Category Archives: Corpocracy

Foreshadowing the Great Recession bankster debacle, a 1980s bank collapse with elements of what was to come — another story killed by the Sacramento Bee

On 28 June 1985, we submitted our last story as a reporter on the staff of the Sacramento Bee, a story about a Gambino Family wiseguy, the bankruptcy of a Northern California county’s largest employer, money laundering, and a death buy arson in a Goodfellas-style Southern California insurance scam.

Since we had quit the paper over repeated censorship of major stories, most notably our coverage of the crimes and corruption that would lead the what became the largest single bank collapse to date and the subsequent censorship of another story about organized crime and political corruption in California and its nationwide connections.

That final story was undertaken after we turned in our two weeks’ notice, and it’s the never-before-published story we posted on 10 November.

Today’s story was written after the editor of the Bee’s Sunday editorial section called us at home with a request to write something for him. “Sure,” we said, “but they’ll probably kill it.”

No, he said, he had only taken the editorial position after he had been assured he would have absolute editorial discretion.

So what did I want to write about, he asked.

“What about the collapse of a bank in Davis, a major player on the national scene?”

We explained that we had inside information from friends and other sources in Davis, just across the river from Sacramento and the city where we were living at the time.

We explained that we’d need some serious expense money in order to acquire documents and buy some lunches. No problem, came the reply.

The story we turned in several weeks later, the editor said, was the best work he’d ever commissioned. It would run in two weeks.

Then came the call. “We’re still ready to go, but there’s been a quest that you leave out one name.”

I named the name [more of that later]. “That’s the one,” the editor said.

“The answer is no.”

“I’ll have to get back to you,” the editor said.

The next day came the expected call.

“Still insist on leaving the name in?,” came the question.


“Well, then, I’ve got some good news and some bad news,” he said.

“The bad news being that your higher-ups won’t run the story if the name stays in, and the good news is that you’ll pay the full amount and give up any claim to rights on the story.”

“You got it.”

So we pocked our check for five figures and took the story to the Davis Enterprise, the much smaller daily paper in the community most impacted by the bank collapse.

The story ran with the name intact. A few months later a friend at the Enterprise called with some news. My report had just been award the 1992 California Newspaper Publishers Association Best In-Depth Reporting award — a fact the Bee didn’t report, though it did cover other awards.

So why is the story still important today?

The problems that brought down Farmers Savings and Loan came about, in part, because of differences between state and federal regulations involving S&Ls and banks. In addition, Farmers was chartered under state law, not federal, and the state had far fewer regulators than Uncle Sam, and state rules were somewhat loser [though federal S&L rules were also looser than federal bank laws].

In the years since, that state got out of the S&L charter business, and federal rules were tightened.

Then came Bill Clinton, and federal rules for banking institutions were dealt a major blow by the abolition of the Depression-era Glass-Steagall Act, paving away for the financial shenanigans leading up to the Great Recession.

The story of Farmers Savings foreshadowed in key respect what would happen a quarter-century later.

Oh, and that name we were encouraged to omit? He was the man Hillary Clinton would use to leak word to the press about her current presidential run — and more on that at the end of our very long post.

Here’s the story:

FARMERS SAVINGS BANK: A Tale of Big Bucks, Ruin, and Death

For a time, it was a marvel, the American Dream come true.

There was the $2 million corporate jet, a corporate Mercedes fleet, a system of huge bonuses, and a set of offices that was the largest non-governmental complex in Davis.

There was the stock, too — soaring from a low of $12.50 to as high as $70 a share in less than five years.

More impressive were the numbers on the yearly balance sheets, colossal nine-figure sums with dollar signs in front of them. At its peak, the bank was administering nearly $2 billion in mortgages, collecting fees for handling notes it bought from some institutions and sold to others.

Then there were the profits — $4.4 million in 1983, up from less than $50,000 three years earlier.

In just four short years, Farmers Savings Bank had grown from a single office housed in a trailer into a financial titan. It was the 41st largest S&L in a state which housed the nation’s largest thrifts.

More significantly, it had skyrocketed into one of the top ten players in the nation’s volatile secondary mortgage market and bankrolled the play by creating a new investment vehicle — a high-yielding six-, seven- and eight-figure certificate of deposit dubbed the ULTRA.

But it was a case of too much of a good thing and too few internal checks.

Within a few chaotic months, Farmers collapsed, foundering on a catastrophic computer crisis, the acquisition of an out-of-state company one regulator called a financial black hole, and a portfolio of questionable value.

Finally, after a disastrous slide in reserves, a pair of massive layoffs, and a missed payroll, federal and state regulators stepped in, deposing the man who shaped and rode the whirlwind through its dramatic rise and precipitous fall.

And for that man, Peter Anders, mysterious death was to follow.

