JANUARY-FEBRUARY 2006

 California INTERNATIONAL BUSINESS Report

CONTENTS

News and Politics

Letters to the Editor 

Public Sector News

Commercial News

People on the Move

Heard on the Street

News you can Use

Meetings and Events

Editorial / Op Ed

Governor Calls for Infrastructure Investment

Governor Schwarzenegger has announced a proposal for a massive public works program to upgrade the State's infrastructure.  Speaking at his State of the State address this month, the Governor proposed a $68 billion general obligation bond package go to voters to pay for transportation, air quality, schools, water projects and public safety.   "California is already on the leading edge of the global economy and it's changing and growing by leaps and bounds", the Governor said, "And yet we will let this advantage slip from our fingers, if we don't make the long-term investment in our ports, our roads, our schools, our information systems and all the other infrastructure required to compete in a world that thrives on innovation".  The Governor also acknowledged his defeat in the special election he called, "The people, who always have the last word, sent a clear message - cut the warfare, cool the rhetoric, find common ground and fix the problems together".  The massive domestic public works program the Governor has proposed will likely dominate the State's politics for the next year.  We will continue to cover those elements of the program that relate to international business as part of the publication's exploration of California's place in the world.
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  News and Politics    back

California Solar Initiative Approved

In a major victory for Governor Schwarzenegger, State energy regulators have approved $2.9 billion in consumer rebates over the next decade to encourage people to put solar panels on their roofs. The state Public Utility Commission voted 3-1 to adopt the California Solar Initiative, which will cover roughly one-third the cost of solar systems. Last month, the five-member PUC approved $300 million in rebates for 2006.  That proposal was "a marquee idea of the governor's ... legislative agenda (but) got bogged down in politics in Sacramento," said PUC member Susan Kennedy, who attended her last meeting after being appointed as chief of staff for the Governor.   Governor Schwarzenegger had championed the idea as a candidate in 2003 but it stalled in the Legislature last year because of demands for union involvement. Schwarzenegger presented it to the PUC instead, and the third and decisive vote came from Commissioner Rachelle Chong, whom the governor just recently appointed. The state's huge solar program will be funded by a new fee on power bills that is estimated to average $1.10 a month for residential customers, depending upon usage. It will be offset, PUC officials said, by the elimination of another fee that expires in 2007. "The California Solar Initiative is the largest solar program in the country, and I hope it will be a model for other states," Commissioner Dian Grueneich said. "The program will be a major source of dependable and environmentally friendly electricity". The initiative's goal is to install 3,000 megawatts of solar capacity - equivalent to six large power plants - on 1 million homes, farms, businesses and public buildings by 2017. Solar advocates said the total $3.2 billion program will make solar energy more affordable, create jobs, reduce air pollution and cut emissions of heat-trapping gases blamed for global warming. The solar initiative includes $2.5 billion in rebates for existing homes, businesses and public buildings that install solar panels. Another $350 million in rebates will be offered for solar installations on new homes. About 10 percent of the rebates will be set aside for installations on low-income or affordable housing projects. Solar advocates expect the massive state investment will lead to more solar energy ventures and will increase business for existing companies.  In recent years, the state has been overtaken by Japan and Germany, now the world's two largest solar markets, but advocates hope the subsidies will help California regain its position as a global leader in solar power.

Special Report: UC Salary Scandal

In what seems to be a growing scandal, the University of California has been accused of paying hundreds of millions of dollars in unauthorized perks and compensation to senior-level management.  The story first surfaced in the San Francisco Chronicle last fall and reported that UC had lavished a shocking $871 million in hidden compensation on top officials without legislative approval.  Subsequent news stories have reported that hundreds of UC's senior-level employees received generous housing allowances, bonuses and other perks during the state's budget crisis.  The Chronicle also reported that at least three departing executives got extremely generous bonuses.

Former UC Provost M.R.C. Greenwood was found to have violated UC conflict of interest policies in hiring a business partner for a newly created management position.  Officials also said an internship created for her son by one of her subordinates was funded improperly.  M.R.C. Greenwood who resigned from her post last month during the inquiry, hired Linda Goff in June 2004 as director of the university’s Science and Math Initiative.  The investigation found that at the time of the hiring, Goff and Greenwood had an “ongoing business relationship, which included joint ownership in a house and a listing as co-mortgagees on a bank loan” and constituted a violation of UC policies. While Greenwood will no longer be provost, she will remain a part of the university as a member of the UC Davis faculty a salary of $163,800 per year.   Additionally, a separation agreement between Greenwood and the University of California promises the former provost a year long sabbatical at her former salary of $301,840 per year in addition to three months’ paid administrative leave at that rate after the sabbatical.

A related investigation found that former UC Vice President of Student Affairs Winston C. Doby improperly created a position at UC Merced for Greenwood’s son, James Greenwood, who was hired for a $45,000-per-year internship.  James Greenwood was the only candidate for the job, and the report found that the funding and recruitment surrounding the internship’s creation were done with him in mind.  Doby also had a role in hiring of an unqualified young woman as an analyst and a personal friend for a job with an inflated salary. Doby was reprimanded and lost some powers after being on paid leave for two months. He responded to the minor punishment by saying it had been "a witch hunt".  

As reported here last February, The University of California created a $192,000-a-year job of "international strategy development" for the domestic partner of UC Santa Cruz chancellor Denice Dee Denton. Her partner is Gretchen Kalonji, a professor of materials science at the University of Washington in Seattle and she also got a full tenured professorship. Then UC Provost: M.R.C. Greenwood was quoted as saying that "This is one of the most talented women engineers in the country who has turned her skills to developing international strategies, something which the University of California doesn't really have right now". Greenwood claimed that UC officials already were talking about creating a strategy position anyway when Kalonji became available so they approved her hiring in a closed door meeting. Ms. Kalonji has not returned phone calls from this publication for information on this international strategy.

In a footnote to this story, the Santa Cruz Sentinel recently reported that UC Santa Cruz built a $30,282 dog run for Chancellor Denton's dogs, while spending $600,000 renovating her residence.

The University of California also recently decided that a former chancellor will not have to pay back the $355,000 salary he earned while on a year-long leave even though he broke an agreement that he would return to teaching for the same amount of time, university officials said. Robert Berdahl, who resigned in 2004 as the chancellor of the University of California, Berkeley, said he would leave the university after teaching just one semester to run an academic trade group. Berdahl plans to take over in May as president of the Association of American Universities, a nonprofit industry group representing public and private research universities. UC officials said he won't have to pay back any of his leave salary because it was granted under an exception to normal university policy since they claim his new job will  benefit the university.

There seems to be no end to reports of this salary and benefit abuse.  The San Diego Union Tribune recently reported that UCSD Chancellor Marye Anne Fox, who was recruited last year at a base salary of $359,000 also got an additional $248,000 in undisclosed compensation.  This money was for a sabbatical she earned at her previous university but did not take.  Fox also was given a $30,000 annual research stipend and $6,500 a month in rent for a temporary residence in La Jolla.  Fox's compensation also includes health and retirement benefits, a car allowance and entertainment expenses.  In addition, as part of her compensation, a full tenured professor position was created for her husband, James K. Whitesell.  It was this position that was used to justify creating the international strategy job for the domestic partner of UC Santa Cruz chancellor Denton

The list goes on and on.  The Chronicle also reported that UC Davis Chancellor Larry Vanderhoef gave Celeste Rose, former vice chancellor of university relations, a $20,000-a-year raise and no work requirements after she threatened a race and gender discrimination lawsuit when pressured to resign from her position last summer. Rose will remain on the payroll for two years with a $205,000 annual salary plus benefits and no formal job description or regular duties. UC promised not to fire her, no matter how little she does- and if she quits, she will still be paid.

