9-26-09
9-26-09
Badlands Journal
Blue Dog healthcare honcho accused of taking bribes...Badlands Journal editorial board
http://www.badlandsjournal.com/2009-09-25/007431
"You can buy half the town for $420,000," said Adam Guthrie, chairman of the county Board of Equalization and the only licensed real estate appraiser in Prescott. -- Marcus Stern, ProPublica, Sept. 22, 2009
Rep. Mike Ross, Blue Dog-AR, is the chairman of the Blue Dog Coalition Healthcare Task Force, which also includes two Californians, representatives Mike Thompson and Loretta Sanchez. Ross is also accused of having taken bribes from a drug-store chain as part of the sale of a pharmacy he and his wife owned in his district.
This story is of interest to Merced and the San Joaquin Valley because Valley representatives Dennis Cardoza and Jim Costa are Blue Dogs. Former Rep. Gary Condit, D- Ceres, was a founder of this group of Boll Weavil Democrats, created when the Republicans took over the Congress in 1994 in the rightwing counter-revolution.
Like Ross' Arkansas district, as we know, Cardoza's and Costa's districts are chronically low-income, high- unemployment districts, where, due to the fiscal collapse of the state, public medical services are being cut back daily. They are also districts, again as we have recently seen, whose politicians are bought and paid for by large landowners at home and lobbyists in Washington. Costa has at least taken a position against a public option for healthcare insurance. Cardoza continues to ride the fence, with palms outstretched to both sides for "balance".
The free market in votes by members of Congress is on full display in the debate on healthcare reform.
Ross on Thursday again defended the sale, which was first
reported by the Web site ProPublica. The Democratic
congressman called the story part of a "left-wing, special
interest conspiracy against me." "Ross sold pharmacy for
more than apparent value," Andrew DeMillo, Kelly P. Kissel,
Associated Press, Sept. 25, 2009.
Badlands Journal editorial board
9-22-09
Propublica.org
Rep. Mike Ross Raises Eyebrows With Healthy Haul by Marcus Stern
http://www.propublica.org/article/arkansas-rep-sold-family-pharmacy-to-chain-with-stake-
Arkansas Rep. Mike Ross -- a Blue Dog Democrat playing a key role in the health care debate -- sold a piece of commercial property in 2007 for substantially more than a county assessment [2] (PDF) and an independent appraisal [3] (PDF) say it was worth.
The buyer: an Arkansas-based pharmacy chain with a keen interest in how the debate plays out.
Ross sold the real estate in Prescott, Ark., to USA Drug for $420,000 -- an eye-popping number for real estate in the tiny train and lumber town about 100 miles southwest of Little Rock.
"You can buy half the town for $420,000," said Adam Guthrie, chairman of the county Board of Equalization and the only licensed real estate appraiser in Prescott.
But the $420,000 was just the beginning of what Ross and his pharmacist wife, Holly, made from the sale of Holly's Health Mart. The owner of USA Drug, Stephen L. LaFrance Sr., also paid the Rosses $500,000 to $1 million for the pharmacy's assets and paid Holly Ross another $100,001 to $250,000 for signing a non-compete agreement. Those numbers, which Ross listed on the financial disclosure reports he files as a member of Congress, bring the total value of the transaction to between $1 million and $1.67 million.
And that's not counting the $2,300 campaign contribution Ross received from LaFrance two weeks after the sale closed.
Holly Ross remains the pharmacist at Holly's Health Mart under USA Drug. Neither she nor her husband agreed to speak with ProPublica for this story...At the time of the 2007 sale, the county assessor's office valued the pharmacy's building and the land on which it sits at $263,000 -- nearly $160,000 less than the Rosses got for it. Because assessors' valuations don't always reflect true market value, ProPublica hired Guthrie to appraise the property. He placed the current value of the lot and building at $198,000, substantially lower than the county's assessment, which was raised from $263,000 to $269,000 this year. Guthrie explained the difference between his appraisal and the county assessment by saying that county assessments have been running higher than actual market value.
Mike Ross frequently speaks for a coalition of House moderates known as the Blue Dog Democrats, a group that helped force changes to the version of the health care reform bill drafted by the House Energy and Commerce Committee. The role has lifted him to national prominence in recent months.
Ross, a member of the committee, told reporters on Aug. 5 in Little Rock: “We held the bill hostage in committee for 10 days to make it better. ... We protected small businesses. ... And we ensured that if there is a government option, it will be just that, an option. It will not be mandated on anybody."
Ross bristled at suggestions he was trying to kill the bill.
"I wasn't trying to kill health care reform," he said. "If I was, I wouldn't have been in negotiations for 10 days."
LaFrance has amassed a privately held chain of more than 150 pharmacies operating in fiveSouthern and Midwestern states under a variety of names, including USA Drug. It was the 15th largest drug chain in the country in 2008 with an estimated $906 million in sales, according to Racher Press, which publishes business intelligence reports.
The pharmacy industry is aggressively lobbying Congress in an effort to protect its interests in the health care debate. Ross, who belongs to the 52-member Congressional Community Pharmacy Coalition, has introduced and supported legislation backed by pharmacy trade groups.
