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.

In 2006, the Schwarzenegger campaign uncorked an ad almost immediately after the primaries showing Phil Angelides walking backwards, the assumption being that he would take the state backwards as well.  One of the ads liberally quoted Angelides’ rival for the Democratic nomination, Steve Westly, using the bruising primary against the winner.  “What if Steve Westly was right?” the announcer says, after citing Westly’s rhetoric in claiming that Angelides favored $10 billion in new taxes.  Steve Westly wrote most of Arnold Schwarzenegger’s early strategy and even his campaign spots, as Angelides was defined by his opponent swiftly.

Steve Poizner basically bestowed the same gift on eMeg Whitman over the weekend.  The ads about Whitman’s failure to register to vote for 28 years write themselves, but Poizner took the liberty of making the ad.  If Republicans know how to do one thing well, it’s go hard negative, and this ad will probably be very effective to the GOP primary audience.  It will also be effective as a “here’s what Republicans say about Meg Whitman” ad next year, should see prevail in the primary.  Poizner actually reiterated his call for Whitman to drop out of the race “for the good of the party” over the weekend at the Republican convention in Indian Wells.  The issue received major pickup throughout the media.  

And Whitman did herself no favors at all with some of the worst damage control you’ll see in politics, as she repeated like a mantra this line about how “there is no excuse for my voting record,” completely avoiding any specifics about why.  If she manages to win the primary, expect to hear this audio right through to next November.  It’s cringe-worthy.

I’m guessing the Republican Governor’s Association just tried to pull back their invitation to Meg Whitman to come to any of their gala events.

This is terrible crisis management, of course.  And it suggests that the general election would be no kinder on eMeg.  But it’s not like the split in the US Senate race, with serial non-voter Carlyfornia going up against wingnut conservative Chuck DeVore (The LA Times gets this wrong by trying to impose a blanket comparison).  The Yacht Party grassroots has figured out that they have no candidate in the Republican primary, and regardless of who wins they probably won’t be all that excited to work for the top of the ticket.

For activists such as Mike Spence, past president of the conservative California Republican Assembly, such centrist talk inspires unease following what they said was Gov. Arnold Schwarzenegger’s betrayal of the Republican base.

Spence called the Republican governor a failure and blasted him for breaking his promises to conservatives by, among other things, approving the biggest tax increase in state history earlier this year. Schwarzenegger has also championed traditionally liberal causes such as Assembly Bill 32, which requires the state to reduce greenhouse-gas emissions by about 25 percent by 2020.

“After the governor, people are cautious about who they support,” Spence said.

Of course, this could be true of the Democratic grassroots as well, depending on circumstances.  I think the only certainty in next year’s elections will be the low turnout, as a slice of both sides stay home for their own reasons.  But the Yacht Party’s cast of characters look particularly uninspiring.

Since it referenced me, let me start by shouting out to fellow Calitician Lucas O’Connor, writing on the front page of MyDD:

Since approximately the morning after election day in November, Dave Dayen has been writing over at Calitics about the dramatic Congressional pick-up opportunities in California that were missed in the Obama wave. Specifically, Obama carried 42 of California’s 53 districts (I won’t even begin right now to get into the state leg breakdown which is also a debacle), including eight districts held by Republicans in Congress. Well all of a sudden this week, the whole world is waking up to the Dayen gospel.

Attention started building about two weeks ago when the DCCC announced it would target all eight of these Obama-Republican California districts. But an announcement of DCCC targeting hasn’t always meant a lot, so to really get going it took a new report from California Target Book finding in part:

Not only is the current statewide Republican registration of 31% a historic low, but for the first time there is not a single congressional, state senate or assembly district that has a majority Republican registration.

Apparently Bob Mulholland sent out a press release waking up to these facts last week.  Now, I’m not going to hate on Mulholland for finally getting with the program.  But let’s make ourselves clear – this was true in 2006 and 2008 as well, and yet the state party failed to capitalize, by their own admission.  So it’s going to take more than one press release to show a commitment.  Republicans have obviously become repellent to the broad majority of Californians, and they’re too busy trying to recall each other to notice.  It’s upsetting that we haven’t used this unpopularity in the past two election cycles, and I hope that the CDP can catch up with the curve.

They can start with effective recruitment.  John Garamendi, who spoke to Greg Lucas as if he’s still a gubernatorial candidate but who by all accounts will be running for Congress, ought to be pushed to run in the 3rd District, where he is the largest landowner and where there is currently no viable candidate to beat Dan Lungren in a district that is trending Democratic, instead of the 10th, where there are multiple viable candidates.  Recruitment is an often-unremarked-upon but crucial element to winning elections.

Speaking of which…

• CA-04: This CapAlert piece certainly makes it sound like Charlie Brown might challenge Tom McClintock once again.