The University of California has responded to the outrage about these decisions by downplaying the situation.  They announced policy changes that give UC President Robert Dynes broad new powers to set salaries.  Regents, however, now must approve all salaries over $168,000 and raises above that level. The new system requires regent approval for the highest-paid 32 university employees, for salary actions above $200,000 and for raises above 7.5 percent.  The UC also released a consultant report that estimated that it pays is 15 percent lower then competing Universities- a report that mysteriously didn't mention the unauthorized compensation.  As a result of this study, then have decided they are underpaid and now plan additional raises to bring them in line with "elite private and public universities".  Under this new  plan, regents will now compare UC compensation with about two dozen mostly private universities, including Harvard, Stanford and MIT and salaries will be ramped up.

Critics of the UC Salary practices, including union representatives, were outraged. "It is deplorable that the regents show their lack of leadership and insensitivity to the needs of students and workers, the lower-paid workers," Amatullah Alaji-Sabrie, chief negotiator for the Coalition of University Employees, told the regents during a public meeting. "On their backs, you're giving perks to the top-paid administrators". 

A joint committee of the State Legislature has responded by voting to require a wide-ranging audit of the University of California's practices for compensating top faculty and staff.  Assembly Speaker Fabian Nunez who also serves as a member of UC's Board of Regents, made the request to the Joint Legislative Audit Committee. Senate and Assembly members voted 12-0 to order the audit.  Nunez, in a statement to the legislative committee, accused UC of "flagrant disregard for the use of taxpayer dollars".  "They have raised fees on students year after year, and then turned around and gave almost a billion dollars in raises, bonuses and other compensation to their top staff," he said.

Huge Cross-Border Tunnel Found.  Authorities have located a sophisticated tunnel under the U-S Mexican border that leads from Tijuana to an industrial building in Otay Mesa in San Diego.  Acting on a tip, Mexican federal police located the tunnel entrance on Mexican soil three-quarters of a mile west of the Otay Mesa Port of Entry in San Diego near the Tijuana Airport.  A spokeswoman for U-S Immigration and Customs Enforcement says the tunnel was under construction. It ended 100 feet north of the border, buried under four and half feet of U-S soil- and was huge- as long as three football fields. The tunnel was was wired for electricity, had a ventilation system and may have been designed to integrate with the storm drain system. Two tons of marijuana were found in the tunnel but no arrests have been made and authorities believe the tunnel builders were at work just before it was discovered. Concerns about this kind of tunnel go beyond drug smuggling as authorities believe terrorist groups planning to attack the U.S. might most easily enter the United States through Mexico.

Filipino Star in Drug-Diversion Program after Crystal Meth bust. Filipino film and music star Nora Aunor, arrested in March at Los Angeles International Airport for allegedly having methamphetamine, was accepted has been into a drug-diversion program. Criminal proceedings against Aunor, 52, were suspended by Airport Branch Superior Court Judge Bernard Kamins so she can enter the rigorous Drug Court program. Aunor, whose real name is Nora Cabaltera Villamayor, had been charged with one felony count of possession of a controlled substance. The charge will be dismissed if she successfully completes the program. Security screeners at LAX reportedly found about eight grams of methamphetamine in a film container in Aunor's carry-on bag. Aunor is a huge star throughout Asia. She has recorded more than two dozen albums and made more than 170 movies, however she spends much of her time in the United States and owns a home near San Diego.

Agents in San Francisco Seize Fake Tamiflu.  Customs agents in San Francisco have seized  more than 50 shipments of counterfeit Tamiflu.  The shipments were labeled generic Tamiflu and were sent by Asian suppliers to individuals who placed orders over the Internet.  There has been a huge surge in websites hawking fake Tamiflu since the product has been reported to be the only drug know to be effective against bird-flu, causing a worldwide shortage.  U.S. customs officials say the shipments contained the first counterfeit Tamiflu capsules seized in the country.The first package was intercepted late last month at an airmail facility near San Francisco International Airport. Since then, agents have seized more than 50 separate packages, each containing up to 50 fake capsules and labeled "generic Tamiflu." There is no generic brand available for Tamiflu, and tests showed the pills contained none of Tamiflu's active ingredients. The antiviral drug is being stockpiled by many governments in anticipation of a bird flu pandemic and is not readily available to the public.

Mexican police break up international counterfeiting ring. Mexican investigators announced the dismantling of an international counterfeiting ring that produced an estimated $5 million in fake $100 bills during more than four years of operation in Mexico. Authorities detained six people, including a man believed to be a former state police officer, and nearly US$400,000 in fake bills during raids of eight buildings in the western state of Jalisco, where the operations were based, said Jose Luis Marmolejo, of the federal attorney general's organized crime division. Marmolejo said all of the bills were made in Mexico and sold in the United States. On the same day, U.S. Secret Service agents arrested 10 people and seized $75,000 during raids on three houses in Santa Ana, California, according to U.S. Assistant U.S. Attorney Robert Keenan, who announced the investigation. Keenan said 13 people were indicted in the U.S. for allegedly selling the counterfeit bills. The AP reported that officials suspect that more than 30 people belonged to the organization, which sold the $100 bills on the U.S. black market in Phoenix, Arizona; and in San Diego and Santa Ana, California, Marmolejo said. The arrests took place following a joint two-year investigation that began after the Secret Service tipped off Mexican authorities to the ring, he said. Mexican authorities also seized six guns of different calibers, ammunition, printing equipment and printing chemicals during the Jalisco raids. The bills, produced with offset printing equipment, were well made – "one of the best falsifications we've seen," Marmolejo said. Among those detained in Mexico were two alleged leaders of the organization. They were identified as Jose Maria Loaiza Gaspar, who officials believe is a former state police officer in Jalisco, and Carlos Enrique Barajas Duran. Marmolejo said he did not know their ages, and that officials were not releasing the names of the other detainees in order to protect the investigation.

Gandhi Kin nailed for tax evasion.A man who claims to be a descendant of Indian leader Mohandas Gandhi was sentenced to two years in prison for trying to hide hundreds of thousands of dollars from the federal government. Yogesh K. Gandhi, 55, of Pleasant Hill, was sentenced in U.S. District Court in Oakland after pleading guilty this summer to four counts of unlawfully structuring currency transactions. He agreed to surrender by April to begin serving his prison sentence at a federal facility. Gandhi, who said he runs an international business consulting firm from his home, admitted he tried to hide about $156,000 in deposits over a five-month period ending in February 2002 by breaking the deposits down into small amounts that the Internal Revenue Service might not detect, according to court documents. Banks are required to report whenever someone moves more than $10,000 into or out of an account or institution in a single day, and employees are trained to spot efforts to dodge detection. Yogesh Gandhi ran the Gandhi International Memorial Foundation, which was named after Indian independence leader and pacifist icon Mohandas Gandhi, who he claimed was his great granduncle.  Mr. Gandhi does not seem to be following in the footsteps of his famous relative, however, he previously has served time in prison and paid $237,000 in back taxes after pleading guilty in 1999 to mail fraud, tax evasion and other charges.

