In 2005, the U.S. Department of Justice announced in this press release that Anne Sholtz, a then-high-flying entrepreneuer instrumental in creation of the planet’s first smog cap-and-trade, had admitted to defrauding an obscure New York-based energy trader called AG Clean Air. Sholtz’s little-noticed plea and corporate bankrutpcies ignited a mess that still has many smarting and confused, while giving global warming skeptics such as Texas Rep. Joe Barton ammunition to question the prudence of Pres. Obama’s hope for a greenhouse gas market. Oh yeah, there’s also this issue of whether Sholtz, a former Caltech economist and owner of a resplendent mansion, perpetrated an earlier fraud –with the supposed help of ex-CIA and military operatives — that never went investigated or flagged by authorities. See my story about her and “Operation Bald Headed Eagle” for the particulars.
Now, lookie here. The apparent parent company of AG Clean Air, is one of the creditors of the Tribune Corp. bankruptcy. For those who don’t know, Tribune owns the Los Angeles Times, our hometown paper, the Chicago Tribune and other media assets. As this story shows, former Disney chief executive Michael Eisner is bidding to become Tribune’s post-bankruptcy chairman.
Here’s a crucial passage: “… Tribune and its creditors are still struggling to negotiate a settlement around charges that (Sam) Zell’s 2007 leveraged buyout was a case of “fraudulent conveyance,” meaning the transaction rendered the company insolvent from Day One. That settlement would serve as the basis for a plan of reorganization, but depending on how negotiations go, it could be months in coming or the case could easily devolve into litigation.
Nobody in the case doubts that senior creditors led by money center bank JPMorgan Chase and two hedge funds, Angelo, Gordon & Co. and Oaktree Capital Management, will end up owning Tribune by virtue of their $8.6 billion in claims …”
In a earlier article, the L.A. Times depicted Angelo, Gordon & Co. as a “distressed-debt hedge fund.” Here’s the company’s website, so judge for yourself.
When I contacted the company for comment about my last story on Shotz last summer, the PR flack initially denied there was a connection between AG Clean Air (which apparently stood for Angelo, Gordon Clear Air) and Angelo, Gordon & Co. until I disputed otherwise and said the court documents show the exact same New York address for both entities: 245 Park Ave., 26th floor, New York, NY 10167.
Coincidene? I think not.
Whether AG Clean Air still exists is not clear. That the parent is the same one entangled in the debacle that Sam Zell created with his highly leveraged Tribune purchase some years back seems undeniable.
* The startling picture of smogged out L.A. was the cover shot for a Wired magazine feature story about Southern California’s epic fight for blue skies against it’s own people’s auto addiction. They were gracious to highlight our book, Smogtown: the Lung-Burning History of Pollution in Los Angeles, and interviewed me. Here’s a little blurb:
“… People in Los Angeles were very proud of their air,” said Chip Jacobs, one of the authors of Smogtown: The Lung-Burning History of Smog in Los Angeles. “They said that L.A. was the land of pure air, and that moving there could cure tuberculosis and alcoholism. They thought there had to be one simple answer.” The day after the first big smog, city officials pointed to the Southern California Gas Company’s Aliso Street Plant as the source of the thick cloud. The facility manufactured an ingredient in synthetic rubber called butadiene. Public pressure temporarily shut down the Aliso Street Plant, but the smog episodes continued to get even worse. Undeterred, Los Angeles Mayor Fetcher Bowron announced in August that there would be “an entire elimination” of the problem within four months. But the search for the culprit of the “gas attacks” — and the ensuing battle to curb the culprit’s emissions — was just beginning …”
* An interesting MSNBCpiece about scientists’ progress in creating artificial lungs. Gosh, L.A. would be the perfect test city.
” … Nearly 400,000 people die of lung diseases each year in the United States alone, according to the American Lung Association, and lung transplants are far too rare to offer much help. But how to replicate these spongy organs? Niklason’s team stripped an adult rat’s lung down to its basic structural support system, its scaffolding, to see if it would be possible to rebuild rather than start completely from scratch …”
* For now, forget using the prospect of a green-jobs bonanza to convince Congress and the American public to support the national climate bill stalling in Washington, D.C. From the L.A. Timesblog.