On Aug. 1, the National Community Pharmacists Association issued a news release thanking Ross for an amendment to the health care reform bill that would create greater transparency in the operations of pharmacy benefit managers, who act as clearinghouses for insurance company reimbursements for pharmaceuticals.
In June, the National Association of Chain Drug Stores issued a news release thanking Ross for introducing legislation authorizing payments to pharmacists to train patients in how to manage their medications.
Health-related interests have donated $342,475 to Ross since 2007, according to federal campaign data maintained by the nonprofit Center for Responsive Politics. No other business sector has given Ross as much.
LaFrance declined to be interviewed for this story. His son, Stephen L. LaFrance Jr., who helps run the chain, asked for questions to be submitted in writing but didn't respond to them.
Ross's spokesman, Brad Howard, said the real estate deal was "open, honest and by-the-books." He described Ross and LaFrance as "acquaintances" but declined to say whether they have discussed the pending legislation, adding that Ross has discussed health carereform with many of his constituents.
The $157,000 gap between the property's assessed value and the price LaFrance paid wasn't unusual, Howard said, because assessments are done for tax purposes and typically don't reflect the full market value of the real estate.
"The appraisal always differs from the assessment, and you can't really compare the two," Howard said.
In that initial interview on Sept. 2, Howard told ProPublica that the appraised value of the real estate at the time of the sale "was somewhere around where the purchase price was, which was, you know, I think was like $420,000." He said he didn't have a copy of any such appraisal and suggested obtaining it from LaFrance, who did not respond torequests for a copy. On Friday, however, Howard said he could "only assume there was anappraisal done on the property by the buyer in 2007" and that he "never said" the property was appraised at $420,000.
Nevada County, which includes Prescott, hires an outside firm -- Arkansas CAMA Technology Inc. -- to update its assessments every five years. After LaFrance bought Holly's Health Mart in 2007, someone from CAMA called the headquarters of LaFrance's pharmacy chain to verify the sale price for the lot and building, in part because "it was such an expensivesale for that area," CAMA employee Mike Shepherd told ProPublica.
Commercial property values in Nevada County "have stayed flat" in recent years, Shepherd said, adding, "I would say flat or a slight increase, maybe. That would be pretty slight, though."
Brenda Williams of Nevada County Real Estate in Prescott said county property assessments tend to be slightly below market value, but usually "no more than 5 percent."
"Being in the real estate business, I know that I see the tax card every time, and it's usually assessed a little bit less than the actual value or sales price, a little bit less but not that much less," she said. Asked about the value of the lot and building housing Holly's Health Mart, she said: "It might cost $250,000 to build it. I wouldn't have a problem with that two hundred and something thousand. But not over 400."
The Rosses bought the lot in 1999 for $10,000, then constructed a building that the county assessed at $225,000.
Two months after the 2007 sale, LaFrance's concerns about health care reform were spelled out in an article in the Arkansas Democrat-Gazette.
"Universal health care will ruin our health care in America," LaFrance told the reporter."There'll be long lines, they won't be able to get treated, potential doctors will be afraid to go into medical school, there will be an outflux of doctors -- in my opinion. It's not broke and don't fix it."
Describing the drug industry as "very big business," he said the high prices charged for prescription drugs are possible only because insurance companies and the government underwrite about 95 percent of the cost.
"So when the customer pays $7, $10, $15, $20" for a prescription co-pay, "it doesn't hurt him. They don't realize that the insurance company is paying the other $125. That's kind of a double-edged sword; if it wasn't for insurance, the American pharmaceutical industry wouldn't be able to charge the prices it charges today, because the public wouldn't put up with it," LaFrance told the Democrat-Gazette.
"Our sales are higher, because it affects the top line of sales," he added. If the government doesn't interfere, there's "nothing but good days ahead."
ProPublica research director Lisa Schwartz and researcher Kitty Bennett contributed to this report.
9-22-09
ProPublica.org
Rep. Mike Ross Responds to ProPublica-Politico Investigation of Pharmacy Sale
http://www.propublica.org/article/rep-mike-ross-responds-ro-propublica-politico-
In response to our story of this morning..., Rep. Mike Ross issued a statement...today. Here it is in its entirety; some important qualifications follow:
"This style of gotcha politics is why many folks are fed up with Washington and it is a shame serious debate on reform has, once again, fallen off course. Instead of having civil dialogue over true and substantive disagreements about reforming our broken health care system, outside groups are trying to taint a completely legal and respected small business that my wife and I worked hard for 14 years to establish. When we sold our family business, Holly's Health Mart, over two years ago, we reportedand disclosed all the transactions required by the House Ethics reporting requirements. I also accurately reported the property on my personal financial statement in 2007, when I sold the business. I sold it for the amount that I have indicated it was worth on every personal financial statement since 1999. I spent $316,000 in 1998 constructing the building that houses the pharmacy and sold it for $420,000 in 2007 – the annual return on investment is less than four percent. I would have made more during that time period if I had invested in a certificate of deposit (CD).
