G.W. Schulz

Red-tape bandage

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By G.W. Schulz

Both the Los Angeles Times and the San Francisco Chronicle ran large stories last week on problems in the workers’ comp system since Schwarzenegger so proudly initiated reforms two years ago as part of a major recall campaign promise.

In fact, the pendulum has swung startlingly fast in the other direction away from what was viewed as a bloated system that encouraged excess and fraud. My computer’s operating very slowly this week, otherwise I’d post the links. You’ll have to find them yourself. The reporters are Marc Lifsher at the Times and Tom Abate at the Chron.

A tough pill to swallow

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The furor over escautf8g prescription drug prices has inspired dozens of state investigations and civil lawsuits in recent years across the United States, most of them targeting manufacturers.
But another factor in the increases quietly surfaced Oct. 6 in a Boston federal courthouse. Two major Bay Area companies were accused in court documents of infutf8g the cost of prescription drugs to the tune of an estimated $7 billion between 2001 and 2005.
The Wall Street Journal first reported in early October that a drug data publishing company based in San Bruno called First DataBank had reached a settlement with a group of unions in Massachusetts and Pennsylvania over how the company gathered and presented prices in the pharmaceutical catalog that it’s maintained for years.
First DataBank is a subsidiary of the New York–based media empire Hearst Corp., owner of the San Francisco Chronicle, Esquire, and dozens of other publications across the country. Another company still being targeted by the plaintiffs is the San Francisco–based drug wholesaler McKesson Corp., which earned $88 billion in revenue last year and is ranked 16th among Fortune 500 companies.
First DataBank’s price listings play an enormous role in determining what Americans pay for medications. When you receive a bottle of antibiotics to treat an infection, for instance, your private health insurer or state Medicaid program (known as Medi-Cal here) will refer to First DataBank’s listed drug prices as a benchmark to determine what it’ll pay the pharmacy as a reimbursement. That means if the benchmark goes up, so too can your insurance premiums and the cost to state governments.
The settlement, according to federal records, forces First DataBank to adjust the formula it uses to determine those prices. An economist hired by the plaintiffs testified that the savings in 2007 alone for consumers could amount to a staggering $4 billion. First DataBank has also agreed to cease publishing the prices in their drug guides within two years.
Physicians, hospitals, pharmacists, and all manner of other health care professionals pay First DataBank a subscription rate for access to a digital clearinghouse of information on drug dosages and allergies, among other things.
More importantly, First DataBank publishes what’s known as an “average wholesale price” for more than 290,000 pharmaceuticals. There are three major drug wholesalers in the United States, including McKesson, that buy drugs directly from manufacturers and then mark up the price before selling the drugs to pharmacies. The average wholesale price — widely used around the country to determine what pharmacies will get as a reimbursement — is supposed to be a reasonable reflection of what the pharmacies pay the wholesalers for drugs.
First DataBank claimed to survey these wholesalers to come up with an average price that includes the markup, which it then lists in its drug-pricing database. But in recent years, the Journal reported, such surveys have been few and far between, and sometime around 2002, First DataBank inexplicably froze the markup at 25 percent, even though the prices pharmacies were actually paying fluctuated dramatically due to competition.
Citing testimony from one employee, the Journal notes that First DataBank began surveying only one company to come up with its average: McKesson. The cost to pharmacies still varied, but McKesson had reportedly standardized its markups on paper at 25 percent. That meant insurers and state health care administrators relying on First DataBank were making reimbursements that translated to higher profits for the pharmacies.
The employee’s testimony and documents in the case indicated that McKesson knew exactly what was happening. What remained unclear at press time was why First DataBank would choose to survey only McKesson or how it might have benefited from the decision.
The Journal notes the pharmacies were the only ones that stood to profit from the standardized markups, not McKesson directly. But internal McKesson e-mails show the company not only was aware of its impact on First DataBank’s published figures but hoped pharmacies would see McKesson working in their best interests — a marketing scheme, if you will.
An e-mail from one McKesson product manager gleefully exclaims that the profit for pharmacies dispensing a bottle of the cholesterol drug Lipitor leaped from $6.86 to $17.18.
First DataBank admitted no wrongdoing and is not paying money to the plaintiffs of the Boston settlement. The company was founded in 1977, and Hearst purchased it in 1980. Federal records show that in 1998, Hearst bought a $38 million company that owned one of First DataBank’s only real competitors, Medi-Span.
A later investigation by the Federal Trade Commission revealed that Hearst had failed to turn over key documents to the Justice Department’s antitrust division during the sale. As a result the feds slapped Hearst with a $4 million fine in 2001, at that time the largest premerger antitrust penalty in US history. The FTC also belatedly concluded that Hearst’s ownership of Medi-Span gave it a monopoly over the drug database market and not only required that Hearst give up Medi-Span but forced the company to disgorge $19 million in profits generated from the acquisition.
Hearst spokesperson Paul Luthringer directed us to a bare-bones statement when the Guardian called with questions about the Boston suit. “The allegations made in these actions have raised concerns with respect to the integrity of the pricing information that is provided to First DataBank for purposes of publishing [the average wholesale price],” the release states. “In light of these concerns, First DataBank has determined to make certain changes in its drug pricing reporting practices.”
Climbing drug costs can’t be attributed mainly to First DataBank or McKesson, of course. In fact, recent investigations and civil suits spearheaded to find out why prices have skyrocketed have focused on the manufacturers. During those inquiries First DataBank has been hit with dozens of subpoenas nationwide requesting company records and testimony, according to San Mateo Superior Court records. Many of those cases are still ongoing.
Attorneys for the plaintiffs in Boston who made McKesson and First DataBank defendants in the summer of 2005 declined to comment. McKesson also has remained tight-lipped since the Journal story was published. Spokesperson James Larkin said the company would not answer questions beyond a prepared statement.
“If First DataBank decided to survey McKesson only, it did so without telling McKesson,” the statement reads. “In fact, First DataBank has affirmed in an earlier lawsuit involving other parties that it never told McKesson that at times McKesson was the only wholesaler being surveyed.” SFBG
Here are links to key documents, including federal court records of the Oct. 6 Boston settlement with the Hearst-owned First DataBank (www.hagens-berman.com/first_data_bank_settlement.htm), the Justice Department’s antitrust fine of Hearst in 200l (www.usdoj.gov/atr/cases/indx330.htm), and the Federal Trade Commission decision requiring Hearst to give up its monopolistic subsidiary, Medi-Span (www.ftc.gov/bc/healthcare/antitrust/commissionactions.htm).

Bloodlet

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By G.W. Schulz

Sure, street sports have become a cluster fuck for corporate sponsorships, but in some cases, that just means more money for punks with BMX bikes and less money for sleaze ball marketing execs who’d prefer spending it on tasteless furniture and bad hair.

If you haven’t been following the Mountain Dew Action Sports Tour, the final stop yesterday in Orlando proved to be a gruesome death march for nearly all of the competing riders in the BMX street finals. Almost no one managed to escape without at least a mild injury, but mostly the competition proved to be nothing less than brutal.