* Speaking of cap-and-trade, California and other regions, though not the first ones envisioned, may enact their own greenhouse market. Good luck getting voters to support it in this jobless recovery or keeping fraud at bay. From the L.A. Timesstory.
“As the nation’s most populous state and the world’s eighth-largest economy, California wields significant influence. International and national controls are needed to curb global warming, Gov. Arnold Schwarzenegger said Tuesday, “but California and the rest of the Western Climate Initiative partners are not waiting to take action.”
” … The Western initiative would cut emissions 15% below 2005 levels. It would transition the region to “a green economy that will reduce our dependency on oil, increase our energy security and create jobs and investment now,” Schwarzenegger said in a statement. The trading program would allow companies to meet targets by purchasing less expensive “offsets” from forests, agriculture or garbage dumps when companies in those sectors store carbon dioxide beyond what they would have emitted in the normal course of business …”
* I’ve probably written a dozen stories about L.A.’s unheralded crisis with deadly hexavalent chromium (otherwise known as “chrome-six,” or the Erin Brockovich chemical) creeping and moving through its acquifiers and land. In 2004, I did a series about it for Southland Publshing and in 2000 I covered the subject for the L.A. Times. Unfortunately, the problem is getting worse. Here’s the L.A. Daily Newscoverage (and the Daily News deserves lots of credit for its mid-1990s stories on chrome-six related to Lockheed Corp; I was lucky to have on the team that wrote about it). With all the focus on greenhouse gases and the drought, we’ve all forgotten about a deadly industrial poison spreading through wells and leaving local officials with tricky decisions to make.
Texas Congressman Joe Barton, along with fellow Republican Greg Walden, last year pressured the Justice Dept. to release documents on the secretive prosecution of former high-flying, emissions-broker Anne Sholtz. Barton, a global warming skeptic and longtime champion of big oil, made news again recently for his comments that the federal mandate for BP to set aside $20 billion for cleanup of the massive Gulf of Mexico oil spill amounted to a “slush fund” and shakedown. Guess what? He was forced to apologize.
Washington Post story on his outburst, which was curious to say the least. Here’s the official contrition from him in an MSNBC update.
I’m just wondering when Barton will get around to explaining why he and House lawyers and investigators were chomping at the bit to learn more about Sholtz and what her air pollution-exchange scandal says about a possible greenhouse gas cap-and-trade, when a national energy/climate bill was on the front burner, and why he’s allowed it slip from it from his political consciousness now that the bill’s propsects faded. Could it be Barton’s entire reasoning was to slam Obama, via California, and shield the petroleum sectors? Naw, couldn’t be.
In any event, my story on Sholtz — and it’s contexualized and expanded in our book Smogtown: the Lung-Burning History of Pollution in Los Angeles– won gold in the Southern California Journalism Awards Sunday night. I dislike even mentioning this, because I am ambivalent about subjective honors, but in this case I make an exception because after all these years, there is still more heat than light about the Sholtz caper and Barton’s real motives, let alone why the Justice Dept. handled her the way it did and all that CIA stuff.
Here’s my little Op-Ed on the lessons of former emissions broker Anne Sholtz, who defrauded the very smog cap-and-trade she helped concoct. We write about her spectacular and alarming escapades at length, as well as about L.A.’s air pollution market, in Smogtown: the Lung Burning History of Pollution in Los Angeles.
“In the toxic air of Los Angeles is a primer on human nature as we debate a national cap-and-trade for greenhouse gases.
During the 1990’s, Southern California manufacturers, weary of decades of stern regulation, wanted a new way to shrink their emissions of sky-smudging, health-damaging oxides of nitrogen and sulfur. Their answer was the planet’s first smog cap-and-trade system. Its name was awkward — the Regional Clean Air Incentives Market, or Reclaim — but its implications seismic. Industry finally had flexibility in achieving its cuts, and a motive to reduce more than their yearly pollution cap. They could sell unneeded “credits” for profit!