“It was a case of too much too fast,” said Jim Streng, Sacramento Counter Supervisor and a member of the Farmers board of directors until he quit in 1984after leading an unsuccessful fight to kill the Lear Jet purchase.

Said Thomas Needham, a co-founder of the bank, “It was such a dramatic up-and-down event. It took off like gangbusters, and then the party was over.”

The story of Farmers Savings is a testimony to the ills besetting California’s savings and loan industry. According to federal regulators, the state has led the nation in savings and loans takeovers. With 18, California houses a quarter of all the country’s thrift placed in receivership by the feds.

And that number, they caution, may represent just the tip of the iceberg.

One of the problems, according to some officials, is in the differences in regulatory requirement for state- and federal-chartered thrifts.

State-chartered thrifts are permitted to maintain 10 percent of their assets in direct investments, such as real estate and service corporations. Federally chartered S&Ls have a three percent direct investments ceiling.

“That was certainly one source of many of Farmers’ problems,” said one state official.

Origins in a small town

Farmers began as the dream of one man, David de la Cruz of Dixon.

In 1978, de la Cruz was working in the controller’s office of Pacific Standard Life Insurance in Davis.

“I was thinking of leaving them, and I had always dreamed of starting my own bank,” de la Cruz said. So he approached another colleague at Pacific Standard, attorney Thomas Needham of Davis.

Together the two explored requirements for starting a state-chartered outfit.

“We found we needed a third incorporator, so we turned to Peter Anders,” de la Cruz said.

Anders was a UC Davis law school graduate who had set up business as a financial consultant and real estate speculator. He specialized in creating IRA and Keogh retirement accounts for many of the community’s most prominent citizens.

Together the three men raised $125,000 to cover the legal and consultant costs required to file the complex application forms with the state Department of Savings and Loan in 1978.

They also recruited 200 potential stockholders who pledged to buy nearly $1,4 million in stock and make deposits of $315,950. Of the potential investors listed in the 1978 filing, de la Cruz brought in 51, Anders 15, and Needham 5.

While Anders and Needham went after large investors, de la Cruz went for smaller investors, “like waitresses at the restaurant where I ate.” But de la Cruz also brought in Norman Woodard Sr., a prominent Dixon businessman who, with pledges for $100,000 in stock and $100,000 in savings, was the largest of the initial investors.

Needham himself signed up for $100,000 in stock, de la Cruzfor $37,500, and Anders for $20,000.

Farmers was chartered as a Dixon savings and loan.

“The state requires very complicated market studies, including an extensive analysis of the area. We filed for Dixon because there was no way we could’ve gotten a charter for another savings and loan in Davis,” de la Cruz said.

Farmers opened for business in in 1980 with 20 employees and a trailer for an office.

Anders pushes for control

For the first two years, with de la Cruz as chairman, Farmers chartered a conservative path.

“I was represented as a savings and loan that would serve the farm community,” said one early investor recruited by de la Cruz. “I liked that, because I’m a farmer and anything that helps farmers is near and dear to my heart.”

Needham and de la Cruz were conservative. They wanted their bank to grow slowly, as a traditional thrift — taking in savings and lending money to farmers and homeowners.

But Peter Anders had bigger dreams.

As a professional investment counselor, Anders had played on the mortgage market and made money, friends say.

He had also created a bewildering array of real estate partnerships, including A&A Investment Partnership, C&C, D&D, E&E, F&F, H&H, I&I, K&K, L&L, M&M, O&O, Q&Q, R&R, and S&S, as well as California Mortgage Investors, PFA Financial Services, PFA Retirement Plan, and PFG Financial Group.

In 1980, Anders and a Sacramento man, Charles L. McGranaghan, set up the first in a series of businesses operated out of offices at 719 Second Street in Davis.

Those business, Pension Income Program [PIP] One and Two and PMC Development Fund, specialized in creating real estate syndications for tax-sheltered retirement accounts. Anders was listed as a general partner in PIP One and Two and vice president and senior account manager of FMC.

Anders was also responsible for selecting and managing the protfolios of the PIP shelters, according to their 1980 prospectuses.

Eventually, Anders and McGranaghan parted company, with McGranaghan taking the businesses. On 23 October 1984, McGanaghan filed for bankruptcy, listing debts of more than $1.5 million.

Anders has been named a defendant in a lawsuit filed by an attorney for creditors who invested in PIP One and Two. “We don’t know where their money went,” said Steve Baird, of Mountain View, the attorney for the investors. “The lawyers for Anders’ estate have told us there’s no use suing them because there isn’t any money there.”

Launching the push for growth

Peter Anders was a man who dreamed in large numbers, and the slow-growth course charted by de la Cruz and Needham was not for him.

In 1982, Anders made his push for control.