Buried treasure

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› gwschulz@sfbg.com
Despite the fast-moving urban centers that surround it on each side of the San Francisco Bay, not much about Treasure Island has changed since it was shut down as a United States naval station 10 years ago.
After the feds ceased operations on the island and at several other military installations in the mid-’90s, the idea was to give the land to local governments for redevelopment to fill the economic void of losing active bases. Since then, several plans for Treasure Island have been floated with great fanfare in the press, but all have become mired in the infamously contentious development politics of San Francisco.
Late last month, after three years of deadline extensions, the Treasure Island Development Authority (TIDA) finally received a full-blown plan from the developer — a partnership between Lennar Corp., Wilson Meany Sullivan, and Treasure Island Community Development — that was given exclusive negotiating rights over the land three years ago.
The $1.2 billion redevelopment plan must now run a gauntlet of state and local approval, including consideration from the Board of Supervisors, which is expected to hold hearings and debate the plan by the end of the year. It isn’t likely that construction will begin on the island for at least a couple more years.
The latest proposal anticipates about 6,000 new homes, 1,800 of which will be targeted to low-income residents, including 750 units for households earning no more than 60 percent of San Francisco’s median income and 440 built as part of a program for the homeless. Plans include town houses, single-family homes, and high-rise residential towers, although at least half the properties will be limited to 65 feet in height.
Right now the island contains about 800 occupied units, over half of which are market-rate leases with the John Stewart Co., while about 200 are operated under the Treasure Island Homeless Development Initiative. By the time the project is done, according to the newest plan, the island’s population is expected to balloon to around 10,000 residents, plus around 3,000 new workers necessary to maintain the minicity.
Some of the existing housing stock will be demolished, or as the plan calls it, “reconstructed.” Current residents will have an option to move into the new units or be placed in a lottery if demand for certain types of units outstrips the supply. The plan calls for about 27 percent of the overall planned housing units to be rentals.
Private automobile use would be regulated by metering ramp access to the island during peak commute hours; assessing possible congestion fees for driving on the island; limiting residential parking; and emphasizing thruways that promote walking, bicycling, and public transit.
Much of the development is slated for the west side of the island — with its breathtaking and profitable views of the city — near an existing ferry terminal that would provide access to the city all day long.
Treading lightly, Sup. Chris Daly, whose District 6 includes the island, said he supports the environmental and housing components so far, but if existing island residents mount significant opposition for any reason, he’d consider opposing the plan.
“You don’t know how clean something is until you take it out of the wash, and they’re just now starting to throw it in,” Daly told the Guardian.
Rob Black, Daly’s main challenger in the upcoming election, lives on Treasure Island. He was similarly cautious. “I think people have finally begun to think in a more progressive way about making this a more sustainable neighborhood,” Black told us. “Past plans have been so poorly put together.”
On the local level, the plan must be approved in the coming months by both the TIDA board and the Board of Supervisors. After that, it will undergo an extensive environmental impact review by the city’s planning department before returning to the board for final local approval.
The developer and the TIDA board — which is composed entirely of mayoral appointees, three of whom work directly for Mayor Gavin Newsom — must still overcome other major hurdles as well, including the fact that the Navy hasn’t turned over any of the land yet and likely won’t without major concessions.
The Bush administration has stalled the transfer, pushing for some payment before giving up valuable federal land. One tentative option is to relieve the Navy of about $45 million in environmental cleanup costs for which it is currently responsible. Those costs would then be borne by the redevelopment plan and the developer, which has already pledged $26 million for remediation. The land became contaminated in part after decades of military activity that included emergency drills with radioactive materials.
David Rist, a project manager for the state Department of Toxic Substances Control, which is overseeing the cleanup, said that while there is some contamination where residents are living today, it doesn’t pose an immediate threat to human health. Identified contaminants include dioxin, lead, and PCBs. Rist told us the cleanup, regardless of who ends up paying for it, will be “significantly done in the next two and a half years.”
After mulling over ideas, TIDA finally brokered an exclusive deal in 2003 with a company incorporated as Treasure Island Community Development, a group of Democratic Party heavyweights with deep links to the current and former mayoral administrations and other top elected Democrats.
Jay Wallace, a project planner for Treasure Island Community Development, said the plan’s mammoth size and uniqueness have required considerable and time-consuming attention to specifics. Investors anticipate spending $500 million of their own money, but they’re looking to earn upward of $125 million in profits, according to the plan.
The remaining cost of about $760 million for infrastructure, open space, and transportation system improvements could be covered largely by tax increment financing from the redevelopment area and Mello Roos bonds, both of which would essentially be funded by future property taxes, according to the latest term sheet.
Wallace told the Guardian that his group “has worked in good faith and transparency throughout this project, with over 150 public meetings before reaching this milestone and presenting this plan to the city.”
Daly said that while “there are going to be a hundred issues that need to be worked out,” the green-meets-affordable-housing theme “is the right proposal for San Francisco.”
“Political connections to the Newsom juggernaut notwithstanding, these guys are politically savvy enough to know what’s wise and what isn’t,” he said. “On the actual merits of the proposal, it’s palatable if you’re OK with the concept of high-rises in the middle of the bay.” SFBG

Working in the East Bay

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By G.W. Schulz

Both the issues of fair compensation for hotel workers and immigration rights merged this week in the East Bay with an emergency picket and a call to the police. Hotel housekeepers announced that a demonstration against Woodfin Suites Hotel in Emeryville would take place on Wednesday after claiming that the establishment threatened mass firings of immigrant workers who were demanding recognition of Measure C, a living wage and workload protection ordinance passed by East Bay voters in 2005.

According to a statement sent out by the non-profit East Bay Alliance for a Sustainable Economy, managers at Woodfin Suites gave workers 24 hours to re-submit work authorization forms or be fired. Ouch. The following day, workers delivered a petition protesting the re-verification demand and a hotel manager called the cops on them and kicked them out of the building. Since then, the 24-hour deadline has been extended to 14 days, but the hotel is still demanding a valid social security number, or workers who can’t provide one will be fired.