Though environmentalists caterwauled about corporate sellout, the anti-smog officials were on board. For years, they’d been sandwiched between federal clean air mandates and industry accusations that they had crippled the region’s manufacturing muscle with overzealous rulemaking. Why not allow the market to be the magic?
Leading this vanguard environmentalism was Anne Masters Sholtz, a 30-something Caltech economics professor and aspiring emissions-broker. Her brokerage, which used the Web and advanced software to match trades, lined up heavyweight clients and enlisted marquee financial institutions as trade clearinghouses. Sholtz bought a spectacular hillside estate, won niche celebrity, and had a seemingly blue-sky future in the mecca of whiskey-brown air.
The problem is the system was vulnerable. During California’s electricity brownouts in 2000 and 2001, speculators made a killing off the boutique, $90-million-a-year market by hoarding credits the utilities needed to run full time. By then, Sholtz had twice fleeced the system.
In 1996, she misappropriated roughly $2 million in credits belonging to Chevron, then Mobil Corporation and another client and sold them to Southern California Edison. A few years later Sholtz lulled another client, a New York-based trading outfit called A.G. Clean Air, into believing she owned credits the company needed to complete a lucrative trade with Mobil. In truth the credits weren’t available.
Predictably, local regulators were in the dark about both episodes until industry complained to them. As her case illustrates, and Europe’s cap-and-trade scandals corroborates, even the best-intentioned oversight is laps behind sophisticated schemers, be they full timers or just desperate like Sholtz. Concoct a market anywhere, whether for beads or subprime mortgages, and they’ll show up.
Two House Republicans today are moving to unseal court records of Sholtz’s federal prosecution in a ham-fisted effort to hurt President Obama’s chances for a carbon market. If there’s chicanery with smog, imagine a trillion-dollar greenhouse market, they say. But the Sholtz case is too important for politicization, because global warming is a global threat now.
I’m against Obama’s plans because a more straightforward carbon levy seems more cost-effective and less contrived. Yet cap-and-trades can work, as they generally have in L.A., as long as we remember that to make a commodity out of something is to arouse temptation.”
To read the entire New York Times “Room for Debate” online forum, click here.
Here’s the link to my last story about Sholtz and L.A.’s cap-and-trade. It’s a tale of environmental fraud and foreign intrigue unlike any others.
From the story titled, Electrical pollution from cell phones and WiFi may be hazardous
“In 1990, the city of La Quinta, CA, proudly opened the doors of its sparkling new middle school. Gayle Cohen, then a sixth-grade teacher, recalls the sense of excitement everyone felt: “We had been in temporary facilities for 2 years, and the change was exhilarating.”
But the glow soon dimmed.
One teacher developed vague symptoms — weakness, dizziness — and didn’t return after the Christmas break. A couple of years later, another developed cancer and died; the teacher who took over his classroom was later diagnosed with throat cancer. More instructors continued to fall ill, and then, in 2003, on her 50th birthday, Cohen received her own bad news: breast cancer … ”
This one falls under the environmental “Duh” category. Can you believe that Chinese smog drifts over the Pacific Ocean, adding to the West Coast’s pollution problem. It’s only a phenomenon that’s been heavily reported for years, and makes it way into our book, Smogtown: the Lung-Burning History of Pollution In Los Angeles based on a 2005 Wall Street Journal story. Well, the L.A. Times is catching up. Hooray. They can use a “recent study” to explain why they’re just awakening to a seriously scary pattern of atmospheric assault. Story link.
“Ozone from Asia is wafting across the Pacific on springtime winds and boosting the amount of the smog-producing chemical found in the skies above the Western United States, researchers said in a study released Wednesday.
The study, published in the journal Nature, probes a phenomenon that has puzzled scientists in the last decade: Ground-level ozone has dropped in cities thanks to tighter pollution controls, but it has risen in rural areas in the Western U.S., where there is little industry or automobile traffic.
