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Catellus Development: TheOctopus Reborn

Thirty-seven years before writer Frank Norris created the fictional Octopus in his 1901 novel of the same name, the U.S. Congress gave birth to its real-life counterpart by granting the Southern-Pacific Railway company a checkerboard pattern of right-of-way land parcels lining either side of their tracks from Texas to California.. Although the railroad would dry up economically in the mid-20th century, and disappear entirely in 1994 when it was taken over by the Union-Pacific Railroad in a merger, the Octopus that Congress created still lives on in the form of the real estate giant that it evolved into from those 1864 checkerboard easements. This company, once known as Southern-Pacific Realty, has tentacles that span the continent. Is now known as Catellus Development, and it is an absolute Colossus.

Catellus is the second largest private landholder in the western United States with a total of 817,000 acres in California alone. It develops commercial real estate, shopping centers, and housing, and recently it has acquired a number of former military bases as a result of the Clinton administration’s base closure program begun in 1995. It has also been very active in a number of land swaps, where it exchanged mostly worthless rural properties for prime development land within urban areas or adjacent to freeways.
Catellus is headed by chairman/ CEO Nelson Rising, a former Hollywood producer and political operative whose 1971 film, The Candidate, essayed the political corruption of an environmental idealist who sells out his principles to get elected as a California U.S. Senator. Catellus is one of the most politically wired development companies in the state with significant ties to Senator Dianne Feinstein, San Francisco Mayor Willie Brown (who was formerly their attorney), California State Senate president John Burton (another ex-Catellus attorney), and John Foran, the MTC lobbyist who briefly served as Catellus’ lobbyist on a piece of legislation carried by Burton in 1997. Another Foran/Nossaman, Guthner client, the L.A. Metropolitan Transit Authority, has its offices in another Catellus property currently being renovated in downtown Los Angeles at Union Station.

In a 1997 article published in Forbes Magazine, writer Mary Beth Grover put it this way: “With real estate, politics matters a lot, almost as much as location. In California real estate, politics is the most important thing (and) aside from sheer corruption, there are a number of ways to appease these little gods. Catellus knows the game well.”

It certainly hasn’t hurt Catellus cause that the corporation and its officers, including Rising, have been significant contributors to the political war chests of both Willie Brown and Dianne Feinstein. Besides the $140,000 in legal fees that Brown received from Catellus as an attorney from 1982 until 1994, Brown’s two San Francisco mayoral campaigns also received significant contributions from Catellus. So did Feinstein’s U.S. Senate campaigns. Over the past five years, Feinstein’s campaigns have received over $100,000 from Catellus Development. Brown’s two mayoral campaigns received a total of close to $50,000 from Catellus and individuals associated with the corporation.

Senator Feinstein has proven very successful in promoting a land-swap project that involves Catellus properties in Southern California. This is the Desert Wilderness Protection Act of 1994, which involved the transfer of over 400,000 acres of Catellus land in the Mojave Desert to the federal government to create a natural preserve. Of the $56.5 million purchase price for the Catellus desert properties, $30 million of the money is coming from the U.S. government. while the additional $26.5 million is coming from a non-profir group called The Wildlands Conservancy.

In a press release put out by Senator Feinstein’s office, Nelson Rising gave credit to Feinstein: “The successful completion of these transactions would not have been possible without the significant efforts of Senator Dianne Feinstein.” Rising then went on to credit David Myers and the Wildlands Conservancy for “rais(ing) the private funds necessary to complete these sales.”

But a number of critics have emerged who wonder whether this massive land swap was such a great deal for anybody other than Catellus.

Jeffrey Baird, a computer programmer who works for the County of San Bernardino, says that the whole thing stinks to high heaven. “I believe that non-profits (e.g. The Wildlands Conservancy) masquerading under the cloak of “environmentalism” are being used as vehicles to initiate a series of land purchases/swaps that will ultimately benefit Catellus Corporation and their friends at the expense of John Q. Public.” Baird says that Catellus is giving up desert lands that are undevelopable in (part) exchange for lands adjacent to freeways that are well traveled and worth considerably more.

Baird pointed out that there seems to be a connection between Catellus Development and The Wildlands Conservancy that constitutes a direct conflict-of-interest and says that he fears “that the resulting charitable gift/sales of “ostensibly appreciate land” (from Catellus) to Wildlands) are inconsistent with the underlying land values of these properties as determined by the county assessor.” Baird says that the assessed values of the land when they are transferred from Catellus ownership to the Wildlands Conservancy increase sharply. Baird has been trying to get investigattive agencies to look into the issue. So far, none have.