If that’s not enough, Woodfin Suites is suing the city of Emeryville over the ordinance, but according to an e-mail from EBASE organizer Brooke Anderson, their motion for a preliminary injunction has been denied.

“Workers see the hotel’s re-verification and termination plan as clear retaliation, which is illegal under both federal labor law and the living-wage ordinance,” the statement read.

More information can be found at EBASE’s Web site, www.workingeastbay.org.

Skate or die

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By G.W. Schulz

Gavin Newsom has made a lot of promises during his tenure. He’s even come up with a few half-baked plans to contend with the city’s highest homicide rate in 10 years. But he recently dropped the ball on a seemingly simple gesture that could have at the very least kept a few kids out of trouble.

SF PartyParty reported a while back that the mayor has slipped on a promise to build two new skateparks for the city this year. They confirmed it with a call to Parks and Rec and noted that at the very most, the city could see one new skatepark next year.

We reported earlier in the year that kids attending an after-school program at Cellspace in the heart of the Mission off Bryant Street had grown fond of a group of skate ramps that had appeared quietly in the parking lot of the long-time flea market and bike kitchen located across the street from Cellspace’s warehouse. But the non-profit’s executive director Zoe Garvin told us at the time that the lot was slated for a new housing development, and the ramps wouldn’t be permitted to stick around much longer.

A new skatepark could have been timed perfectly. What a shame. Thanks to SF PartyParty for the heads up. By the way, Cellspace is holding a fundraiser on Saturday, Oct. 14 from 7-10 pm. Attend and help out some fine folks. While you’re there, ask Henry about his idea for a veggie-fueled lowrider with solar-powered hydraulic suspension. Awesome.

No, your honor

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G.W. Schulz

If you haven’t caught up with the New York Times in a while, don’t miss the intense three-part, investigative series the paper launched on Monday. Links for all three stories are now up on their site.

The series is about the completely out-of-control rural magistrates that populate New York State. Yes, it sounds a little lackluster, but the Times spent a year putting it together and it’s making the rounds like crazy.

Thirty states have “justices of the peace,” according to the piece, who often have little to no education, but are powerful enough to rule on civil suits worth hundreds of thousands of dollars, and they can put people in jail for up to two and three years. Some of the judges hardly even have a high school education, let alone a law degree, yet they possess an enormous amount of power. A mind-blowing deviation in the nation’s criminal-justice system.

Mural as magnet

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› gwschulz@sfbg.com
Stretched across the west wall of the New Santa Clara Market in the Lower Haight is a full 15 by 45 feet of political controversy, in both its intended content and the fact that it has become a magnet for graffiti.
Located on the southeast corner of Haight and Scott streets, Positive Visibility, as the mural there is titled, shows women suffering from the symptoms of HIV-AIDS. It was completed in 1995 by an artist named Juana Alicia, who learned her craft in part from two former students of painter Diego Rivera.
Reflecting a somewhat surreal departure from Rivera’s own direct imagery, Alicia’s painting (finished with help from other HIV-AIDS activists) contains a multitude of pastel colors applied in vigorous brushstrokes. In one segment, a tattooed drug addict accepts a clean needle from a needle-exchange worker. Another woman nearby wears a shirt with the queer pink triangle and the phrase “silencio = muerte.” Three pig-faced corporate drug execs guard a prescription bottle, and a woman is kicking one of them directly in the face. Slivers of broken mirrors create a mosaic across the mural’s top center. Affable skeletons celebrate el Dia de los Muertos.
The message: women contract HIV too. It’s not unlike the hundreds of other politically charged murals most San Franciscans are proud to have coloring the city. But currently, Positive Visibility faces a cruelly ironic fate; it’s half covered in a red paint used by the building’s owner to rub out graffiti while awaiting a complex decision about how and when to restore it.
Alicia, who now lives in Mexico and has taught arts education and community organizing for 25 years, has also completed major pieces in the Mission District and at the San Francisco International Airport and the UCSF Medical Center. (She did not respond to an e-mailed list of questions.)
The problem is that Positive Visibility has been plagued by graffiti since it was completed — not spray-can lettering so much as haphazard markings. The entire bottom has been covered at times, sending neighbors into a furor and attracting citations to the owner of the building from the San Francisco Department of Public Works. Some of the graffiti has targeted the content of the mural in the form of angry expressions that the piece is antimale. One resident said she’d prefer that any existing mural at the spot reflect “the neighborhood’s vitality.”
“It’s been very controversial,” said Marc Shapiro, who lives nearby on Waller Street. “Some people want the mural. Some people don’t. I didn’t care what happened as long as somebody would maintain it…. The street has been so terrible for the last 10 years, you know. Nobody was maintaining the mural. So we had to live in a neighborhood with all of this horrible graffiti.”
The Neighborhood Beautification Fund under then-mayor Willie Brown put up $8,000 to restore the mural in 2000, an effort that included several layers of what was supposed to be a special graffiti-proof varnish. It wasn’t enough, and the graffiti continued.
“The final straw was when there were swear words — ‘Fuckin’ bitch,’ ‘asshole,’” said the building owner’s son, Suheil Alaraj. “The neighbors were, like, ‘We have children. We can’t keep walking across the street and bypassing this.’” Shapiro added that sometimes attackers would throw entire buckets of paint on the mural.
Alaraj called Alicia last year to see if she’d be interested in restoring it again. But the talks broke down and Alicia, he says, threatened to sue him if he painted over the mural completely. Exasperated, he called Sup. Ross Mirkarimi, whose district includes the Lower Haight, looking for suggestions on what to do. His office convinced Alicia to allow the Mission-based muralist collective Precita Eyes to restore the piece. Nonetheless, finding money for the project took several months. Some of the funds again came from the mayor’s beautification fund.
“Basically, they took such a long time,” Alaraj said. “They could have had it up six months ago, restored. They were waiting for this, waiting for that, waiting for this. [The graffiti] kept getting worse and worse. Once there’s tagging on it and you don’t do anything about it, people feel it’s a free-for-all. It just got out of control.”
Three months ago he decided to paint over the bottom, which was hardest hit with graffiti. Each morning he’d go back with a paintbrush until finally, about two months ago, the graffiti ceased.
Mirkarimi aide Regina Dick-Eudrizzi told the Guardian that due to a misunderstanding about covering the graffiti, Alaraj used the red paint instead of white, which would have made restoring the mural easier. The red paint doubled the costs, and only recently did Mirkarimi’s office and Precita Eyes manage to come up with the $10,000 necessary to complete the restoration. There’s a possibility that Precita Eyes could re-create the mural at a new spot, rather than restoring it at its current location. SFBG

