanamo or military brig.
Ten days after the attacks, Abdullah was arrested as a material witness to the 9/11 attacks and shipped off to New York. Prosecutors there considered charging him along with Zacarias Moussaoui, who is serving life in prison for conspiring to kill Americans in the 9/11 attacks but ultimately decided not to.
Commission documents show that Abdullah presented a dilemma for the government, which believed that he knew much more about the attacks than he would admit, but lacked sufficient evidence to support a terrorism charge. Abdullah was charged with visa fraud and deported to Yemen in 2004.
“If anyone in San Diego had prior knowledge of the 9/11 attacks it would be Abdullah,” one unnamed FBI agent told the Commission.
Abdullah had befriended the two hijackers when they lived in San Diego in 2000 and admitted helping the two men obtain state identification, contacting flight schools on their behalf and translating for them. Abdullah knew the pair had extremist leanings and sympathized with them, according to the 9/11 Commission’s final report. After Hazmi after he left San Diego, he remained in contact with Hazmi.
For three weeks before the attacks, Abdullah had been acting strangely. Several witnesses described him as nervous, paranoid and anxious. He stopped using the phone and didn’t show up at work or school.
On the morning of Sept. 10 at the Texaco station where Abdullah worked, an FBI source reporting hearing Abdullah saying something like, “It’s finally going to happen.” That night, Abdullah wanted to marry a young woman he had met a few months earlier, according to FBI Special Agent Daniel Gonzales.
Much later, Abdullah’s fellow inmates told the FBI that he had bragged to them of advance knowledge of the attacks, but authorities couldn’t substantiate the reports.
Abdullah denied foreknowledge of the attacks.
Gonzales described Abdullah as “a ‘slick’ and charismatic ‘liar.’” The unnamed San Diego FBI agent described Abdullah as a “goofball” and didn’t think he was a willing facilitator for the hijackers.
In their efforts to deport Abdullah, U.S. authorities were “running against the clock,” Justice Department officials told 9/11 Commission staffers in 2004.
Exactly what this means is unclear. The full explanation remains classified, but there’s no doubt that authorities didn’t want to let Abdullah go.
“The fear was a worst-case scenario where the opportunity to deport disappears, criminal charges do not materialize, and Abdullah succeeds in his habeas petition and is walking the streets,” Jonathan Cohn of the Justice Department told Commission staffers.
Foggo Talks to the NY Times
Kyle “Dusty” Foggo, the imprisoned former top CIA official, has given an interview to The New York Times, which published his claims last week in a front-page story titled, “A Window Into CIA’s Embrace of Secret Jails.”
From behind the walls of a Kentucky prison where he is serving more than three years for fraud, Foggo says he was given a special assignment to help build secret prisons for suspected terrorists.Foggo “went on to oversee construction” of three prisons — one in Bucharest, Romania, one in Morocco (that went unused) and a third in an unnamed Eastern European country, the Times reported.
A review of the story and the background of the case shows there is evidence to believe Foggo’s account, but ultimately, there’s more reason to doubt he’s telling the whole truth.
First a bit of background:
Foggo pleaded guilty last year in a fraud scheme involving a defense contractor named Brent Wilkes. Foggo admitting using his influence at the agency to steer $2 million in contracts to Wilkes, who paid for lavish overseas vacations for Foggo and his family. Wilkes was separately convicted of bribing former Rep. Randy “Duke” Cunningham with cash, travel and hookers.
The scheme centered around Foggo’s time as chief support officer of FRANSUPT, the agency’s crucial regional support terminal in Frankfurt, Germany from July 2001 to November 2004. In that position, Foggo had control over millions of dollars in government funds.In November 2004, CIA Director Porter Goss picked Foggo to run day-to-day operations at the CIA, as the agency’s executive director, the No. 3 job. Foggo says he was promoted in part because of his work on the prisons.
The Times story paints a picture of Foggo as a lovable rogue, “a cigar-waving, burbon-drinking operator” who could get things done. The job of building prisons was “too sensitive to be handled by headquarters,” Foggo said. “I was proud to help my nation.”
One problem lies with what isn’t in the story. Missing from the Times account is any comment from federal prosecutors, who have a strikingly different view of Foggo. To them, Foggo is a man who is motivated not by patriotism but by “narcissism and deceitfulness.”
In sworn declarations filed by prosecutors, a former director of the CIA’s Counterterrorism Center director described Foggo as a “con man” who was “seriously flawed, ethically and morally.” Former CIA Director Porter Goss says Foggo left him feeling “deceived and betrayed.” A CIA attorney recounted how she became convinced that Foggo was “effortlessly lying” to her.
Is it possible Foggo is telling the truth? As chief support officer, he quite likely knew something about the prisons. Before securing his guilty plea, prosecutors complained that the defense wanted turn the case into “a referendum on the global war on terror” and a debate over sensitive “CIA programs and methods.”
Foggo’s attorneys asked to be read into areas of sensitive compartmented information — the most closely guarded class of secrets. One pertained to the CIA’s terrorist detention and interrogation program. The request was denied. Shortly before he went off to prison, Foggo spoke with a prosecutor investigating the CIA’s destruction of videotaped interrogations.
Human Rights Watch, the Council of Europe and ABC News have reported that Romania (as well as Poland) served as locations of CIA prisons. The most detailed of these investigations (pdf) by the Council of Europe’s rapporteur Dick Marty found evidence that Romania’s “black site” was located near in a secure zone around an airbase near the Black Sea — a ways from Bucharest.
The choice of a busy street for a location of a secret prison, however, strains credulity, since the changing of guard shifts, supplies and transport of detainees could attract unwanted attention.
As James Risen wrote in State of War, “The CIA wanted secret locations where it could have complete control over the interrogations and debriefings, free from the prying eyes of the international media, free from monitoring by human rights groups, and, most important, far from the jurisdiction of the American legal system.”
The story lacks some internal consistency, something interrogators look for when evaluating truthfulness: Foggo says he was given the task secret prisons because it was “too sensitive for headquarters.” Nevertheless, his work on the CIA’s so-called black sites helped him win a promotion back at headquarters, suggested that headquarters was well aware of his sensitive mission.