“Some of us on the board filed a petition with the state asking them to refuse him permission to buy more stock. You have to get state approval before you can buy a controlling interest,” de la Cruz said.

“We wanted to keep things on an even keel. We didn’t want to see things skyrocket. We were also worried because if he had control, Peter could set his own salary.”

But the petition was denied, and in May Anders won control. His first move was to oust de la Cruz from the chairmanship of the nak he had founded.

It was then that Farmers shifted course.

By the end of 1982, Farmers had assets and liabilities of $53.3 million — up 1000 percent from the year before.

That was just the beginning.

The secondary mortgage market is a frantic one. Profits on individual mortgages are usually small; they are bought, at a discount, from the original lender, them resold, often for a fraction of a percentage point higher, to pension funds and other institutional investors.

Making money means dealing in high volumes, tens and hundreds of millions of dollars worth of paper.

To play in the fast-paced secondary market, Farmers needed capital, lots of it. And the way to raise that money was through jumbo certificates of deposit [CD’s] — accounts of $100,000 or more.

At the end of 1981, Farmers had assets and liabilites of $53.3 million. Of the total $2.3 million in savings, $1.1 million was in the form of jumbo CDs. Passbook and checking accounts totaled   just over $350,000.

By the end of 1982, with Anders at the helm, assets and liabilities leaped to $53.3 million. Jumbo CDs totaled $44. million — an increase of nearly 4100 percent.

“They were paying considerably more for money than any other major association in the industry,” said the president of a major Sacramento-based savings and loan.

Numbers rising, very rapidly

By the end of 1983, assets and liabilities had leaped to $205.4 million. Savings deposits reached $186 million — with $177 million in jumbo CDs, up 395 percent from the year before.

Farmers had begun a major advertising campaign. “They were taking these big ads in Mortgage Banker magazine, advertising how much money they had,” said Edward Rubin, a UC Davis real estate law professor. “They were the largest single advertiser.”

Anders had also moved the bank’s headquarters to a former bank building at the corner of Second and C Streets in Davis — a building purchased for $550,000 in 1979 by real estate partnerships Anders headed. Dixon, the bank’s original home, now housed only a branch.

As the numbers on Farmers’ balance sheet grew, so did the bank’s staff. “They were pirating our people at incomes that seemed to be substantially more than were justified by the industry,” said one Sacramento area thrift president.

If the salaries were high, the bonuses paid to the crew who played the mortgage market were higher still.

“We were paying those guys huge bonuses,” said de la Cruz. “They were making several times their annual salaries. Some of us on the board were concerned because the bonuses were based on the bottom line of the financial statement.”

De la Cruz said bank statements can be misleading. “The profit is real only if all the loans are paid, if the insurance stays in force, if everything works. If something goes wrong, the profit evaporates.”

But Anders was charging ahead, buying more stock for himself, bringing in friendly directors, consolidating his position.

Lord, won’t you buy me a Mercedes Benz?

In addition to the hefty bonuses, Anders asked the board to buy a Mercedes for the bank’s president, lawyer Dean Itano. Next came a Mercedes for Anders himself, then more cars for the staff.

“I voted against them,” said Streng. “Six months earlier we had voted to buy a Volkswagen, and now we were buying Mercedes.”

Streng left the board in December 1983 when Anders announced that Farmers was now the proud owner of a Lear Jet, purchased for a mere $2 million.

“I don’t think any company nears a Lear Jet,” Streng said, “especially Farmers Savings with Metro Airport just 30 minutes away. But Peter said it would save the corporation money. I just never understood how it would.”

Streng said the Lear Jet purchase was merely the catalyst for a decision which had been taking shape in his mind.

“When I got onto the board, it was a conventional savings and loan, in the business of making conventional real estate loans. As a builder, I know something about that.

“But then Peter saw some openings in the secondary market, and I don’t pretend to understand that. It appeared to be very profitable, but I had concerns that if you would make money that easily, you could lose it just as easily.”

At nearly the same time as Streng left, Anders gathered the final votes needed to force de la Cruz and Needham off the board. He was the last of the founders, the one now firmly in control. The new board was his, controlling 80 percent of the corporate stock, including those shares in a $1 million December offering.

That same month, Farmers paid out nearly $1.7 million for land in a South Davis industrial park to build a new corporate headquarters, following the city’s rejection eight months earlier of a proposal to build an eight-story high-rise complex in downtown Davis on land Anders owned.

The board approved a pair of sprawling two-story office buildings, and, when the city gave the go-ahead, construction started in 1984. On 23 July 1985, Yolo County set a value of $3.9 million on the just-completed buildings and fixtures — bringing the total cost of the offices to $7.3 million.