Redefining radicalism

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› news@sfbg.com The Ella Baker Center for Human Rights has a 10-year history — which it marked Sept. 14 with an anniversary gala in Oakland — of aggressive opposition to police abuse, racism, economic injustice, and the get-tough policies that have created record-high incarceration rates. Those problems have only gotten worse over the last decade, despite some significant successes by the group in both Oakland and San Francisco. But these days, founder and director Van Jones sounds more like a hopeful optimist than an angry radical. “When we first got started, our politics were more about opposition than proposition,” Jones told the Guardian. “We were more clear what we were against than what we were for.” An organization once prone to shutting down the halls of power with sit-ins is now working on prison reform legislation, doing antiviolence public education campaigns, and promoting the potential for a green economy to revitalize West Oakland and other low-income communities. “Now, I’m in a place where I want to see the prisoners and the prison guards both come home and get some healing,” Jones said. Some of that transformation comes from Jones’s evolving critique of progressive political tactics, which he has come to see as ineffective. “Our generation would be better if we had a little less New Left and a little more New Deal.” But the change was also triggered by a personal epiphany of sorts following his unsuccessful effort to stop the passage in 2000 of Proposition 21, which sent more minors into the adult correctional system. “I went into a major depression and I almost quit being an activist,” Jones, an attorney who turns 38 this month, told us. “It was a very personal journey, but it had a big impact on the Ella Baker Center.” The change has made allies of former enemies, like radio station KMEL, which was vilified for selling out the Bay Area hip-hop culture after Clear Channel Communications purchased the station, but which is now helping the Ella Baker Center spread its antiviolence message. The center has also attracted a new breed of employees to its ranks of 24 full-time staffers, people like communications director Ben Wyskida, who moved here from his Philadelphia communications firm last October. As he told us, “What drew me to the Ella Baker Center was this message of hope.” Jones has a critique of the problems and those in power that is as radical as ever, noting that authoritarians have taken power and essentially dismantled our democratic institutions. But he’s moved from diagnosis to prescription, telling us, “I think the ‘fuck Bush’ conversation is over.” His new approach hasn’t always gone over well with his would-be allies. Environmental groups including Greenaction boycotted Mayor Gavin Newsom’s photo-op posturing during World Environment Day last year, and they were critical of Jones for validating the event and using their absence to grab the media spotlight for his green economy initiatives. But Jones tells us he doesn’t get rattled by criticism that he’s playing nice with the powerful because he remains committed to helping the underclass. “The most important thing is to know who you’re for and know your history.” And if the group’s 10th anniversary black-tie celebration in the Oakland Rotunda was any indication, the Ella Baker Center has more support now than at any other time in its history. The guest list for the event was a veritable who’s who of every major political, grassroots, and environmental organization on the West Coast. Guests included Code Pink cofounder Jodie Evans, Mother Jones publisher Jay Harris, and actor-activist Danny Glover. “Radical means root — that’s what we have always been addressing,” Jones told us at the event. “We used to spend a lot of time pointing out the hurt in the community. Now we connect the points of hope.” To Jones, hope means tying the need to save the planet from global warming to the need for economic development in Oakland. “Let’s make it into job opportunities for poor people and build a green economy strong enough to lift us out of poverty. That’s hope. We want to take people out of the prison cells, into solar cells.” Jones’s allies see him as a silver-tongued visionary, a lighting rod who can bridge movements with apparently differing agendas. Activist Julia Butterfly Hill, a longtime friend and political ally of Jones, told us at the event, “Van shows he cares and he’s human, and he puts himself out there on the line. That’s why you saw this coming together. This is the voice, this is the conversation that the planet is literally dying for, and I really mean sick and dying for.” The evening, a spirited celebration of hope and achievement, gave influential friends a chance to size up where the group has been and where it’s headed. As Harris of Mother Jones told us, “Van is a big thinker. He really engages people’s imaginations in terms of what could be. There’s one way, which is to fight against the system. Van’s way is to reimagine the system.” There to bless the event, Glover warmly heaped his own praise on Jones by comparing him to the Civil Rights Movement worker who is the organization’s namesake. “When I think of Ella Baker and what she stood for, Van carries on that work, and I think that’s vital. We envision ourselves through the women and men that set a certain standard. Van sets a certain standard.” SFBG www.ellabakercenter.org

San Francisco could totally kick Google’s ass

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By G.W. Schulz

It’s always been difficult to imagine that privatization could become so popular entire cities would actually begin outsourcing all of their administrative functions. But it’s occurring, according to the USA Today. Truly scary. Anyone who thinks private companies that claim they can handle the public sector and save mobs of money won’t eventually get into some kind of trouble in their haste to generate profits isn’t thinking clearly.

A woman’s place is in the House — and the Senate

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By G.W. Schulz

I’ll never forget the first time I stood in the presence of Ann Richards.

Years ago during the late 90s when I lived in Austin, I worked at a little natural foods grocery store on the west side of town. Richards used to come into the deli quite frequently. Although she was a short woman, there was something about her stature that simply commanded respect. Plus, she was the widely revered former governor of Texas. She just exuded principled toughness. I was sad to learn this week that she had succumbed to cancer at the age of 73. One thing the Democrats can’t afford to lose right now is anyone with a sense of humor.

Shoot me instead!

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By G.W. Schulz

It’s not healthy for the press to be relentlessly pessimistic. In that spirit, hats off to Gavin Newsom for introducing a new plan designed to counter the city’s surge in violence. Critics, including this newspaper, have repeatedly demanded a bold plan, and the mayor appears to be stepping up to the plate. Here’s part of it.

There are a few problems with the plan, however. Newsom intends to enforce a controversial city curfew for kids 13 and under that’s already on the books. He says he’s willing to expend the political capital necessary to make it work. We’re proud of you for being bold, Gav. Seriously. This city needs strong leadership.