Homeland Security Testing e-Passports in San Francisco. The Department of Homeland Security (DHS) has begun a three-month trial to test the RFID technology underlying electronic passports. The documents, which contain RFID inlays encoded with biographic and biometric information about the passport holders, are designed in compliance with International Civil Aviation Organization (ICAO) standards. The goal of the test is to assess how the RFID readers and biometric equipment needed to process the e-passports will impact the passport inspection process, as well as how well the RFID interrogators read the tags embedded in the passports. It will also gather information supporting other countries' development and implementation of e-passports that comply with ICAO standards. As of October, all U.S. passports will be issued as e-passports. The U.S. State Department decided to begin issuing e-passports in the hope of making passports more secure documents and harder to counterfeit, as well as expediting passport inspection agents' verification process.

Crisis hits Surfboard Industry.  The small, but culturally  important California surfboard industry got hit by a torpedo last month when the supplier of the foam blanks they used decided to stop production in Laguna Nigel. For 44 years, Clark Foam supplied these blocks that were hand shaped into boards, but Mr. Clark unexpectedly shut his business last month, saying he was worried about environment lawsuits. As surfboard makers depleted their reserves of Clark's foam blocks, some shapers' jobs were at risk and board prices rose. Since Clark Foam closed, stores have raised prices as much as 40 percent on boards that previously sold for $350 to $900 according to the director of the Surf Industry Manufacturers Association. This association estimates that Surfers in the United States spent about $200 million to buy boards last year, and in California the industry employs about 5000 people. The factory that Clark shuttered in Laguna Niguel, 50 miles south of Los Angeles, supplied 90 percent of the polyurethane foam blocks, called blanks, in the United States. While other makers use the same chemical, Clark says he employed a unique process that made him subject to more regulations. "They simply grind away until you either quit or they find methods of bringing serious charges or fines that force you to close", Clark wrote in a letter faxed to his customers. Stepping into the void was, you guessed it, manufacturers in China and Asia. Asian factories were quick to recognize the opportunity and their machine-made products have flooded the market. Craig Cooper, a surfer who is also a partner at Softbank Capital Partners, an investment firm in Newport Beach, California, recalls shaping boards using Clark Foam blanks when he was a teenager in New Zealand. "The industry is moving on," Cooper said in an interview. "Clark Foam's closing and the use of new materials", he said, mean more manufacturers "are dipping their toes in the water."

 

  Letters to the Editor   

A David and Goliath Story

Rob,

I always appreciate and enjoy your business report. I tip my hat to you on your successful outcome with the Chinese government. A great David and Goliath story!

Best regards,

Dan Wong

President
Omniface, Inc.
Monterey Park, California

www.omniface.com

Editor's Note:  This letter is in response to our story about this newsletter and our web portal being blocked in the Peoples Republic of China after we wrote a story about the Yahoo-Alibaba deal and their role in the arrest of pro-democracy journalist Shi Tao, and about Chinese filtering of the Internet. At the moment, we are not blocked in China. 

Demise of the Gold Key Program

For many years the US Department of Commerce has had a program aimed at helping small exporters called the “Gold Key” program (http://www.export.gov/comm_svc/goldkey.html). The program facilities international business relationships through the facilities of US Commercial Service agents in US embassies worldwide. The costs for these services have been low to moderate (almost never more than $1000). It seems, however, that a recent decision by the Bush administration has gutted the program. Apparently with an attitude that only large corporations are important for the US economy, the program now is based on “cost recovery,” which means that what formerly cost $1000 will now cost $10,000+ (based on costs which cannot directly be determined anyway, as most of the costs involved are the fixed costs of keeping staff employed in embassies and domestically-based "Export Assistance Center" offices). Department of Commerce employees have told me that often the service itself is now useless, as the $10,000 will now often buy you nothing more than an online search of Kompass by a Commercial Service agent. In addition the Department of Commerce has been told that they must use their existing budget to help rebuild New Orleans. To finance that they are laying off hundreds of Commercial Service employees. This is not being covered in the media, but should become an issue for people to this and similar groups.

Barney Lehrer

Federation of International Trade Associations

Brooklyn, New York

http://fita.org/

Editor's Note:  This letter was posted on one of the online trade forums we sponsor.  As a result of protests like this, the USDOC has backed down and returned to their previous policy, however the Gold Key program is still a fee based service.

Proposed Training Seminar for Russia and the CIS

Hi Rob

I wanted to ask you about your thoughts on a business training seminar that a corporate partner of ours has developed.

In short, the seminar is a one-hour, half-day, or full-day seminar on doing business in the CIS, with special emphasis on Russian-American relations. The seminar is given by Julia Karpeisky, president of JMK Contact (www.jmkcontact.com).

She has been working as a business intermediary and professional interpreter for years, and is considered one of the best in Washington DC. She works regularly for various Russian-speaking embassies and has interpreted for Russian political dignitaries during their visits to DC.

Perhaps this is something we can work together on to promote in California. Or if you are looking for a speaker for a future event, she might be a good candidate.

JMK Contact and my company worked together with the Kazakhstan Embassy to organize the Kazakhstan Investment Conference in San Diego in September. Since then, we've continued to collaborate on ideas to work together, and with our geographic locations, having her provide these seminars here in California is one way to do so.

I'm interested in your thoughts and comments as to how this would be received by the international trade community here in California, and how you envision it could be marketed with CalTrade's help.

Happy new year to you!

Scott J. Sambucci, Director
Economic Information Services LLC
San Francisco, CA 94123
http://www.economicis.com

We would like to hear from you.  Please send us your ideas and opinions to caltrade@gmail.com

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Governor wants imported prescription drugs legalized.Governor Schwarzenegger said he will urge Congress to pass legislation to legalize the importation of foreign prescription drugs. In a letter to congressional leaders, the governor said that while he has urged action from the Bush administration, so far no progress has been made. "Drug prices continue to escalate, and there is no evidence that the federal government has been able to bring more equity to the global pharmaceutical marketplace," Schwarzenegger's letter said. Democrats noted that Schwarzenegger had vetoed other legislation that may have helped Californians get cheaper drugs from overseas, "While I appreciate the governor's election year interest in joining our efforts to make prescription drugs more affordable, the governor's letter looks like a publicity stunt to paint over his repeated vetoes of legislation that would have saved Californians 40 to 75 percent on prescription drugs,'' said Assemblyman Dario Frommer, D-Los Feliz (Los Angeles County), the author of two prescription drug bills. Schwarzenegger, however, address the issue in his recent "State of the State" address, "Health care. I ask myself, what's the quickest way that we can help the greatest number of people with the spiraling health care costs? I believe in the free market. I believe in free trade. I mean we buy food from overseas. We buy cars from overseas. Why not prescription drugs? So I call upon the federal government to permit the safe importation of prescription drugs. I say, let the free market work".

Tequila agreement formed by U.S. and Mexico.  The United States and Mexico have signed a tequila trade agreement, resolving a dispute sparked by Mexico's threat to cut off bulk exports of the liquor to the U.S. market.  The agreement creates a registry of approved tequila bottlers and eliminates restrictions of bulk tequila exports to the U.S. as well Mexican regulation of tequila labelling or marketing. In 2003 Mexico said it could stop all bulk exports of tequila to assure the high quality of the gold-plated name brand that is owned by the Mexican government. The Bush administration, citing the potential loss of bottling plant jobs in California, Arkansas, Missouri and Kentucky, protested against Mexico's intention in negotiations that lasted about two years. "Mexico's initial position, which would have required that all Mexican-made tequila be bottled in Mexico, threatened the huge investments by U.S. companies in building bottling plants and developing brands in the United States", US Trade Representative Rob Portman said. The US is Mexico's largest export market for tequila and accounts for 50 per cent of Mexican production.