The study, led by Owen R. Cooper, an atmospheric scientist at the University of Colorado, examined nearly 100,000 observations in the free troposphere — the region two to five miles above ground — gathered from aircraft, balloons and ground-based lasers.
It found that baseline ozone — the amount of gas not produced by local vehicles and industries — has increased in springtime months by 29% since 1984. The study has important implications both for the curbing of conventional pollution that damages human health and for controls on greenhouse gases that are changing the planet’s climate, experts said.”
Finally, Bill gets a little digital ink in the Huffington Post with a book review about the Southwest’s perennial drought. That silky prose dances on the page.
“The Environmental Protection Agency proposed the nation’s strictest-ever smog limits this morning, a move that could put large parts of the country in violation of federal air quality regulations.
The EPA proposed allowing a ground-level ozone concentration of between 60 and 70 parts per billion, down from the 75-ppb standard adopted under President George W. Bush in 2008.
That means cracking down even further on the emissions from power plants, factories, landfills and motor vehicles which bake in sunlight and form smog.
Obama administration officials and environmental groups say the new standards align with the levels scientists say are needed to safeguard against increased respiratory diseases, particularly in children, and that they could save $100 billion in heath costs over time. The EPA also said compliance costs could total up to $90 billion nationwide.
A 65-ppb standard — the middle of the proposed range — would avert between 1,700 and 5,100 premature deaths nationwide in 2020, compared to the 75-ppb standard, the EPA estimates. The agency projects the stricter standard would also prevent an additional 26,000 cases of aggravated asthma, compared to the Bush-era standard, and more than a million days when people miss work or school …”
The new year could well ignite fireworks anew over the Anne Sholtz caper, a story we showcase in our book Smogtown and in Chip’s freelance articles about her intriguing case. It’s a tangled, air-pollution market story involving fraud, red flags, the CIA, a secretive prosecution and much more, with sticky lessons for the carbon market Pres. Obama wants enacted nationally. So far officials at Southern California’s smog-fighting agency, the South Coast Air Quality Management District, hasn’t wanted to acknowledge that their cap-and-trade, known acronymistically as RECLAIM, has been vulnerable to white-collar troubles, and the U.S. Dept. of Justice-L.A. office still probably wishes their mixed-bag prosecution of Sholtz went the way of Compuserve. As George Bush I would say, “Not gonna happen.” Probably.
From the Wall St. Journal/Dow Jones New Service story:
WASHINGTON -(Dow Jones)- U.S. legislators have obtained a court order unsealing documents in a case involving a multi-million-dollar cap-and-trade fraud.
Republican legislators say the records–due to be opened to the public in early January–could shed light on the potential challenges of policing a new, trillion-dollar commodities market that would be created under climate legislation that Congress is considering.
In a rare filing by House lawyers, Reps. Joe Barton (R., Texas) and Greg Walden (R., Ore.), the ranking members respectively of the Energy Committee and the Oversight Subcommittee, asked a federal district court in California to unseal all the closed records regarding the successful prosecution for fraud of Anne Masters Sholtz, a former California Institute of Technology economist.
Lawmakers say Sholtz’s case could expose the weaknesses of a federal cap-and- trade system because it involved the same market mechanism meant to cut emissions …”
Be forewarned there are a lot of errors in these Republicans’ understanding of Sholtz’s case. It involved cap and trade for two smog-forming chemicals unrelated to global warming, and did NOT involve counterfeit credits. However, the federal case against Sholtz did NOT even mention an earlier action involving 500,000 in RECLAIM credits that allegedly bankrolled a CIA-associated currency repatriation effort. See here for that.
For more on this story, here is Rep. Barton’s comments about it and the judicial order lifting the veil of secrecy thrown over many of the case’s key documents.
“The top cops in Europe say carbon-trading has fallen prey to an organized crime scheme that has robbed the continent of $7.4 billion — a massive fraud that lawmakers and energy experts say should send a “red flag” to the U.S., where the House approved cap-and-trade legislation over the summer amid stiff opposition.