Terrorizing the peace marches

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› gwschulz@sfbg.com
If any questions remain today as to how the law enforcement establishment views antiwar activists in the post–Sept. 11 world, just follow the money for answers.
The San Francisco Police Department was paid $3.3 million from the US Department of Homeland Security to cover overtime costs for officers who patrolled the major antiwar demonstrations of early 2003.
After months of haggling, the Governor’s Office of Homeland Security finally turned key records over to the Guardian. They showed that the money came from a federal “critical infrastructure protection” grant and covered police overtime costs that were incurred by the city between March 2003 and October 2004.
The overtime payments concentrated mostly on more than two weeks’ worth of large protests that occurred in San Francisco around the outset of the war in Iraq. On March 23, 2003 — the first full day after the war began, when the city was nearly shut down by the demonstrations and there were nearly 2,000 arrests — the overtime costs covered by terror money alone reached nearly $800,000.
Other days’ payment ranged from $5,000 to as much as $500,000. Most of the Police Department records included in one file the Guardian obtained describe the events as “anti-war demonstrations,” but one protest is identified as an “alternative bicycle event,” while another is listed as a “Global Exchange Protest of Fox News.”
To obtain the federal antiterror funding, local governments must first spend their own money and follow up with a request for reimbursement from the feds. While the critical infrastructure protection grant exclusively covers overtime expenses, the records we obtained happen to show the full amounts motorcycle patrol officers earned to work the protests: sometimes up to $80 an hour.
San Francisco already pays out millions of dollars annually for overtime expenses from the city’s General Fund to cover chronic staff shortages at the Police Department. The San Francisco Office of the Controller predicted in March that overtime expenditures generated by the department would climb to around $20 million by the end of fiscal year 2005, $7 million more than the year before.
During the spring budget process, police officials asked the city for $12.5 million to send 250 new wannabe cops through academy classes. But the department hopes to hire 350 to 400 more sworn and nonsworn employees over the next three years. Mayor Gavin Newsom made new police recruitments a top priority in his proposed budget for fiscal year 2006–07.
In 2003, the San Francisco Chronicle reported that then-mayor Willie Brown intended to cover some of the costs of the city’s widely publicized antiwar protests through federal terror funds. An agreement for the total award between San Francisco and the state, which administers the federal funds, was signed in August 2003 by former budget director Ben Rosenfield, who worked for the both Brown and Mayor Newsom. Spokespeople for Newsom and the Police Department did not answer our inquiries in time.
At the time of the protests, Brown seemed to really stretch in his attempt to link them to a terrorism threat. According to the Chronicle, Brown said, “Terrorists could use the demonstrations as a ‘cover’ to get near the bridges or targeted buildings in the Financial District or Civic Center area.” (G.W. Schulz)

Bad cops walk into the shadows

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› gwschulz@sfbg.com
In late June, two San Francisco police officers were accused of giving beer and vodka to three teenage girls and making sexual advances toward them. One of the young women was just 16 years old, and the two others were 17. The alleged conduct of the officers occurred both in and out of uniform, and they even reportedly offered the girls confiscated fireworks from the trunk of their patrol car.
In February, an off-duty San Francisco Police Department officer was arrested for threatening to kill his ex-girlfriend and their 5-year-old daughter during a domestic quarrel. The officer was awaiting disciplinary hearings before the San Francisco Police Commission, according to the most recent public records of the matter.
In March 2005, an SFPD domestic violence inspector was arrested for driving drunk through Marin County and smashing into another car. Fairfax cops found the inspector had a blood alcohol level of 0.27 percent, more than three times the legal limit. She was eventually suspended by the SFPD for 45 days.
These are just a few cases of alleged misconduct that have recently appeared before the Police Commission. And they’re among the last cases, which until now were available through state open-record laws, that most people will ever know details about. Due to a state Supreme Court ruling issued at the end of August, citizens and the press will be unable to access most public information about why individual officers are charged with vioutf8g department rules or even possibly breaking the law.
“It’s devastating,” said Rick McKee, a longtime open-government activist and president of the Sacramento-based group Californians Aware. “It creates a two-tiered system of public access: one for general government employees and another for police officers…. There was no considerable thought given to what this does to the public’s right to know.”
Records of misconduct charges have largely been open in San Francisco until now. The public could access summaries of misconduct charges, filed either by the San Francisco Office of Citizen Complaints (OCC) or the police chief’s office, and attend hearings at the Hall of Justice that included testimony from the officers. No longer.
An attempt by the Guardian last week to obtain misconduct records from the Police Commission was blocked by administrative staff, and two disciplinary hearings scheduled for Sept. 6 and 7, ordinarily open to the public, were cancelled due to uncertainty surrounding the decision in Copley Press v. San Diego County.
Historically, the names of officers investigated by the OCC and charged with misconduct by the chief were not revealed publicly until their cases had made it to the commission, which is where the Guardian has obtained them in the past. In other words, frivolous charges of police brutality, for instance, weren’t immediately disclosed to the public. Personnel files maintained by the department could remain secret, but cities and counties individually decided what independent review commissions could make available.
The Aug. 31 Supreme Court ruling greatly broadens the scope of privacy laws that exclusively protect cops from the disclosure of disciplinary records maintained by police departments. The decision now shields disciplinary records previously available either through records requests or citizen review panels, such as the OCC.
Guylin Cummins, an attorney who represented a Southern California newspaper in the public records challenge that led to last week’s ruling, said Sacramento legislators never intended to completely curtail access to disciplinary files.
“Nowhere in the legislative history does it say, ‘We’re going to trump the [California Public Records Act],’” Cummins said.
But an attorney for the Deputy Sheriffs’ Association of San Diego County, Everett Bobbitt, told the Guardian that public defenders and litigants were compiling the records in databases to use arbitrarily against cops in court.
“You’d go to one county and they’d restrict [the records], and you’d go to another county and they wouldn’t,” he said. “I thought that wasn’t fair. There was a lot of personal material in those files.”
Steve Johnson, a spokesperson for the San Francisco Police Officers Association, said the group has always believed that the California Penal Code extended such privacy rights to officers, but that the Police Commission had regularly declined to honor them. When we contacted him, he had yet to read the Copley decision.
“We have always been of the opinion that the city should comply with the penal code…. Our attorneys have made motions in the past, but they were denied,” Johnson said.
The case that led to last week’s decision began in 2003 when a San Diego deputy sheriff was fired for failing to arrest a suspect in a 2002 domestic violence dispute involving a clearly injured female victim. The deputy then didn’t report the incident and manipulated his patrol log to depict the call as less serious than what was actually probable cause for an arrest. He appealed the termination but requested that the hearing be kept confidential.
As a result, the San Diego Union-Tribune was barred from attending the hearing, and a public records request for details of the disciplinary proceedings was denied. The paper’s parent company, Copley Press, sued to retrieve the deputy’s name, among other things, but a trial court in San Diego denied relief. Further records requests by the paper following the decision prompted the San Diego Civil Service Commission to reveal some additional details, but only in redacted form. The deputy’s name was still withheld.
Following a closed-door commission meeting, the deputy’s firing was changed to a resignation and the charge that he falsified his patrol log was removed from the record. The Union-Tribune went to an appeals court judge asking for the deputy’s name and any additional evidence of the agreement, including documents and audiotapes, from the case. The lower-court decision was overturned there. But along with the Supreme Court, where the case eventually arrived, the appeals court never technically ruled on public access to disciplinary hearings. It only addressed disciplinary records.
“[The decision] is not saying that civil service commission hearings are closed,” said Susan Seager, a First Amendment lawyer in Los Angeles who submitted an amicus brief to the Supreme Court on behalf of the Union-Tribune. “I think that’s the debate here.” But because so much material presented at the hearings comes from personnel files, Bobbitt responded, they’ll likely have to be closed in order to comply with the decision.
Journalists at the Union-Tribune, for their part, obviously dislike the ruling.
“Certainly officers have an understandable motive for being fiercely protective of their privacy,” the paper wrote in a Sept. 2 editorial. “Yet decades of scandals across the nation show that police cover-ups of internal misconduct are disturbingly common. The idea that police often operate under a ‘code of silence’ isn’t just a figment of a pulp novelist’s imagination.”
It’s not easy being a cop in this city. San Francisco for the most part ideologically opposes rigid, law-and-order conservatism. Pressure on the SFPD to do something about the city’s alarming rate of gun violence continues to swell. And few people even want to be a cop anymore, leaving the department chronically understaffed and forcing the city to pay out millions of dollars for overtime expenses.
But bad cops are a fact of life.
More than 70 cases of alleged police misconduct were sustained by the OCC and sent to Police Chief Heather Fong for action last year. Literally hundreds of misconduct cases involving still-incomplete investigations were pending by the end of 2005. The department’s own internal affairs arm, which handles additional misconduct probes, sustained 63 cases of misconduct in the second quarter of 2006.
In exchange for receiving a considerable amount of power, cops have always been responsible for maintaining a higher standard of conduct, a fact enshrined in the Police Department’s own General Orders.
“Police officers are empowered to deprive other citizens of their freedom when they violate the law,” the orders state. “Because they have this power, the public expects, and rightly so, that police officers live up to the highest standards of conduct they enforce among the public generally.”
In the 6–1 Copley ruling, Justice Kathryn Werdegar stood alone in her dissent, arguing that “the majority overvalues the deputy’s interest in privacy, undervalues the public’s interest in disclosure, and ultimately fails to implement the legislature’s careful balance of the competing concerns in this area.”
The majority opinion, written by Justice Ming Chin, stuck mostly to technical details and argued that the appeals court erred in not defining the San Diego Civil Service Commission as an “employing agency” of the deputy, a key legal distinction.
Ultimately, the convoluted decision seems to beg for clarity from the legislature, but taking on privacy rights for cops could be tantamount to political suicide in Sacramento. One of the state’s most powerful lobbying groups, the California Correctional Peace Officers Association, would be affected by changes in the law. Bobbitt warned that any attempt by the legislature to toy with the decision would be met with fierce resistance.
“Law enforcement associations will lobby very hard against any changes that would impact this decision,” he said.
The view is a little different in San Francisco. Police Commission president Louise Renne — who is hardly known as a bleeding heart liberal — told the Guardian, “I don’t think the state Supreme Court made the right decision from a public policy point of view.”
For now, at least, six state Supreme Court justices have moved one of local government’s most powerful entities deeper into the shadows. SFBG

The quiet force of Frontline II

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By G.W. Schulz

I mentioned yesterday that I’d been downloading older episodes of Frontline from the PBS Web site. The show has three major new episodes coming out next month. But yesterday I didn’t get a chance to summarize what I felt were some of the better pieces they’d done over the last few years that contained some cool local angles.