And finally, while the Times doesn’t rely on Foggo alone — it cites anonymous “former intelligence officials and others briefed on the matter.” One of these sources may be Brant Bassett, who is quoted later on in the piece speculating that Foggo was taken down because of his “fast rise and blunt approach.”
Regardless of whether Bassett is a confidential source or not, The Times didn’t fully explain his connection to the story. Bassett was a friend of both Wilkes and Foggo, part of their poker playing D.C. social circle. Bassett also served under Porter Goss the House Intelligence Committee and may have played a role in getting Foggo named executive director.
We owe a great deal to reporters like The Washington Post’s Dana Priest, who helped expose the CIA’s network of secret prisons with the help of agency insiders who were troubled by what was going on. It’s an important story, perhaps too important for the Times to give such credence to a man like Kyle “Dusty” Foggo.
More on hedge funds and pensions
The chief investment officer at San Diego County’s beleaguered pension fund has resigned after the fund lost more than $2.6 billion and invested millions in a hedge fund whose owners were arrested for fraud. Here’s my story on what happened at yesterday’s dramatic board meeting. The board is raising sharp questions about some of the issues I raised in my story earlier this week on the WG Trading scandal. One important question: Why isn’t the fund helping law enforcement?
Couple of stories out
My piece on another hedge fund blowup at San Diego County’s $7.9b pension fund ran in the Voice of San Diego.
And The American Lawyer is out with my story about the heightened pace of congressional investigations.
Foggo & Wilkes, Jerry Lewis & Tom DeLay
Sharp-eyed reader Oskar points out a little nugget buried in the Foggo documents:
I was reading the Foggo appendix and found something pretty interesting. Om page 60, we learn that Wilkes and Foggo apparently dined with Lewis and DeLay(!). Of course, a dinner is just a dinner and doesn’t prove anything. But, still, it’s pretty interesting given Lewis’ claim that he had not seen Wilkes for 10 years or so…
This blog is lucky to have such astute readers.
The dinner for four at the Capital Grille that Oskar is referring to took place on Monday, May 16, 2005. Foggo, then the CIA’s executive director, and his old friend, defense contractor Brent Wilkes, had two impressive guests. The government’s appendix states: “Assumes DeLay and Lewis also dined on the bill,” which came to $1,423. Wilkes, as always, picked up the tab.
Fast-forward to today. Wilkes has been sentenced to 12 years prison for bribing former Rep. Randy “Duke” Cunningham with cash and hookers. (He’s out on appeal) Foggo was sentenced to more than three years for illegally steering CIA contracts to Wilkes.
At the time, Reps. Jerry Lewis and Tom DeLay were two of the most powerful members of the House of Representatives. Lewis was chairman of the House Appropriations Committee and the House was set to take up its annual appropriations bills. DeLay, of course, was the majority leader.
One year later, Lewis was apparently suffering from memory loss, according to this 2006 story in The New York Times:
In recent months, Mr. Lewis has said that he barely knew Mr. Wilkes and that he did not remember seeing him in nearly a decade. But Mr. Wilkes says their relationship was closer than that. (emphasis added)
Ever since they went on a scuba-diving trip together in 1993, he said, Mr. Lewis had referred to him as his “diving buddy.” They occasionally dined together or met at political functions, Mr. Wilkes said. At a Las Vegas fund-raiser in April 2005, Mr. Wilkes said, Mr. Lewis greeted him as “Brento” and hugged him as Mr. Wilkes surprised the lawmaker with $25,000 in campaign contributions.
As for DeLay, he had flown three times on a jet owned by one Wilkes’ company. Another Wilkes company gave $15,000 to TRMPAC, a political action committee DeLay founded to establish a Republican majority in the Texas legislature. (See my AP story here for more.)
Wilkes and Foggo were regulars at the Capital Grille and shared a well-stocked wine locker there. In 2005, documents show the two old high school buddies dined together at the pricey D.C. steakhouse about once a month.
Porter Goss on Foggo and the CIA
ProPublica’s Marcus Stern has unearthed a trove of documents filed in the case against Kyle “Dusty” Foggo.
For those of you who don’t know, Foggo is the former No.3 man at the CIA who has pleaded guilty and is scheduled to be sentenced Thursday for steering agency contracts to his childhood friend, Brent Wilkes.
Reading the documents about this lothario of a man with a nasty temper, I came away with the same impression as one of Foggo’s former bosses at the spy agency who stated that he was “flabbergasted” when then-CIA director Porter Goss tapped Foggo in November 2004 as his executive director.
“I found Director Goss’s selection to be quite revealing, that Mr. Goss would be taken in by a ‘con man’ like Mr. Foggo,” wrote agency veteran described only as John Doe No. 2, who was Foggo’s supervisor at an overseas CIA station in 1989, when local police filed a diplomatic protest against Dusty for assaulting a bicyclist.
So how did Foggo come to be selected as Goss’ No. 3? Goss refused to comment when I called him while reporting my book, but the question has always nagged at me.
Porter Goss answers those questions for the first time in a sworn declaration filed in an appendix to the memorandum, which you can read here.
Goss says Foggo’s name was suggested by members of his senior staff. Although Goss doesn’t say this, I’ve heard that Foggo was recommended by Patrick Murray. Murray was chief counsel on the House Permanent Select Committee on Intelligence, which Goss chaired, and he served as chief of staff at the spy agency during Goss’ stormy tenure there.
Goss says he directly asked Foggo whether there was anything he needed to know that would “reflect poorly” on the Director’s office or the CIA. Foggo denied there was. Had he known what Foggo was up to with Wilkes, Goss says he would have fired him on the spot.
When press reports linked his executive director to Brent Wilkes, “I learned from my public relations staff that Foggo had been less than candid.” Ultimately he lost confidence in Foggo and asked him to resign. In May 2006, less than two years after he was sworn in as CIA director, the White House fired Goss and replaced him with Gen. Michael Hayden.
“I felt deceived and betrayed by Mr. Foggo,” Goss concludes.
A source tells Laura Rozen that Goss is lying, but I’m taking Goss at his word. He’s out of public life now, and I don’t think he would expose himself to perjury charges. At any rate, it’s more than apparent that he was absolutely the wrong man for the job of CIA director.
How out of the loop was Goss if it fell to public affairs to inform him of the problems with Foggo? As the documents make clear, were already well known to his supervisors and were included in his agency file.
