12-25-08

 

12-25-08
Sacramento Bee
The Economy at a Glance...Interactive Map
http://www.sacbee.com/1232/rich_media/1422637.html
This interactive map, created in partnership with the University of the Pacific's Business Forecasting Center, provides a detailed look at key economic trends and forecasts in the most heavily populated areas of the Central Valley. Here you can find data on employment, income and housing starts in the five major metropolitan areas from Sacramento to Fresno.
Contra Costa Times
Environmental concerns halt state's trout stocking; private plants continue...Paul Thissen
http://www.contracostatimes.com/environment/ci_11306402
The foot-long rainbow trout tumble out of the truck through a translucent tube, flying momentarily through the air before falling into the Lafayette Reservoir.
This used to be a weekly ritual at the reservoir, but now it only happens every other week. Elsewhere in the state it has stopped entirely. The state is no longer stocking Lake Refugio in Hercules.
A lawsuit by environmental groups has prevented the California Department of Fish and Game, which used to stock half the fish into the Lafayette reservoir, from planting any fish. Now the only fish stocks come from the private Mount Lassen Trout Farm.
Superficially, the suit pits environmentalists who worry about the environmental impacts of the trout — planted by the state for more than 100 years — against anglers who want to fish for stocked trout as they have for a century.
But for the moment it pits them both against the Department of Fish and Game. The only reason stocking has been halted is that the department failed to meet a court-ordered deadline to finish an environmental review of the stocking program.
"What's the environmental impact of anything that's been going on for 100 years?" said Jordan Traverso, a spokeswoman for the Fish and Game Department. "That's quite a task to achieve."
In November, a judge ordered a temporary halt to the stocking programs until the department can finish the review, scheduled to be complete in January 2010. An eventual agreement between the department and the environmental groups which filed the suit limited the scope of the ruling to affect only small lakes in threatened species habitat that are connected to streams.
In Contra Costa and Alameda counties, only the Lafayette and San Pablo Reservoirs and Lake Rufigio are affected; other lakes and reservoirs are still being stocked. A complete list of lakes that are and aren't being stocked is available at www.dfg.ca.gov.
Lafayette and San Pablo reservoirs are two of only a handful of places where the state is not allowed to stock, but private stocking continues.
It's good that anglers can still head to Lafayette and San Pablo, said John Beuttler, conservation director of the California Sportfishing Alliance. They're lakes he, too, has fished.
"There are so many urban anglers," he said. "These places give them a place to fish that's close to home."
Beuttler said he's not thrilled about the limitations on stocking, but he also thinks anglers need to be good environmental stewards. And he recognizes that the lawsuit by environmental groups is the same type of technique anglers might use under other circumstances to preserve fishing areas.
He hopes the department does a good impact review that addresses the concerns of both anglers and environmentalists, he said.
Thus far in 2008, about half of the trout stocked in the Lafayette Reservoir came from the Department of Fish and Game and half came from Mount Lassen's private farm — about 17,000 pounds each, said Rich Sykes, manager of natural resources for East Bay Municipal Utility District, which operates the Lafayette and San Pablo reservoirs.
In the San Pablo Reservoir, 34,000 pounds came from Mount Lassen and 11,000 pounds came from the department, Sykes said. The district also stocks 5,000 pounds of catfish into the San Pablo Reservoir.
The district pays for the extra stocking with the fishing access fees it charges, and the fees are set to just cover the program's costs, Sykes said.
The utility district is already trying to ensure that the stocking programs will not affect threatened species, primarily the red-legged frog.
"We're pretty familiar with the native species and the sensitive species around San Pablo and around Lafayette," Sykes said. "We don't believe that the stocking programs have any significant impact on those species."
The lakes are within the habitat of the red-legged frog and the foothill yellow-legged frog, said Eric Larson, biological program manager for the Fish and Game department. But no detailed studies on the frogs' presence at those lakes has been done, he said.
There is not too much literature about the effects of trout on the red-legged frog, but there is some that suggests they are affected by stocked fish, said Chris Frissell of the Pacific Rivers Council, which is based in Portland, Ore., and is one of the groups that filed the lawsuit. The effects need to be more closely studied, he said.
"Almost all those frogs in that genus, they're almost all vulnerable to fish predation at some life stage," Frissell said. "There can be effects in many different directions and ways and they can bounce back to affect native species in ways we don't expect."
In some places in California, there are studies that show a clear link between the fish stocking and the decline of threatened species.
It's a little frustrating that private stocking can continue in the same places the state has to stop, Frissell said, but "we did the best we could."
Santa Cruz Sentinel
More pharmacies accepting old medicines and used needles...JONDI GUMZ
http://www.santacruzsentinel.com/business/ci_11307395
Going to Grandma's house for the holidays? Check the medicine cabinet. Don't fret if it's chock-full of expired medications. Local pharmacies will help you get rid of them in a safe and environmentally sound way.
Two dozen drugstores have signed on to Sharp Solutions, a program that lets people drop off old medicines and used needles at no charge. Eleven pharmacies, most of them locally owned, will take both, as does Walgreens; Longs and Safeway accept needles only. Scotts Valley Medical Clinic and the Santa Cruz Police Department accept medicines only.
The program is coordinated by the county of Santa Cruz with the cities of Santa Cruz, Watsonville, Scotts Valley and Capitola.
Flushing expired drugs down the toilet had been a common practice until people realized wastewater treatment plants do not remove pharmaceuticals.
The Associated Press reported in March that trace amounts of commonly used drugs turned up in drinking water in 24 of 28 metropolitan areas tested.
Local efforts to reduce pollution and public health risks from old medications got under way in 2006, thanks to a caring teen and initiative by the city of Santa Cruz.
When Rebecca Kassel learned how flushing drugs away could disturb aquatic life in Monterey Bay, the 17-year-old Aptos High School student was appalled. She proposed pharmacies help consumers keep drugs out of the bay.
Her idea won state Sen. Joe Simitian's "There Ought to be a Law" contest in 2006. Simitian's bill, SB 966, became law in 2007.
Inspired by Kassel, staff at the city of Santa Cruz wastewater treatment plant initiated a pilot project for safe disposal of medicines, teaming up with Horsnyder Pharmacy, Sutter Maternity and Surgery Center, the Santa Cruz Police Department and Westside Pharmacy.