Agriculture officials pay peach farmers to cut down trees.Canned peaches have been a part of the Central Valley's economy for decades. But with a recent market downturn, government officials are paying farmers to tear down some of their trees. California farmers grow about 85 percent of the peaches that end up in a can in the United States, but demand has been falling as consumers buy more fresh fruit and cheaper imports from places like Greece and China have cut into the state's share of the market. The glut has led the U.S. Department of Agriculture to offer $7 million to California growers who agreed to cut their trees and promised not to plant peaches for the next 10 years. AP reported that this isn't the first time the USDA is helping struggling peach farmers. The agency regularly buys surplus canned peaches to supply government-funded institutions, making them a staple in school cafeterias, senior citizen centers and disaster relief programs. Last year, the USDA spent more than $26 million on the syrupy fruit. It's also not the first time farmers have been offered money to tear out their peach trees. The California Canning Peach Association paid growers to cut down orchards four times over the past 20 years. But the effort failed when other farmers planted more orchards. There are more acres devoted to the summer fruit now than there have been in a decade, according to the association. American consumers are also eating more imported peaches than ever. According to Rich Hudgins, president of the canning association, the share of imported canned peaches has nearly doubled in the past decade, with foreign peaches now accounting for about 11 percent of the domestic market. "The scope of the problem was just too big for us to handle," Hudgins said, explaining the government's decision to step in. About a quarter of the state's canning peach farmers applied for the government's offer of up to $1,700 per acre of trees destroyed.

Ex-Governors support "Green Freight" Initiative.Four of California's ex-Governors have jointly written an editorial in the Los Angeles Times calling for both increased trade cargo and better infrastructure for Southern California's ports. Excerpts:

More than 14 million containers move through the Los Angeles Basin each year. Bouncing along local streets battered by truck traffic; surrounded by tractor-trailers on the Long Beach and Pomona freeways; and delayed at rail crossings in the San Gabriel Valley, northern Orange County and the Inland Empire, people living along our major trade corridors can be forgiven for believing that a reduction in trade would be better than an increase" ... "we believe the answer is not less trade, but more. In fact, handling more trade at the ports and corridors than we do today is the only way to fix the problem. This surprising conclusion is rooted in the mutual dependence of the private and public sectors. Two types of projects are needed -- those that allow us to move more containers to and from the ports and those that protect the surrounding environment and community -- and neither can proceed alone"... "The state... needs the new permanent jobs and taxes generated by moving more international goods to pay back the bonds needed for critical environmental and community projects. In other words, trade growth, congestion relief and air quality will all sink or swim together. As former governors representing both major political parties, we are united in our opposition to sinking. We have come together to rally business and local community leaders behind what could be called a ``green freight'' initiative -- a self-reinforcing cycle of investment in trade growth and environmental improvement projects"... "The way forward is to build support for a coordinated effort in which the public and private sectors will each pay only for those projects from which they derive tangible benefits. The state must only pay for projects that make communities more livable, such as eliminating delays at rail crossings or reducing or eliminating diesel pollution along freeways. Meanwhile, the private-sector partners should focus their investments on adding capacity and efficiency, and paying for any state-mandated environmental mitigation. Southern California's goods-movement system is nearing a breaking point. We are now working with the Southern California Leadership Council to create a virtuous cycle of investment that will unite the green of money associated with economic growth and the green of environmental protection".

The editorial was published December 22 and was signed by Jerry Brown, George Deukmejian, Pete Wilson and Gray Davis. 

UC Wins Los Alamos Management Contract. In a result expected by almost no one, the University of California, along with its three corporate partners, has been awarded the new management contract for the Los Alamos National Laboratory, the Department of Energy announced this month. The UC has managed the lab since it started in 1943, but its role in operating the lab was threatened by a series of mismanagement troubles that led the DOE to open the lab's contract to competition. After the UC Board of Regents voted to compete for the contract, the university teamed up with engineering and management firm Bechtel National, BWX Technologies and the Washington Group International to form the Los Alamos National Security team, which submitted the winning bid. The UC-Bechtel management proposal won against a joint bid for the lab by the University of Texas and defense contractor Lockheed Martin. Most observers thought it was unlikely that UC would win this bid, given that it was put up for bid because of alligations of past mismanagement, plus the perceived political closeness of the University of Texas to the Bush Administration. The new contract will be for seven years and includes provisions to earn extensions of an additional 17 years. Tom D'Agostino, a selection official and assistant deputy administrator for defense programs at National Nuclear Security Administration said at a DOE press conference that though the UC has had problems in the past, the new UC and Bechtel-led management called Los Alamos National Security will be able to capitalize on the strength of each of its individual partners. The Secretary of Energy Samuel Bodman said the contract will include new measures for accountability and provide the lab with the means to enhance its pioneering research. Bodman stressed that the new contract is not a continuation of the UC's old contract, saying the DOE is more concerned with the future of the lab than its past. "This contract marks a new approach to management at Los Alamos, one that will benefit the national security of the United States through superb science," he said.
 

Have you heard  any public sector news related to "international business"please let us know at caltrade@gmail.com. 

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Disney buys Pixner.  Steve Jobs is on a roll. Not only has his iPod been the hottest thing on the markets in recent memory, Walt Disney has just announced that it is buying his Pixar animated studio in a deal worth $7.4 billion. Pixar has had a run of of cartoon hits, including the two "Toy Story" films, "Finding Nemo" and "The Incredibles."
Steve Jobs, the CEO of Apple and Pixar, will become a board member of Disney following the closing of Disney's purchase of Pixar. According to the terms of the deal, Disney will issue 2.3 shares for each Pixar share. "The addition of Pixar significantly enhances Disney animation, which is a critical creative engine for driving growth across our businesses," said Disney CEO Robert Iger in a statement. This deal probably would not have happened a few years ago. The two companies broke off talks to extend their current distribution agreement in 2004 due to a strained relationship between Jobs and former Disney CEO Michael Eisner. But since Iger succeeded Eisner last year, he has extended an olive branch to Jobs. According to an article in Slate, there is already speculation that Jobs may one day succeed Iger. "After the deal, Jobs will become a member of Disney's board. Jobs has more entrepreneurial, managerial, and Wall Street credibility than anybody at Disney. (How many other executives have built multi-billion-dollar stakes in two companies from scratch?) Jobs owns 60 million shares of Pixar, a bit more than half the company, which means he'll wind up with 138 million shares of Disney, about 6 percent of the company. That would dwarf the holdings of today's largest Disney shareholders".

Apple Profits soar on iPod Sales.Apple had a record-breaking fiscal first quarter, which ended Dec. 31, thanks to its iPod music and video players. The iPod accounted for about half of the company's year-end revenue and was a hot selling item over the Christmas holidays. The Cupertino company sold 14 million iPods, exceeding the predictions of analysts who expected sales of 10 million. Overall, Apple recorded profits of $565 million, or 65 cents a share, and revenue of $5.75 billion during the 14-week quarter. For the same period a year ago, the company had profits of $295 million, or 35 cents a share, with sales of $3.49 billion. "We are thrilled to report the best quarter in Apple's history", Apple Chief Executive Steve Jobs said in a statement. During the holiday season, Apple sold more iPods then its Macintosh computer. The company reported $2.9 billion in iPod sales, while Macintosh computers had revenue of $1.72 billion.