Whether or not the land-swap and the Wildlands/Catellus connection finally merit an investigation for possible fraud or income tax evasion (the two areas that Baird has asked agencies to investigate), the land swap is proceeding ahead. And in a 1997 issue of Media ByPass Magazine, writer Karen Lee Bixman explored an area of the land swap that made Baird’s concerns look almost pale by comparison.

In a story titled “The Great Gold Heist: The Desert Wilderness Protection Act”, Bixman characterized Senator Dianne Feinstein as “The Modern Jesse James.” Exchanging worthless desert land for more viable commercial land alongside interchanges is bad public policy, but swapping worthless land for rich, gold-bearing deposits might also have occurred.
Bixman wrote: “the real motivation for the passage of (the Feinstein) bill lies with the special interest groups that would benefit monetarily…Through a complex series of land exchanges, Catellus will receive land that contains some of the richest gold deposits in the world.”

Part of the Catellus land exchanges included a swap for a decommissioned military base called Chocolate Mountain. Bixman said geologists told her that Chocolate Mountain has deposits that are worth somewhere between $40-100 billion. Another nearby gold mine owned by Catellus in the Chocolate rift zone is the Mesquite mine, which, she says “is one of the ten most profitable mines in the United States and has some of the most profitable gold deposits of any mine in the world.”

Catellus Development is based in San Francisco, and it has a number of high profile, multi-billion dollar projects underway in the Bay Area, including the $3 billion Mission Bay project in San Francisco, and the $1.5 billion base conversion project in Alameda at the former Fisk Naval Air Center. Both of these projects are mixed-use developments that will include commercial office space, retail space, and housing. And there is a strong possibility that Catellus could be the latest publicly traded stock which might experience a sudden price rise from a process-related to a planned transportation project. This project is the so-called Mid-Bay Crossing Bridge currently being studied by the Metropolitan Transit Authority.

Almost directly after Alan Temko's article touting the bridge of T. Y. Lin appeared on the front page of The San Francisco Chronicle in its March 10, 1997 edition, the MTC’s chief lobbyist, John Foran, was hired as a lobbyist by Catellus Development to work on behalf of SB 1215. The legislation was authored by San Francisco’s state Senator John Burton, the man who describes himself as “Willie Brown's best friend." Burton was also once Catellus’ lawyer. The bill was co-sponsored by the two Assembly members from San Francisco, Carole Migden and Kevin Shelley, both of who are part of what former State Senator Quentin Kopp calls "Willie Brown’s cabal."

The bill resolved a long-standing dispute between the city of San Francisco, the state of California, and the private developers, Catellus, doing business under the name of Western Realty. The bill would allow the development of filled tidelands to take place in Mission Bay. The bill also provided for a new University of San Francisco campus and was passed as an emergency measure to take effect immediately.
What is most interesting about the hiring of John Foran was the length of his contract with Catellus and how much money he was paid. Foran's term of employment was 22 days, for which he was paid almost $17,000. That’s an astronomical rate of pay for a contract lobbyist to represent a client on one piece of legislation only. Durong that same time, Foran’s yearly pay for the MTC was $50,000. What was a transportation lobbyist, the man who founded the MTC, doing on behalf of a real estate company like Catellus? What was also intriguing was the fact that Foran filed his employment form as an amendment to his regular quarterly report. Having covered state politics for as long as I have, I concluded that he did this to hide the fact that he was working for Catellus.

When I asked Willie Brown about this bill at one of his press opportunities in the summer of 1998, he denied that he knew anything about it. This also seemed puzzling, as the main lobbyist for Catellus, Marsha Smolins, also happens to be the main lobbyist for the City of San Francisco. Smolins began her career in politics as an aide to U.S. Senator Dianne Feinstein. Brown’s response to my question was “I’ll have my people get back to you about it. " I then asked him that since this bill provided for a new UCSF campus, and that since such a campus would likely demonstrate a significant demand for transit, whether or not he had given any thought to the possibility of a new Mid-Bay crossing bridge. "You'd better watch yourself, or you're going to go off that bridge, " Willie Brown said.

