Tag Archives: Scott Baugh

Red County Publisher Accused of Fraud by SEC

In another stunning blow to a reeling California Republican Party, Red County publisher Chip Hanlon was served with a harsh and detailed order by the SEC. The order alleges fraud and misrepresentation, with repeated failures to follow other orders to disclose hundreds of thousands of dollars in negative judgments. Hanlon’s Delta Partners claimed over a billion dollars in assets under management, while the actual assets were below 25 million, and as low as nine million.

Red County grew from Matt Cunningham’s local Red County blog in Orange County to be a major communication tool for Republicans, with a national edition, regional editions, and seven local versions just in California. The blog was considered important enough that Meg Whitman paid Red County $110,000 for Hanlon’s services. Red County describes itself as among the most elite and powerful political websites in existence.

Hanlon is closely allied with existing Orange County Republicans like lobbyist and OCGOP chair Scott Baugh and lobbyist Curt Pringle. He has also been in step with rising leaders like Don Hansen in Huntington beach and Jim Righeimer in Costa Mesa.

Update:

As of this morning, still no comment at Red County, although Chip Hanlon’s bio has disappeared into the memory hole. Flash Report is still strangely quiet. Surprisingly, the best mainstream story so far is at the Orange County Register, where the story came from excellent real estate reporter, Jon Lansner, instead of the sycophantic political writers.

Below the fold, read sections of the actual SEC order.

    RESPONDENTS FAILED TO MAKE REQUIRED DISCLOSURES ABOUT DELTA’S POOR FINANCIAL CONDITION AND HANLON’S DISCIPLINARY

   HISTORY

   13. In August 2009, Delta’s financial condition was seriously impaired because it had minimal liquid assets and several overdue bills. On November 13, 2009, Delta informed Commission examination staff by letter that it was “in the process of communicating with all clients on this matter and will have completed this process by December 9, 2009.” However, contrary to Delta’s representations, Hanlon never disclosed Delta’s financial condition to any clients.

   14. On June 28, 2010, a default judgment was entered against Delta and Hanlon in a lawsuit filed by one of Delta’s clients relating to Delta’s advisory services. The lawsuit alleged breach of fiduciary duty, negligence, failure to supervise, negligent misrepresentation, and breach of contract, all relating to Hanlon and Delta’s activities as investment advisers. Among other things, the plaintiff claimed that Delta and Hanlon (i) did not follow plaintiff’s investment guidelines and objectives, and (ii) failed to disclose certain conflicts of interest. The judgment ordered Delta and Hanlon to pay $353,706 indamages. Neither Delta nor Hanlon has satisfied the judgment. In addition, Delta did not disclose the existence of this judgment to Delta’s clients or its precarious financial condition as a result of the unsatisfied judgment, even though it was required to do so.

   15. In June 2010, a FINRA arbitration panel ordered Hanlon to pay compensatory damages of $272,290 and $5,500 in fees arising from a complaint against him alleging breach of contract, slander, and fraud. Hanlon failed to comply with this arbitration award and consequently on June 29, 2010 FINRA suspended Hanlon from acting in any registered capacity. Delta did not disclose this disciplinary action to its clients, even though it was required to do so.

Lies, Damn Lies, and PowerPoint in Costa Mesa

Costa Mesa is ground zero for the California war against public employees, the bloody tip of the spear.

The Orange County GOP has chosen this middle-class burg as their laboratory and given pink slips to 213 employees, even before making any analysis of whether his planned outsourcing makes any fiscal sense.

Mayor Pro Tem Jim Righeimer has been beating his chest on John and Ken and appearing all over the local news in Southern California.  

Riggy’s spiel always includes his description of the pension crisis in Costa Mesa, which he describes like this, “Ten years ago Costa Mesa paid 5 million for public pensions. Now we pay 15 million a year, and CalPERS projects that five years from now we will be paying 25 million. His allies point to this scary, scary graph that was presented at a study session in Costa Mesa in February.

There’s only one problem. It’s phony as a three dollar bill. Click “There’s more” to see an honest graph.

 

When I first saw that graph, it just seemed screwy, so I went to the City of Costa Mesa web site to see the back-up documentation. Surprisingly, there was none. I made a visit to Costa Mesa City Hall to see what was in the agenda packet. “Only the Powerpoint”, the City Clerk told me.

I persevered with requests under the Public Records Act, talked to current and former Council members in Orange County, got comparative figures from other cities, and remained mystified.

Of course it made sense that pension costs had increased since 2000. Back then, Costa Mesa had superfunded pensions and didn’t even have to make the employer’s share of the contribution. Lately, pension rates have increased, but Costa Mesa has also cut over a hundred employees, including police and fire.