In a statement released last week, the Europol police agency said Europe’s cap-and-trade system has been the victim of organized crime during the past 18 months, resulting in losses of roughly $7.4 billion. The agency, headquartered in the Netherlands, estimated that in some countries up to 90 percent of the entire market volume was caused by fraudulent activities.
“These criminal activities endanger the credibility of the European Union Emission Trading System and lead to the loss of significant tax revenue for governments,” Rob Wainwright, Europol’s director, said in a statement …”
“In the first global assessment of the impact of ozone on climate warming, scientists at the NASA Goddard Institute for Space Studies (GISS), New York, evaluated how ozone in the lowest part of the atmosphere (the troposphere) changed temperatures over the past 100 years. Using the best available estimates of global emissions of gases that create ozone, the GISS computer model study reveals how much this single air pollutant and greenhouse gas has contributed to warming in specific regions of the world.
Ozone was responsible for one-third to half of the observed warming trend in the Arctic during winter and spring, according to the new research. Ozone is transported from the industrialized countries in the Northern Hemisphere to the Arctic quite efficiently during these seasons. The findings will be published soon in the American Geophysical Union’s Journal of Geophysical Research-Atmospheres …”
On the same day that California unveiled details of its proposed West Coast cap-and-trade to attack greenhouse gases, two House Republicans vehemently opposed to President Obama’s national greenhouse-gas cap-and-trade announced they convinced the U.S. Department of Justice to unseal many of the documents in the enigmatic case of former-hotshot pollution broker Anne Sholtz. Barton and Walden had been pressing for answers about the case from the Justice Department for months now, igniting a whole bunch of behind the scenes activity and rather long-winded and vague regulatory defenses from the regional South Coast Air Quality Management District, which oversees the RECLAIM cap-and-trade for oxides of nitrogen and sulfur, and the U.S. Environmental Protection Agency, which oversees the district’s progress against smog. RECLAIM, short for the Regional Clean Air Incentives Market, began in 1993 as the planet’s first of its kind.
In those letters, which I’ll dig up later, the AQMD insists its systems are essentially scam-proof and the agency does seem to have a good regulatory track record if not for the Sholtz case and the rampant speculation that nearly detonated the market with spiking prices during California’s 2000 and 20001 electricity blackouts — the ones that exposed the likes of Enron’s. Curiously, the AQMD board is still waiting to fully hear an explanation of what occurred, so I’m told. Do the individual members even know about Sholtz’s alleged (but uncharged) misappropriation in mid-1998 of some 500,000 RECLAIM credits from Chevron, Exxon and Aera Corp. that she later sold to Southern California Edison? And how she poured the proceeds form that un-noticed transaction into a daring, alarming and apparently unsuccessful effort — code named “Operation Bald Headed Eagle” — to extract millions of dollars worth of cash, gold, and bonds of former U.S. aid to the Philippines using a cache of CIA and military Special Ops personnel, with supposed diplmomatic immunity no less?
The EPA, meantime, says it’s on top of RECLAIM and that, as of this summer, had no active investigations into any emissions markets anywhere in the country.
All in all it’s a complex, provocative story, one fraught with policy implications and headscratching human behavior, with spy-book sidelines and institutional hubris, and the charge in D.C. to get the lowdown on this now-closed criminal fraud case, in our opinion, is pretty nakedly political.
But wouldn’t it be something if Rep. Joe Barton of Texas (picture above) and Greg Walden of Oregon proved us wrong with a sincere, nonpartisan investigation into:
* how Sholtz TWICE gamed the system she helped concoct?
* why the AQMD and EPA failed to stop her sooner, and nobody at either agency seems very accountable?
* why the Justice Dept. has acted so secretly and oddly in this matter, apparently never following up on Sholtz’s explosive whistleblower tips once she was in custody?
* and how widespread the supposed-CIA and national security types Sholtz worked with in one cap-and-trade-financed “venture” have penetrated situations like this, and why there seems so little interest in probing whether we have a mini-Iran-Contra playing out while we all figured that was so 1980s of the Oliver North dimension?