I have never done a favor for the buyer, who I have only met a few times in my life. The buyer did not just buy brick and mortar; he bought a successful, trusted, centrally-located and profitable pharmacy in my hometown. In two of my closest races, the buyer supported my Republican opponent in both of them. He has since supported my campaign.
I welcome any debate and review on my voting record and my positions on the issue. I have said all along that we need health care reform in this country; in fact, I ran for Congress to address our broken system. It is for these reasons why I supported health care reform legislation in the Energy & Commerce Committee in order to ensure that we could move forward with the legislative process and give Members of Congress time to read the bill and talk it over with their constituents. We need common sense health care reform that reduces costs, increases access, forces insurance companies to cover pre- existing conditions and protects patient choice. My ultimate goal has always been to pass a health care reform bill that will offer the kind of reforms I can support – a common sense plan that reflects Arkansas values.”
Responding to the congressman’s statement, Paul E. Steiger, editor-in-chief of ProPublica, said:
"The issue here is not whether Rep. Ross filed the proper disclosure forms. Nor is it whether Rep. Ross earned a large or small return on his initial investment in the building. The issue is whether the Congressman received more on the sale of his building than someone without his power and influence would have received for selling this building. As we read his statement, Rep. Ross does not deny that he received significantly more than an arms-length fair-market price for the building -- on top of the very considerable sums he and his wife received for selling and continuing to run the business."
Rep. Ross states that the buyer bought more than “brick and mortar” for their $420,000, that they also bought "a successful, trusted, centrally-located and profitable pharmacy in my hometown." But, as the story noted, the buyer paid an additional $500,001 to $1 million for the business, as well as between $100,001 and $250,000 for agreement not to compete against the new owners. Those payments brought the total value of the transactionto between $1 million and $1.67 million.
Rep. Ross declined numerous requests for interviews over a two-month period to discuss the transaction in question. He still has not disclosed whether he has discussed the pending health care reform legislation with the buyer, who owns a large chain of drug stores and has a clear and pointed interest in the outcome of the health care legislation
9-24-09
ProPublica.org
Drug Store Chain Releases Some Details About Its Transaction With Rep. Mike Ross by Marcus Stern
http://www.propublica.org/article/drug-store-chain-releases-some-details-about-its-transaction-with-ross-924
The drug chain that bought a pharmacy from Rep. Mike Ross, D-Ark., in 2007 has released a two-page summary [1] (PDF) of the transaction, revealing for the first time the exact amount that Ross and his wife, Holly, received -- $1,254,420.10.
Previously, public documents had only provided a range: $1 million to $1.67 million.
Ross asked USA Drug to release the information in response to a story published Tuesday by ProPublica and Politico [2] that raised questions about the real estate portion of the sale. Ross declined to be interviewed for that story.
"This should certainly clear up any misunderstanding the press may have about our transaction," Joe Courtright, president and CEO of USA Drug, wrote in the two-page summary of the business arrangement, which was published on a business Web site.
However, the summary offered no new information about the central question raised by the ProPublica story: How did USA Drug and Ross arrive at the $420,000 price for the building and lot that house the pharmacy at a time when the county estimated the value of both at a combined $263,700?
Ross paid $10,000 for the lot in 1997, and on Tuesday he said in a news release...that he had spent $316,000 in 1998 to construct the building. But the county, taking stock of the building materials and the size of the building, valued it at $225,000 in 1999 and $237,700 in 2004. A recent reassessment by the county...set the current market value for the building and the lot at $269,000. An independent appraisal...paid for by ProPublica found the current market value of the property to be $198,000.
Real estate professionals in Prescott say property values in the economically depressed community, about 100 miles southwest of Little Rock, have been flat over the past decade, largely unaffected by the wild market swings seen elsewhere in the country. A sawmill that for some 50 years provided many of the town's jobs has closed, and a Firestone plant, the other major local employer, has cut its work force in half.
Courtright's summary did provide new information about the other two components of the pharmacy sale -- the valuation of the business assets and a non-compete agreement benefiting Holly Ross.
USA Drug paid $724,420 for the assets of the business and $110,000 as part of an agreement by the Rosses not to compete in the future against the business being sold, Holly’s Health Mart.
Courtright is on the board of the National Association of Chain Drug Stores, which represents pharmacy interests...in Washington, including during the current health care reform debate. Calls to Courtright at his office in Little Rock were not immediately returned.
9-23-09
Citizens for Responsibility and Ethics in Washington
CREW FILES DEPT. OF JUSTICE COMPLAINT AGAINST REP. MIKE ROSS
Contact:
Naomi Seligman // 202.408.5565
http://www.citizensforethics.org/node/42490
Related Documents
9/23/09 - CREW Complaint to DOJ (Rep. Mike Ross)
// 4.9 mb
Related News Coverage
Ross sold pharmacy for more than apparent value // 25 Sep 2009
Associated Press, as seen on WashingtonPost.com
Inquiry is sought in Ross deal // 24 Sep 2009
Arkansas Democrat-Gazette
The Early Word: Ross Pharmacy // 24 Sep 2009
New York Times' "The Caucus Blog"
Washington D.C. – Today, Citizens for Responsibility and Ethics in Washington (CREW) asked the Department of Justice to investigate whether Rep. Mike Ross (D-AR) engaged in bribery and honest services fraud by selling a piece of commercial property for more than its worth to a pharmacy chain with an interest in pending legislation.