A year-and-a-half after he had warned me about “going off that bridge”, and almost directly after being reelected Mayor of San Francisco in the fall of 1999, Willie Brown received an appointment to the $100 billion California Public Employees Retirement System (PERS) pension fund investment board- the company that once owned 80% of Catellus Development stock and is still its largest institutional shareholder at somewhere close to 20%. Shortly after Mayor Brown was appointed to PERS, Dianne Feinstein wrote a letter to Governor Gray Davis asking for an updated study of the Mid-Bay Crossing. If a Mid-Bay Crossing Bridge was built that included a landfall at either of the two Catellus properties, it would surely have a beneficial effect on Catellus stock prices.

In near record time, MTC approved the study, which is currently underway. Then Willie Brown and his San Francisco band took a shot at winning the trifecta: three stocks with three bills.

The first bill was the Catellus-sponsored legissslation, SB 1215, from the 1997 session. Senator John Burton’s bill in the 2000 session, SB 1562, calls for development of a new rail link between San Francisco Airport and another airport on land within the city and county of San Francisco but located in another county. There is only one place that this could be: the former Fisk Naval Air Center in Alameda. By some strange quirk, part of this airbase is within the city and county limits of San Francisco. The Fisk Center is presently being developed as a mixed-use commercial office and retail center with 350 dwelling units. The developer is Catellus, a publicly traded company.

On the day that he introduced SB 1562, Senator Burtons campaign received a $4,000 contribution from Nossaman, Guthner, Knox and Elliott, the lobbyist group that John Foran works for who have been active on every speculative-driven stock from the bullet train in 1982 until now.

When the legislature went to conference committee in June, 2000, a new paragraph was amended into the trailer bill that was the financing scheme for the purchase of the Cargill salt flats. The trailer bill was Migden’s AB 398. Migden’s original bill called for $150 million in state funds to help acquire the Cargill salt flats. (When Governor Gray Davis signed the bill into law, the amount had been reduced to $20 million). Besides acquiring the salt flats for environmentalists, the land could also be used for the estimated $3 billion expansion of the San Francisco Airport. During the hearing for AB 398, Migden mentioned the fact that Senator Feinstein was carrying the ball for the acquisition in Congress with another spot bill.

The stocks that could be affected from these three
pieces of legislation are URS Greiner, Catellus, and Lockheed-Martin, the owner of Transrapid International, the German manufacturers of a high-speed mag-lev train. Transrapid was purchased in 2000 by Lockheed-Martin, another colossus of a corporation with a history of deep-pocket contributions to Democratic candidates. As a matter of fact, the lone Democrat in the George W. Bush presidential administration is Norman Mineta, the former Democratic Congressman whose last job was as a vice-president with Lockheed-Martin. Mineta currently serves as the Bush administration’s Secretary of Transportation.

Like all the other transportation bills all the way back to the bullet train in 1982, the Burton-Migden-Feinstein package began as “spot” bills that contain the famous CEQA exemption and other key elements these legislative wizards have been refining ever since. It also involved an airport runway “competition” for SFO that was very like that of the Bay Bridge. This time, the notice for the competition was posted the very day the competition closed. But this time, there were five finalists, not two.

All the usual players were present when the deal was going down in conference committee: Mayor Willie Brown’s people- Phil Isenberg and Richard Katz- were there. So was Linda Morshed, the wife of California High Speed Rail Authority Executive Director Mehdi Morshed. Senator John Burton was up on the dais. The MTC’s Steve Heminger was circling around, and so was MTC founder, John Foran. So were other lobbyists from the Nossaman, Guthner group. One of their biggest clients is Cargill Salt, the company that owns the salt flats where the airport expansion is planned. Notably absent were Mayor Willie Brown and Senator Dianne Feinstein.

In the weeks leading up to the Burton-Migden-Feinstein legislative package, the savvy investors were furiously buying stock. Richard Blum was purchasing URS stock in 100,000 share lots; it had fallen from 28 to 12 in the time that Willie Brown and Dianne Feinstein made every effort to kill the new eastern span MTC had chosen. Now MTC was studying, a southern crossing bridge. Can you imagine the effect on Catellus Development stock if the chosen bridge option runs from one of their properties to a landfall on another property they own? The previous study in 1991 alluded to such a possibility. As a matter of fact, T.Y. Lin already has a bridge designed for a Mid-Bay crossing. And who cares if it ever gets built? Just take the speculative profit and move on to the next process.