Virgin America gets funding. Financial backers have finally been found for for Virgin America- a new venture of Richard Branson: the billionaire founder of Virgin Atlantic of Great Britain. Because of U.S. law regulating ownership in the domestic Airline industry, Mr. Branson was not allowed to be a majority investor, and finding American investors in this time of Airline failures, proved to be a challenge. According to a report in Airline Business, virgin's Fred Reid, the veteran Delta Air Lines and Lufthansa executive who has spent nearly two years in investor roadshows seeking funding for Virgin’s venture, emerged just before Christmas with enough funding in hand to grab the public eye. Airline bankruptcies, the oil shock and merciless competition may have made some bankers wary, but with $177.3 million committed to its start-up, Virgin America will be the most strongly capitalized US launch yet, with deeper pockets than JetBlue Airways. Many observers have viewed Branson’s vow to start a US airline as a direct challenge to the nation’s ownership regime, but Reid says that is not the case. Of the total capital, $90 million is from VAI Partners, a US investment group funded by Black Canyon Capital and Cyrus Capital Partners. The two funds are run by veterans of large Wall Street companies, including defunct investment bank Drexel Burnham Lambert. About $30 million comes from companies owned by Branson. The rest is debt held by Virgin companies. Virgin plans to have 17 new Airbus A319s and A320s flying within its first year. It has agreements for 33 of the narrowbodies in all, financed by Airbus and GE, which would supply the engines.  Virgin America, which will be based out of the San Francisco International Airport, recently announced the signing of a long-term building lease for the company's headquarters in South San Francisco. The 42,000-square-foot building is housed at the Bay Park Plaza II located at 555 Airport Blvd. Virgin America reports that it plans to move into its new office by March of this year, creating some 1,500 new jobs within its first two years of operation. The Department of Transportation and the Federal Aviation Administration must give the airline and its fleet safety approval before any flights take off. According to a Virgin America spokesperson, the airline will be prepared to fly in mid-2006, but that may change depending on how long it takes for the airline to become certified by the FAA and the Department of Transportation to offer transportation in the United States.

Acura Design Center to be based in California.Taking some of the sting out of the recent loss of  Nissan's North American Headquarters, Honda Motor Co. has chosen Torrance as the site of the brand's first design center. "Acura will become a more global brand, and will go out into China and Japan," Honda President Takeo Fukui said in an interview at the North American International Auto Show in Detroit. "Acura models developed in the U.S., led by U.S. engineers, will become key products in the global operation". The new design center will open next year in Torrance, home to Honda's U.S. headquarters, Fukui said. Acuras are currently designed at Honda design studios in Torrance and in Japan. It will cost "less than $10 million" and probably employ fewer than 100 designers, said Koichi Kondo, Honda's North American chief executive. More than a dozen automotive design studios run by the world's biggest automakers are based in California. Honda, based in Tokyo, began selling Acura models in the U.S. in 1986 to retain buyers looking to upgrade from Honda's small, fuel-efficient cars to larger, more luxurious models. Acura, the No. 5 premium auto brand in the U.S., will build the studio after selling a record 209,610 cars and light trucks in 2005, a 5.4% increase from the year before. Lexus sold 302,895 vehicles in the U.S. last year and is the country's largest luxury brand, followed by BMW, General Motors Corp.'s Cadillac and DaimlerChrysler's Mercedes-Benz. Honda said last month that as many as five Acura models would be sold in Japan starting in 2008. Sales in China begin this year, Fukui said, and the automaker "hopes to sell about 250,000 to 300,000" Acuras a year worldwide by 2008. Acuras are now sold mainly in the U.S. and Canada.

California Wine Losing Market Share.Two recent studies of the U.S. wine market have found that California was losing out to foreign competitors in both market share and consumer perception. A study by the Wine Market Council found that consumers liked foreign vintages for two reasons: taste and price. American consumers scored Italian wines higher than the state's varietals on a measurement of satisfaction. The same wine drinkers said Italian and Australian wines were of better quality, while Australian wines were deemed the best value. The study, released at the Culinary Institute of America in St. Helena during a presentation about attitudes of U.S. wine consumers, followed a report by New York brokerage Merrill Lynch & Co. this week that said California was slowly losing market share to imported wines in grocery store sales. "This is something that should be a real wake-up call for California's wine industry," said Michaela Rodeno, chief executive of St. Supery Vineyard & Winery in Napa Valley and the council's chairwoman in an interview with the LA Times. "California used to have 90% of the business in the U.S. and now it is down to 74%," including restaurants and other places that sell wine. A review of supermarket scanner data by Merrill Lynch found that California's share of the U.S. wine market by volume slipped 0.7 percentage point to 71.4% in 2005. Australian wines picked up 0.7 percentage point to hold 7.7% of the market. "Australian wines have been beating us up at the lower price points," said Nat DiBuduo, president of Fresno-based Allied Grape Growers, the state's largest wine grape growing cooperative. He also said California's industry was not about to concede the low end of the market. "We are going to fight this battle," he said. "We are not backing off from producing good quality wine that is priced competitively." The Wine Institute, California's largest wine trade group, said its own surveys showed that the state's wine beat wine from every other region in comparisons of taste, value and quality. "We are in a good position, we have the majority of market share but we know we need to get a cohesive message out about California," institute spokeswoman Nancy Light said. "It is a very competitive global market out there."

Starwood Capital buys Mammoth Mountain Ski Area. Intrawest Corporation announced that an entity controlled by Starwood Capital Group Global, L.L.C. (Starwood Capital) has completed the previously announced purchase of a majority interest in Mammoth Mountain Ski Area, based on an enterprise value of $365 million. The transaction has resulted in a pre-tax profit to Intrawest of approximately $101 million. Intrawest has retained a 15 per cent interest in Mammoth Mountain and will continue to provide management expertise and other corporate resources as required. The operations of the resort will remain unchanged with Rusty Gregory continuing as chairman and chief executive officer and maintaining approximately a 12.5 per cent interest. Also previously announced, Intrawest and Starwood have entered into a preliminary agreement for a joint venture on the development of the majority of Intrawest's separately owned real estate in the Town of Mammoth Lakes. With the closing of the MMSA transaction and with Starwood completing the greater part of its due diligence, Intrawest and Starwood will now turn to finalizing the terms and conditions on the joint venture agreement which is expected to be completed by the end of January 2006. Mammoth Mountain Ski Area is the leading mountain resort company in California, owning Mammoth Mountain, June Mountain, Tamarack Lodge, Mammoth Mountain Inn and Resort, Mammoth Snowmobile Adventures and Mammoth Mountain Bike Park. The company also operates Sierra Star Golf Club in Mammoth Lakes, California. Mammoth Hospitality Management is a 50/50 joint venture between Mammoth Mountain and Intrawest that currently manages over 380 units in the Village at Mammoth and will manage future units developed by Intrawest at Mammoth. Starwood Capital Group Global, L.L.C., which is headquartered in Greenwich, Connecticut with offices in San Francisco, Washington, D.C., Atlanta, London, Luxembourg and Tokyo, has been involved in eal estate investments since its inception in 1991. Its investors include some of the largest state and corporate pension funds, endowments and high-net worth families from around the world. Currently, Starwood Capital manages a real estate portfolio valued at over $10 billion.