I know. Click your heels three times and you’ll land in Kansas faster than the answers come here.
Here’s the link to Barton and Walden’s announcement. At the bottom are links to the motion and background documents, which I encourage the interested to read carefully. This was not some flimsy legal effort. It was surgical and well-researched.
If you want a more colorful and detailed look at the Anne Sholtz caper, please read my story, which ran in August in three different publications (before a bunch of blogs snatched ‘em). Here’s the definitive link to “Air of Deceit.”‘
The Hill, which covers the Capitol, has this brief story about the Barton-Walden initiative to get these secret records released.
“Senior Republicans on the House Energy and Commerce Committee are looking to a closed federal wire fraud conviction in California to bolster their argument against climate legislation.
Rep. Joe Barton (Texas), the senior Republican on the committee, and Rep. Greg Walden (Ore.), the top Republican on the committee’s oversight panel, have asked a federal court to unseal documents in the 2005 conviction surrounding a California pollution credit trading program. Barton calls the case a cautionary tale about setting up a massive nationwide carbon emissions trading market.
The two Republicans, who filed a motion Monday in the United States District Court for the Central District of California, want the pleadings unsealed in the case of Anne Masters Sholtz, who pleaded guilty in 2005 to one count of wire fraud following a six-count federal indictment for trying to game a Los Angeles-area pollution abatement initiative …”
In other news:
A somewhat predictable shift in American public opinion about global warming. Washington Post story
President Obama is not going to Copenhagen empty handed. He’s vowing to push for U.S. reductions in a bid to persuade the world, particularly India and China, to get serious as well. From the L.A. Timesstory
Happy Thanksgiving everyone! Let’s remember what’s important when we return from the break. It’s called sincerity.
“A solar energy project proposed for development on public land in the Mojave Desert would create jobs mostly for Las Vegas and electricity for San Francisco at the expense of the relatively pristine area of east San Bernardino County where it would be built, San Bernardino County Supervisor Brad Mitzelfelt said …
‘Obviously, there is a lot of political pressure to get this project expedited and under construction,” Mitzelfelt said. “But its impacts in San Bernardino County and sensitive and scenic Mojave Desert environment are not worth the benefits.’ … ”
* Hmm, does this sound familiar – a green Ponzi scheme that slipped past the regulatory watchdogs? Not that many honest politicians want to discuss this. From the New York Times post
“Federal regulators have accused four people and two companies of using bogus claims about “green initiatives” to entice more than 300 investors into what was really a $30 million Ponzi scheme.”
* Power to … ummm, the windmills. Sorry, that’s politically incorrect green jabber. Power to the windturbines, micro or massive, whether they spin horizontally or merry-go-round style. Interesting story about this in the L.A. Times (link). Stay tuned on this subject.
* In a scene straight from our book, Smogtown: The Lung-Burning History of Pollution in Los Angeles, comes this latest effort to beat back global warming with “geo-engineering.” Anyone have an air pollution sewer blueprint ready to roll. What I find interesting isn’t the scientific bravado and ingenuity that some might otherwise tab hubris but a discussion of the unintended consequences of messing with Mother Nature.
“If there were some kind of panic button to stop global warming, what would it look like?
How about billions of tiny mirrors, launched into orbit to deflect solar rays away from Earth? Or big, fluffy clouds, artificially whitened so they reflect more sunlight back into space? Or maybe mechanical trees, ugly but effective at sucking carbon dioxide from the air along busy highways?
Outlandish as some of these proposals may seem, scientists and engineers are paying increasing attention to such ideas amid mounting evidence that human-caused climate change is wreaking havoc in some parts of the world.
The proposals belong to a field known as geo-engineering, or manipulation of the environment on a grand scale …”
* Think we’re too cynical here. Read on about what’s happened in China here.
* If that doesn’t depress you about what’s happening in Asia, you always have super-duper dirty L.A. Break out the bubbly – we’re the 7th most toxic city in America (depending on how you calculate that.) Link.