On Sunday night I went back and watched 2004’s “Tax Me if You Can,” which appears to have been inspired at least in part by David Cay Johston’s spectacular tax-beat reporting for The New York Times. Johnston made popular what was long considered a dreadful area of government to cover as a Times reporter – the IRS. We localized some of his more recent reporting for the Times on big IRS layoffs and the estate tax a while back.

The quiet force of Frontline

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By G.W. Schulz

So I’ve been watching older episodes of Frontline lately, the longtime investigative journalism program produced by PBS. You can download each of their past shows in pieces here. Sure, it doesn’t sound like the most exciting way to spend your free time, and it may even say something disturbing about my personal life.

Maybe it helps that as I watch Frontline, I swill whiskey and crank the volume on the computer’s speakers – neighbors be damned – while spitting a beer chaser at the screen when a voiceover lists the show’s nonprofit benefactors. Okay, that’s a lie.

The silent scandal

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Editor’s note: This story has been altered to correct an error. The original version stated that an Examiner editor had admitted in court testimony to providing positive coverage to politicians in exchange for help with a business deal. The person who testified to that was not an editor, but Publisher Tim White, and he was talking about editorial, not news, coverage.

› gwschulz@sfbg.com
After William Randolph Hearst flunked out of Harvard in the 1880s, he pursued a new career path, asking his wealthy father for only one thing: the San Francisco Examiner.
Young William didn’t stop with the Examiner — over his lifetime, he accumulated dozens of newspapers nationwide. Eventually, one in five Americans regularly read a Hearst paper.
That seems like a lot of power and influence, and it was. But it’s nothing compared to what the heirs to Hearst’s media mogul mantle are doing today.
In fact, the Hearst Corp. is working with another acquisitive newspaper magnate, William Dean Singleton, to lock up the entire Bay Area daily newspaper market. If the project succeeds, one of the most sophisticated, politically active regions in the nation may have exactly one daily news voice.
That worries Clint Reilly.
The political consultant turned real estate investor has sued the Hearst Corp., owner of the San Francisco Chronicle, for the second time in a decade to stop a partnership he fears will eliminate the variety of voices among newspapers in the Bay Area.
It’s an amazing story, full of politics, big money, secretive arrangements, and juicy executive bonuses. What’s at stake? Control over one of the most lucrative businesses in Northern California.
But for the most part, you aren’t reading about it in the daily papers — which means you aren’t seeing it on TV or hearing about it on the radio.
In fact, the blackout of the inside details of the Singleton deal and Reilly’s effort to stop it is one of the greatest local censored stories of the year — and the way the press has failed to cover it demonstrates exactly what’s wrong with monopoly ownership of the major news media.
The story began in the spring when one of the nation’s more respected newspaper chains, Knight Ridder, was forced to put itself up for sale after Bruce Sherman, a prominent shareholder, decided that the company’s relatively healthy profit margins (and dozens of Pulitzers) were simply not enough.
It’s the nature of publicly traded companies to be vulnerable to shareholder insurrections, unless they have multiple classes of stock. Knight Ridder didn’t, and although its former chief executive, P. Anthony Ridder, later said he regretted the sale, Knight Ridder went on the block.
The Sacramento-based McClatchy chain bought the much bigger Knight Ridder but needed to sell some of the papers to make the deal work.
In the Bay Area, Knight Ridder’s two prime properties, the San Jose Mercury News and the Contra Costa Times, were bought by MediaNews Group, the Denver-based conglomerate run by Singleton. That was a problem from the start: Singleton already owned the Oakland Tribune, the Marin Independent Journal, the San Mateo County Times, and a series of smaller local papers on both sides of the bay. The two former Knight Ridder papers would give him a near-monopoly on daily newspaper ownership in the region; in fact, there was only one daily in the area that would be in a position to compete with Singleton. That was the San Francisco Chronicle.
But in one of the strangest deals in newspaper history, Hearst — the erstwhile competitor — joined in the action, buying two of the McClatchy papers (the Monterey Herald and the St. Paul Pioneer Dispatch) and then immediately turning them over to Singleton, in exchange for some stock in MediaNews operations outside of California.
When news of the transactions first broke, MediaNews publications and the Hearst’s Chron covered it extensively, more than once putting the billion-dollar partnership on the front pages. (The transactions also involve a company formed by MediaNews and two of its other competitors, the Stephens Group and Gannett Co., called the California Newspapers Partnership.)
Since then, however, coverage has been overshadowed by JonBenet Ramsey and local crime news. The real story of what happened between Hearst and Singleton and how it would devastate local media competition never made the papers.
If this had been a deal involving any other local big business that had a huge impact on the local economy and details as fishy as this, a competitive paper would have been all over it. And yet, even the Chron was largely silent.
In fact, when Attorney General Bill Lockyer decided not to take any action to block the deal, the Chron relegated the news to a five-paragraph Reuters wire story out of New York, buried in the briefs in the business section. The original Reuters story was cut; the news of Reilly’s suit and his allegations didn’t make it into the Chron version.
At times, the new Singleton papers have treated the story with upbeat glee: in early August, the Merc proclaimed in a headline that the area’s “New media king is having fun.”
The story noted: “MediaNews is privately held, a step removed from the Wall Street pressure that forced the Mercury News’ previous owner, Knight Ridder, to put itself up for sale…. Singleton is its leader, and by all accounts, a man who lives, breathes and loves newspapers.”
Longtime media critic and former UC Berkeley journalism school dean Ben Bagdikian, author of The Media Monopoly, told the Guardian that most of the coverage so far has focused on the business side of the transactions.
“The coverage I’ve seen has simply described the devices they used to divide the McClatchy chain and did not describe how cleverly it was designed to avoid an antitrust action,” Bagdikian said.
Here’s some of what the daily papers have ignored:
The Hearst deal was certainly good for MediaNews, because on the same day the agreement was signed, top executives at the company were awarded $1.88 million in bonuses. MediaNews president Joseph Lodovic earned the chief bonus of $1 million, while the president of MediaNews Group Interactive, Eric Grilly, received over $100,000 in bonuses on top of a $1.25 million severance package for retirement. The figures were disclosed in the company’s most recent Securities and Exchange Commission filing.
Hearst has insisted repeatedly that its investment in MediaNews involves only tracking stock, meaning its up-and-down value rests solely on the performance of MediaNews businesses outside of California. Such a structure may help the two companies comply with antitrust rules — for now.
But in a little-noticed footnote included in a July memo filed by Hearst in response to Reilly’s lawsuit, the company revealed that its tracking stock could still be converted to MediaNews common stock in the future — meaning it would then have a stake in the entire company, including its Bay Area holdings. “The tracking stock will be convertible into ordinary MNG common stock, but that will require a separate, future transaction and its own Hart-Scott-Rodino review,” the July 25 document states.
In other words, public records — information freely available to the 17-odd business reporters at the Chronicle — show that Hearst’s fundamental presentation of the deal is inaccurate. Hearst is not just a peripheral player in this deal; the company is a direct partner with Singleton and thus has no economic incentive whatsoever to compete with the Denver billionaire.
And that means there will be no real news competition either.Reilly has been in politics most of his adult life, and he knows what happens when one entity controls the news media: perspectives and candidates that aren’t in favor with the daily papers don’t get fair coverage.
Newspapers, he told us recently, are charged with checking the tyranny of government; without competition they will fail to check the tyranny of themselves.
“The combination intended to be formed by these defendants constitutes nothing less than the formation of a newspaper trust covering the Greater San Francisco Bay Area,” Reilly’s suit states, “implemented through anticompetitive acquisitions of competing newspapers, horizontal divisions of markets and customers, and agreements not to compete, whether expressed or implied.”
A federal judge recently tossed Reilly’s request for a temporary restraining order against the Hearst transaction. But Reilly’s overall lawsuit, designed to stop Hearst’s $300 million investment in MediaNews, will still wind its way through the courts, and Judge Susan Illston signaled in her last order that she would “seriously consider” forcing MediaNews to give up some of its assets if the court finds the company’s transactions to be anticompetitive.
There are clear grounds to do that. In fact, as Reilly’s attorney, Joe Alioto, points out in his legal filings, the monopolists have made the argument themselves. When Reilly sued to block the Examiner-Chronicle deal in 2000, Hearst, which wanted to buy the Chron and shutter the Examiner, argued that closing the Examiner would have no competitive impact — since all the other competing Bay Area papers provided the reader and advertiser with a choice. Now the lawyers are arguing just the opposite — that the Chron and the outlying papers never competed in the first place.
Hearst will more than likely argue in court that since its newspapers face unprecedented competition from online content, there’s technically no such thing as a one-newspaper town. The world is globally connected now, this thinking goes, and the Chron and MediaNews both face competition from popular blogs such as Daily Kos and Valleywag on the West Coast and Gawker and Wonkette on the East Coast.
But that ignores a media reality: for all the power and influence of bloggers and online outlets, daily newspapers still have the ability to set the news agenda for a region. Among other things, local TV news and radio stations regularly take their cues from the daily papers — meaning that a story the dailies ignore or mangle never gets a real chance.
MediaNews argues in its most recent memo to Judge Illston that “any potential anticompetitive effect of the transactions against which the Complaint is directed is greatly offset and outweighed by the efficiencies that will result from those transactions.”
“Efficiencies” isn’t actually defined, but if the past is any indication, jobs could be the first place MediaNews looks to “efficiently” save money for its investors — at the cost of performing the traditional role of a newspaper to monitor government.
Reporting — real reporting — is expensive. It requires experienced journalists, and a good paper should give them the time and resources not only to watch day-to-day events but also to dig deep, below the headlines.
That’s not the monopoly media style.
Speaking in general terms, Jon Marshall, who runs the blog Newsgems and teaches at Northwestern University’s Medill School of Journalism, wrote us in an e-mail that newspapers have to be willing to invest in innovation now, while there’s still time.
“If newspapers really want to win back readers, they’ll need to start offering more outstanding feature stories that really dig deep and have a big impact on their communities,” Marshall wrote. “Readers need a reason to turn to newspapers rather than all the other content that’s now available through the Web. Newspapers will have a hard time creating these outstanding stories on a consistent basis if they keep paying their current skimpy entry-level salaries.”
The pattern Singleton is known to follow isn’t unique. A recent survey conducted by journalism students at Arizona State University revealed that the nation’s largest newspapers are giving reduced resources to investigative and enterprise reporting as media companies trim budgets to maintain or increase profits. More than 60 percent of the papers surveyed, the report stated, don’t have investigative or projects teams.
Brant Houston, executive director of Investigative Reporters and Editors, told us that while teams of reporters dedicated exclusively to investigations may be disappearing, many papers are willing to pull staffers away from their regularly assigned beats to make sure that big stories are thoroughly covered. But, he said, Wall Street’s haste to make money could backfire if readers head elsewhere in search of more exclusive content.
“I think everything is in flux right now,” Houston said. “Everyone’s trying to figure out what the next newsroom looks like.”
Luther Jackson, an executive officer of the San Jose Newspaper Guild, which represents staffers at the Merc, said it’s too early to determine the impact of MediaNews on the paper. The union just recently began new contract negotiations with the company, while the previous agreement, which expired in June, remains in place. Jackson said he didn’t believe the Merc’s Silicon Valley readers would tolerate any dramatic dip in quality coverage.
“We have a problem with the idea that you can cut your way to excellence,” Jackson said.
Just six years ago, after Reilly sued Hearst the first time to stop its purchase of the Chronicle and subsequent attempt to shut down the Examiner, trial testimony revealed that the Examiner had, in fact, abused its editorial power to advance its business interests. Examiner Publisher Tim White admitted in open court that he had traded favorable editorial coverage to then-mayor Willie Brown in exchange for his support of the Chronicle purchase.
Reilly lost that one — but for now this case is moving forward. The suit could be the last legal stand for people who still think it’s wrong for one person to dominate the news that an entire region of the country depends on — and at the very least will force the story of what really happened out into the open. SFBG
PS At press time, Judge Illston ordered the trial be put on the fast track and set a trial date for Feb. 26, 2007. See the Bruce blog at www.sfbg.com for more info.