Seagate buys Maxtor.Seagate and Maxtor- two of the major hard disk drive manufacturers, have jointly announced that they have entered into a definitive agreement under which Seagate will acquire Maxtor in an all stock transaction. The value of the transaction is approximately $1.9 billion. The combined company will retain the Seagate name and executive offices will be located in Scotts Valley, California. Seagate's chairman, CEO, executive vice presidents, and the principal equity investors have committed to vote their shares in favour of the acquisition. "This transaction has significant strategic and financial benefits, and the combined company will be better positioned to anticipate and serve the needs of the global customer base in the highly competitive data storage market," Steve Luczo, Seagate chairman, said. The combination of Seagate and Maxtor will build on Seagate's foundation as the premier global hard disc drive company, and will enable the combined company to compete more effectively as the highly competitive data storage industry addresses the challenges and opportunities for significant growth that lie ahead. "With the increased scale of the combined company, we can reduce overall product costs and provide more innovative products at more competitive prices," said Bill Watkins, CEO, Seagate. "We believe this is a strategic combination that will provide value for our shareholders as well as benefits for our customers". added.

Australian Surfware company buys California's Nixon brand. Australian surfwear company Billabong International Ltd is continuing its global push with the acquisition of California-based youth brand Nixon Inc. Billabong International chief executive Derek O'Neill said the acquisition would bolster the firm's prospects in the under-represented watch and sports accessory markets. "We're not actively out there pursuing acquisitions but this is a category that we were under-represented, so it's really a natural fit," he said. The $97 million acquisition includes a future payment of up to $24 million dependant on future earnings and the company founders, Andy Laats and Chad DiNenna, remaining with the firm for five years. "We expect they'll be there driving and running this brand indefinitely," Mr O'Neill said. The firm will now look to expand Nixon's Australian and worldwide reach, with its watches and accessories available in about 30 countries compared to Billabong's 100. "We'll be looking to utilise the penetration we have in Australia to expand upon that and give it a bit more presence in the market," he said.

Gap hires IBM to Manage its Information Technology. Gap Inc. has hired International Business Machines Corporation to operate parts of its information technology structure to improve efficiency, a deal worth about $1.1 billion to IBM over about 10 years, the clothing retailer said in an SEC filing.   San Francisco-based Gap, which has reported lower sales for 13 of the past 14 months, said the arrangement would also help it cut costs. IBM will support Gap's data center, store operations, as well as support Gap's help desk and disaster recovery services, among other business areas. Gap said it expects about 400 of its employees or workers at its subsidiaries to join IBM. The retailer, which runs the Old Navy, Banana Republic and namesake Gap clothing chains, said the agreement has an initial term of 10 years, though it could renew it for up to three additional years.

Craigslist May Move into News.  Craig Newmark, the creator of the popular Craigslist Internet site, is getting involved in the news business according to a report in the San Francisco Chronicle. Newmark told them that he is working with other people on a new media venture involving "technologies that promise to help people find the most trusted versions of the more important stories." The Craigslist business model has already reeked havoc on the Nation's newspapers by deep penetration into their classified ad business- their bread and butter business. Long known as a "hippy company" offering mostly free services, Craiglist received an investment from eBay Corporation recently when they bought a 10 percent share of Craigslist  The British newspaper the Guardian, writing about a speech Newmark gave at a conference in Oxford, characterized his plans as a major online journalism project that would launch in three months. Newmark, perhaps trying to avoid the rath of an industry later said in his blog that the initiative is "not associated with Craigslist, just me, trying to help".  In a subsequent call to The Chronicle, Newmark said, "There is confusion about this thing being my effort, whereas I'm just a minor contributor to a second effort". 

The Guardian said Newmark criticized conventional U.S. media and said that a more decentralized "wisdom of crowds" approach might work better. "The big issue in the U.S. is that newspapers are afraid to talk truth to power. The White House press corps don't speak the truth to power -- they are frightened to lose access they don't have anyway." Newmark, who started Craigslist in his apartment in 1994 and has seen it grow to a worldwide audience, said recent developments, such as journalists coming under fire for controversial leaks in the Valerie Wilson case, are eroding readers' trust. "The American public has lost a lot of trust in conventional newspaper mechanisms. Mechanisms are now being developed online to correct that," he said, according to the Guardian. Yet Newmark, whose site was blamed in one study for siphoning $50 million in ads from Bay Area newspapers, struck a more conciliatory note on his blog, at "This kind of technology is intended to preserve the best of existing journalistic practices and should help retain newsroom jobs," he wrote. "It's intended to complement, preserve and grow existing media".
 

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David Tang, a partner at the Seattle law firm Preston Gates & Ellis, has been appointed chairman of the Federal Reserve Bank of San Francisco. Tang is now in charge of a group that contributes to the formulation of U.S. monetary policy, making recommendations based on regional economic information. His new role gives him a vote in setting the central bank’s interest rates. He is the first Asian American to lead the San Francisco bank’s board of directors.. A few years ago, John Nordstrom of the department-store family served as chair.

Sunkist Announces Resignation of President & CEO Jeff Gargiulo.  Sunkist Growers announced Jeff Gargiulo has decided not to renew his contract and will leave the company in June after five years as president and chief executive officer. Gargiulo assumed the leadership post at Sunkist when he joined the company in June 2001. During his tenure he spearheaded the reorganization of several of the Sunkist divisions while turning the focus of the organization toward leveraging the Sunkist brand.  He helped develop strategies for global sourcing and diversified products, including the introduction of Sunkist’s pre-cut fruit program and its berry marketing program.  Gargiulo, at one time one of the largest tomato growers in the world before he sold the company to Monsanto, is owner of Gargiulo Vineyards in Napa, California.

Dr. Eugene Eidenberg,  political scientist and a San Francisco businessman is part of a multinational delegation sent to observe the Jan. 25 Palestinian Legislative Council Elections. Dr. Eidenberg is on the board of the National Democratic Institute for International Affairs. This Institute and the Carter Center sent an 80-member delegation to the elections. The delegation is led by former U.S. President Jimmy Carter, former Swedish Prime Minister Carl Bildt, former Albanian president Rexhep Meidani, and former Spanish Foreign Minister and current member of the Spanish Parliament Ana Palacio.
 

Do you know someone who's "on the move"- please let us know at caltrade@gmail.com. 

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Sometimes, it takes a giant to stand up to a bully.  That's apparently what happened recently when Google refused U.S. Government demands that they turn over 1 million random web addresses and the records of all Google searches during a one-week period.  Microsoft, America Online, and of course Yahoo complied, but Google resisted the subpoena from the Justice Department saying it was a "fishing expedition".

The government made this request of Google not in conjunction with a criminal inquiry, but to gather data to help it revive a law, the Child Online Protection Act. That act would have required adults to use online access codes or registration systems before being able to see pornography or other material deemed harmful to minors.  This is part of the Bush administration's "war on pornography" but the Justice department said it was not trying to link this information to individuals.  Still, privacy advocates saw this as a disturbing first step.  While Google got tons of positive press from this stand, the whole thing has raised troubling questions.  How much information is Google storing about us, and why?  Google maintains a cookie on its registered users that expires in 2038, and originally it only recorded the user's IP address.  More recently, however,  it has begun to integrate services which record the user's personal search history, email, shopping habits, and social contacts. After first promising not to tie its email service to its search service, Google went ahead and did it anyway. It's all part of CEO Eric Schmidt's promise to create a "Google that knows more about you".

The positive press Google got was also off-set by the news that there is another bully they didn't stand up to, and that, unfortunately,  was the Chinese Government.  They have decided to join the club of American software companies helping the PRC government in censoring and blocking Internet content.  They explained it this way:

 "In order to operate from China, we have removed some content from the search results available on Google.cn, in response to local law, regulation or policy....While removing search results is inconsistent with Google's mission, providing no information (or a heavily degraded user experience that amounts to no information) is more inconsistent with our mission".