Foggo was not the only staff member who was unworthy of Goss’ trust. Equally suspect was Goss’ choice of Murray and the other “Gosslings” he brought over from Capitol Hill. As Ken Silverstein noted back in 2006, the Gosslings arrived at Langley with a “lengthy list of names of people to be purged and went about removing them.” One was Stephen Kappes, who eventually returned to the agency and is now serving as deputy director under President Obama.
A man who can’t tell the difference between the Foggos and the Kappeses shouldn’t be in charge of the Central Intelligence Agency. Period.
Update from CQ’s Jeff Klein:
Kyle “Dusty” Foggo’s CIA dossier included allegations that he was sharing a woman with a suspected Russian mole, according to a top former spy agency official and other sources.
CIA Director Porter J. Goss knew about the allegation when he hired Foggo to be the agency’s executive director, its third highest official, an aide said today.
But Merrell Moorhead, an aide to Goss at the CIA from 2004 to 2006, said CIA security officials later withdrew that and other serious allegations about Foggo’s record and “gave him a clean bill of health.”
Second Update: Klein updated his post to quote Moorhead as saying that Bassett “recommended” Foggo. Laura Rozen agrees. Ken Silverstein has reported that Bassett “positioned” Foggo for the job of executive director.
I’m not convinced. Bassett was a consultant to the agency. Maybe that makes him part of the “senior staff” Goss alludes to in his statement. I’m not so sure.
It seems there are still some hard feelings over Foggo and the blame game goes on.
Cunningham Case Prison Watch
But Dogs Need Stimulus too, Mr. President
Chula Vista, just south of here, is asking for $500,000 in federal stimulus money to build a dog park.
Sunset View Dog Park is part of the U.S. Conference of Mayors “Mainstreet Economic Recovery” wish list now circulating in Congress. The money would upgrade an existing park and provide employment for seven people. It would also stimulate untold numbers of canines, fleas and ticks. The tennis ball and doo-doo bag industry are big believers.
In Chula Vista, the dog park is a small sliver of the $487 million worth of projects the city is seeking, to create 6,325 jobs. The other 18,000 “ready to go” projects include $2 million for neon signs in Las Vegas and $4.5 million for an “eco park” in Boynton Beach, Fla. featuring butterfly gardens and gopher tortoises.
Just … wow. Anybody know the name of Chula Vista Mayor Cheryl Cox’s pooch?
Carlsbad Half-Marathon
I would have dominated in my age group if I were a 70-year-old woman.
Google saves green by going green
Who knew Google had an energy czar? Google’s Bill Weihl was in town yesterday talking about his company’s efforts to save energy. The Internet search giant uses a lot of energy to power the massive data centers where all those YouTube videos are stored. One of them in Oregon is powered by a dam.
Eric Holder, on hold
Senate Republicans are holding up the nomination of Eric Holder, President Obama’s pick for attorney general. I explored one reason why and spoke to the San Diego attorney at the center of it in this Voice of San Diego piece.
The (Alleged) Reasoning Behind Wilkes' Release
I’ve been scratching my head over the 9th U.S. Circuit Court of Appeals ruling that freed Brent Wilkes from prison on $2 million bail while he appeals his conviction for bribing former Rep. Randy “Duke” Cunningham. The court’s reason for releasing Wilkes makes absolutely no sense at all.
First, a bit of background: The 9th Circuit granted Wilkes bail in March. Judge Larry Burns in San Diego required Wilkes to post collateral of $1.4 million. Wilkes pledged three homes, but Judge Burns ruled in June that it wasn’t enough as he had concerns over the value of the homes.
On Dec. 30, 9th Circuit Judges Thomas G. Nelson and A. Wallace Tashima apparently decided that the homes Wilkes pledged as collateral were suddenly worth more now than they were in June:
“While the district court (Judge Burns) has concluded that a personal appearance bond secured by $1.4 million in property or assets is required during the pendency of this appeal, we conclude that given changed market conditions which have resulted in a decline in the value of real property, Wilkes’ pledge of three properties subject to forfeiture is sufficient to assure his appearance during the pending of this appeal.”
That’s pure gibberish. If the housing market declines, homes are worth less, which means that Wilkes is even further from the $1.4 million threshold. Despite their cushy lifetime appointments, Judges Nelson and Tashima had to know that much. Maybe the court thought no one would notice.
I checked with Shaun Martin, a law professor at the University of San Diego who clerked for the 9th Circuit to see whether I was missing something. After reading the order, he was as confused as I was.
“That raises more questions than it answers,” he said. Teading between the lines, Martin said the judges had grown impatient with all the back and forth and just wanted to move on. “You can fairly put the order down to frustration and needing to say something to let the guy go,” he said.
Wilkes Released
Two former defense contractors convicted of bribing former Rep. Randy “Duke” Cunningham are swapping places in the prison system. As Mitchell Wade prepares to head to prison following his sentencing last month, a federal judge granted $2 million bail for Brent Wilkes, who was serving 12 years for bribing Cunningham.
Wilkes has been fighting for release for nearly a year. The 9th U.S. Circuit of Appeals in March granted Wilkes bail pending appeal of his bribery, fraud, and conspiracy convictions. Judge Larry Burns in San Diego, however, kept the 54-year-old Wilkes locked up over concerns over the value of the collateral he was posting to secure release.
Burns required Wilkes to post collateral of $1.4 million or 70 percent of his bail — seven times the typical 10 percent requirement. Wilkes pledged three homes subject to forfeiture, but Judge Burns said it wasn’t enough.
On Dec. 30, the appellate court ordered Wilkes’ release, ruling that the three homes was now sufficient “given changed market conditions which have resulted in a decline in the value of real property.” The court seems to be saying that a million bucks isn’t what it used to be.
Wilkes has been serving his time at Terminal Island in San Pedro. His former consultant, Mitch Wade, hasn’t yet reported to prison to begin serving his 30 month sentence.
The sentencing judge recommended that Wade serve his time at a prison “camp” in Petersburg, Va. Cunningham is serving 100 months in a similar prison camp in Tuscon, Arizona.