The brokerage staff moved into one of the two buildings; the second, unfinished by the time the drama ended, was to house lavish executive suites, a large ultra-modern cafeteria, and a well-equipped gymnasium.

The 1983 annual report was an exuberant document. It concluded with these words: “In the coming year, Farmers will break ground in many areas. There are no existing formulas on which to rely. The Bank will continue to respond with innovative alternatives to meet the challenges that lie ahead.

The troubles had already started.

From the Jumbo to the ULTRA

To fuel its rapid emergence into the secondary mortgage market, Farmers needed cash — lots of it. But it couldn’t rely on federally insured accounts to cover the play.

So the company needed to sell millions in jumbo CDs, individual certificates of deposit greater than the $100,000 insurance ceiling set by the Federal Savings and Loan Insurance Corporation [since folded into the Federal Deposit Insurance Corporation].

“They were paying more than anyone else around,” said the president of a rival savings and loan.

Late in 1983, Farmers executives had created a CD called the ULTRA, a floating rate certificate paying a guaranteed minimum that ran as high as 12 percent, according to one investor. The ULTRA was designed, in part, to attract brokered deposits from other institutions.

ULTRA funds were earmarked in part for as series of limited partnerships, with Farmers or its subsidiaries as the general partner. Funds were to be invested in income-producing property.

Thanks to the ULTRA, Farmers was able to attract the needed cash, and by year’s end, brokered CDs accounted for 96 percent of the institution’s deposit base.

But by the end of 1984, federal regulators grew alarmed with what they saw as excessive reliance on expensive accounts and the use of savings deposit to fund real estate transactions. The federal bank board handed down an edict limiting the size of Farmers’ pool of Ultra accounts.

That decision was the first step in slowing what had, until then, been a seemingly endless growth surge.

A computerized debacle

Buying and selling massive blocs of mortgages requires an incredibly sophisticated system to keep track of hundreds of thousands of loans.

Making money in that market means dealing in volume — where millions can ride on the rise and fall of a fractional interest rate.

It is a business made possible only by modern data processing technology — by computers.

Farmers’ original system was based on small “micro” computers. When Anders moved into large-scale buying and selling, the old system bogged down.

The bank brought in a new computer, an IBM mainframe. But then, in an effort to maintain continuity with the old system, the bank hired a crew to write a program for the new machine based on the program for the vastly smaller old system.

It was a disaster. The new program was cumbersome and painfully slow. As programmers struggled to bring the system up to speed, record-keeping started to fall behind.

Soon bank managers simply didn’t have a clear picture of where the bank stood. The only accurate information was six to eight months out of date.

“Records were in terrible shape,” said one bank source. “A lot of paperwork was missing. We might know the amount of a loan, but sections describing the interest rate or duration might be missing.”

“We were flying blind during much of 1984,” said one former member of the bank’s board of directors.

It also meant that information reported to regulators and accountants wasn’t accurate.

There were other problems, too.

Loading on troubled loans, missing data

According to one bank source, when Farmers bought the mortgages, sellers insisted the bank take varying percentages of troubled loans along with the blue chips. “That’s a common industry practice,” the source said.

In addition, one top regulator said, when Farmers bought large blocs of mortgages, there was often no time to scrutinize files on individual loans.

In some instances, files would prove incomplete, and when Farmers resold the loans and the problems were discovered, the purchasers would ask Farmers to take the loans back — and the bank would comply. “That’s standard practice in the industry,” the regulator said.

The net effect was that, as time passed, Farmers was holding an ever-larger portfolio of questionable loans, said the official.

Playing the mortgage market requires buyers and sellers — and, according to a 1995 article in American Banker, Farmers was buying paper before they had sellers lined up, contrary to normal banking policy.

Normally, loans have been presold to pension funds and other institutional investors before a broker buys them from the originating lenders. But with Farmers, thanks in part to the severe digital record-keeping problems, that wasn’t always the case, leaving the bank with a large “uncovered position,” with mortgages in hand and no buyers.

By 19 October, the signs were clear enough that Anders decided to go public with his fears. In an interview with a Sacramento Bee reporter, he acknowledged that Farmers was “at a dangerous point” in its growth.

But he was to make his worst decision two months later.

Entering the real estate game

Before he took the helm at Farmers, Anders had been active in real estate syndication — creating limited partnerships to buy property with his own business acting as general partner.

He wanted the bank to do the same thing.

Farmers had already purchased a small California syndicator, Ibex Capital, but the money it generated was too small for Anders, bank sources say.

It was in the fall when Anders opened negotiations with Security Properties, Inc. [SPI], a Seattle company with no relation to a similarly named California corporation based in Pebble Beach.

Security was a high stakes real estate syndicator with partnerships holding $1,5 billion in property and a payroll of 1,500.