Translation: we would rather do the censorship ourselves than have any of our users encounter broken links.  I just disagree.  When I am watching a movie on TV, I would much rather hear the censor's "bleep" then have the censor use deceptive audio dubbing techniques to try to trick me into believing words that weren't in the original movie.  Like a Sylvester Stallone movie I remember, when during a tense confrontation with criminals, he called one of them a "melon farmer".   If the Chinese government wants to prevent its citizens from seeing certain political information then they should do their own dirty work, and if that means broken links in the Google search engine, so be it.     As one blogger put it, Google's motto of "do no evil" might now have to be changed to: "do just a little bit of evil".

About 60 years ago a man from India showed us the way; that there can be an immense amount of power in not cooperating with evil, so now we have to watch to make sure the giant that seemed to be on our side, doesn't itself turn into a bully.

Speaking of giants, Bechtel Corporation, California's last Fortune 500 engineering firm (Fluor Corp split for Texas last year) has won a victory in a long legal battle with the government of the nation of Bolivia.   The company had sued the impoverished nation before a World Bank trade court to demand compensation for a water-system privatization contract cancelled by a popular uprising in 2000.  Here is how it was described in the World War 4 Report:

In January 2000 the people of Cochabamba, Bolivia woke up one morning to discover that their public water system had been taken over by a mysterious new private company, Aguas del Tunari. The World Bank had coerced Bolivia to privatize its water, as a condition of further aid. The new company, controlled by Bechtel, the California engineering giant, announced its arrival with a huge overnight increase in local water bills. Water rates leapt by an average of more than fifty percent, and in some cases much higher. Bechtel and its Spanish co-investor, Abengoa, priced water beyond what many families here could afford.  The people demanded that the rate hikes be permanently reversed. The Bolivian government refused. Then the people demanded that the company’s contract be canceled. The government sent out police and soldiers to take control of the city and declared a state martial law.  In the face of beatings, of leaders being taken from their houses in the middle of the night, of a seventeen-year-old boy being shot and killed by the army – in the face of it all, the people did not back down. In April of 2000 Bechtel’s company was forced to leave and the people won back control of their water.

Bechtel, however, fought back.  The company filed a $50 million legal action against Bolivia in the World Bank’s trade court – the International Centre for Settlement of Investment Disputes (ICSID).  While this was a forum ideally suited for them, the company probably wasn't prepared for what followed:

What Bechtel did not count on was the firestorm of public protest that it would face. Cochabamba water revolt leaders, The Democracy Center, and a host of allies all over the world launched a global campaign to force Bechtel to drop the case.  Thousands sent e-mails to corporate executives. Protesters in San Francisco blocked the entrance to Bechtel’s headquarters, occupied its lobby, and draped a banner across its front. Dutch activists mounted a ladder and posted a sign renaming Bechtel’s Amsterdam office after Victor Hugo Daza, the 17-year-old killed in Cochabamba. The San Francisco Board of Supervisors approved a resolution calling on Bechtel to drop its case.  More than 300 organizations from 43 countries joined in a citizens petition to the World Bank demanding that the case be opened to public scrutiny and participation. Activists in Washington DC protested at the home of the head of Bechtel’s water company. Hundreds of articles and dozens of documentaries were published and produced worldwide, making Bechtel and its Bolivian water takeover a poster child of corporate greed and abuse.

So what did Bechtel get for all this bru ha ha?  About 30 cents.   That's right, Bechtel settled the case for a token payment of two bolivianos- the equivalent of thirty cents.  Bechtel’s CEO, Riley Bechtel, weary of the ongoing damage to the corporation’s reputation, was said to have personally intervened to bring the case to and end.  Bechtel officials flew to Bolivia this month to sign the agreement and collect their two coins.

Listen for that hissing sound.  It just could be the California real estate bubble beginning to deflate.  Maybe it won't "pop" but most people in the industry have already noticed a slow down, and since a stunning 50 percent of all new jobs in California in the last three years have been related to the real estate industry, this could be really bad news.  There was an interesting article recently by Paul Krugman, Economist and Columnist for the New York Times.  He cited a recent study of housing affordability that found "that for the nation as a whole, the cost of owning the median home is still only 23.7 percent of median family income".  He views the real estate economy, however, as dividing America into two basic regions that he calls "Flat Land" and "Zoned zone" that he describes as follows:

In Flatland, there's plenty of room to build houses, so house prices mainly reflect the cost of construction. As a result, Flatland is pretty much immune to housing bubbles. And in Flatland, houses have, if anything, become easier to afford since 2000 because of falling interest rates.  In the Zoned Zone, by contrast, buildable lots are scarce, and house prices mainly reflect the price of these lots rather than the cost of construction. As a result, house prices in the Zoned Zone are much less tied down by economic fundamentals than prices in Flatland.

His description of "Zoned Zone" fits California big cities and coastal zones perfectly- along with the New York and the Northeast, most of Florida, and other large American cities.  Krugman notes that most American families live in Flatland, but because housing costs so much more in Zoned Zone it has absorbed most of the value of the real estate bubble in the last few years.

You see, the unaffordability of housing in the early 1980's led to an epic collapse in the housing industry. Housing starts fell from more than 2 million in 1978 to only 1.06 million in 1982. And the housing implosion was one of the main factors in the worst economic slump since the Great Depression, which brought the unemployment rate to a peak of 10.8 percent at the end of 1982.

Let's hope not, but California's economy has become ridiculously over dependent on the Real Estate industry.  Many people made off like bandits during this bubble, but others will get burned.  "We are already seen the first wave of defaults in variable-rate mortgages" we heard one banker say.  Worse off are the people who don't have the same huge access to credit that has been given to homeowners.  "The real estate industry has killed off entrepreneurship" one business owner told us.   Worse still is the situation of small business owners and those on salaries whose income is already falling far behind rising rents and mortgages.  

What's going on in Sacramento?  As usual we don't know, but lately Governor Schwarzenegger's politics, while maybe not effective, have certainly been entertaining.  Many think he took a sharp turn to the left by proposing a massive new public works spending so he could get more Liberal votes.  If so, he may have misread the situation.  Progressives may cling to the idea that government investments can help sometimes, but they hate wasted money as much as anyone- maybe even more.  Steve Lopez, columnist for the Los Angeles Times quoted Democratic strategist Bill Carrick as saying of Governor Schwarzenegger: "it's almost as if he had a political breakdown, he said, "The equivalent would be for Sen. Ted Kennedy to call a press conference tomorrow and say he was wrong on the war and now he wants to send in more troops, crush the Iraqis, and then invade Syria".  He also reported that Stu Spencer,  the former Reagan campaign manager and the Grandfather of California GOP strategists got a call from Maria Shriver last year asking for advice on a smart political course for the Governor.  "Just tell the son of a bitch to start governing" he was said to have told her.  Lopez thought that was good advice, "I don't know how much Schwarzenegger pays the numbskulls on his advisory staff, but he could have fired them all and gone with those few words of wisdom. 

Meanwhile, the perceived left turn has caused an open revolt in the Republican Party.  Former California Republican Party chairman Michael Schroeder, wrote a brutal attack in the Orange County Register saying among other things:

"Gov. Schwarzenegger to date has not shown that he possesses the basic skills needed to competently govern... Since he came into office during a recall, he has swung wildly between the far right and the far left in the apparently mistaken belief that this constitutes governing from the center. It does not. It simply defines him as erratic and unable to govern. In each area of governance that has caught the governor's attention, he has been unable to stay with a policy direction for longer than the shelf life of a pint of yogurt. It is hard to get away from the feeling that the governor focuses on the nearest shiny object until a new one comes along".