Alpha engine hits the brakes
San Diego County’s pension fund says the assumptions underlying its $1b hedge fund investment are no longer true. The fund’s alpha engine had used hedge funds and derivatives to power its to “alpha,” above-market returns. My piece is now up at Voice of San Diego.
Who paid for Cunningham's bribes? You did.
That’s the true meaning of today’s sentencing of defense contractor Mitchell Wade, who supplied former Rep. Randy “Duke” Cunningham with $1.8 million in bribes.
Judge Ricardo Urbina sentenced Wade to 30 months in prison and, unbelievably, imposed a fine of only $250,000. If I’m reading the prosecution’s court filings correctly, that means the judge is allowing Wade to keep most of the wealth his corruption bought.
Prosecutors had asked for a much higher “significant” fine. In court filings, the government said the $250,000 fine Wade’s attorneys were seeking was “far too low” a penalty, noting that it’s only $16,000 more than the mandatory minimum penalty.
“Wade, whose company earned $150 million from Defense Department from 2002-2005, is still a wealthy man. He has the capacity to pay more, and he should pay more,” Assistant U.S. Attorney Howard Sklamberg wrote in a court filing.
Judge Urbina had the tricky task of balancing what prosecutors called Wade’s “mammoth acts of corruption” with the extraordinary assistance he provided the government in its investigation of Cunningham and others. The judge rewarded Wade for his cooperation with reduced prison time.
By failing to impose a significant fine and seize the ill-gotten gains, the judge is assuring Wade can pay his $2 million legal team at WilmerHale and still profit from his corruption.
And here I thought the criminal justice system was supposed to discourage crime.
Mitch Wade's Sentence: 30 months
Mitch Wade, the defense contractor who bribed former Rep. Randy “Duke” Cunningham and then helped to swiftly put the congressman behind bars, was sentenced to 30 months in prison today in return for the extraordinary assistance he provided the government. With time off for good behavior, Wade will serve about two years.
Prosecutors had sought four years in prison and a “significant fine” for the $1.8 million in cash, a yacht, a used Rolls-Royce, antiques and the purchase of the congressman’s Del Mar home for an inflated price. Wade’s attorneys had asked for a year of home detention.
Equally significant, Judge Ricardo Urbina ordered Wade to pay a $250,000 fine. That essentially allows Wade to keep much of the money he made bribing Cunningham, who used his positions on the powerful Defense appropriations subcommittee and the House intelligence committee to steer lucrative contracts to Wade’s firm, MZM Inc. Over three years, MZM was awarded more than $150 million in government contracts. In the end, taxpayers are stuck with the bill for Cunningham’s bribes.
Wade also made $78,000 in illegal campaign contributions to Reps. Harris and Goode. (Wade was fined $1 million by the Federal Election Commission, the second-largest fine in its history.) And he provided job offers and other goodies in the Defense Department to ensure favorable treatment for his company.
When his corruption was exposed by Copley News Service reporter Marcus Stern, Wade quickly became the government’s main informant. He was debriefed 23 times and provided a searchable, electronic database of 150,000 documents. It was Wade who handed over the most infamous evidence of Cunningham’s corruption — the “bribe menu.” Wade also testified at the bribery trial of his former boss, Poway defense contractor Brent Wilkes, the man who introduced him to Cunningham.
According to a sentencing memo filed by Wade’s attorneys says he also aided the government in its investigation of “at least five other members of Congress” under investigation for “corruption similar to that of Mr. Cunningham.” Sources with knowledge of the investigation say these five include Sen. Dan Inouye (D-Hawaii), Rep. Allan Mollahan (D-W.Va.), Rep. Jerry Lewis (R-Calif.), outgoing Rep. Virgil Goode (R-Va.), and former Rep. Katherine Harris (R-Fla).
The extent of his cooperation is reflected in Wade’s sentence, the lowest of any of the major figures caught in the Cunningham scandal. The former congressman is serving 100 months. Wilkes was convicted at trial and sentenced to 12 years. Thomas Kontogiannis was sentenced to eight years for laundering the congressman’s bribes.
Judge Urbina specifically commended Wade’s $2 million legal team at WilmerHale for their work on the case.
Mitch Wade Column for Voice of San Diego
My column on Mitch Wade’s sentencing is up.
If you haven’t heard of the Voice of San Diego, it’s a not-for-profit that The New York Times thinks may represent the future of watchdog journalism.
Please take a look, and support the Voice or a not-for-profit near you, like ProPublica, where Marcus Stern, the reporter who exposed Cunningham’s corruption, has hung out a shingle.
The prosecution's "own private law firm"
Federal prosecutors in Washington, D.C., responded today to defense contractor Mitchell Wade’s request for a sentence of a year of home detention for the extraordinary cooperation he provided the government in its investigations of Randy “Duke” Cunningham and many others. Simply put, the government thinks Wade’s good deeds don’t cancel out his bad ones.
Wade, after all, is a man who shelled out $1.8 million in bribes to Randy “Duke” Cunningham. Add in Wade’s corruption of officials in the Defense Department and the election fraud scheme he conceived and led, and you have a conduct that prosecutors think merits four years in prison.
And Wade’s suggestion of a $250,000 fine is “far too low.” MZM Inc., earned $100 million to $150 million in Defense Department contracts from 2002-2005. (See my earlier post below on MZM’s profitability.) Although prosecutors don’t note this, Wade spent $2 million on his legal team at WilmerHale.
“Wade … is still a wealthy man. He has the capacity to pay more and should pay more,” wrote Assistant U.S. Attorney Howard Sklamberg.
Prosecutors from San Diego chime in with their own piece of Wade fan mail. In a letter to the sentencing judge, Assistant U.S. Attorney Jason Forge says that Wade “transformed” the nascent investigation of Cunningham in 2005. Without his help, convicting the congressman might have taken years, instead of months.
On more than one occasion, several of us observed that the responsiveness and thoroughness of Wade and his legal team made us feel as if we had our own private law firm.
When Wade said Cunningham had written out on his congressional stationery a price list for increasing levels of government contracts, Forge thought it was a great story, but found it hard to believe. Wade’s counsel found the document, which became known as the “bribe menu,” a damning symbol of corruption.
The discovery of this bribe menu marked a high point in our investigation and also marked the last time we would seriously doubt any information Wade provided.