California thrift regulators were also looking at SPI, because all major acquisitions by state-chartered S&Ls required authorization from the Department of Savings and Loan.

While regulators couldn’t find enough wrong with the deal to issue a clear turn-down, they were worried and urged Anders not to buy. “We told him it looked like a potential disaster,” said one state regulator.

But on 3 December 1964, Anders notified the press that Farmers had bought Security Properties for $30 million.

There’s a whole lot more after the jump, including computer shenanigans, lies to state regulators, questionable investments, an unsolved murder, a powerful political player and Hillary Clinton backer, and much, much more. Continue reading

Chris Hedges hosts a new show on Telesur

Telesur English is getting very interesting. In addition to weekly episodes of shows by esnl favorites Abby Martin and Laura Flanders, the Venezuelan broadcaster has added the inimitable Chris Hedges, former Mideast bureau chief for the New York Times.

In this latest episode of Days of Revolt, Hedges discusses the insidious nature of the Trans-Pacific Partnership [TPP] with attorney Kevin Zeese, co-director of and It’s Our Economy, an organization that advocates for democratizing the economy. Zeese is a political activist and former press spokesperson for Ralph Nader, and in an unsuccessful 2006 Senate run, he was the only candidate ever nominated simultaneously by the Green, Libertarian, and Populist parties.

From Telesur English:

The Most Brazen Corporate Power Grab in American History

An excerpt from the transcript, discussing the TPP’s provision for overturning the power of the American judiciary in the interests of the corporation:

HEDGES: And they’re not allowed to make any amendments, no changes, nothing.

ZEESE: No amendments. Up or down vote. That’s it. And in the Senate, there’s no filibuster, so it’s only 50 percent. You can’t force them to 60 votes. It’s only 51 they need. And so it’s a very restricted Congress.

And all these agreements, by the way, as Ralph mentions in that quote, greatly restrict each branch of government, and Congress [crosstalk]

HEDGES: Well, let’s talk a little bit about how they do that, this kind of–part of this kind of creeping coup d’état, corporate coup d’état that’s taking place.

ZEESE: And I just want to say one more thing about this coup d’état. This is just one aspect of it. We’re seeing the corporate power grow in the United States with Citizens United and the buying of elections and all that corruption. But we’re also–out of places like the World Economic Forum, they’ve come out with a working group called the–that’s redesigning, the Global Redesign Initiative that’s redesigning the way governance works to minimize the nationstate and maximize transnational–. They want the UN to become a hybrid government and corporate body. So that’s what the World Economic Forum is working on as this is all going on, too. So this is a big, big fight about where we go. This is the epic struggle of our times, corporate power versus people power.

Now, the way that they–what Ralph was talking about in that quote was one aspect of this, which is the trade tribunal system, which already exists, but this is expanded. For the first time, for example, financial services can use the trade tribunals to overrule legislation to regulate the big banks.

HEDGES: Now, these trade tribunals, they’re three-person tribunals. They’re made up of corporate lawyers. One of the things I think I was speaking with you that you told me is that if you’re a citizen or advocacy group, you’re excluded from even going to these.

ZEESE: Yeah. You know, in our federal court system, which is the third branch of government that–Ralph’s favorite branch, I think. He just opened the museum in his —

HEDGES: Right, a tort museum.

ZEESE: — in his hometown, a tort museum, which is a great museum. People should go to Winsted to see it, by the way.

But, anyway, in our federal court system, an individual can sue a corporation. They can find a lawyer who takes it on retainer, only get paid if they win. You get a jury of your peers to decide it. That’s a real court system. It has lots of weaknesses that need to be improved on. They’ve been cutting back on it is much as they could with so-called tort reform–as Ralph calls tort deform. And so it’s getting weaker. But it’s still an important branch of government.

This overrules that. Our courts cannot review what a trade tribunal does. The trade tribunal judges are three corporate lawyers who can also represent corporations in other cases. So there’s a real conflict of interest here, because if you’re a lawyer who’s filing suits on behalf of corporations at these trade tribunals, you want to broaden the power of the trade tribunal and the corporation. So as a judge, you can decide things that, say, corporations have this power, corporations have that power, no, that the security issue doesn’t matter, the corporation still wins. They can create legal fictions.

Headline of the day II: A new rival to the NSA?

From Pacific Standard:

Your Television May Be Watching You More Than You Watch It

Vizio, one of the most popular brands on the market, is offering advertisers “highly specific viewing behavior data on a massive scale.”

High Facebook ‘likes’ stress out recipients

Last week we noted that researchers in Denmark found that folks who ditch Facebook are happier after they do.

And now research from Sonia Lupien, professor at the University of Montreal’s Department of Psychiatry and Scientific Director of the university’s affiliated Institut universitaire en santé mentale de Montréal Research Center, gives us an idea why that’s so.