At the Jefferson-Jackson dinner at the Blue Goose Fruit Shed in Loomis, Brown and his wife, Jan, were honored as photographs flashed of Brown and supporters during four years of campaigning. The production was accompanied by songs from Bruce Springsteen’s “No Surrender” to Neil Young’s “Long May You Run.”

And then Brown stirred huge cheers when he hinted he might have the stamina for one more try for Congress in 2010.

“We’ll see what happens over the next few months – and whether you’ll have the opportunity to get into any pictures again,” Brown said.

In an interview, Brown said he is still mulling his prospects. He said he expects to decide by this fall.

We’re big fans of Charlie here at Calitics, and should he run again we’ll stand with him.  McClintock would have the power of incumbency and a red-leaning district but the rumblings I’m hearing out of there signal that residents and local pols aren’t all that enthused by the new Congressman’s performance.

• CA-32: The LA Times weighs in with an overview of the 32nd race to replace Labor Secretary Hilda Solis set for May 19.  They list Judy Chu and Gil Cedillo as the front-runners (though Emanuel Pleitez is profiled) and suggest that the race is a harbinger of the changing, minority-majority face of Southern California politics.  They also mention the Betty Tom Chu controversy, as well as some allegations on the Cedillo side.

Judy Chu supporters suspect that Republican Betty Tom Chu, a Monterey Park councilwoman and a political opponent of Judy Chu, entered the race to confuse voters and harm the chances of her distant relative by marriage. Tom Chu said last week she did not have time to discuss her candidacy, but earlier told the San Gabriel Valley Tribune that she is running because she could not support any of the other candidates and wanted to offer voters an alternative.

Apparently motivated by concerns that the large number of Latino candidates in the race would split the vote in that group and give Judy Chu the edge, there also were signs of jockeying.

Democratic candidate Francisco Alonso, a former mayor of Monterey Park, and a campaign official for Democratic actor/filmmaker Stefan “Contreras” Lysenko each said Cedillo called them shortly before filing closed and urged them to drop out. A Cedillo spokesman said the state senator was merely inviting the others to “work together” with him and did not intend to discourage them from running.

Over the weekend, Cedillo won the endorsement of the LA County Young Democrats, while Chu garnered the endorsement of the state Democratic Party.

CapAlert gets around to covering the issue we covered on Wednesday – how legislative vacancies on the Democratic side embolden the Yacht Party and make it more impossible to pass a decent budget.  What amazes me is that they get a Yacht Party leader to go on the record about it:

To this day, Ridley-Thomas’ seat remains unfilled. Democratic Assemblyman Curren Price of Inglewood finished first in the primary last week and is expected to take his place in the upper house after a May 19 runoff.

Of course, that will create a vacancy in the Assembly, which will likely last until early October by virtue of the state’s election-scheduling laws.

“Every vote we pick up, it is exponential for the Republicans,” said Assembly GOP leader Mike Villines. “It gives us a lot of ability to move the debate and navigate to issues that we care about.”

This is Yacht Party logic – they actually think a vacancy is a PICK-UP for them.  It’s the logic of an extortionist.  No sane person other than someone trying to exploit would agree that a less-than-full legislature for years on end makes sense from a public policy standpoint.  That’s why we could significantly reduce the time of the merry go-round AND save millions of dollars in special election costs by instituting Instant Runoff Voting for special election seats.

But the Yacht Party has no intention of fixing the policy.  They want to laugh as they see legislators walk out the door.

In Northern California, Rep. Ellen Tauscher has accepted an Obama post in the state department, though still faces the confirmation process.

Sen. Mark DeSaulnier, D-Concord, has already declared for the seat, and Assemblywoman Joan Buchanan, D-Alamo, is said to be considering a run.

“Joan Buchanan should run for Congress,” said a laughing Villines, hoping for yet another vacancy in his house. “She’d be an excellent congresswoman.”

“It creates a better dynamic than having the ability of the liberal-controlled Legislature to just steamroll its own desires,” Villines said.

A better dynamic in the sense of being a fake dynamic, where the elected will of the voters is not reflected in the ability of the legislature.  I can’t think of a better argument to repeal two-thirds than these two quotes.

The latest report of registration, current up to February 2010, shows that voters have continued to register Democratic in higher numbers even since the general election.  There are now 17.3 million registered voters, 74.4% of all eligible adults, and Democrats have a 2.32 million vote advantage over Republicans.  By the percentages, the state consists of 44.52% Democrats, 31.14% Republicans, and 19.99% decline to state, with smaller parties rounding out the rest of the voters.

2010 is the last year before a new census and new district lines, so the district-level numbers only apply for the next election cycle.  Still, a close reading makes clear where Democrats should be focusing their registration efforts and resources for the next year.