Josh Wolf leaving jail

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By G.W. Schulz

Josh Wolf is finally on his way out of jail. An appeals court ruled that his argument against being required to turn over video he captured from a demonstration last year is in fact not frivolous.

He could still see more jail time, however. Another panel will review the contempt order, which a federal judge previously slapped him with, and if it’s ruled as legit, he could go back to jail until next July. For now, he’s out on bail.

Wolf, of course, was hit with a subpoena commanding that he testify and turn over his video to a grand jury that’s investigating an alleged attack by anarchists on a cop and a patrol car during an anti-G8 protest. Wolf insisted journalist’s privelege protected him from having to do so. The feds and the SFPD, for their part, appear to be on little more than a fishing expedition.

So what will Josh do first? We hear he’ll probably being getting to a computer as fast as he can to circulate a message to his supporters.

By the way, when was the last time law enforcement in the Bay Area put this much energy into solving homicides?

Here comes Miami Beach

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› gwschulz@sfbg.com
A pebbled, unmarked trail crunches underneath Peter Loeb’s soft leather shoes as he walks through the Rockaway Quarry in Pacifica, his dog following behind.
Until recently, the 87-acre plot was owned by a man named William F. Bottoms. But he never showed much interest in developing it, and locals have long used the network of trails for hiking. It’s one of the few remaining vacant lots of its size in Pacifica.
Bordering the west side of the property is a ridgeline — a small stone peak literally cut in half by what was once a noisy limestone mining operation — that separates the Pacific Ocean from flat seasonal marshlands that turn to rolling hills just past the highway, where the property stops.
Like the rest of the small coastal town, the former quarry is submerged much of the year in a thick, fast-moving fog. From the ground, it hardly seems like an ideal place in which to introduce luxury living.
“It’s the windiest spot in Pacifica,” Loeb says. “It’s the coldest, windiest spot in the whole city.”
But its close proximity to San Francisco has a headstrong Miami developer drooling.
R. Donahue Peebles bought the quarry last summer for what he says was $7.5 million, and although he hasn’t actually submitted a formal proposal to the town, he’s talking about building 350 exclusive hotel suites, 130 single-family homes, more than 200 town houses, live-work lofts and apartments, and an untold number of stores, such as the Gap and Trader Joe’s.
It’s an unusual battle for the normally quiet town. Tucked 10 miles south of San Francisco just off Highway 1, Pacifica is a largely middle-class bedroom community of about 37,000 people that’s so overwhelmingly residential, it’s hardly seen any commercial development larger than a shopping center with a Safeway.
Loeb served on Pacifica’s City Council for eight years in the 1980s and has lived in the same home near the quarry for three decades. He helped formulate the land use plan for the property, which was designated a redevelopment area in 1986. The plan calls for mixed-use residential and commercial spaces, preservation of the walk and bikeway system, and “high-quality design in both public and private developments including buildings, landscaping, signing and street lighting.”
Joined by a stay-at-home dad named Ken Restivo, Loeb is now organizing the opposition to Peebles — and it hasn’t been an easy task. Peebles has already poured several hundred thousand dollars into a campaign to overturn a 1983 city law that requires voter approval of a housing element in the redevelopment zone. This in a town where the typical council candidate spends less than $10,000 running for office.
Of course, as the opponents point out, it’s not clear exactly what Peebles wants to do. His plans are still tentative; he’s trying to get blanket approval for a massive development before he actually applies for a building permit.
The point of the 1983 law was to ensure that new development on the property would be mixed-use, mostly to offset the city’s high residential concentration and to increase the amount of money the city received in tax revenue.
“What he’s trying to do is privatize the certainty and socialize the risk,” Restivo said. “He wants to know whether he can build the houses before he even starts with a plan, and he wants to leave us trusting him to do whatever.”
Measure L on the November ballot would give Peebles the right to include as many as 355 housing units in any final plan. But even if the bill passes, Pacifica’s City Council would get to negotiate and vote on any final deal with Peebles.
Peebles isn’t the first developer to spend a small fortune attempting to overcome the required ballot vote to develop housing on the quarry, which could attract buyers from all over the millionaire-heavy Bay Area. A similarly well-funded effort failed just four years ago.
The difference is, Peebles likes to win — and has proven before that he knows how to do it.
When it comes to commercial and residential development, Peebles is a prodigy of sorts.
At just 23 years old, after one year at New Jersey’s Rutgers University, the ambitious young man forged a relationship with Washington, DC’s infamous former mayor Marion Barry.
The returns were handsome. Barry appointed Peebles to a city property assessment appeals board membership, a sleep-inducing government function that is nonetheless among the most powerful at the municipal level. Peebles also counts the legendary former congressman and now Oakland mayor–elect Ron Dellums as a mentor; a teenage Peebles worked for him as a legislative page.
“Ron was an interesting person,” Peebles said in a recent phone interview. “One of the things I learned was that you can have your own ideas. He was a very liberal member of Congress. He got to chair two committees even though he was an antiwar person [during Vietnam], because he respected the process.”
After a short tenure on the assessment board, Peebles was developing thousands of square feet of commercial space across the nation’s capital under the Peebles Atlantic Development Corporation, today known simply as the Peebles Corporation. Eventually, an attempt to lease a multimillion-dollar office building to the city inspired accusations of cronyism, according to a 2001 Miami New Times profile. Peebles left Washington and moved to Florida.
There he indulged in the truest spirit of American affluence, putting together enormous hotels and condominium complexes, working in partnership with public agencies. He earned a reputation for resorting to multimillion-dollar litigation when those relationships went bad.
Peebles is well aware that major developments naturally attract conflict. He says it took him a while to become thick-skinned as a controversial developer. In south Florida, however, he proved skilled at getting cranes into the air, completing a $230 million residential tower and a $140 million art deco hotel in Miami Beach during the first half of this decade.
And now he’s set his sights on the low-density, small-scale town of Pacifica.
“Pacifica is unique in many ways, but politically it’s not,” he told the Guardian. “If you look at any city, small or large, it always has people on both sides of the issue. There are people who like to say ‘no’ a lot. [In] most environments — if you look by and large across the country, DC for example — developers are generally not the most popular all the time. Pacifica is not different politically in that regard from other places.”
Press accounts depict Peebles as highly self-assured, even cocky. He once cited his favorite saying to the San Francisco Business Journal as “Sometimes you have to be prepared to stand on the mountain alone.” But he’s also charming and enthusiastic, something that Loeb admits has won Peebles the hearts of many Pacificans.
“The comments we get from people who have seen him speak is, ‘I was soooo charmed by him. I trust him,’” Loeb said. “On the basis of what?”
Restivo chimed in, “He’s a very charismatic speaker. He makes promises and gives voice to people’s fantasies and wishes.”
Pacifica isn’t technically the first place in California where Peebles has attempted to introduce his version of the East Coast’s taste for high-rise condos and hotels. In 1996 a bid to redevelop the old Williams Buildings at Third and Mission in San Francisco crumbled when the partnership he’d created with Oakland businessman Otho Green turned into a civil battle in San Francisco Superior Court. The two couldn’t agree on who would control the majority stake, and another bidder was eventually chosen by the San Francisco Redevelopment Agency. Peebles and Green later settled a $400,000 dispute over the project’s deposit, according to court records. Green, in fact, alleged in a complaint against the city that Willie Brown had him kicked out of the deal.
The 1996 fallout notwithstanding, Pacifica marks the first time Peebles has actually bought land on the West Coast for development.
And he’s using a proven political tactic to win over hearts and minds: fear.
The quarry is still zoned as commercial land, and if Measure L fails, Peebles reminds Pacificans, he could go to the city council with a proposal that strictly includes retail and office space.
In a letter he circulated to the city’s residents, he warned that the alternative to a plan that includes housing could just as easily be a Wal-Mart.
“Your ‘yes’ vote means we will have an opportunity to study and evaluate a better option for our community,” Peebles wrote in the letter. “A ‘no’ vote means we would be forced to file an application for a large scale commercial development such as a big box or a business/industrial complex.”
But a plan that exclusively contains commercial space doesn’t appear to be what Peebles really wants. Despite the fact that Pacifica is hardly the type of crony-driven city that he’s used to, he’s shown that he’s willing to pay what it takes to get his housing element.
In a six-month period, the political action committee that he formed to push through Measure L spent more than $163,000, according to campaign disclosure forms kept in Pacific’s tiny, half-century-old City Hall, which sits close to the ocean amid a neighborhood of clapboard beach houses.
Nearly $90,000 went to a Santa Barbara public relations firm called Davies Communications, whose clients range from schools and major oil producers to Harrah’s Entertainment and the Nashville-based privatization pioneer Hospital Corporation of America.
Two user profiles under the names “Jimmy” and “Susan” surfaced on a Google message board where the development has been discussed, and they link back to a Davies mail server in Santa Barbara. Jimmy and Susan claimed to be Pacifica residents in favor of Peebles’s plan. (A call to Sara Costin, a Davies project manager who’s been present at some of the community meetings, was not returned.)
Peebles spent $10,000 more on the influential Sacramento lobbying firm Nielsen, Merksamer, Parrinello, Mueller and Naylor, which specializes in passing ballot measures. Another $70,000 went to professional petition circulators who were needed to get the measure on a ballot.
Peebles isn’t the first one to bring big money to the city. Four years ago the publicly traded Texas developer Trammell Crow Company spent $290,000 just on election costs in an attempt to get a mixed-use development with housing past Pacifica voters, according to public records. The company’s plan for the quarry included 165,000 square feet of retail space, over 300 apartments and town houses, and a town center. The late 2002 ballot measure still lost by over 65 percent of the vote, despite the fact that the opposing political action committee, Pacificans for Sustainable Development, spent just $6,500.
An Environmental Impact Review released at the time suggested the wrong type of development could threaten the habitat of an endangered garter snake and a red-legged frog, both known to be living in the area. The lush Calara Creek, which runs the length of the property to the ocean, was also perceived to be in danger of pollution runoff without the proper setbacks. And traffic mitigation on Highway 1 has remained a top concern of the city’s residents.
Peebles insists he’s identified state money that can help with widening the highway and says he’d also donate land for a library and new city center. Beyond election costs, Peebles says he’s spent hundreds of thousands of dollars on experts who’ve helped him craft a better plan that promotes sustainability compared to what Trammel Crow had to offer.
“I’ve had an environmental consulting team and contractual consulting team for the last year analyzing this property, analyzing these issues that are necessary,” he said.
Affordability is another matter, however. Peebles has suggested to the business press that single-family home prices on the land could range from $3 million to $8 million.
A mixed-use development on the land could still bring millions of new tax dollars to a city that has struggled in the past to find money for emergency services and even basic public works projects.
Loeb and Restivo haven’t been without their own rhetoric in the debate. They started a Web site, www.pacificaquarry.org, which prophesies a nightmare traffic scenario on Highway 1 where it bottlenecks into two lanes through town. They add that estimates on potential tax revenue are unreliable without a definite plan.
But their group, Pacifica Today and Tomorrow, has hardly spent enough to even trigger disclosure requirements. And Pacifica remains a modest world, far removed from Miami’s glass-and-steel monoliths. Only a man with an ego equal to the size of his development dreams would try to so dramatically alter Pacifica’s topography. Peebles says he’s confident he’ll prevail in November.
Loeb and Restivo recognize that the area won’t stay empty forever, and they aren’t opposed to all development. Restivo told us he’d be more than happy to consider a commercial and residential project on the site — “but ideally it’d be much smaller.” SFBG

Politics in moderation

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G.W. Schulz

The state Dems staged a media event yesterday as part of their ongoing attempts to link incumbent Schwarzenegger to the Bush White House. A commentator from CSU Sacramento called it a flawed strategy, and he’s right to the extent that campaigns shouldn’t be filled with everything but healthy political discourse.

Asking for a clean fight, however, is a bunch of wide-eyed, quixotic bullshit.