Duke Cunningham's Pardon File
I received a response today from the Justice Department to my request under the Freedom of Information Act for former Congressman Randy “Duke” Cunningham’s petition for clemency from President Bush. I’ve written about this here.
The Office of the Pardon Attorney withheld Cunningham’s clemency application as well as correspondence from his attorney, James B. Craven III. They did, however, provide some letters written on Cunningham’s behalf, which I have posted here. Some of these letters were written before Cunningham asked President Bush to commute his sentence in December 2007.
Cunningham, a Republican who represented the San Diego-area for 15 years, is the most corrupt congressman in history. He is serving a 100-month sentence for taking millions of dollars in bribes from two defense contractors. Cunningham was also the first flying ace of the Vietnam War. As the letters show, he is still a hero to some.
I’d like to hear your thoughts about this. Please leave a comment below.
Former CIA Executive Director pleads guilty (Updated)
CIA Executive Director Kyle “Dusty” Foggo pleaded guilty today to a single count of fraud. As the former No. 3 at the spy agency, he is one of the highest ranking CIA figures charged with a crime, but the sensitivity of his position is sparing him major time in prison. Simply put, Foggo played chicken with the government, and won.
The Justice Department tries to put a brave face on this news in its press release with the true but highly misleading fact that Foggo faces a maximum of 20 years in prison. Under his plea agreement, Foggo will serve no more than three years in prison, and there’s a good chance he will serve even less.
Foggo is quite a character. (Background here). He’s the last person charged in the Randy “Duke” Cunningham scandal to plead guilty, but his was the case one that threatened to transform what was essentially an embarrassing case of congressional bribery involving yachts, antiques and a mansion into “a referendum on the global war on terror.”
That’s the prosecution’s spin, at any rate. A few weeks ago, prosecutors warned that Foggo was threatening to expose details of highly-classified programs and protected “sources and methods.” This is a legal tactic known as “graymail” which is basically a game of chicken involving information that the government doesn’t want to risk disclosing. The defense’s take on this is classified, along with much of the case.
Prosecutors said those secrets were irrelevant to the charges that Foggo was using his influence at the CIA — his executive director “grease,” as he put it in an e-mail — to helping both his mistress and his best friend, a defense contractor named Brent Wilkes, who is serving 12 years in prison.
What were those secrets? No one really knows, which is how the CIA likes it.
There are few clues in court papers, but they are tantalizing ones. Among other things, Foggo was trying to help Wilkes land a multi-million dollar contract providing air support services for the CIA. The government refused to declassify the highly-secret information Foggo passed along to his poker buddy.
CIA air support. Sources and methods. A referendum on the war on terror. It doesn’t strain credulity to wonder whether the secrets involved the CIA’s rendition program, which involves snatching suspected terrorists and whisking them to secret prisons and has proven to be a major black eye with some of our allies. But those who know aren’t talking. Not to me, at any rate.
Foggo’s plea agreement carries conditions I haven’t seen for anyone else in this case. The government had Foggo sign away his rights to information that was obtained during the government’s investigation of him. Foggo also waived his rights to profit from publicizing the circumstances of his crime.
The Justice Department’s reluctance to proceed is ironic given the other bit of news today involving the former U.S. Attorney in San Diego, Carol Lam. There have been incessant rumors in the liberal blogosphere that Lam was forced to resign because she poked her fingers into the Bush administration’s beehive by prosecuting Foggo. A report today by the Justice Department’s Inspector General Glenn Fine says that ain’t so, but bloggers aren’t letting facts get in the way.
There’s an interesting footnote in Fine’s IG report. Far from trying to hinder Lam’s investigation of Foggo, Deputy Attorney General Paul McNulty’s office tried to help her prosecutors “to obtain classified documents from the White House or the CIA that were relevant to an investigation.”
In the summer of 2006, as Foggo was being indicted, Lam’s office reached out to McNulty’s staff to obtain classified information from the CIA on several matters, and “the White House Counsel’s Office was involved in those discussions.” Sensitive stuff indeed.
Who could have imagined that when the FBI drilled the locks and stepped into Cunningham’s mansion, the investigative trail would lead all the way to the White House and the executive offices of the CIA?
P.S. The Washington Post says Foggo is the “highest-ranking member of a federal intelligence or law enforcement agency to be convicted of a crime.” I guess CIA Director Richard Helms‘ 1977 conviction for lying to Congress doesn’t count.
McCain in San Diego: "Washington changed us."
John McCain stopped in San Diego tonight for a fundraiser and reminded us of our major contribution to Washington politics in the past 20 years, the most corrupt congressman ever.
From the Union-Tribune:
“We came to Washington and gained a majority to change Washington and Washington changed us,” said the Arizona senator, who will officially claim the Republican presidential nomination next week. “We let spending get completely out of control.”
Without mentioning Cunningham by name, McCain alluded to the former Rancho Santa Fe Republican congressman who was driven from office in 2006 by a massive bribery scandal.
“I don’t use the word corruption lightly,” he said. “We have former members of Congress residing in prison, and it’s because of this practice of earmarks. And it’s going to stop.”
ABC News reports that McCain is preparing to ramp up attacks on Obama contributor Tony Rezko. Mentioning Cunningham will probably go over like warm champagne with McCain’s moneybags at The Grand Del Mar, but at least somebody’s talking about corruption in Washington. About damn time!
Duke Cunningham, Mike Aguirre and Sign On radio
I was on Chris Reed’s radio show on Sign On Radio this morning, an Internet radio station run by the San Diego Union-Tribune. Chris is an editorial writer and blogger at the San Diego Union-Tribune.
We started talking about Randy “Duke” Cunningham’s request for a commutation, but then Chris asked me about a piece I wrote back in February on San Diego City Attorney Mike Aguirre.
That piece caused a bit of a stir, I guess, because I asked a question that nobody else was asking. Aguirre, our elected city attorney, called the mayor “schizophrenic” and told a San Diego Union-Tribune that he was “pathological.”
That struck me as odd because many people say privately that Aguirre is the one with mental problems. But if you, as a reporter, raised this issue, Aguirre suddenly got defensive. Or hinted at forces out to stop him. Or wrote a letter to your editor telling you to get out of the office more.
Then today I spotted news that Aguirre’s brother, a wealthy attorney, is working as an “unpaid intern.” Double the fun!