In October 2010, Costa Mesa employees agreed to pay an additional $3.6 million a year in pension costs that are just now going into effect. That’s why the expenditures for 2011-2012 decrease even while there was a marked increase in CalPERS rates used in the City’s projections.

I’ve emailed back and forth with the new $3,000 a week communications director, Bill Lobdell, who promises to get back to me next week.

So finally, I pulled out the October 2010 actuarial valuation reports that I had received from the City of Costa Mesa, and made my own projections and graph. Here’s what it looks like over a six year period. The numbers through 2011-2012 come from the City’s report. The next two years are my projection.

Image width=500 Hosted by ImageShack.us

Not so scary, eh?

There’s one huge difference. The City’s projection includes a notation that says, “includes employee reimbursement from current contracts only”. I am assuming that the employees of the City of Costa Mesa will continue to pay the same share of the pension contribution that they are paying now.

Really, could anyone believe that Costa Mesa’s radical Republican City Council is going to negotiate new contracts that involve picking up a bigger share of the pensions.?

Following are my assumptions. I am challenging the City of Costa Mesa to show theirs.

*2012-2013 projection based on October 2010 CalPERS reports that projects increase in city’s share of pension costs using actual 2009-10 investment returns.from

**2013-2014 projection based on October 2010 CalPERS report where CalPERS projects five different rates based on FY 2010-2011 investment returns, which are quite good so far this year.

FY 2013-14 projection is based on blended rate between 3rd scenario with 7.75% return (47th percentile) and 4th scenario with 16% return (75th percentile)for this fiscal year.

(Appendix D-1 of each report.)

Assumption of compensation subject to pension for each pool (estimates) used to calculate increase in City’s share of pension costs

For FY 2011-2012 with no changes for 2012-13, 2013-14

Sworn fire 13 million

Sworn police 18 million

Everyone else 20 million

Employee Suicide at Costa Mesa City Hall

In an earlier post called Wisconsin Comes to Costa Mesa, I wrote that “Costa Mesa is at the bloody tip of the spear in California Republicans’ war against public employees.”

I meant that metaphorically.

Today it became literal as one of the 213 laid-off employees leaped to his death from the 5th floor roof of Costa Mesa City Hall.

Employees are stunned, yet nobody is surprised.

Costa Mesa’s pension crisis was phony. Its budget crisis was vastly overblown.

But Jim Righeimer, a ruthless Republican ideologue trying to position himself for higher office, was trying to show that he was the real OC anti-employee, anti-pension, anti-union crusader. Riggy took advantage of a vacant seat to name one of his cronies, Steve Mensinger, to the City Council, and the two of them have pushed to outsource employees in 18 city departments. Two other weak-minded Republican Council members followed along.

They didn’t do any studies about cost effectiveness. They didn’t show their work. They just appointed a two-person committee that arbitrarily came up with a list of departments that might benefit from outsourcing, then rammed it through in a single Council meeting.

And because they were required to give six months’ notice to any employee they were to lay off, they arbitrarily issued pink slips to 213 employees on Thursday, March 17th.

It wasn’t just the fact of the pink slips.

Riggy is an arrogant bully, as is Mensinger. Instead of serving as part-time Council members, they have taken up residence in City Hally, threatening and bullying workers on a daily basis, arrogating power to themselves, and justifying their pompous pronouncements with a relentless series of lies and half-truths.

They’re not very different from some of the Assembly members from the OC. Don Wagner and Allan Mansoor are cut from the same cloth. Righeimer was a one-time roommate of Congressman Dana Rohrabacher, as well as his campaign manager. He shares an office suite with lobbyist and former Assembly leader Scott Baugh.

Tempers are high.

The Orange County Register,reports.

Councilmen Jim Righeimer and Stephen Mensinger were threatened by a city employee at the scene, who ran toward the councilmen before being restrained by three coworkers. Another city employee said “You’re not welcome here,” referring to the councilmen.

Peter Naghavi, director of public works, was seen crying and consoling other city employees.

Nick Berardino, general manager of the Orange County Employees Association, was seen cursing out city CEO Tom Hatch in the lobby of City Hall.

“You cannot give out notices wholesale like that in this economy,” Berardino said. “That’s what’s going to happen.”

An LA Times article continues to try to provide coverage with false balance, quoting Stewart Drown and Joe Nation, two of the apologists for the anti-pension jihad. Curiously, the LA Times continues to restate the discredited claim that Costa Mesa’s pension costs will rise from 15 million to 25 million in a few years.

It’s not a new model. It’s the same model that the Republican party is trying across the country of attempting to destroy organized labor and roll back the safety network.

And it’s killing people.

Here’s a local blog story on Riggy which is also a rant on the sad nature of the alternative OCWeekly, sister to the LA Weekly.

The Surreal Politics of Orange County: Romney & The Machine

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