From Newswise:

Facebook can have positive and negative effects on teens levels of a stress hormone, say researchers at the University of Montreal and the Institut universitaire de santé mentale de Montréal. Led by Professor Sonia Lupien, the team found that having more than 300 Facebook friends increased teens’ levels of cortisol. On the other hand, teens who act in ways that support their Facebook friends – for example, by liking what they posted or sending them words of encouragement – decreased their levels of cortisol. Their findings were published in Psychoneuroendocrinology.

Lupien and her colleagues recruited 88 participants aged 12-17 years who were asked about their frequency of use of Facebook, their number of friends on the social media site, their self-promoting behaviour, and finally, the supporting behaviour they displayed toward their friends. Along with these four measures, the team collected cortisol samples of the participating adolescents. The samples were taken four times a day for three days.

Stress levels measured in adolescents from cortisol samples are obviously not entirely due to the popular social media site. “While other important external factors are also responsible, we estimated that the isolated effect of Facebook on cortisol was around eight percent,” Lupien said. “We were able to show that beyond 300 Facebook friends, adolescents showed higher cortisol levels; we can therefore imagine that those who have 1,000 or 2,000 friends on Facebook may be subjected to even greater stress.”

Other studies have shown that high morning cortisol levels at 13 years increase the risk of suffering from depression at 16 years by 37%. While none of the adolescents suffered from depression at the time of the study, Lupien could not conclude that they were free from an increased risk of developing it. “We did not observe depression in our participants. However, adolescents who present high stress hormone levels do not become depressed immediately; it can occur later on,” Lupien said. “Some studies have shown that it may take 11 years before the onset of severe depression in children who consistently had high cortisol levels.”

The study is one of the first in the emerging field of cyberpsychology to focus on the effects of Facebook on well-being. “The preliminary nature of our findings will require refined measurement of Facebook behaviors in relation to physiological functioning and we will need to undertake future studies to determine whether these effects exist in younger children and adults,” Lupien said. “Developmental analysis could also reveal whether virtual stress is indeed ‘getting over the screen and under the skin’ to modulate neurobiological processes related to adaptation.”

The study, “Facebook behaviors associated with diurnal cortisol in adolescents: Is befriending stressful?,” was published in Psychoneuroendocrinology and would cost a nonsubscriber $35.95, with the proceeds going to the rapacious Elsevier.

Laura Flanders: Surveillance and community

Los Angeles has always been one of the bastions of the surveillance state, where all means, fair and foul, were used to investigate and discredit not only criminals but activists who were deemed a threat to the city’s powerful business interests.

Bombs, sex, blackmail, and — quite possibly — murder were tools in the hands of the city’s “Red Squad” and its successors, the Public Disorder Intelligence Division, the Organized Crime Intelligence Division, and the Anti-Terrorist Division.

We have written before about our own journalistic experience with these organizations, as have other journalists, and the record is indeed grim [see this timeline from the Anderson Valley Advertiser for more details].

While a series of lawsuits forced significant reforms in LAPD’s surveillance regime, they have been significantly undone thanks to the political expediency of the “War on Terror.”

From the Laura Flanders Show via Telesur English:

Hamid Khan: The Surveillance-Industrial Complex

Program notes:

Surveillance, spying, and infiltration has a long history in the United States — from the Police Red Squads in the 1880s to the FBI’s Counter-Intelligence Program (COINTELPRO) to today. This week’s guest says The “surveillance-industrial complex” has profound but poorly understood impacts on our political, structural, economic, and cultural lives. Hamid Kahn is the director of the Stop LAPD Spying Coalition, and serves on the boards of several organizations, including the National Network for Immigrant and Refugee Rights, Political Research Associates, and Youth Justice Coalition. Also in this episode, we meet the students that forced Columbia University to divest from private prisons. All this, and Laura discusses US government spying on Black Lives Matter movement activists.

In October, 2011, Larry Aubry described one notorious Los Angeles Police surveillance program for readers of his column in the LA Sentinel, a publication serving that city’s African American community:

The Los Angeles Police Department’s Special Order 11 (SO 11) is the lead model of the National Suspicious Activity Reporting (SAR) initiative launched in 2008. SO 11 trains and authorizes LAPD officers to gather street level intelligence and information based entirely on “observed behavior.” Such purely, and/or largely subjective and arbitrary police action signals a “surveillance industrial/governmental complex” at the local level. Through SO 11, LAPD and the Department of Homeland Security have established a vague and ambiguous reporting system combined with vague and virtually unlimited authority. SO 11 solidifies a system that normalizes racial profiling and places the brunt of repressive policies on Blacks, other communities of color and immigrants.