Then a local company, Advanced Waste Solutions, offered to work with the county Environmental Health Department to collect "sharps," or used needles at no cost at a few drugstores. Horsnyder, Westside, and Bruce's Medical Plaza Pharmacy in Santa Cruz signed on along with two South County drugstores, Valle Verde and Watsonville Pharmacy.
In September, SB 1305 banned disposal of sharps in the garbage and requires sharps be transported in an approved container.
Locally, officials were prepared for the change, sponsoring a one-day take-back event in October. Horsnyder and Westside stepped up again, along with New Leaf Community Markets Pharmacy in Felton, Lauden Pharmacy in Capitola and Watsonville Pharmacy.
The response was huge: 298 people dropped off 703 pounds of medicine and 203 pounds of needles, waste that otherwise might have been flushed down the toilet or buried in a landfill.
Ramona Lloyd, a retired county worker, turned in outdated ibuprofen and aspirin, several inhalers, and dozens of needles used by her husband, who is diabetic.
Angela Rose, mother of a 2-year-old, brought in hundreds of needles she had accumulated after contracting gestational diabetes during pregnancy.
"People told me to put them in a bleach container and throw them out but it didn't feel right," said Rose. "It makes me feel good to know that getting rid of them isn't putting anyone at risk."
Los Angeles Times
Lavish spending is not the culprit in California budget crisis...George Skelton, Capitol Journal
http://www.latimes.com/news/columnists/la-me-cap25-2008dec25,0,6492861,print.column
Reporting from Sacramento — There's a giant Christmas tree all lit up outside California's Capitol. But inside, the place is hardly filled with tidings of joy.
This has not been a season to be jolly.
The state faces a real danger of running out of cash by spring. Major highway projects already are being delayed because the state can't sell bonds. It's facing a $15-billion deficit in the fiscal year that ends June 30 and, if nothing's done about it, another $25-billion-plus for the next fiscal year.
That totals $40 billion in red ink. But the figure really is moot because before things ever get that bad, state government will have collapsed.
Everybody's pointing fingers as they squabble over a solution.
The Republican governor and Democratic legislators ridicule GOP lawmakers as ultraconservative, inflexible obstructionists because they refuse to vote for a tax increase.
Democrats are denounced by Republicans as out-of-control spenders. Nothing new there. But now the GOP also is taking dead aim at Gov. Arnold Schwarzenegger. And why not? Virtually nothing gets spent without a governor's sign-off.
But how lavish has been the spending on Schwarzenegger's watch?
Assembly Republican Leader Mike Villines of Clovis last week pegged the spending growth at 43% and asserted: "It is unfortunate that the governor and Democrats are only interested in raising taxes."
That's not quite true. Democrats last week passed a bill that would have pared spending by $7.3 billion -- on top of $11 billion in previous program cuts this year -- while raising taxes and fees by $9.3 billion. Schwarzenegger said he'd veto the bill because the cuts weren't deep enough and the taxes were too high.
Villines' broadside at Schwarzenegger prompted an angry response from the governor's office. Communications director Matt David accused Republicans of blocking tax hikes "because they have signed pledges to protect special interests." And he called the 43% spending growth figure a "factual inaccuracy." David placed it at only 32%.
Both men were referring to the general fund, the state's main account, over which the governor exercises the most control. There also are special funds fed by user fees and taxes designated by voters for specific programs.
Added together, the general fund, special funds and bond spending amount to a current grand budget total of $144.5 billion. That's about a 39% increase over what Schwarzenegger inherited, David calculates.
Like a fool, I set out to find the correct percentage for general fund spending growth. Was it 43% or 32%?
The answer depends on what you count, of course. And remember that Schwarzenegger took office in November 2003.
Villines' 43% figure uses as its base the last budget signed by recalled Gov. Gray Davis in late summer 2003. That number is compared with the current budget signed by Schwarzenegger in September. The adopted general fund budgets for each year are $71.1 billion and $103.4 billion, respectively. And that actually amounts to 45% growth.
David's 32% growth figure uses a higher base: the final 2003-04 spending total of $78.3 billion that was calculated after all the bills had been paid, long past the end of the fiscal year. That figure will go into the archives as the year's official general fund spending total.
But the GOP has a good point: When the administration compares final spending for 2003-04 with merely an adopted budget for 2008-09, it's like comparing fruitcake to eggnog.
There's less contention over what accounts for the spending growth. For that, I checked with the state Finance Department.
To begin with, inflation and population combined have grown nearly 25% since Schwarzenegger took office. So that's responsible for much of the increased spending.
"None of us decided, 'Oh, boy, let's have a party and grow government,' " said Finance Director Mike Genest. "In all those years, there was virtually no money for new spending commitments."
Well, there was one commitment. And it amounts to the single biggest chunk of the spending growth, nearly 25% worth. That was paying for Schwarzenegger's car-tax cut, his first -- and most fiscally imprudent -- act in office.
All the revenue from the car tax -- officially the vehicle license fee -- had gone to local governments. Schwarzenegger cut the tax by two-thirds and generously agreed to "backfill" local governments for their loss with money from the general fund. That's a $6.2-billion annual hit.
Prisons have swallowed 17% of the spending growth. It's all those tougher sentences.
Some so-called social programs also have been cost-drivers. Medi-Cal accounts for 17% of the spending increase. As the economy tanks, more people qualify.
Mental healthcare costs are escalating. More kids are being treated and so are a new category of "sexually violent predators." The cost of developmental services is rising as more children are diagnosed with autism and the population ages. In-home supportive services are costing more because pay is rising for providers. They got tired of bathing and dressing invalid shut-ins on minimum wages.
Education? K-12 schools account for only 12% of the spending growth.
One other item: We're up to $6.1 billion in annual debt payments on loans.
It all adds up to relatively modest, real spending growth, less than under most modern governors.
The biggest sin of Schwarzenegger and Legislature has been muddling along, unwilling to confront the inevitable need for both spending cuts and tax increases.
And the greatest transgression was that car-tax cut. Largely because of it, Sacramento again will be kicking the aged, blind and disabled. Bah, humbug.
Pinched colleges squeezing their alumni
As the economic downturn shrinks endowments, big institutions may be affected more than smaller schools that rely more on fees. Officials try to strike a balance in the messages sent to graduates...Gale Holland
http://www.latimes.com/news/local/la-me-alumni25-2008dec25,0,1944375,print.story
The first e-mail to alumni was encouraging: Syracuse University would be cutting costs but remained "solidly positioned" to weather the financial downturn, college president Nancy Cantor said in mid-November. In fact, a $1-billion college campaign was on track, with $600 million raised and $200 million earmarked for scholarships, she said.