According to a story appearing in the September 22, 2009 Politico, in June 2007, Rep. Mike Ross sold Holly’s Health Mart in Prescott, Arkansas to USA Drug for $420,000. In addition, the owner of USA Drug, Stephen L. LaFrance, also paid Rep. Ross and his wife, Holly, between $500,000 and $1 million for the pharmacy’s assets and Ms. Ross was paid between $100,001 and $250,000 for signing a covenant not to compete with Super D Drug Acquisition as part of the sale. In addition, just two weeks after the sale, Rep. Ross received a $2,300 campaign contribution from Mr. LaFrance.
At the time of the sale, the county assessor’s office valued the pharmacy’s building and the land on which it sits at $263,000, $157,000 less than the Rosses were paid.
ProPublica hired a licensed real estate appraiser in Prescott, Arkansas to assess the property, and he valued it at $198,000, less than the county’s assessment, which was raised from $263,000 to $269,000 this year. Another Prescott real estate professional said county property assessments tend to be slightly below market value, but usually not more than 5% below. Nevada County, which includes Prescott, also questioned the purchase price. A contractor hired by the county to update property assessments every five years contacted USA Drug to verify the purchase price, finding it inconsistent with commercial property values in the area.
Even assuming a price of 5% above the assessment, the building and property would have had a value of no more than $276,150. Therefore, at a minimum, it appears the Rosses received at least $143,850 more than the property’s value -- and perhaps as much as $222,000 more, excluding the additional money paid for the non-compete clause -- when they sold it to USA Drug.
In 2008, USA Drug was the 15th largest drug chain in the country with an estimated $906 million in sales and the pharmacy industry is aggressively lobbying Congress regarding proposed health care reform legislation. Two months after the purchase of the Ross property, Mr. LaFrance was profiled in the Arkansas Democrat-Gazette. He opined if the government does not interfere, there are “nothing but good days ahead” for the pharmacy business.
As a member of the Energy and Commerce Committee and the Blue Dog Coalition, Rep. Ross has been integrally involved in the debate over health care reform. This past June, the National Association of Chain Drug Stores thanked Rep. Ross for introducing legislation authorizing payments to pharmacists to train patients how to manage their medications.
Rep. Ross receives significant financial support from the health care industry. According to OpenSecrets.org, this campaign cycle Rep. Ross has so far received $81,100 from those in health-related industries, $23,850 of which is from the pharmaceutical/health products industry. In the 2008 cycle, Rep. Ross received $261,275 from the health care interests, $50,600 of which was from the pharmaceutical/health products industry.
CREW executive director Melanie Sloan stated, “With the sale of his business and the high priced non-compete covenant, Rep. Ross has gone from accepting campaign contributions from those with legislative interests before him to accepting significant personal financial benefits of dubious legality.” Sloan continued, “The situation is reminiscent of that in which former Rep. Randy “Duke” Cunningham sold his house to a defense contractor for an amount above its value in return for legislative assistance – a sale that ultimately resulted in Rep. Cunningham’s conviction on criminal charges.” Sloan explained, “Given that Rep. Ross received a personal financial benefit conservatively valued at no less than $143,850 and probably a great deal more, both the sale of the property for $420,000 and payment of no less than $100,001 for the covenant not to compete certainly
merit criminal investigation.”
Federal bribery law prohibits public officials from directly or indirectly demanding, seeking, receiving, accepting, or agreeing to receive or accept anything of value in return for being influenced in the performance of an official act. Honest services fraud prohibits members of Congress from depriving their constituents, the House of Representatives, and the United States of the right of honest service.
At a time when health care reform legislation is a matter of pressing concern and heated debate, it is particularly important for Americans to have faith that their government officials are making decisions based on the best interests of the nation rather than their own financial interests. As a result, it is imperative for law enforcement authorities to thoroughly investigate Rep. Ross’s conduct.
ProPublica.org
Marcus Stern bio
Marcus Stern had worked for Copley News Service in Washington, D.C. since 1983. In 2006, he shared the Pulitzer Prize and George Polk Award for his role in breaking the story of former Rep. Randy "Duke" Cunningham's wide-ranging corruption. Stern has also, in recent years, reported extensively from Iraq and other conflict zones. He spent most of the 1990s covering immigration issues for Copley.
Modesto Bee
Utah gov undecided on Snake Valley water deal...The Salt Lake Tribune, http://www.sltrib.com
http://www.modbee.com/state/v-print/story/870005.html
SALT LAKE CITY -- Utah Gov. Gary Herbert hasn't made up his mind on whether he supports a proposed agreement with Nevada over the shared Snake Valley aquifer.