In Congress, there are two Republican-held seats where Republicans hold less than 40% of the registration share, seen as a key dividing line.  Those are Dan Lungren’s CA-03 (39.7% Republican-37.7% Democratic) and, surprisingly, Buck McKeon’s CA-25 (39.7% Republican-39.2% Democratic), which has changed dramatically over the past few years and could be ripe for a well-funded, legitimate challenger.  Obama won that district 50-48 as well.  With only 351,421 registered voters in CA-25, there are additional non-voters waiting to be registered there to tighten up those numbers even further.  CA-19 also has a shortfall of voters which could lead to a tightening of the rolls.  

In the State Senate, the only even-numbered seat (the ones up for election in 2010) that deserves a focus is SD-12, where Jeff Denham is termed out.  There are 47.5% registered Democrats and 33.1% registered Republicans.  Democrats in that region are fairly conservative, and so there may not be a progressive coming out of that district, but there’s no reason on Earth why Democrats shouldn’t own that seat.  Especially since there may be 100,000 unregistered voters out there.

As for the Assembly, the numbers look good in AD-05, AD-26 (Dems have a 42-39 lead in registration), AD-30 and AD-36, with a few other marginal possibilities based solely on the voter reg. numbers (AD-38, AD-63, AD-64, and AD-65 come to mind).  There is absolutely a path to pick up three seats and a 2/3 majority in the Assembly, if the net is cast wide enough.

Of course, oftentimes Democratic officials focus too much, in my view, on voter registration statistics, and shoudl recruit good candidates and give them the resources they need to compete instead.  But in this off-year, registration stats offer an opportunity to determine where to target.  You can dig through them yourself at the Secretary of State’s page.

Voting for the budget and facing retirement has seemed to liberate Bakersfield-area Senator Roy Ashburn.  He shared coffee with a couple local reporters and dished about the behind-the-scenes budget process, confirming a lot of expectations:

In the wee hours of the Thursday before the budget vote – which had to have been Thursday, the 12th – the Senate Republican caucus met.

One of the senators pointed to four others and basically outed them for coming to his office and asking him to vote for the budget- when they didn’t have the guts to do it themselves.

Ashburn wouldn’t name names.

Ashburn also said senators went to state Sen. Abel Maldonado, R-Santa Maria, and asked him to put pet projects into the budget. That as Republican senators railed against overspending. Maldonado wouldn’t do it, Ashburn said.

What you have with the Yacht Party is a group of lawmakers afraid of their own base.  They glorify the importance of simpletons like John & Ken* to almost mythic levels, so that if they dare to step out of their comfortable ideological shells and help move the state from the brink of financial collapse, they believe it would be the end of their careers.  So like all sniveling creatures, they would rather have somebody else do the heavy lifting so they could maintain their pose of anti-tax purity.  And at the same time, they have the gall to ask the same people to slip in tasty goodies for themselves and their districts, so they can have all the benefits of compromise with none of the costs.

I’m going to sound like a broken record, but this is again the fruit of a dysfunctional process that enables Yacht Party cowards to extract as much as possible and maintain maximum leverage over negotiations despite their small minority.  The conservative veto must end, and democracy must be restored to California.

* – Just to add to the John & Ken stuff: James Rainey, the LA Times’ media critic, slaps them around a bit:

It’s all the fault of those no-good illegal immigrants. Yes, the price tag that comes with a huge influx of noncitizens is rightly part of the public discourse. So why muddy the waters with some confounding information?

John and Ken wouldn’t make that mistake. They make sure to mention the taxes the newcomers don’t pay and the bills they run up in public hospitals. Who needs to mention the taxes they do pay, or to waste time worrying about the lower prices and convenience we all derive from their low-wage labor?

Then, please, protest the cost of state workers. It’s beyond righteous to worry about the payroll growing, when everyone else is cutting back. But certainly don’t remind your listeners (at least that I’ve heard) that the fastest-growing state job category is prison guard and that their support of tough sentencing helps explain why that part of the state budget keeps growing by leaps.

And certainly don’t suggest that an economic downturn — affecting virtually every government and business in the world — played any role in ruining the state’s finances. It’s much more fun to pin it on that special someone. Gov. Arnold Schwarzenegger “had five years to fix the problem and it got to $42 billion,” KenJohn said the other day. (Sorry, I’m name-lumping. But when the two get all worked up, I can’t tell their voices apart.) […]

It should be no surprise that “California Psychics” is a frequent advertiser on the program of late.

The business offers the services of tarot card readers, clairvoyants, astrologers and the like. “I think, most of all,” one satisfied customer says in the ad, “I felt validated.”

It seems to me that’s what John & Ken are selling too. A bit of hocus-pocus and validation of their listeners’ anger with a story that doesn’t bother with all the messy details.