Three weeks later, the mood had darkened: 400 students would have to drop out of school unless alumni contributed $2 million in emergency aid, Syracuse fundraising co-chairman Howard Phansteil warned.
"Without additional scholarship support -- they won't be back at SU in January," Phansteil said in the e-mail. "So please give now." The last two words linked to a page listing payment options.
A Syracuse spokesman said the campaign money was intended for long-term obligations, including future financial aid, while the scholarship appeal was for emergency shortfalls. Still, the mixed messages reflect the difficulty many colleges are having in responding to an economic dive that remains very much a moving target.
Walking a narrow ledge between reassurance and realism, college presidents and chancellors have struggled to assess the effect of a slow-motion slump that has no clear beginning or end. More than one president has sent out a relatively rosy assessment, only to follow up with news of cutbacks, hiring freezes and canceled projects.
"The severity of this and the universality has taken everyone by surprise," UC Berkeley Chancellor Robert Birgeneau said in a recent interview.
For public colleges, the financial crisis was immediate. With the state budget in disarray, both the California State University and University of California systems are looking at undergraduate student fee hikes of up to 10% for next year, and Cal State also will reduce its 450,000 enrollment by 10,000 students for the same period.
The plunge also delivered a sharp punch to some of the nation's wealthiest universities. With $8 billion in losses to its $36-billion endowment, Harvard recently announced a hiring freeze and suspended faculty searches. Yale's $23-billion endowment has lost 25% of its value since June, the college announced this week. It ordered cutbacks including deferring construction projects and restricting raises, travel and new hiring.
Stanford University, citing steep losses in its $17.2-billion endowment, has reduced research funding and financial aid and ordered across-the-board budget cuts of up to 15% over two years, including some layoffs and a hiring freeze. Top officials recently took a voluntary 10% salary cut.
No one is worried about these institutions withering away -- they remain the No. 1, 2 and 3 "super-endowed" colleges in the country. But the news of financial troubles sent ripples through their communities of students, parents and alumni -- especially alumni, who often hold memories of their alma maters close and like them to remain unchanged.
"I was concerned," said Harvard alumnus Jeremy Friedman, a Beverly Hills attorney. "No matter how much money you have, $8 billion is a large amount," he said of the school's loss.
Liberal arts colleges also have seen their endowments sink by double digits, but their budgets generally rely more heavily on tuition and fees than the research schools' do. At Stanford, about 29% of the general operating budget comes from its endowment, 28% from research revenue and only 25% from tuition. Occidental College in Eagle Rock, on the other hand, derives 18% of its budget from endowment revenues, and Mount St. Mary's College in Los Angeles only 3%, with the rest coming from tuition, room and board, and other fees.
Many of the liberal arts schools enjoyed exponential investment gains in the flush years. At Pitzer College, one of the Claremont Colleges, for example, the endowment had soared 136% during the last six years, but it is now down 31% from its peak. Although some colleges have stopped new construction, many are completing major projects or renovations begun in better times. Santa Clara University has a new $95-million library and a $48-million business school; Harvey Mudd College, another of the Claremont schools, plans to complete a dorm renovation next summer.
As long as students continue to apply to, and stay in, college, many liberal arts schools could be squeezed less than their larger counterparts, administrators said. Enrollment is steady or on the rise at many California colleges -- no surprise in a dismal job market.
"It's a strange moment where rich institutions are at a financial disadvantage over institutions that are more driven by tuition," said Thomas Minar, vice president of development and alumni relations at American University in Washington, D.C. Minar is also president of the Pomona College alumni association. "We spent a lot of our lives wishing we had their endowments."
The biggest financial pressure on many schools is expected to come as families seek more help with college costs. The first appeals are coming from parents who own small businesses affected by the retail downturn, but other families are expected to follow suit, several financial aid officers said.
Many parents in California and elsewhere had hoped to rely on home equity to pay for their children's education; but much of that has gone up in smoke, along with investment income. However, colleges probably will not feel the brunt of student financial troubles until later this academic year or next. Financial aid is generally set for the year, not the semester; spring fees are just now coming due; and many students are muddling through with the help of loan programs expanded by Congress last year.
Thomas Aquinas, a small Catholic college in Santa Paula, will rely on gifts to sustain aid for its students, many of whom come from large, middle-class families in need of financial help, President Thomas E. Dillon said. "Of course we're very apprehensive," he said.
Mills College, a liberal arts school in Oakland, has established a $500,000 emergency loan fund for students, but expects its supporters to cover the cost of that pool.
"One of the things that are quite wonderful is our annual giving is going up this year," Mills President Janet L. Holmgren said.
Santa Clara University has set up $225,000 in emergency financial aid for strapped students, with the help of the parent of a current student who donated enough money to cover half the fund, said James Purcell, vice president of university relations.
At Syracuse University, Kevin Quinn, vice president for public affairs, said alumni have responded warmly to the emergency appeal to help current students with fees. But Syracuse graduate Declan Durcan said he found the messages confusing.
"So we get an e-mail in November . . . and it sounded like things are fine," said Durcan, a Santa Monica network engineer. "Now they say they need a measly $2 million?"
Durcan said the amount "seems like panhandling in the scope of things."
David Gin, associate vice president of student finance and administrative services at Mills, recently returned from a financial aid conference in Las Vegas. He said most school officers expressed "a wait-and-see attitude" about the severity of the crisis. "We're always hopeful we can continue our work," Gin said.
Earlier this month, at Biola University in La Mirada, President Barry Corey announced an emergency relief board to provide financial counseling to financially distressed students considering dropping out. At a campus-wide chapel meeting, Corey said he knew that many students were hurting at the Christian college on the border of Los Angeles and Orange counties. But the 100-year-old institution is not in a financial crisis, he said.
"We are aware times are tough for some folks right now," said Corey. "But come what may, we made it through the Depression of the 1930s and the recessions since.
"We will make it through this recession now."
New UC Irvine law school to offer free tuition to first class
The plan is part of an ambitious strategy by Dean Erwin Chemerinsky to attract Ivy League-caliber students. 'Our goal is to be a top-20 law school from the first time we are ranked,' he says...Associated Press
http://www.latimes.com/news/local/la-me-uci-law-school25-2008dec25,0,4272653,print.story
UC Irvine's new law school, set to open next fall, is offering a big incentive to top students worried about the cost of a legal education during the recession: free tuition for three years.