I voted for Aguirre because I thought we needed someone to shake things up in paradise or Enron-by-the-sea as The New York Times called us.
I just don’t like bullies.
The Princess Mariana
On my way to dinner with some friends last night, I spotted this megayacht docked along Harbor Drive in San Diego.
Today, the Union-Tribune had a small item about this 258-foot yacht. It’s called the Mariana. It’s not just a megayacht, it’s one of the world’s biggest megayachts. It has six staterooms, a 13-seat cinema, a wine cellar, a pool, and six decks, including a party deck with a dance floor and grand piano. You can rent it for 610,000 euros a week.
The Port of San Diego is rolling out the welcome wagon for the Mariana, the first to dock at its brand-new megayacht “Mediterranean mooring.” Yesterday, the Mariana notified the Coast Guard that it had dumped about 30 gallons of diesel fuel in San Diego Bay.
The yacht’s owner is Mexican telecom billionaire Carlos Peralta Quintero.
Peralta made his fortune in 1994 by selling his family-owned Iusacell company to it to Bell Atlantic for $1.2 billion. This is reportedly his seventh yacht.
An investigation by Frontline’s Lowell Bergman turned up a Bell Atlantic confidential document that described the Peraltas as Mexican “robber baron[s]” who have always “had top-level collaborators in the Mexican government.”
In the middle of the Bell Atlantic deal, Peralta wired $50 million to the Swiss bank account of the Mexican president’s corrupt brother, Raul Salinas as part of a handshake deal between the two men. Swiss prosecutors say Salinas used the account to launder money from drug dealers. Peralta insisted the money had nothing to do with drugs.
Peralta also paid Carlos Hank Rohn $100 million as part of the cell-phone deal. Hank Rohn owned the franchise for Guadalajara and that was included in the purchase. Hank Rohn paid $10 million for it — a $90 million profit.
Hank was not only linked to Salinas, but a leaked U.S. government report called the Hank family a “major threat” because of the family helps narcotraffickers move drugs and launder money. (Hank’s flamboyant brother Jorge served as Tijuana’s mayor)
In 1997, Peralta was charged with fraud in Mexico for failing to pay $5 million in taxes and then acquitted. In 2002, he tried to buy the Anaheim Angels from Walt Disney Co. The next year, he got the Mariana, named for his wife.
So welcome to San Diego, Carlos Peralta! The Mariana, by the way, is homeported in the offshore tax haven of the Grand Cayman islands.
The Candidate Who Wasn't
The Delicia Holt story keeps getting better!!!
Delicia may or may not be a candidate for Congress in my district (California’s 53rd) who sells “youth juice” on her website. She says she’s raised nearly a quarter million dollars but her name isn’t on the ballot.
She has posted the answers to all 36 questions she received from Martin Wisckol, a reporter at the OC Register, who has been asking questions about Delicia because our local scribes are too busy sending out resumes.
Here answers are just…Well, see for yourself. (The site is found here.)
Q. Is it true and accurate that you raised $216,778 from donors as documented on your FEC documents?
A. Over the years and all of which will be used for my campaign in 2010 as has been fully noted on my website and we sent out press releases to certain organizations when that decision was made.
Translation: I’ve raised tens of dollars for my campaign.
Q. I wrote all 217 of your donors at the addresses listed on the FEC documents, inquiring about their support for your campaign. None responded that they had given you money. Eight responded that they definitely had not given you money. Can you explain this discrepancy?
A. I believe everyone has the right to privacy and I respect that right.
Translation: I’m preparing for office by swindling voters before I get elected.
Q. Where are you keeping the balance — $239,476 according to your FEC forms – of your contributions?
A. in a bank, which with the closure of the recent banks may not be the wisest decision.
Translation: It’s in my closet.
Q. Are you aware that the Orange County District Attorney’s Office is investigating your real estate dealings?
A. No, but I am not hard to locate, so if they need access to me they know where to find me, especially since I have interviewed for positions in their office.
Translation: Delicia who?
Q. Is there anything else you can say to help explain the concerns raised in any of the above questions?
A. Approximately a month or so ago, I spoke to (conservative talk show host) Roger (Hedgecock) and he told me to “watch my back”. I guess he knows how cruel people can be to one another, better than anyone. I was also told that sometimes people strike at others when they are attempting to deflect scrutiny of themselves. I have faith that no matter what people attempt to do to discredit me and my efforts, which no man can be against me, as long as God is for me!
Translation: Spoken like a true politician!
San Diego For Sale
From (Not) The Los Angeles Times:
Although San Diego is the nation’s eighth-largest city, it has often endured second-class treatment in its home state. The Los Angeles Times, for example, regularly refers to “Southern California” as a region that doesn’t extend below Orange County.
The truth hurts.
The Candidate Who Wasn't
My representative in Congress, Democrat Susan Davis, is being “challenged” by a Republican named Delicia Holt. Holt reported raising $216,000 but her name isn’t on the ballot. The Orange County Register dug in a bit deeper:
The Register wrote each of the 217 donors at the addresses listed on Holt’s federal financial filings, inquiring about their donations. Not a single one responded that they had supported the would-be candidate.
The Register heard back from eight of the listed donors – all said they had not given Holt money, and six said they’d never heard of her….
Most of those listed as donors no longer lived at the addresses listed – 165 of the 217 letters were returned as undeliverable. Records show that at least 96 lost their homes to foreclosure.
Holt ran in 2006 against Randy “Duke” Cunningham as a self-described “intelligence security analyst.” She sells $45 bottles of “youth juice” on her campaign website, which says she’s running.
Why would someone fake their own campaign?
Union-Tribune for Sale
It’s the end of an era: Copley Press announced today that it’s exploring a sale of the San Diego Union-Tribune. The U-T’s president and CEO said the newspaper is caught up in a “perfect storm” affecting all media organizations.
“Part of it is secular – that is, brought about by forces that are fundamentally changing our business model and making it impossible for us to continue doing business as usual. The other part is cyclical, brought on by the collapse in the real estate market that is affecting the entire country, but is slamming Sun Belt cities especially hard.”
It’s a big day for San Diego, and for people who resent the old order that Copley represented and the virtual stranglehold that the U-T had on the city, it’s a happy one. Copley and the U-T were the only game in town for many, many years, intimately tied in to the city’s and the GOP power structure in a way that few newspapers ever were.