Michael Der Manouel, the president of the Fresno County Lincoln Club, was even more blunt.  He says in his blog that he sees "no conceivable scenario" under which Schwarzenegger can be reelected next year.  His reasoning: "the special election was his re-election" and he has "seen no strategy, reason, or real analysis done by anyone to realistically prove that 500,000 voters will change their minds from 2005 to 2006. The indications that he is moving to the left on fiscal policy, borrowing and education spending are no matter. No Democrat votes are to be had for such pandering".

We're not sure that we agree, though he is right about the "pandering" part.  Remember, we were one of the early predictors that the Governor's special election would be a disaster (read, "What's the Matter with California" in our June  issue) but we are nowhere near ready to write Schwarzenegger off.  Republicans and right wing radio didn't get Schwarzenegger in, they got Davis out. Although the Governor and his staff may not want to believe it, it was Progressives and Democrats who voted Schwarzenegger into office, though many with the lukewarm support of also having voted against the recall.  These are the people who liked his initial bi-partisan approach, but were later offended and maybe insulted by some of the Governor's highly partisan attacks and special interest fundraising.  So accepting Mr. Der Manouel's premise that the Special Election really was a referendum on the Governor, and that 500,000 Democrats and progressives will now have to change their minds for Governor Schwarzenegger to win, the question is can he pull it off?

I think he can, but it may be a rough ride.  It could almost be on a movie set: the Terminator, hopelessly cornered by an angry right wing mob, makes one last desperate move.  He revs his Harley and turns sharply to the left- seeing a makeshift ramp, he speeds up it and flies over the fist waving crowd.  The Progressives tribe is stunned to see a flying man on a motorcycle sail over their left flank- which they had left undefended.  They saw his crashed motorcycle and rumpled body way out in the weeds in left field- but was this man friend or foe?  They sent scouts to investigate and they came back with an incredible story.  They said the man had survived but was badly injured, and that he spoke with an accent.  They couldn't understand everything he was saying but he said he had escaped from the far right and that he had brought with him big bags of money!  The scouts thought he might be crazy, because he said he had 68 billion dollars in those bags that he wanted to give them. "Do you think we should help him?" the scouts asked the Tribal Elders- "Do you think we can trust him?".

The Tribe was divided.  "It's a trick" the warriors said, "Don't you remember- he was the one shouting across the valley insulting our manhood!"  "No" said some of the merchants and trades people, "For too long we have fought, we must have peace in this valley- maybe he can help".  Still others said, "Wait- he's just crazy- he even says he recruited one of our kin and left her in the enemy camp as a spy- maybe the other side was just trying to get rid of him".  "I like him", still another said, "No one can understand him, but he keeps saying things will be 'fantastic' - I think he means us no harm".  In the end, there was no consensus, so the tribe decided he could live among them until the winter comes, then they will have a vote to decide if he can say.  To be continued...

Stu Spensor's advice that Schwarzenegger "just start Governing" was spot on, but that advice was given last year when that was a much better option.  Almost all of 2005 was wasted on the special election campaign.  The Democrats probably don't want to do him any favors, but their feet is to the fire also- California simply can't afford another wasted year.   The next year is going to be like seeing a bunch of people who just had a food fight who now try to sit down and conduct business so they can try to accomplish things for the State. 

This month's Lame Award is a no brainer.  I almost got writer's cramp trying to cover the University of California's numerous and outrageous salary abuses.  Several members of the UC Board of Regents say they didn't know about many of the hidden salary perks, and UC President Robert Dynes blamed it on other UC presidents who have heaped "policy upon policy" while not stating which ones transcend others.  We're sorry Mr. Dynes - that is lame! - and it is not clear if the Regents are pleading ignorance or incompetence.  In any event, the conclusion is inescapable:  The monkeys are in charge of the zoo.    Therefore, President Dynes and the UC Board of Regents, for disservice to your State and Country, below and beneath the call of duty, we hereby confer upon you the CIBR Lame Award.  Unfortunately, in this case, "Lame" doesn't quite capture the gravity of the situation- some of these shenanigans seem borderline criminal.

This is a situation where we surely could use "a terminator", but it was the affable "Arnold" who showed up at the Regents meeting in San Diego this month.  The Governor is also the President of the UC Board of Regents but this was the first time he had attended one of their meetings since he was elected.  He shook up the pompous formality of the Regents and drew laughter when he invited a student to speak and mostly boasted about his proposal to cancel student fee increases.  While everyone likes a "nice guy" we have to remind the Governor that this is serious business and this scandal happened on his watch.  The Regents meeting may have been great fun, but it just also may have been the scene of a crime.       

Note to State Legislature: Take away the University of California's authority to self govern- they have proved themselves to be inept at that responsibility, and while you are at ittake away their tenure.  Do these people not realize the incredible privilege of an offer of lifelong employment- one that exists almost no where else in our society.  For them to heap hidden benefits on top of their huge salaries is beyond outrageous. To ignore this you yourselves will be guilty of deliration of duty.  This system doesn't need a band aid, it needs radical surgery.

Let's move onto something positive.  We are making a concerted effort to do this because we have been accused of being too negative in this report.   In fact, we have apparently been banned from State government meetings because of opinions we have expressed here.  In truth, we do like positive stories, it's just that there are so many examples of extreme lameness in these politically and economically dark times, that we feel compelled to report it.  That's why this month, we are pleased to announce the Not Clueless Award.  We were all set to give this award to Google Corporation for standing up to the United States Government- in fact we thought it was a slam dunk, but then- actually as we were writing this, news broke that they had kowtowed to the Chinese government and will now be helping them with their censorship projects.

That means the prize goes to the runner-up.  Even though California got rid of its economic development agency a few years ago, a few State Departments have maintained some humble programs.  One of them, at the California Secretary of State's "California Business Portal" is called the International Business Relations Program.  As far as Government programs go, this one is fairly modest. It is simply a website where they have consolidated all the information about California's Foreign Consulates, Trade Offices, Bi-national Chambers, and Trade Associations.  Still, no one else wants to maintain this information, and it provides useful information not available elsewhere- and we doubt if they have spent much government money in providing this service.  California's Secretary of State is Bruce McPherson, who was appointed last year after having served as a Republican State Senator from Santa Cruz.  He may have inherited this program but he can accept the award.  Therefore, Secretary of State McPherson, for service to your State and Country above and beyond the call of duty... you got the idea- he gets this month's Not Clueless Award.  A special honor since he is are our first recipient.

An Honorable Mention for the "Not Clueless" Award goes to the California Energy Commission for their Global Energy Connection.  They have compiled a list of all companies in California known to be involved in the development of energy products, technologies and services for export to world markets.  When this organization goes on trade mission, they make sure there are engineer-to-engineer meetings that produce results, so the "junket" label does not fit.  They also seem to professionally manage their bid process, and have avoided the "no bid contracts" still being granted by some State agencies.  As Manager Tim Olsen told me "We always survey the market first to make sure we are not replicating work being done by the private sector".

Please let us know is you have any candidates for the "not clueless" award.  We do expect this award to be highly coveted, so let us know who you think best deserves it.

Till next time.

RG

What have you "Heard on the Street?" please let us know atcaltrade@gmail.com.