SO 11’s fundamental premise is that each and every person is a suspect, hence, a threat to national security. It codifies “suspicious activities” through a LAPD, Suspicious Activities Report (SAR) that documents “any reported or observed activity or criminal act, or attempted criminal act which an officer “believes may reveal a nexus to foreign or domestic terrorism,” which is downright scary.

Here are excerpts from LAPD Special Order on SAR, APPENDIX B: “Information reported in a SAR may be the result of observations or investigations by police officers, or may be reported to them by private parties. Incidents (over 40 listed) which shall be reported on a SAR include the following: “Engages in suspected pre-operational surveillance (used binoculars or cameras, takes measurements, draws diagrams, etc.); appears to engage in counter-surveillance efforts (doubles back, changes appearance, evasive driving, etc.); engages security personnel in questions focusing on sensitive subjects (security information, hours of operation, shift changes, what security cameras film, etc.);

“Takes measurements (counts footsteps, measures building entrances or perimeters, distances between security locations, distances between cameras, etc.; takes pictures of video footage (with no apparent aesthetic value, i.e., camera angles, security equipment, security personnel, traffic lights, building entrances, etc.); in possession of, or solicits, sensitive event schedules (i. e., Staples, Convention Center) ” , etc., etc…….” God forbid!

And Darwin Bond-Graham and Ali Winston wrote about the newest twists in LAPD’s panopticon ambitions for LA Weekly in February 2014:

Los Angeles and Southern California police. . .are expanding their use of surveillance technology such as intelligent video analytics, digital biometric identification and military-pedigree software for analyzing and predicting crime. Information on the identity and movements of millions of Southern California residents is being collected and tracked.

In fact, Los Angeles is emerging as a major laboratory for testing and scaling up new police surveillance technologies. The use of military-grade surveillance tools is migrating from places like Fallujah to neighborhoods including Watts and even low-crime areas of the San Fernando Valley, where surveillance cameras are proliferating like California poppies in spring.

The use of militarized surveillance technology appears to be spreading beyond its initial applications during the mid-2000s in high-crime areas to now target narrow, specific crimes such as auto theft. Now, LAPD and the Los Angeles County Sheriff are monitoring the whereabouts of residents whether they have committed a crime or not. The biggest surveillance net is license plate reading technology that records your car’s plate number as you pass police cruisers equipped with a rooftop camera, or as you drive past street locations where such cameras are mounted.

If history teaches anything, it’s that the forces of repression will exploit any tragedy to augment their own powers. The history of the LAPD offers ample proof.

Headline of the day: A bloody silver lining

From The Intercept:

Stock Prices of Weapons Manufacturers Soaring Since Paris Attack

The private-sector industrial prong of the Military and Surveillance State always wins, but especially when the media’s war juices start flowing

The Mafioso, missing beef, and death by arson: A censored story appears, four decades later

esnl reported for the Sacramento Bee for three years, starting in January, 1983. We left because of censorship of stories we reported involving organized crime in California and its ties to politics and corrupt union officials.

What follows is one of those stories, the last we wrote on the Bee’s payroll. It is a story about the Mafia, corrupt businessmen, and a fatal arson.

It is also a story that’s never before been told in its full scope. We submitted it on 28 June 1985 and met with the expected response from an editor wearing a solid gold Rolex with a diamond-studded bezel: “It’s not the sort of thing we’re interested in.”

But it’s a story that should ring familiar to anyone who’s seen Goodfellas, and we think it should be finally told:

An element of mystery still lingers

“I don’t think we’ll ever know what really happened,” said the judge. “There was just too much going on.”

“My feelings are that all of these little arms are part of the same octopus,” said the prosecutor. “I think organized crime is the right adjective. I think it’s totally organized.”

All the investigators and prosecutors who worked on the case agree that they never got to the bottom of it all. But some things can be said for sure about a drama that had been playing out for more than a decade.

Tehama County’s largest stable employer was bankrupted, scores of workers lost their jobs, a arsonist died in a Long Beach because of a fire he had set, and scores of ranchers lost livestock and cash.

The cast of players includes a talented sausage-maker who was less skillful as an entrepreneur, an Arizona businessman with a shadowy past and shadowier linkers to th Teamsters Union, and a mafioso with powerful connections.

The name of then-California Attorney General John Van de Kamp also surfaced in a nor found in a fugitive’s briefcase that triggered an investigation by the Los Angeles County District Attorney’s office.

The Beginnings

The story opens in 1972.

Nicholas J. Cichirillo Sr. was a skilled maker of Italian sausage and, the the time, principal officer of Messina Sausage Company.

“Cichirillo decided he wanted to expand, explained Roger Boren, a Los Angeles County deputy district attorney who got to know Chicirillo when he prosecuted him got arson and grand theft.