The financial carrot is part of an ambitious strategy by Dean Erwin Chemerinsky, a renowned constitutional law scholar, to attract Ivy League-caliber students.
The school hopes to offer full scholarships to all 60 members of its inaugural class in 2009 -- but only the best and brightest need apply. Subsequent classes will face normal tuition.
Chemerinsky believes that the prospect of free education, combined with a public interest curriculum and the University of California moniker, will quickly fill his first class and eventually land Irvine among the nation's best law schools.
"Our goal is to be a top-20 law school from the first time we are ranked," he said.
Such a rapid rise to prominence would be unprecedented but not impossible, said Richard Morgan, founding dean of Boyd Law School at the University of Nevada, Las Vegas.
"It's like trying to fly the plane while you're still building it," he said, adding that competition for top-notch students is fierce.
There are 200 law schools accredited by the American Bar Assn., including two new schools in North Carolina.
Several others are in the planning stages in New York state, and dozens of unaccredited schools operate across the country.
At last count, 141,719 students were enrolled in ABA-accredited schools.
"During an economic downturn, there is historically an increase in law school applications," Chemerinsky said, explaining that it's an attractive option for undergraduates with poor job prospects.
Chemerinsky has hired 19 professors and administrators, including some who are abandoning jobs at prestigious universities.
The law school hopes to eventually enroll 600 students and to employ 40 to 50 professors.
Rachel Moran, president-elect of the Assn. of American Law Schools, is leaving her longtime post at UC Berkeley's revered Boalt Hall to teach at Irvine. She likens it to a "Star Trek" adventure.
"You're going where nobody's gone before," she said. "I feel that it's going to be a remarkable ride."
A law school has been part of UCI's long-term plan since the university opened in 1965. Its cost was incorporated into the campus growth plan, and Chemerinsky says no additional state funds will be needed to cover estimated first year costs of $25 million.
The school is also the beneficiary of a $20-million start-up grant from Donald Bren, chairman of the Irvine Co., and a $1-million grant from the Joan Irvine Smith and Athalie R. Clarke Foundation that will pay for the core collection at the law library.
Other Orange County businesses and law firms are pledging sizable donations to bolster an ambitious $100-million fundraising effort during the next 10 years.
Chemerinsky said he has made substantial progress toward raising the $6 million needed to fund full scholarships for his inaugural class. He's promising students a unique program with hands-on experience in legal clinics and eventual job interviews with more than 70 law firms, public interest law organizations and government offices.
Still, in a society seemingly overloaded with lawyers, the question arises: Do we need another law school?
"There isn't a need for another law school like all the rest," Chemerinsky said. "This is our chance to create the ideal law school for the 21st century."
San Diego Union-Tribune
City sued for approving large development
Residents oppose scope of proposal...Jennifer Vigil and Jeff McDonald
http://www3.signonsandiego.com/stories/2008/dec/25/
1cz25suit193241-city-sued-approving-large-developm/?zIndex=27588
SERRA MESA — A group of Serra Mesa residents is suing the San Diego City Council over its approval of a development near Montgomery Field they say is too big for the neighborhood.
The Serra Mesa Community Council filed its lawsuit Friday, claiming the City Council ignored state development rules requiring a formal environmental study before developers can proceed.
“We're frustrated that we weren't able to work within the system,” said James Feinberg, a member of the community council suing City Hall and the vice-chair of the Serra Mesa Planning Group, a neighborhood planning group that rejected the project.
“We thought we made a very strong case to the Planning Commission and to the City Council that this project is out of scale and out of character with the community.”
City Council President Ben Hueso said the council majority did its best to balance the needs of the community with the interests of the developers. “It's really hard to evaluate whether our decision is going to trigger a lawsuit,” Hueso said.
The lawsuit is the latest in a series of legal challenges to projects approved by the City Council. The city has been sued at least four times in recent months for approving projects that residents claimed did not adhere to the California Environmental Quality Act.
The Palladium at Aero project includes 412 apartments and almost 5,200 square feet of retail space on 7.5 acres at Aero Drive and Sandrock Road. It would replace four single-and two-story buildings set far back from the road with buildings of up to six levels.
The City Council approved the project 6-2 last month without requiring an environmental impact report, a formalized analysis that would have delayed the development and added to its cost.
Council members Donna Frye and Tony Young voted no.
Opponents describe the plan as out of character for Serra Mesa. They also worry that it will dwarf about 20 single-family homes nearby.
“This intersection is a major gateway into Serra Mesa, so this is going to totally transform it,” said Feinberg, the community council member. “Right now there's a big green swatch of open space, and instead there's going to be a big, tall and massive building.”
Instead of requiring the environmental study, the council approved a mitigated negative declaration, a document that says a development will have no adverse effect on the community.
The project is just inside the boundary of the Kearny Mesa Community Planning Group, which approved the plans in September on a 7-1 vote with one abstention.
But city planners asked the developers, Westcore Properties and Wermers Cos., to present their plans to the Serra Mesa Planning Group because it would also affect that community.
The Serra Mesa Planning Group voted 10-1 to reject the project, and urged both the Planning Commission and City Council to oppose the development. At least two members of the planning group also serve on the community council that filed the lawsuit.
Officials from Westcore Properties or Wermers Cos. did not return calls yesterday.
Frye, who represents the area, said the Palladium at Aero project would redefine the community – and could be used as a model for other developments in the future.
“That will be the basis for making (new developments) ever higher and larger,” she said.
The city should stop approving major projects without requiring developers to prepare environmental impact reports, Frye said. “I don't know of one lawsuit filed under CEQA where the community hasn't been successful,” she said.
This year, Kensington residents sued to overturn a council decision to allow a major retail, office and housing project in that neighborhood. The developer agreed to downsize the project to avoid a trial.
Since 2007, San Diego residents have sued over the city's approval of projects in Otay Mesa, Hillcrest and Kearny Mesa.
Quicker start to pension trial urged
Prosecutors point to appeals court ruling...Greg Moran
http://www3.signonsandiego.com/stories/2008/dec/25/
1m25pension23553-quicker-start-pension-trial-urged/?zIndex=27669
FEDERAL COURT — Federal prosecutors are seeking to accelerate the trial of former San Diego pension board members, using as leverage a recent appellate court decision that they contend undercuts a key defense argument.
If successful, the nearly three-year-old case could be headed for a trial in the first part of next year.
