The Bay Citizen this past weekend followed up on our series of scoops begun in February about Gov. Arnold Schwarzenegger's rotten deal to sell prize California government buildings for an upfront payment, and then lease them back at exorbitant cost. The new news -- coming out of a lawsuit filed by fired officials whose job it was to oversee the buildings' finances -- is that it's actually big secret who, exactly, is paying to own 11 state office complexes in San Francisco, Los Angeles, and elsewhere. Private attorneys working for Schwarzenegger are proceeding with unusual haste to get the deal closed before the governor leaves office Jan. 3. However, there seems to exist no procedural deadline that would require the deal to close by that date.
Events surrounding the lawsuit have prompted questions such as: Why is the outgoing governor in such a hurry to lose the state billions of dollars? Is it because people close to him might benefit financially?
Under the building sell-off deal
first approved in the summer of 2009, the state would get a one-time
payment of $1.3 billion for the buildings, then pay back $6 billion in
lease installments over the ensuing years. Schwarzenegger officials said
in interviews that this was a prudent way to "get California out of the
real estate business." The state legislative analyst said this was a
lousy deal for taxpayers.
When these buildings were erected decades
ago with state bond funding, special commissions were set up to make
sure the repayment of the bonds, and the financing of the buildings, was
handled prudently. Schwarzenegger's sell-off involves retiring the old
bonds; and the special commissioners had been hired to weigh in on just
this sort of thing. Several of them called foul. And Schwarzenegger
fired these whistleblowers so he could keep his sell-off deal on track.The whistleblowers sued
. A state appeals court halted the sale Dec. 13. The
ensuing legal fight suggests this transaction is being pushed with
unusual haste by attorneys working for Schwarzenegger, for the benefit
of buyers who refuse to reveal their true identities.The Bay Citizen
story cites two influential opponents of the deal who suggest the secrecy and haste could be driven by political cronyism. The state legislative analyst reported that the deal would be a multi-billion-dollar loser for taxpayers.
In a deposition earlier this month, California Treasurer Bill Lockyer testified that he believed the mayor of Santa Ana, Miguel Pulido, would recieve a $500,000 finders fee
if the building selloff deal closed. And the Citizen
story quoted California Controller John Chiang as saying: "I'm very concerned about political influences. It is very
important to shed light on the parties involved and everyone with
financial interest in this deal."
On paper, the buildings' buyer is slated to be California First LLC. Its leading partners are CityView, the real estate firm run by Henry Cisneros, executive chairman of After School All-Stars, the nonprofit Schwarzenegger founded in advance of his 2003 run for governor; and Richard Mayo, who was appointed during the administration of former
Republican governor Pete Wilson to oversee the privatization of 35
million square feet of state-owned real estate.
Other partners include
Grover McKean, a former state deputy treasurer, and Chandra Patel, a
real estate investor from Mumbai. The state paid a $1.9 million fee to CB Richard Ellis, a company chaired by Sen. Dianne Feinstein's husband, Richard Blum, to broker the sale.
Left unanswered, however, was where the partners were going to get the $995 million up-front capital needed to close the deal. We placed a call to California Fist's attorney, Anton Nick Natsis, and we'll fill you in when he gets back to us.
Until further notice, it remains a bizarre mystery who's really behind a deal to profit by needlessly putting California billions of dollars further in debt.
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