In 2004, Congress required Utah and Nevada to reach an agreement on dividing up the water in the aquifer, which straddles the state line. The Southern Nevada Water Authority wants to eventually start delivering rural groundwater from the aquifer to the Las Vegas area.
The draft agreement dictates construction of the pipeline can't begin until at least 2019 so the environmental impacts can be fully studied.
Both states would be entitled to half the water in the aquifer under the agreement.
Herbert spent Friday listening to Utah residents' opinions on the agreement.
EDITORIAL: Now look what they've done
Special session on water on hold till lawmakers return from junkets.
http://www.fresnobee.com/opinion/v-print/story/1651827.html
The special legislative session to solve the California water crisis has been delayed because some lawmakers are on out-of-country junkets. Senate President Pro Tem Darrell Steinberg said that will delay a special session until Oct. 13.
We are stunned that legislators, who took intense criticism for ducking the water crisis during the regular session, would so arrogantly skip out on Californians now. But the Los Angeles Times has reported that several senators will be gone for 19 days to see how Europeans govern. That means they'll be taking their wives and significant others to Europe for sight-seeing trips.
This report comes in the wake of Steinberg and other legislative leaders saying they are very close to solving the water crisis. They are so close, in fact, that they don't need to stick around Sacramento and get the deal done.
This latest maneuver reminds us of the special legislative session that Gov. Arnold Schwarzenegger called last December to deal with the budget meltdown. Many lawmakers, including Senate budget chairwoman Denise Ducheny, D-San Diego, went on junkets instead of showing up for the special session.
This is one more reason that we've called for a return to a part-time legislature in California. The current bunch of lawmakers are so far out of touch with their constituents that they don't understand the real world that Californians must operate in. That would change if they had to get other jobs to help pay their personal bills.
The Senate and Assembly have earned part-time status.
We've called on Schwarzenegger to immediately schedule a special session on water. His office said he would do that when lawmakers were serious about returning to the negotiating table. It seems they aren't very serious. We sympathize with Schwarzenegger for having to deal with lawmakers who think their jobs are part of a Club Med vacation package.
Our lawmakers would rather visit Spain and Denmark than spend time in Sacramento figuring out how to deliver enough water to 38 million Californians. The California Legislature has become an embarrassment to the state.
Sacramento Bee
Massive real estate losses hidden at California bank...Andrew McIntosh
http://www.sacbee.com/business/v-print/story/2210835.html
A California bank that received $298.7 million in federal bailout money is facing state and federal scrutiny and has fired its two top executives after an internal investigation discovered that massive real estate loan losses were improperly and deliberately hidden from its finance department and outside auditors.
The Securities and Exchange Commission is looking into troubles at United Commercial Bank of San Francisco, which has branches in Sacramento and Citrus Heights, bank officials confirmed. Other state and federal regulators have restricted the bank's activities after examiners found the bank engaged in "unsafe and unsound banking practices that jeopardize the safety of its deposits," state and federal records show.
The cease-and-desist order bars United Commercial from opening new branches or extending further credit to customers with bad loans topping $1 million without its board's prior approval.
In addition to asking for the resignations of the top executives, the bank has stopped paying all dividends to preserve its capital. That includes dividends the lender owes to the U.S. Treasury after it was given the $298.7 million in taxpayers' money under TARP, or Troubled Asset Relief Program, just 11 months ago.
United Commercial spokesman Steve DiMattia said the bank is fully cooperating with the SEC.
"We are not privy to what the SEC is doing or plans to do," added DiMattia, who declined to say if the bank received a subpoena.
Lawsuits followed collapse of stock
United Commercial Bank serves Chinese American communities and entrepreneurs with 50 California branches. It also helps companies doing business in China.
It also has nine branches in New York, five in Atlanta and branches in Houston; New England; and Beijing, Guangzhou and Shenzhen, China.
United Commercial's stock, which trades on the NASDAQ stock market, has collapsed since it disclosed its loan woes in securities filings earlier this month.
Since then, nine law firms have launched shareholder class action lawsuits that accuse United Commercial of falsifying its financial statements and committing securities fraud in 2008 – the same year it applied for and received its TARP money.
United Commercial Bank's ability to repay its TARP money is now uncertain, making it the largest of 65 California-based banks that received taxpayer-financed TARP funds to run into serious financial trouble.
To qualify for TARP money, United Commercial and other banks had to be deemed financially sound by federal officials, who required that the money be used to expand lending and give mortgage relief to troubled U.S. homeowners.
In exchange for the cash injection, the U.S. Treasury – or taxpayers – received a mix of preferred shares and warrants, or future rights to purchase shares. Banks are supposed to pay Treasury a 5 percent dividend for five years. The payout rises to 9 percent afterward.
When United Commercial was told it qualified for TARP money late last October, its chairman and chief executive, Thomas S. Wu, unveiled the decision with fanfare.
"This is an enormous statement of confidence and demonstrates that we are a healthy financial organization that can help support the U.S. financial markets in this time of economic turmoil," he said in a statement. "It is indeed a testament to the strength, safety and soundness of our company."
United Commercial did pay the Treasury a dividend in May. It suspended those payments in July.