Potentially more important than any schedule is a ruling issued Thanksgiving week by the 9th U.S. Circuit Court of Appeals.
A three-judge panel of the court ruled in a political corruption case from Alaska that prosecutors don't need to show a violation of state laws before pursuing an honest services fraud case in federal court.
That could make it easier for prosecutors to get convictions for that kind of fraud, legal experts said. But while prosecutors in court papers say the ruling wipes out a key defense argument, a lawyer for one of the defendants disagreed.
A federal grand jury in San Diego indicted five former members of the retirement system on charges of mail fraud and honest services fraud. The latter charge makes it a crime for public officials to scheme to deprive citizens of their rights to an official's honest public services.
The charges center on a sequence of events in 2002 and 2003 that contributed to the city's deficit-ridden pension system. Prosecutors contend the defendants supported a city plan to put less money into the retirement system than needed in return for enhanced retirement benefits and a special retirement perk for one defendant, former firefighters union leader Ron Saathoff.
Other defendants are former pension system administrator Lawrence Grissom; former system lawyer Lorraine Chapin; and former board members Cathy Lexin, who was once human resources manager for the city, and Teresa Webster, who was once acting city auditor.
The proceedings in federal court have been largely on hold for the past year while awaiting a ruling from the California Supreme Court in a separate case. That one involves basically the same set of facts and charges some of the same people with breaking state conflict of interest laws when they voted in 2002.
Defense lawyers have argued that those votes are protected from prosecution under several exemptions in the state conflicts law. That is the question the Supreme Court will take up.
In the federal case, the defense lawyers have argued to U.S. District Court Judge Roger Benitez that there has to be a violation of state law in order for any honest services prosecution to proceed. And Benitez has indicated frequently in court that he may agree.
But now, all that might be moot.
While some federal courts have said state law violations are needed for a federal honest services case, Judge Raymond Fisher of the 9th Circuit rejected that in plain terms in the Alaska case.
He said the federal honest services law establishes a standard for honest services that all public officials have to follow, and “the government does not need to prove an independent violation of state law to sustain an honest services fraud conviction.”
The case involved an Alaska legislator who prosecutors said arranged for future legal work with an oil services company, in exchange for voting the way the company wanted and taking other steps. Somewhat remarkably, failing to disclose such actions does not violate Alaska state conflict of interest laws.
A federal district court judge cited that and ruled prosecutors could not use evidence relating to the conflicts of interest and the honest services charge in the trial. Prosecutors appealed and the higher court overturned the judge's ruling.
Assistant U.S. Attorney John Owens, the lead prosecutor in the pension case, said in court documents filed Dec. 4 that the appellate court ruling makes it clear “that state law is irrelevant to the charges in this case.”
Because of the new ruling, Owens asked Benitez to move up the date for pretrial motions, initially set for May, to March. He said doing so would mean the case could be tried in 2009.
Owens declined to comment further, but that position was largely endorsed by University of San Diego School of Law professor Shaun Martin. The opinion establishes a new rule for the entire 9th Circuit that is “a good opinion for the government and bad for the pension folks,” he said.
A footnote in the decision could leave an opening for the defense, however. In the note, Fisher said that the court was not passing judgment on actions by public officials that are specifically excused or condoned by state laws.
That is pretty much the argument defense lawyers are making in the case in front of the Supreme Court, defense lawyer Frank Vecchione said.
“There are three separate protections our clients received under state law that remain critical to the case, notwithstanding this opinion,” he said. “State law protections negate any fraud.”
Martin was skeptical if that argument would work. “There is an opening for an argument there, but it is not as good as before,” he said. “I think the chances of dismissal of this case are now a lot less than before.”
OVERVIEW
Background: A federal grand jury indicted five former members of the city of San Diego pension system three years ago on fraud charges. Their attorneys have argued that a violation of state law has to have occurred before the federal prosecution could proceed.
What's changing:The 9th Circuit Court, ruling in an Alaska case, found recently that federal charges can go forward without a state violation.
The future: The federal proceedings against the five defendants could move more quickly now, and a trial could occur in 2009.
New York Times
Coal Ash Spill Revives Issue of Its Hazards...Shaila Dewan. Felicity Barringer and Robbie Brown contributed reporting.
http://www.nytimes.com/2008/12/25/us/25sludge.html?sq=river&st=cse&scp=2&pagewanted=print 
KINGSTON, Tenn. — What may be the nation’s largest spill of coal ash lay thick and largely untouched over hundreds of acres of land and waterways Wednesday after a dam broke this week, as officials and environmentalists argued over its potential toxicity.
Federal studies have long shown coal ash to contain significant quantities of heavy metals like arsenic, lead and selenium, which can cause cancer and neurological problems. But with no official word on the dangers of the sludge in Tennessee, displaced residents spent Christmas Eve worried about their health and their property, and wondering what to do.
The spill took place at the Kingston Fossil Plant, a Tennessee Valley Authority generating plant about 40 miles west of Knoxville on the banks of the Emory River, which feeds into the Clinch River, and then the Tennessee River just downstream.
Holly Schean, a waitress whose home, which she shared with her parents, was swept off its foundation when millions of cubic yards of ash breached a retaining wall early Monday morning, said, “They’re giving their apologies, which don’t mean very much.”
The T.V.A., Ms. Schean said, has not yet declared the house uninhabitable. But, she said: “I don’t need your apologies. I need information.”
Even as the authority played down the risks, the spill reignited a debate over whether the federal government should regulate coal ash as a hazardous material. Similar ponds and mounds of ash exist at hundreds of coal plants around the nation.
The Tennessee Valley Authority has issued no warnings about the potential chemical dangers of the spill, saying there was as yet no evidence of toxic substances. “Most of that material is inert,” said Gilbert Francis Jr., a spokesman for the authority. “It does have some heavy metals within it, but it’s not toxic or anything.”
Mr. Francis said contaminants in water samples taken near the spill site and at the intake for the town of Kingston, six miles downstream, were within acceptable levels.
But a draft report last year by the federal Environmental Protection Agency found that fly ash, a byproduct of the burning of coal to produce electricity, does contain significant amounts of carcinogens and retains the heavy metal present in coal in far higher concentrations. The report found that the concentrations of arsenic to which people might be exposed through drinking water contaminated by fly ash could increase cancer risks several hundredfold.