Cichirillo engineered the merger of four firms into one company. They were: Messina Sausage; Selecto Sausage, an East Los Angeles manufacturer of Mexican-style sausage; Capri Sausage of Covina, another Italian sausage firm; and The Red Devil, Inc., a pizza restaurant chain.

The resulting firm was called Messina Meat Products, Inc., and was based in Covina — although Cichirillo incorporated in Utah after buying a corporate “shell” called Wasatch Iron and Gold Co.

It was in 1975 that Cichirillo ran into trouble. That’s when Messina Meat Products acquired Minch Meats of Red Bluff.

A family-owned firm for 41 years, Mich Meats was Tehama County’s largest employer. Minch was an attractive takeover target. The company owned equipment for reprocessing meat — for removing fat and boine and packing the beef into leaner, more nutritious cuts.

In 1974, according to former company president Robert Minch, the firm had done just over $30 million in business and employed over 150 people.

Just how Cichirillo learned of Minch is still an open question in the minds of law enforcement investigators.

Enter ‘Sal the Swindler’

Sources have told the Bee that before the sale to Messina, Salvatore Pisello may have met with one of the company’s owners. Munch, the grandson of the firm’s founder, says he doesn’t recall ever meeting Pisello, although “somebody mentioned that Sal was going to do this or that.”

Though a sale was allegedly discussed, Pisello didn’t buy the firm then — it went to Cichirillo. Pisello surfaced as an owner later, along with one of Southern California’s most prominent citrus and meat magnates. But more of that later.

Pisello had been a target of law enforcement investigators for decades. The FBI and Drug Enforcement Administration have labeled him a member of the powerful Gambino Family from New York.

According to an FBI report, Pisello once bragged to an informant of starting restaurants with “laundered” underworld funds received from Meyer Lansky, the mob’s late financial genius [and model for the Hyman Roth character in Godfather, Part 2].

Pisello has also been linked to frauds in Italy, a ripoff at the Hotel de Paris in Monaco, and to an alleged scheme to smuggle heroin into the country in airborne lobster tanks used in a fish importing business he once ran.

According to an FBI file, one of his street names is “Sal the Swindler.”

And the troubles begin

Minch and his three partner taded their interest in Minch for a share in Messina and the deal was consummated in July.

But Minch Meats was in trouble even as the deal was being signed. Minch said his company simply couldn’t compete with Midwestern firms, which relied on lower-priced labor, assembly line techniques,m and cheaper feeding procedures.

In the West, Minch said, Safeway set the price standard for beef carcasses, and the price was less than the cost of production. To avoid financial hemorrhaging, Minch remodeled the plant to produce “portion control” prepackaged cuts which, he hoped, could be sold as a higher-priced brand name line.

But stock of beef accumulated in the Minch plant. Buyer weren’t that interested in portion control, and unions refused to accept company-suggested wage concessions.

An attempt to void the existing labor contract failed, despite predictions from company lawyers that courts would strike down the contract, Minch said.

Then disaster fell. Messina filed for bankruptcy on 5 December 1975. When the front doors were locked and workers forced out, some of the plant’s new equipment disappeared — although no one knows where it went, according to William O. Scott, the former Tehama County District Attorney who conducted a seven-year investigation of Messina in conjunction with the district attorney’s office.

Also missing was a large amount of beef for which Tehma County ranchers and feedlots hadn’t been paid.

The investigations commence

Alerted to the missing beef and equipment, Scott began an investigation with the help of Robert Crim, an investigator for the state attorney general’s office.

According to the public statements of the California Cattlemen’s Association at the time of the collapse, Minch owned $780,000 [$3.53 million in 2015 dollars] to beef producers and $100,000 [$452,000 today] to workers.

At one point the missing beef was reportedly stored in a Sacramento warehouse, but by the time a creditor appeared at the warehouse with a court order, the beef had vanished. Minch speculates that it was unloaded by his former partners for ten cents on the dollar.

During the period of the collapse, one of the four original partners, Donald L. Stroud, had been unloaded his own stock onto another partner, H.L. “Tex” Allen.

According to a lawsuit Allen filed later, Stroud had told him that he had access to 60,000 shares of Messina stock they could acquire jointly at a bargain price.

The stock Allen bought turned out to be Stroud’s personal or family holdings — sold, according to court records, after Stroud had assured Allen that the company’s financial outlook was good.

When Messina collapse, Allen was left holding Stroud’s stock and Stroud was holding $37,000 of Allen’s cash.

[Stroud became a controversial character in Tehama County again in the mid-1980s when his Exchange Enterprises, a barter service exchange, collapse, leaving particpants on the hook for thousands of dollars and leading to another criminal investigation by the county district attorney.]

After the jump, a wiseguy takeover, the lethal arson, Teamsters money-laundering, a political connection, convictions, and more. . . Continue reading