DiMattia said the lender "intends to repay its TARP funds when it is capable of doing so." It doesn't know when that will be, he said.
Regulators find 'unsafe, unsound practices'
The bank halted its dividends after examiners from the Federal Deposit Insurance Corp. and the California Department of Financial Institutions visited the bank in April.
In an April 9 report, bank regulators identified what they called "unsafe and unsound banking practices," SEC documents show.
Neither the FDIC nor the California DFI will disclose the report in response to public records requests, but its findings are referenced in the recently issued 18-page cease-and-desist order whose conditions were laid out by federal and state officials and agreed to by the bank.
The order said regulators found United Commercial had "a large volume of poor quality loans" and "unsatisfactory lending and collection practices."
The board failed to supervise adequately the bank's executives, the order added. A subcommittee of the bank's board responded to the examiners' report by launching its own internal investigation.
In documents filed with the SEC this month after the board subcommittee wrapped up its probe, United Commercial said it sought and received the resignations of Wu, the CEO, and Ebrahim Shabudin, its top loan officer.
David S. Ng, who chaired the board's audit and finance committees, also has resigned.
United Commercial Bank said the problems resulted "both from weaknesses in the bank's internal controls" and "the deliberate and improper actions and omissions of certain bank officers," an SEC filing stated.
The bank said its board probe found that problems were caused by "an apparent desire to downplay deteriorating financial conditions."
It found loan terms and documents were modified improperly "to delay negative consequences" and auditors were misled.
The bank now says it also will completely restate and refile its financial statements for 2008 and part of 2009, saying the numbers in prior reports made public to investors and shareholders are unreliable.
United Commercial said it expects write-offs for bad loans to hit between $275 million and $300 million for 2009's second quarter alone and expects to set aside about $400 million more to cover additional potential losses.
Employees fired, reprimanded, reassigned
When told about the case, one retired bank examiner who continues to follow bank failures around the country said both the bank and its regulators should come under scrutiny.
"If taxpayers have been put at risk for $300 million that has become uncollectible a short time later, I hope the U.S. attorney looks at it and goes for blood," said Richard Newsom, who worked for the state of California and the federal government for 27 years. "How could the bank regulators be so inept? They clearly failed to identify many of the obvious unsafe and unsound practices that should have been apparent back in 2008."
United Commercial said it's addressing its problems with "additional training, reprimands, re-assignments and, in some instances, termination of employment." DiMattia declined to say how many bank employees have been reprimanded, reassigned or fired.
Banker Doreen Woo Ho has been named acting president and chief executive officer.
In a statement to The Bee, Ho said United Commercial has a strong franchise in Chinese American communities and is working hard on "an aggressive plan that addresses our operating challenges."
Ho said she is exploring options to boost capital, including sale of either part or all of the bank. The bank's branches remain open.
Shanghai-based China Minsheng Banking Corp., the first non-state-owned bank in China, owns a 9.9 percent stake in United Commercial and could boost its holdings.
San Francisco Chronicle
Top state emitters of greenhouse gases face fees...Wyatt Buchanan, Chronicle Staff Writer
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/26/MN6O19SPHD.DTL&type=printable
Sacramento -- Companies that produce large amounts of greenhouse gases will have to pay new state fees under a decision made Friday - a key step in California's far-reaching program aimed at slowing global climate change.
Right now the fees affect only about 350 companies, but experts say they are an important move in averting some of the most catastrophic possible results of climate change.
The California Air Resources Board voted unanimously in favor of the fees, which will raise $63 million next year for monitoring and regulating greenhouse gases as required by AB32, the Global Warming Solutions Act of 2006.
"This is a necessary step for California to continue its implementation of the nation's first-ever statewide cap on global warming pollution," said Bill Magavern, director of Sierra Club California.
The decision, made at a meeting in Los Angeles County, follows in the path of the Bay Area Air Quality Management District, which became the first in the country to put a fee on large greenhouse gas producers last year. Local air-quality officials use the money to monitor the gases.
The fee will apply to major utilities as well as producers or users of natural gas, gasoline and diesel fuels, electricity, coal and cement. It will cost some companies, such as PG&E, millions of dollars per year, while others will pay tens of thousands of dollars.
The air board expects the fees to be passed through to consumers, who will see minimal costs, including about 77 cents per year in increased electricity and natural gas expenses and 80 cents per year for fuel for a vehicle.
'Pay as you go'
Yet owners of a restaurant, for example, should expect increased costs of about $17 per year. An office with 100 employees will see about $9 in increased costs over a year, and a full-service grocery store about $120, according to the air board.
"If you're going to start a new program, I think it makes a lot of sense to be asking that it is a pay-as-you-go program, and that's what we're doing here," said Mary Nichols, chairwoman of the board, who added that the action is an acknowledgment that limiting greenhouse gases will come with a price. The Legislature had required the board to create such a fee.
Those affected by the fee, including large companies that are part of the Western States Petroleum Association, told the board that they did not necessarily oppose the fees.