Similarly, a 2006 study by the federally chartered National Research Council found that these coal-burning byproducts “often contain a mixture of metals and other constituents in sufficient quantities that they may pose public health and environmental concerns if improperly managed.” The study said “risks to human health and ecosystems” might occur when these contaminants entered drinking water supplies or surface water bodies.
In 2000, the Environmental Protection Agency proposed stricter federal controls of coal ash, but backed away in the face of fierce opposition from utilities, the coal industry, and Clinton administration officials. At the time, the Edison Electric Institute, an association of power utilities, estimated that the industry would have to spend up to $5 billion in additional cleanup costs if the substance were declared hazardous. Since then, environmentalists have urged tighter federal standards, and the E.P.A. is reconsidering its decision not to classify the waste as hazardous.
A morning flight over the disaster area showed some cleanup activity along a road and the railroad tracks that take coal to the facility, both heaped in sludge, but no evidence of promised skimmers or barricades on the water to prevent the ash from sliding downstream. The breach occurred when an earthen dike, the only thing separating millions of cubic yards of ash from the river, gave way, releasing a glossy sea of muck, four to six feet thick, dotted with icebergs of ash across the landscape. Where the Clinch River joined the Tennessee, a clear demarcation was visible between the soiled waters of the former and the clear brown broth of the latter.
By afternoon, dump trucks were depositing rock into the river in a race to blockade it before an impending rainstorm washed more ash downstream.
The spill, which released about 300 million gallons of sludge and water, is far larger than the other two similar disasters, said Jeffrey Stant, the director of the Coal Combustion Waste Initiative for the Environmental Integrity Project, an environmental legal group, who has written on the subject for the E.P.A. One spill in 1967 on the Clinch River in Virginia released about 130 million gallons, and the other in 2005 in Northampton County, Pa., released about 100 million gallons into the Delaware River.
The contents of coal ash can vary widely depending on the source, but one study found that the mean concentrations of lead, chromium, nickel and arsenic are three to five times higher in the Appalachian coal that is mined near Kingston than in Rocky Mountain or Northern Plains coal.
Stephen A. Smith, the executive director of the Southern Alliance for Clean Energy, said it was “mind-boggling” that officials had not warned nearby residents of the dangers.
“The fact that they have not warned people, I think, is disastrous and potentially harmful to the residents,” Mr. Smith said. “There are people walking around, checking it out.” He and other environmentalists warned that another danger would arise when the muck dried out and became airborne and breathable.
Despite numerous reports from recreational anglers and television news video of a large fish kill downstream of the spill, Mr. Francis said the T.V.A.’s environmental team had not encountered any dead fish. On Swan Pond Road, home to the residences nearest the plant, a group of environmental advocates went door to door telling residents that boiling their water, as officials had suggested, would not remove heavy metals.
Environmentalists pointed to the accident as proof of their long-held assertion that there is no such thing as “clean coal,” noting two factors that may have contributed to the scale of the disaster. First, as coal plants have gotten better at controlling air pollution, the toxic substances that would have been spewed into the air have been shifted to solid byproducts like fly ash, and the production of such postcombustion waste, as it is called, has increased sharply.
Second, the Kingston plant, surrounded by residential tracts, had little room to grow and simply piled its ash higher and higher, though officials said the pond whose wall gave way was not over capacity.
Environmental groups have long pressed for coal ash to be buried in lined landfills to prevent the leaching of metals into the soil and groundwater, a recommendation borne out by the 2006 E.P.A. report. An above-ground embankment like the one at Kingston was not an appropriate storage site for fly ash, said Thomas J. FitzGerald, the director of nonprofit Kentucky Resources Council and an expert in coal waste.
“I find it difficult to comprehend that the State of Tennessee would have approved that as a permanent disposal site,” Mr. FitzGerald said.
The T.V.A. will find an alternative place to dispose of the fly ash in the future, Mr. Francis said. He said that at least 30 pieces of heavy machinery had been put in use to begin the cleanup of the estimated 1.7 million cubic yards of ash that spilled from the 80-acre pond, and that work would continue day and night, even on Christmas. The plant, which generates enough electricity to support 670,000 homes, is still functioning, but might run out of coal before the railroad tracks are cleared.
About 15 houses were affected by the flood, Mr. Francis said, and three would likely be declared uninhabitable. “We’re going to make it right,” he said. “We’re going to restore these folks to where they were prior to this incident.”
A spokeswoman for the Environmental Protection Agency, Laura Niles, said the agency was overseeing the cleanup and would decide whether to declare Kingston a Superfund site when the extent of the contamination was known.
United States coal plants produce 129 million tons of postcombustion byproducts a year, the second-largest waste stream in the country, after municipal solid waste. That is enough to fill more than a million railroad coal cars, according to the National Research Council.
Another 2007 E.P.A. report said that over about a decade, 67 towns in 26 states had their groundwater contaminated by heavy metals from such dumps.
For instance, in Anne Arundel County, Md., between Baltimore and Annapolis, residential wells were polluted by heavy metals, including thallium, cadmium and arsenic, leaching from a sand-and-gravel pit where ash from a local power plant had been dumped since the mid-1990s by the Baltimore Gas and Electric Company. Maryland fined the company $1 million in 2007.
As it grew dark in Kingston, a hard rain enveloped Roane County, rendering the twin smokestacks of the steam plant, as locals refer to it, barely visible amid the dingy clouds.
Angela Spurgeon, a teacher and mother of two whose dock was smothered in the ash-slide, said she was worried about the health effects, saying that on the night of the accident everyone was covered in sludge.
“The breathing is what concerns me, the lung issues,” Ms. Spurgeon said. “Who knows what’s in that water?”
Once Trusted Mortgage Pioneers, Now Pariahs...MICHAEL MOSS and GERALDINE FABRIKANT. Renee Feltz contributed reporting and research.
http://www.nytimes.com/2008/12/25/business/25sandler.html?sq=foreclosures&st=cse&scp=2&pagewanted=print
“We are team-oriented, highly ethical, extremely competitive, profit-oriented, risk-averse, consumer-focused, and we try as much as possible to squeeze out any ego. Hubris is the beginning of the end.” — Herbert Sandler, June 2005
SAN FRANCISCO — Herbert Sandler, the founder of the Center for Responsible Lending, is standing in his bayfront office watching a DVD that trains brokers to pitch mortgages by extolling the glories of the real estate boom.
The video reeks of hucksterism, and it infuriates Mr. Sandler.