I’ve written about some of this before: James Copley allowed his news service to provide cover for CIA operatives. Editors like Herb Klein and Jerry Warren moved back and forth from journalism into the Nixon White House.
The newspaper was a kingmaker in this law-and-order town, and it was part of what kept San Diego the lone conservative bastion on the Left Coast. It nurtured people like Bill Kolender, the city’s former police chief and current sheriff. He was hired on as an assistant to the publisher while he pondered his next political move. Lately, the U-T has tangled with progressive City Attorney Mike “We’re Marching On” Aguirre.
Copley was once a chain of newspapers in the Midwest and Southern California. All were sold in the hopes, I suppose, of saving the Union-Tribune, the crown jewel. Even in its weakened state, the newspaper remains a powerhouse. Its estimated revenues in 2006 of $387 million were more than all the local TV stations in town combined. But the company can’t limp along any more.
In the end, it was the mortgage and real crisis that pushed Copley to this. Which is ironic, because the Union-Tribune, like the old L.A. Times under Colonel Otis and the OC Register, were relentless promoters of growth. Think big. Build it and they will come.
But what goes up must come down. San Diego just can’t expand any more because nobody wants to live in Temecula and pay $4 gas for the privilege of driving hours back and forth to work every day. Something’s gotta give.
Gene Bell, the Union-Tribune president and CEO, says newspapers aren’t dying. Maybe, maybe not. But the once mighty newspaper will never be the same.
Issa, Bilbray on Duke's Clemency
From the North County Times:
“I don’t think I can overstate the damage that Mr. Cunningham did to the institution of government,” U.S. Rep. Brian Bilbray, R-Solana Beach, said Monday. “The damage done by Randy Cunningham was deep and broad.”
And…
U.S. Rep. Darrell Issa, R-Vista, said: “I know of no reason at this time that would make a commutation of the sentence appropriate.”
Nice to see that corruption isn’t a partisan issue.
But wait! Someone’s missing here. Who could it be?
Rep. Duncan Hunter, R-Border Fence. Hunter is the dean of San Diego’s congressional delegation, who is retiring from office and bequeathing his seat to his son, also named Duncan Hunter. The elder Hunter recruited Cunningham for Congress, taught him how to sing and dance, got the evangelicals to back Duke.
Duncan’s already forgiven Duke, and thinks all Good Christians should too.
“I think that as Christians, if we can forgive our enemies, we can certainly forgive our friends. So I didn’t run away from Cunningham,” he told the LA Times.
Of course, Duncan doesn’t have the grace in his heart to forgive criminals. Except for his friend Duke.
La Raza = The Race?
The San Diego Union-Tribune story today on the outcry over the name of the largest Hispanic organization in the United States.
DOWNTOWN SAN DIEGO – The National Council of La Raza spends most of its time protecting and advancing the rights of Latinos through advocacy and community work. But as it wraps up its convention downtown, it has found itself defending its name.That’s because activists who oppose illegal immigration are saying in e-mails, during street protests and through the media that “La Raza” means “The Race,” and have been calling the organization a hate group.
Activists are saying that, are they? Well, my Spanish-English dictionary also happens to say the same thing. Not so, according the folks at La Raza:
Many people incorrectly translate our name, “La Raza,” as “the race.” While it is true that one meaning of “raza” in Spanish is indeed “race,” in Spanish, as in English and any other language, words can and do have multiple meanings. As noted in several online dictionaries, “La Raza” means “the people” or “the community.” Translating our name as “the race” is not only inaccurate, it is factually incorrect. “Hispanic” is an ethnicity, not a race. As anyone who has ever met a Dominican American, Mexican American, or Spanish American can attest, Hispanics can be and are members of any and all races.
It’s an interesting debate, but only now that the convention’s over does the newspaper feel comfortable enough to write about it. The Union-Tribune is acting more and more like the house organ of the Convention & Visitors Bureau. We wouldn’t want to upset all those conventioneers spending their dollars in America’s Finest City, would we?
This debate has been going on for quite a while now. There was an outcry when the City Council declared July 8 La Raza Day in San Diego. Right-wing talk show host Roger Hedgecock was beating this like a drum all last week.
Hedgecock appeals to the basest, most virulent nativist instincts. He described La Raza as the “Ku Klux Klan with a tan.” The group’s true goal was “the dismemberment of the United States of America.” He makes Lou Dobbs seem like an intellectual by contrast.
Hedgecock was once a “progressive Republican” former mayor who left office when he was CONVICTED of conspiracy and perjury. He then shifted gears and decided to make a living bashing Mexicans. Last week, he was chatting up his idea for his own group — “La Raza Blanca” — until a listener gently reminded him that … ahem … you might want to knock that off.
Darrell Issa thinks Khazak president should win Nobel Prize!
From ABC News:
Two U.S. lawmakers are pushing for a Nobel Peace Prize to go to a politician accused of taking bribes, abusing human rights, and profiting from widespread and sometimes violent election fraud.
Darrell Issa, R-Vista, and Charlie Melcanon, R-La., say President Nursultan Nazarbayev deserve the award for “reaffirming the worth and advancing the rights of the human person.”
Nazarbayev has at best a mixed record. See more here.
Text of letter to Nobel committee here.
Worst way to get high. Ever.
My piece on illegal drugs detected in city sewers is up.
More on the Drugs in San Diego's Sewer
To answer the question I posed yesterday, Fred Sainz, a spokesman for Mayor Jerry Sanders, told me today that it was the fear of “Big Brother” that led the city to say no when the White House Office of National Drug Control Policy asked for sewer water to sample for drugs. “In a way, it felt like people’s privacy was being invaded,” Sainz said. “It just kind of felt icky.”
Drugs in Sewage? City Didn't Want to Find Out
Earlier this week, the LA Times reported that environmental scientists were testing sewage to get an accurate portrait of drug abuse in major cities around the world.
The results have been intriguing: Methamphetamine levels in sewage are much higher in Las Vegas than in Omaha and Oklahoma City, Okla. Los Angeles County has more cocaine in its sewage than several major European cities. And Londoners apparently are heavier users of heroin than people in cities in Italy and Switzerland.