Suit seeks records
But that organization, along with 10 others, sued the air board for more documentation of how the staff calculated the cost for monitoring and regulating the gases.
"We believe that in order to adequately implement AB32, we need to know what the true costs are going to be," said Shelly Sullivan, executive director of the AB32 Implementation Group, a coalition made up of the organizations that filed suit. Sullivan said the group wants yearly audits and reviews of the fee program.
A judge ruled in favor of the air board last week, but an appeal is likely. Ellen Peter, the air board's chief counsel, called the complaints overstated.
State making progress
AB32 calls for the state's emissions to drop to 1990 levels before 2020. On Thursday, the governor announced the state is 40 percent of the way to that goal, thanks to decisions such as implementing a low-carbon fuel standard.
There is still more to do. Regulators will eventually decide, for example, how to implement something like a cap-and-trade program, which would require companies to limit emissions at a certain level. Companies that exceed those levels would have to buy credits.
Big budget cuts let state parks avoid shutdown...Peter Fimrite
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/26/MNMU19SQBD.DTL&type=printable
Under fire from park supporters and the state's own attorneys, Gov. Arnold Schwarzenegger announced Friday that he has found a way to cut millions of dollars out of the California State Parks budget without completely closing any parks.
The plan, which some are criticizing as little more than a shell game, slashes $14.2 million from the park budget this year by closing some campgrounds and facilities on weekdays, eliminating unfilled seasonal and administrative positions, and cutting back on maintenance and things like bathroom cleaning.
The idea is to allow all 279 state parks to remain open this fiscal year. More options would be explored Jan. 10 when legislators consider next year's budget, according to a statement the governor released Friday afternoon.
"Working closely with my departments of Finance and Parks and Recreation, we have successfully found a way to avoid closing parks this year," the statement read. "This is fantastic news for all Californians."
But several officials familiar with the park budget negotiations said the plan may not be all that the governor's spin machine has promised. The plan does not restore any money taken out of the park budget, the critics said, meaning that even if the gates remain open there will not be enough personnel or resources to run the parks.
"I'm hugely skeptical that you can have the kind of savings that the governor is proposing without having park closures either explicitly or functionally," said Assemblyman Jared Huffman, D-San Rafael, who is chairman of the Water, Parks and Wildlife Committee. "I'm concerned that the administration may be trying to have it both ways. He's functionally closing parks but trying not to face the heat of closing parks."
The budget cuts were part of a deal Schwarzenegger signed in July to erase a $24 billion budget gap. In addition to the $14.2 million in cuts to parks this fiscal year, the deal also chopped $22.2 million out of the 2010-11 parks budget. The governor said Friday that he hopes to find more money for the parks next year.
Park officials had said the 20 percent cut would require them to close 100 state parks, including some of the state's most popular wildland areas. The list of which parks would be closed was never released.
The plan came under fire from legislators, environmental organizations, park supporters and residents of communities where businesses rely on park visitors to spend money.
The state's own lawyers cautioned park officials that the closures would potentially leave them liable for voided concessionaire contracts and for injuries or fires in unattended state parks.
The governor's new parks plan is to save $12.1 million this year by eliminating all major equipment purchases, including vehicle replacements, and a further $2.1 million by cutting seasonal and operations staffing and opening some parks only on weekends and holidays. He did not say which parks would be affected.
Although all the parks would remain open at least part time, selected campgrounds and facilities would be closed, and visitor services provided by rangers, custodians and maintenance workers would be drastically reduced, according to the plan.
Parks spokesman Roy Stearns said the staffing cuts can be accomplished by eliminating vacant positions.
"There are going to be reductions in service, but the bottom line is all those parks will stay open at the busy times when people are using them," Stearns said. "Next year is a new ballgame, but the administration said it will help us find solutions."
Elizabeth Goldstein, executive director of the California State Parks Foundation, said everything the governor is proposing had previously been discussed.
"The governor finally realized that the political and economic consequences of closing parks are enormous and he is now trying to heal a self-inflicted wound," Goldstein said. "The public is going to need to understand in the coming weeks what the level of service reductions are going to be. The implications of this are at the moment unclear."
The proposal to close the parks was quickly becoming a Gordian knot around the necks of the governor and park officials. Besides the legal ramifications, federal grant money was at stake. The National Park Service could have seized land in as many as six parks, including Angel Island, that were once owned by the federal government.
Additionally, nobody seemed to know exactly how they were going to keep the public - let alone marijuana growers and other criminals - out of the forests, woodlands, wetlands and beaches. Park officials even floated the idea of establishing neighborhood watch-style groups to prevent illegal activity.
The budget cuts are clearly going to be difficult whether or not the parks stay open. California's state parks, which cover 1.5 million acres, have already absorbed years of cost cutting and staff reductions and had $1.2 billion in deferred maintenance on the books even before the latest crisis.
Dan Jacobson, legislative director of the nonprofit group Environment California, said he is thrilled the parks will stay open even though the battle is far from over.
"What this whole debacle points out is that we need to find a stable funding system for our parks," he said. "The onus is going to have to be on the state Legislature in 2010 to pass permanent protection for our state parks."