“I would not have approved that!” he declares. “I don’t think we should be selling our loans based on home prices continuing to go up.”
But the DVD was produced in 2005 by a mortgage lender that Mr. Sandler and his wife, Marion, ran at the time: World Savings Bank. And the video was a small part of a broad and aggressive effort by their company to market risky loans at the height of the housing bubble.
The Sandlers long viewed themselves — and were viewed by many others — as the mortgage industry’s model citizens. Now they too have been swept into the maelstrom surrounding who is to blame for the housing bust and the growing number of home foreclosures.
Once invited by Congress to testify about good lending practices, the Sandlers were recently parodied on “Saturday Night Live” as greedy bankers who handily sold their bank — and pocketed $2.3 billion in shares and cash — in 2006 before many of their loans began to sour.
Last month, the United States attorney’s office in San Francisco announced dual inquiries into whether World Savings engaged in predatory lending practices or misled investors about its financial well-being. And the bank has been sued by numerous borrowers who claim they were misled into taking out mortgages they could not afford.
At the center of the controversy is an exotic but popular mortgage the Sandlers pioneered that helped generate billions of dollars of revenue at their bank.
Known as an option ARM — and named “Pick-A-Pay” by World Savings — it is now seen by an array of housing analysts and regulators as the Typhoid Mary of the mortgage industry.
Pick-A-Pay allowed homeowners to make monthly mortgage payments that were so small they did not cover their interest charges. That meant the total principal owed would actually grow over time, not shrink as is normally the case.
Now held by an estimated two million homeowners, the option adjustable rate mortgage will be at the forefront of a further wave of homeowner distress that could greatly delay or even derail an economic recovery, mortgage industry analysts say.
The Wachovia Corporation, which bought the Sandlers’ bank two years ago, was so battered by the souring portfolio of World Savings that it began writing off losses now projected at tens of billions of dollars and eventually stopped offering option ARMs.
Through it all, the Sandlers have maintained they did nothing wrong beyond misjudging the real estate bubble.
“I didn’t mislead anybody, and to the best of my knowledge, our company didn’t, though there may have been an isolated case here and there,” Mr. Sandler said. “If home prices hadn’t declined by 50 percent, nobody would be raising these questions.”
Mr. Sandler also finds it incredible that borrowers feel victimized by Pick-A-Pay. “All of a sudden their home is worth half of what it was, and they say they didn’t know.”
Yet the Sandlers embraced practices like the use of independent brokers who used questionable methods to reel in borrowers. These and other practices, critics contend, undermined the conservative lending practices that the Sandlers built their reputations upon.
“This product is the most destructive financial weapon ever deployed against the American middle class,” said William J. Purdy III, a housing lawyer in California who is representing elderly World Savings customers struggling to repay their loans. “People who have this loan are now trapped, and they can’t get another loan.”
The Birth of Pick-A-Pay
Marion Sandler, now 78, was a Wall Street analyst in the early 1960s when she and her husband decided to buy a bank that took only savings deposits and made mortgage loans — a thrift, or savings and loan, in banking shorthand — and run it themselves.
Mr. Sandler, now 77, was a lawyer in Manhattan who grew up poor on the Lower East Side, the son of a compulsive gambler whose earnings were consumed by loan sharks.
The Sandlers searched for a thrift in the sizzling California market and paid $3.8 million in 1963 for an Oakland enterprise called Golden West Savings and Loan Association, which later became the parent company of World Savings. It had a main office and one branch.
When Reagan era deregulation arrived, the Sandlers and two other competitors were able to market option ARMs for the first time in 1981. Before that, lawmakers balked at the loan because of its potential peril to borrowers.
World Savings initially attracted borrowers whose incomes fluctuated, like professionals with big year-end bonuses. In the recent housing boom, when World Savings started calling the loan Pick-A-Pay, they began marketing it to a much broader audience, including people with financial troubles, like deeply indebted blue-collar workers.
As the entire thrift industry soared after deregulation, the Sandlers’ business also took off. They avoided financial problems by doing things like scrutinizing borrowers’ incomes to make sure loans were manageable and performing astute appraisals so the size of a mortgage was in line with the value of a home.
“Our protection was our total underwriting of the loan,” Mr. Sandler said. “From scratch.”
When many of the Sandlers’ competitors in the thrift industry later began collapsing under the weight of bad loans and investments, Congress and the media invited the couple to speak about the proper way to do business.
“The deregulatory situation attracted bums, charlatans, crooks, phonies, con men,” Mr. Sandler told an ABC News program in 1990.
The Sandlers also held onto World Savings’ loans rather than selling them off to Wall Street to be repackaged as securities. They say this made them more alert to risky borrowers than were lenders who sold off their loans.
When foreclosures occurred, World Savings executives would drive to the house to see if they had made mistakes appraising the property or underwriting the loan. “We called these the van tours,” Mr. Sandler said. “And we would say, ‘O.K., have we done anything wrong here?’ ”
More Philanthropic Work
As the Sandlers’ wealth increased, so did their philanthropy. Over the years, they financed scientific research and groups like Human Rights Watch and the American Civil Liberties Union. More recently they founded and financed ProPublica, a nonprofit investigative journalism enterprise that has collaborated with The New York Times on coverage and a news archive. Its 14-member advisory board includes two top New York Times Company editors.
The Sandlers’ giving intersected most directly with their business interests in 2002 when they helped create an advocacy group for low-income borrowers called the Center for Responsible Lending.
The center was the successor to a smaller organization in North Carolina, whose director, Martin Eakes, had helped the elderly and minorities avoid predatory banking practices.
“I said, ‘Isn’t that incredible what he is doing?’ ” Mr. Sandler recalled. “I said to Martin, ‘What would it take to do what you do on a national scale?’ ”
Mr. Eakes, who became the center’s executive director, had also just helped secure a new mortgage lending law in North Carolina that prohibited, among other things, the use of prepayment penalties.
“I hated prepayment penalties,” Mr. Eakes recalled, noting that such charges make it hard for cash-poor borrowers to refinance a loan for one with more manageable terms.
While Mr. Sandler supported the center’s antipredatory goals, he disagreed with Mr. Eakes’s position on prepayment penalties and sought to change his mind. Mr. Eakes says the Sandlers convinced him to drop his opposition to prepayment penalties, “but they never dictated to us what to do.”
Mr. Sandler acknowledges that some lenders used the penalties to lock borrowers into “absolutely awful” loans. But he said his bank used the penalties to fend off unethical brokers who enticed borrowers with low-interest-rate loans that often had hidden fees.