The White House’s Office of National Drug Control Policy tested the sewage at 100 facilities in 24 jurisdictions under a pilot program in 2006. “Cooperation was very high,” spokeswoman Jennifer de Vallance told me this afternoon. “It was free to the facilities.” The agency mailed out a Nalgene bottle. Each facility filled it up and dropped it in a prepaid FedEx envelope. The test was an experiment to see whether it could produce useful information and the data hasn’t been published.
Usually law-enforcement friendly San Diego, however, refused to participate. To find out why, I put in a call to the Metropolitan Wastewater Department, where a spokesman referred my call to the office of Mayor Jerry Sanders. Still waiting for a call back from Sanders spokesman Bill Harris.
The Salk Institute
I got a chance to pay a visit to The Salk Institute last night. It was established 40 years ago on land overlooking the Pacific by Jonas Salk, who invented the Polio vaccine.
The site was designed by architect Louis I. Kahn. The impact of the site’s centerpiece, the concrete courtyard seen above, is almost beyond words. The image that popped into my mind was the monolith from 2001: A Space Odyssey. It seems timeless, like it has always been there.
Prouder than ever? "Let's get naked!"
So what do you do when your university is the subject of one of, if not the biggest campus drug raid ever. Tell everyone how proud you are?
That’s the response of San Diego State University, after an undercover drug sting on frat row led to last month’s arrest of dozens of students.
It’s clear the university has a drug problem. I spent the past few months teaching journalism at SDSU. Before the raids, several students wrote stories about drugs on campus — the ever-present smell of pot in the dorms, cocaine use in sororities, and a touching story about a young SDSU student who overdosed. (Interestingly, after the raids, my students were surprised at the frats that were busted. The ones they said had the real reputation for drugs weren’t caught.)
SDSU’s response has been, well, to pat itself on the back. The school is running public service announcements on its public radio station, KPBS, that feature well-known coaches, alumni and staff talking about how proud they are of SDSU. Here’s a taste. Of course, Tony Gwynn, Steve Fisher and the others don’t explain why they’re prouder than ever of SDSU right now.
No wonder the school has a drug problem. The administration is behaving like a bad parent, putting a happy face on an ugly problem.
The school has condoned the wild parties that SDSU has long been famous for. Playboy, consistently ranks SDSU on its annual lists of top party schools.
Here are SDSU students doing what they do best at a Playboy-hosted party:
This video, by the way, which features lesbian kissing and a woman shouting “Let’s get naked!” was uploaded to YouTube May 25, 2008 — several weeks AFTER the raid.
Playboy has no problem convincing young SDSU students to shed their clothes for the camera. Miss May 2006 was an SDSU grad student. Each year, the magazine also attracts throngs of young women when it comes to campus scouting for new, young nubile bodies to feature in the magazine. Jenae Nicole, the blond SDSU Playmate at left in the photo, told The Daily Aztec that she got to represent the school she sees as top-10 party school material:
“I think it’s just a great place to get an education and balance a great social life at the same time,” Nicole said. “It’s the best of both worlds; that’s why it’s such an awesome school.”
She must be prouder than ever.
Viva la revolucion!
Eric Bidwell is a T-shirt salesman who’s running for mayor of San Diego. On his MySpace page he says he lives in a van, smokes pot frequently, doesn’t believe in monogamous relationships, and doesn’t bathe everyday.
What he doesn’t say is he has more ethics and integrity than the two leading candidates. During Thursday’s mayoral debate, Bidwell revealed that Michael McSweeney, campaign manager for Mayor Jerry Sanders, had written a statement for him.
The statement blasted fellow candidate Steve Francis, who is spending millions of dollars of his own money to unseat Sanders, as a “hypocrite.” (The fact that McSweeney actually believed someone as independent as Bidwell would do his bidding is mind-boggling.)
Here’s the video of Eric spilling the beans. He also had some choice words for Francis, a Republican who’s attacking Sanders for being Republican:
The upshot: On Friday, Sanders campaign manager Michael McSweeney resigned. Tom Shepard, Sanders’ campaign “consultant,” calls it an isolated incident. Shepard’s client list includes two councilmembers, all five county supervisors, the county sheriff and on and on. How deep down the rabbit hole will we go?Mit anderen Worten , die meisten von uns, wenn Sie Poker online poker turniere wollen, die abends oder am Wochenende ein Spielchen tippen.
San Diego private eye indicted
Any of you attorneys who read this blog ever use a private investigator named Victoria Tade? Uh oh.
Tade ran a San Diego private eye firm named C.I. Inc.. Last week, she was indicted in Tacoma, Washington on charges of conspiracy, wire fraud and illegal solicitation of tax and Social Security information.
According to the indictment, Tade would pay Emilio and Brandy Torella, who ran a husband and wife private eye firm in Washington, for “confidential employment, financial, tax or medical information.” The Torells would then obtain the information under false pretenses by what’s known as “pretexting.”
Tade was hired by insurance companies, attorneys and collection companies who wanted her to uncover background information on opposing parties and witnesses and to uncover assets and income to satisfy debts.
The indictment doesn’t identify Tate’s clients, but I’ll keep you posted.
Copley News Service and the CIA
Realize I’m a bit late in getting this up, but since a lot of folks at the CIA have been perusing my site lately, I thought I would post the Copley News Service and the CIA Article I mentioned in my Peanut Gallery column on the departures of Marcus Stern and Jerry Kammer and the end of Copley News Service.
Cabin Fever
The air was awful this morning. We had all the windows shut and I could still see smoke in the house.We were going a little stir crazy so we tried to get out of San Diego today. We were all packed and ready to hit the road for Palm Springs when we found out the I-15 North was shut. So we’re back at home.
Here’s the situation via Google Earth with an overlay of the U.S. Forest Service’s active mapping program (Click image for larger version):
The closest the fire came was about 7.5 miles early Tuesday morning. The closest active hot spot is about 13 miles away.
The view from space
Staying at home, indoors. Blue skies above, but the air is bad.
250,000 Evacuated
Trial is off. Everything’s on fire in Southern California. I feel safe, but we are keeping a close watch. I was here for the 2003 wildfires, and word is this one is going to be worse. A lot of people are losing their homes today.
Trump / Russia 