Indybay
Another Bullet Dodged In Corporate Agriculture's War on Fish and People...Dan Bacher...9-25-09
http://www.indybay.org/newsitems/2009/09/25/18623252.php
A surprise amendment to prevent the federal government from implementing plans to prevent the extinction of Delta smelt, Central Valley salmon, green sturgeon and southern resident killer whales was defeated by a coalition of fishing and environmental groups. The amendment was orchestrated by a coalition of south valley agricultural groups led by Westlands Water District and only a quickly organized response defeated it by a 61-36 vote. The attempt to prevent the funding of the biological opinion took place as corporate agribusiness, Governor Arnold Schwarzenegger, Senator Diane Feinstein and California Legislators are campaigning from a peripheral canal and more dams that would only accelerate the extinction of these imperiled fish and sea mammal species.
Another Bullet Dodged In Corporate Agriculture's War on Fish and People
Compared to Pearl Harbor...Bill Jennings
On September 22, Senator DeMint (R-South Carolina) introduced an amendment to an Interior Department funding bill on the floor of the Senate that would have prevented any federal funds from being used to restrict exports of water from the Delta. Had it passed federal agencies would have been prevented from implementing the recent salmon and Delta smelt biological opinions.
The surprise amendment was orchestrated by a coalition of south valley agricultural groups led by Westlands Water District and only a quickly organized response, by a coalition environmental and fishing groups, defeated it by a 61-36 vote. Sens. Dianne Feinstein and Barbara Boxer withstood a vigorous last-minute e-mail lobbying campaign and opposed the amendment. Senator Feinstein likened the amendment to “Pearl Harbor.”
The amendment was virtually identical to one proposed by Congressman Devin Nunes (R-Visalia) that was defeated in the House of Representatives. Congressman George Radanovich (R-Mariposa) lobbied Feinstein to support it.
The environmental coalition included the California Sportfishing Protection Alliance, Natural Resources Defense Council, The Bay Institute, Central Delta Water Agency, Defenders of Wildlife, Earthjustice, Endangered Species Coalition, Environmental Defense Fund, League of Conservation Voters, National Wildlife Federation, American Rivers, Pacific Coast Federation of Fishermen's Associations, Save Our Wild Salmon, Sierra Club, The Wilderness Society and WildEarth Guardians
The amendment's supports included Westlands Water District, San Luis & Delta-Mendota Water Authority, San Joaquin River Exchange Contractors Water Authority, California Farm Bureau Federation, Tulare County Farm Bureau, Fresno County Farm Bureau, Kings County Farm Bureau, Families Protecting the Valley, Chowchilla Water District, California Grape and Tree Fruit League, Fresno County Board of Supervisors, Western Growers Association, California Poultry Federation, California Citrus Mutual, California Cotton Ginners Association, California Cotton Growers Association, Nisei Farmers League, California Tomato Growers Association, National Cotton Council of America and Campos Brothers.
Eternal vigilance is the price of viable fisheries.
Bill Jennings, Chairman
Executive Director
California Sportfishing Protection Alliance
3536 Rainier Avenue
Stockton, CA 95204
p: 209-464-5067
c: 209-938-9053
f: 209-464-1028
e: deltakeep [at] aol.com
http://www.calsport.org
CNN Money
Georgia bank is 95th to fail this year
Regulators close Georgian Bank, the 19th bank in the state to fail this year...Ben Rooney
http://money.cnn.com/2009/09/25/news/economy/bank_failure/
index.htm?postversion=2009092517
NEW YORK (CNNMoney.com) -- Atlanta-based Georgian Bank was closed by state regulators Friday, according to the Federal Deposit Insurance Corporation, becoming the 95th to fail in the nation this year.
Customers of Georgian Bank are protected. The FDIC, which has insured bank deposits since the Great Depression, currently covers customer accounts up to $250,000.
First Citizens Bank and Trust Company, Inc., of Columbia, S.C., agreed to assume all of Georgian's $2 billion deposits and will purchase "essentially all" of its $2
billion in assets, the FDIC said.
The five branches of Georgian Bank will reopen Monday as branches of First Citizens Bank.
"We view this transaction as a unique opportunity based on current developments in our industry," said Peter Bristow, president and chief operating officer for First Citizens, in a statement. The acquisition is part of First Citizens' "expansion strategy" in South Carolina and Georgia, he added.
The FDIC said customers of the failed banks will be able to access their money over the weekend by writing checks or using ATMs or debit cards. Checks will continue to be processed, and borrowers should make their payments as usual.
The 95 banks that have failed so far this year, an average of more than 10 per month, is nearly four times the number of banks that failed in 2008. It's the highest tally since 1992, when 181 banks failed.
This year's failures have reduced the FDIC's insurance fund to $10.4 billion from $45 billion a year ago. However, the agency has said it has $42 billion available for bank rescues over the next 12 months.
Friday's closure will cost the FDIC an estimated $892 million.
The FDIC board is scheduled to meet Tuesday to discuss how to raise money to restock the fund, including the possibility of using its line of credit at the Treasury Department.