Shackling the tax man

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› gwschulz@sfbg.com
Late last month, David Cay Johnston of the New York Times managed to get a story about IRS layoffs picked up by the San Francisco Chronicle and placed on page three. That’s no small challenge, even in one of the most politically charged cities in the nation. It was not a sexy story, neither to liberals nor to conservatives.
But the story’s timing was impeccable.
Johnston reported that the IRS was poised to lay off 157 of its 345 estate- and gift-tax attorneys working at agency offices throughout the country — a division of investigators that generates more revenue for the federal treasury by catching tax cheats than any other group of auditors, about $2,200 for every hour that they work.
Dismantling the estate tax has been among the most aggressive crusades taken up by the Republican Party and its friendliest contributors for at least the last decade. Leaked to the Times by IRS whistle-blowers, the story about the layoffs surfaced just days before Congress rejected for the fifth time since 2001 an attempt by fiscal conservatives to get rid of the estate tax. The legislation failed despite Republican control of both the House and Senate. Even tempting Democrats with the first federal minimum-wage hike in 10 years couldn’t do the trick.
So how could defending the estate tax and the right of the IRS to collect it survive two branches of the federal government dominated by a political party that holds most taxation in contempt? It’s because families awash in seemingly infinite wealth are the only ones who get hit by the tax — despite false claims made by the GOP that the estate tax kills small businesses.
California filed more estate-tax returns in 2001 than any other state in the country by a margin of thousands. The only state that came close was Florida, and California still filed around 6,000 more returns, according to the most recent IRS numbers.
In other words, the Golden State is filthy, stinking rich and more vulnerable to the estate tax than other states. GOP party leaders in Washington insist the issue will return in the form of a new bill, and the IRS is behaving as if the estate tax has already disappeared. If it does, the richest families in the United States — highly concentrated in California and the Bay Area — stand to collectively save billions of dollars.
The Bay Area contains within its sloping hills and mammoth upstart tech firms higher income levels and more general wealth than almost anywhere else in the country. In fact, the San Francisco metropolitan area is the fourth wealthiest in the nation, according to Merrill Lynch, and two tiny cities between here and Mountain View, where Google is based, have the highest per capita median income in the United States. Those two cities, Atherton and Hillsborough, have a combined population of about 17,000, and while many of these techie tycoons are young, the day will come when they die and pass millions of dollars on to their descendants. Will there be enough tax investigators available to audit those estates? Will there even be an estate tax?
Following Johnston’s revelations, a Times editorial suggested the layoffs were a politically motivated attempt by the Bush White House to circumvent the legislative process. What it can’t accomplish through Congress it can do by handcuffing the tax police.
“This is an election year issue,” said Jay Adkisson, a private sector tax lawyer from Laguna Niguel who documents egregious cases of fraud on his Web site, Quatloos! “They’re trying to appease Republican voters who were angry over the failure of Congress to do something about the estate tax.”
The story of the IRS layoffs didn’t just catch the attention of readers. Congress responded too. Twenty-three lawmakers — including, somewhat predictably, Democrat Tom Lantos of California’s 12th District — immediately fired off a letter to Bush-appointed IRS commissioner Mark Everson demanding to know if the agency could now effectively investigate estate-tax avoiders.
None but the most obscenely wealthy Americans pay even a dime in taxes when they earn an inheritance upon a death in the family. Estates aren’t hit with taxes until they reach a value of $2 million, or $4 million for a married couple. Only estates exceeding those amounts are assessed any tax, according to the Center on Budget and Policy Priorities (CBPP).
And if the family hires a savvy tax attorney or estate planner, those nontaxable values could easily rise to $10 million, according to Adkisson.
A research director at the Brookings Institution named Diane Lim Rogers opined in the Chronicle last May that because of current exemptions, about one half of one percent of dead people will actually be followed to the grave by the tax man. Besides, it’s the beneficiaries of an inheritance who pay. Despite grand claims made by Republicans that the beneficiaries of an estate will be paying half of what they’re handed in taxes, even the estates eligible for taxation see on average a 20 percent rate, according to the CBPP, which relied on the IRS for its statistics. For those who do pay estate taxes, deep discounts are available through charitable donations.
“The argument made about lots of people being ‘burdened’ by estate taxes is that they go through lots of convoluted tax-planning strategies in order to avoid the estate tax, so even if they don’t end up paying any estate tax, they are still adversely affected [burdened] by the existence of the tax,” Rogers wrote in an e-mail to the Guardian.
But even considering the cost of estate planning, Rogers said, no one would rationally spend more avoiding taxes than they would actually paying them.
Keith Schiller, a respected private sector tax attorney based in Orinda, earns princely sums teaching millionaires how to take advantage of loopholes in the federal tax code. He’s not opposed to the estate tax on principle; he just wants to simplify the way his clients pay their dues.
“I do believe the estate tax serves a social function of breaking down generational dynastic wealth,” he said in a phone interview.
Schiller said the IRS is conducting nowhere near the estate-tax audits it once did and that may be the only justification for laying off auditors. Still, the knowledge required by agency investigators to analyze and understand complex estate-tax avoidance schemes is immense. About 50 estate- and gift-tax attorneys based in Southern California and the Bay Area exclusively handle returns filed for the IRS from inside the state.
David Dean, president of the San Jose–based National Treasury Employees Union (NTEU) Local 238, said it’s not clear which offices will have layoffs. All 350 estate-tax auditors are being offered buyout deals that include their pensions plus up to $25,000, or $13,000 after taxes.
Dean and the NTEU, which represents the auditors and opposes the layoffs, insist the IRS isn’t entirely sure how much money is hidden from the agency each year through either elaborate trusts or simple refusals to file. It’s known as the “tax gap,” and three days after Johnston’s story appeared, the inspector general of the IRS, J. Russell George, told Congress that the agency’s estimated figures for delinquent estate taxes hadn’t been updated in years. His report described a self-fulfilling prophecy in which the IRS expressed no desire to update the figures because “consideration is being given to eliminating or reducing the number of people required to pay estate taxes.” The last estimate was about $8 billion, but that figure is for the most part unreliable, he testified.
But the law still exists, regardless of whether an anti–estate tax agenda eventually succeeds in Congress.
“If a law is on the books, you still have to close down on the cheaters,” said JJ MacNab, an estate planner who spent 18 years in the Bay Area working for tech clients. “If you don’t enforce a law on the books, no one’s going to have faith in the system.”
MacNab now lives in Washington and as a hobby assists people who buy into tax-avoidance schemes that turn out to be illegal. She said these days, it’s low-income earners who are likelier to be audited, a conclusion Johnston also came to in his 2003 best-seller, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich — and Cheat Everybody Else. The book shows how the recent layoffs are a small part of a larger movement to weaken the IRS’s investigative capabilities.
And that movement begins with those who can afford to fund it. Who are they? Well, they’re not your average farmer.
Consistently during the debate over estate taxes, the GOP has co-opted the populist language that once dominated America’s agrarian communities by claiming that the “death tax” bleeds poor farming families dry. It’s a spectacular rhetorical tool, but it’s an ugly distortion.
In fact, it’s the nation’s wealthiest families who have led the charge to dismantle the estate tax, not its small farmers, according to an April report put together by two groups, Public Citizen and United for a Fair Economy. The analysis identified a handful of enormously wealthy families that stand to save more than $70 billion if their lobbying efforts succeed. And that lobbying effort, the report notes, has amounted to around $490 million in direct and indirect lobbying expenditures since 1998.
The list includes Ernest Gallo of the E & J Gallo Winery, based in Modesto, and John A. Sobrato of Sobrato Development, listed by Forbes as one of the largest commercial landlords in Silicon Valley, with a familial net worth of approximately $2 billion. The Gallo family is reportedly worth about $1 billion.
The rest of the list is in part a who’s who of America’s billionaires: Wal-Mart’s Walton family; Charles and David Koch of the nation’s largest privately held company, the Kansas-based Koch Industries (also benefactors of libertarian think tank the Cato Institute, founded in San Francisco); and the Dorrance family of the Campbell Soup Co.
Ernest Gallo’s participation in antitax measures is particularly well documented. Elected officials he has supported with contributions in the past sponsored federal legislation in the ’70s and ’80s that allowed for millions of dollars in estate-tax exemptions for the Gallo family. One bill was even dubbed by estate-tax supporters the “Gallo amendment.”
The Public Citizen report links the Gallos to anti–estate tax lobbyist Patricia Soldano and her Orange County–based Policy and Taxation Group (PTG), which has spent $4 million lobbying solely against the estate tax since 1998. While the authors are unable to pinpoint exactly how much the Gallos had given to PTG directly, both the Sobratos and the Gallos are listed as clients of the group. The Gallos have reportedly spent hundreds of thousands of their own dollars supporting individual candidates.
It’s doubtful that very many people who actually paid estate taxes last year would know how to repair a grain harvester. In 2001, Johnston of the Times famously challenged the anti–estate tax American Farm Bureau Federation and the Bush administration to find just one example of a farm estate being sold to pay the taxes on it. Johnston reported they were unable to do so.
Estate planner Schiller likened opponents of the estate tax to medieval villagers who complained of gout to prove how well nourished they were.
“People want to believe they have an estate-tax problem,” he said, “so they can feel successful.” SFBG

The Pulitzer that keeps on giving

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By G.W. Schulz

Remember that “isolated” incident we discussed below? Uh, yeah. My Lai returns.

Dishonoring Merita

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By G.W. Schulz

As jaded as it sounds, it’s becoming increasingly difficult to be surprised when news accounts surface yet again of U.S. soldiers terrorizing civilians in Iraq, or anywhere else for that matter. We’re told they’re isolated incidents. We’re told they were initiated by twisted individuals.

That’s what we heard after My Lai. That’s what we heard after Abu Ghraib. And that’s what we’ll hear if four soldiers from the B Company, 1st Battalion, 502nd Infantry Regiment are found guilty of raping and murdering a 14-year-old girl in Iraq.

Lookin’ for love in all the wrong places

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By G.W. Schulz

I cracked open the San Francisco Chronicle on Sunday genuinely excited to read it. I like going to the local section first, even if local sections across the country are seeing fewer and fewer available column inches; the Bay Area, and indeed, California, happen to be places that produce interesting local news.

What I found was hardly fulfilling.

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