“You have to understand how independent brokers work,” Mr. Sandler says. “They are the whores of the world.”
Despite that distaste, World Savings made extensive use of brokers. By 2006, they were generating some 60 percent of its loan business, he acknowledged. He said he was compelled to do so because of brokers were a dominant force in the mortgage industry.
As a check on the representations that brokers made to borrowers, World Savings sought to telephone applicants to ensure that they understood the terms of their loan. These calls reached only about half of the borrowers, however, according to a former World Savings executive. Mr. Sandler did not dispute that point.
Customer complaints that an unethical broker had misrepresented the terms of World Savings loans is at the heart of a lawsuit filed against the bank and others in Alameda County, Calif. The broker was sentenced to a year in prison for misleading at least 90 World Savings borrowers.
Mr. Sandler points out that the company was itself a victim of this broker, that it cooperated fully with authorities, and that it was not charged with any wrongdoing.
Others have also raised questions about how carefully World Savings disclosed lending terms to its borrowers.
In August, a federal judge in South Carolina ruled that World Savings had violated the federal Truth in Lending Act by telling borrowers that choosing to make minimum monthly payments on Pick-A-Pay mortgages might cause their principal to grow — when in fact it certainly would occur.
Wachovia, which is defending the case, has appealed the ruling. Mr. Sandler said he was not familiar with this lawsuit, but generally, he says, “Wachovia’s legal defense is deficient.”
A Speedy Merger
By 2005, World Savings lending had started to slow, after more than quadrupling since 1998. The next year, Wachovia bought the bank in a hastily arranged deal. The Sandlers say they sold their firm at the top of the market because they were growing older and wanted to devote themselves to philanthropy.
Some current and former Wachovia officials say that the merger was agreed to in days and that it was impossible to conduct a thorough vetting of World Savings’ loans. Others say the portfolio was adequately scrutinized.
“Herb and his wife had run a tight ship,” said Robert Brown, a Wachovia board member. “There was not a huge concern about it because they had not had any delinquencies and foreclosures.”
Others were less sanguine. The creditworthiness of World Savings borrowers edged down from 2004 to 2006, according to Wachovia’s data. Over all, Pick-A-Pay borrowers had credit scores well below the industry average for traditional loans.
“I don’t think anyone thought a Pick-A-Pay product was a customer friendly product,” says a former Wachovia executive who requested anonymity to preserve professional relationships. “It is easy to mislead them.”
World Savings lending volume dipped again in 2006 shortly after the sale to Wachovia was initiated, according to the company’s federal filings.
This prompted World Savings to attract more borrowers by taking a step that some regulators were starting to frown upon, and which the company had been resisting for years: it allowed borrowers to make monthly payments based on an annual interest rate of just 1 percent. While World Savings continued to scrutinize borrowers’ ability to manage increased payments, the move to rock-bottom rates lured customers whose financial reliability was harder to verify.
Russell W. Kettell, a former chief financial officer of World Savings, says the merger created “pressure” for “a pretty good-sized increase in loan volume.”
Asked if Wachovia ordered World Savings to drop its rate, Mr. Kettell said, “No, but they wanted volume and wanted growth.”
A swift increase in option ARM lending had prompted federal regulators to weigh tougher controls on lending standards in 2005. Of the $238 billion in option ARM loans made nationally in 2005, World Savings issued about $52 billion, or more than one-fifth of the total.
Susan Schmidt Bies, a governor of the Federal Reserve System until last year, said the surge in volume caught regulators by surprise, and that she regrets not acting more quickly to protect borrowers because she believes that they could not understand the risky nature of option ARMs.
“When you get into people whose mortgage payments are taking half of their cash flow, they are in over their heads, and these loans should not have been sold to this customer base,” she said. “This makes me sick when I see this happening.”
In March 2006, two months before the Wachovia deal, Mr. Sandler wrote regulators and objected to several aspects of the new rules, including the regulator’s conclusion that option ARMS “were untested in a stress environment.”
He argued in the letter that World Savings had few loan losses in the recession of the early 1990s. Then again, the current financial crisis is far more severe than what occurred then — far more severe than anything the country has faced since the Great Depression.
By the third quarter of this year, Wachovia was projecting $26.1 billion of losses on a World Savings loan portfolio worth a total of about $124 billion. About 6.2 percent of the Pick-A-Pay loans were more than 90 days late, it said, compared with an industry average of 8 percent on option ARMs and 1 percent on Wachovia’s traditional loans.
Wells Fargo, which is now buying Wachovia, is more pessimistic: it expects losses of $36 billion on the loans unless efforts to stem foreclosures help rescue part of the portfolio. The losses caused analysts and others to reassess the Sandlers’ legacy.
After the “Saturday Night Live” skit, Paul Steiger, the former executive editor of The Wall Street Journal and the editor in chief of ProPublica, was among those who wrote to the show’s producer, Lorne Michaels, saying the Sandlers had been unfairly vilified. Mr. Michaels apologized for the skit (which suggested that the Sandlers “should be shot”) and removed it from NBC’s Web site.
Mr. Sandler says Wachovia did not work hard enough to help struggling borrowers, and that his loans became scapegoats for other problems at Wachovia. He remains confident that losses on its loans will not reach Wells Fargo’s projections.
He says World Savings was hit especially hard because it had made so many loans in volatile markets like inland California, but he disputes homeowner assertions that his option ARMs are at fault.
“We have not been able to identify one delinquency, much less a foreclosure, that is due to the product,” Mr. Sandler said, adding that “if home prices had not dropped, you wouldn’t see” a single article.
Over all, analysts expect the option ARM fallout to be brutal. Fitch Ratings, a leading credit rating agency, recently reported that payments on nearly half of the $200 billion worth of option ARMs it tracks will jump 63 percent in the next two years — causing mortgage delinquencies to rise sharply.
Mr. Sandler says that his loans are not in the pool that will become distressed in the next few years; he says they reset at a later date. He adds that were he not sure that the market would recover he would have sold his Wachovia stock at the time of the takeover. His charity has sold off much of its Wachovia stock, but he said he and his wife retain a substantial portion of their personal holdings.
Still, the Sandlers have their detractors.
“As the largest and most respected regulated institution providing option ARMs, I hold the Sandlers responsible because a large percentage of home borrowers — but not all — should have been advised that it was in their best interest to have a fixed-rate mortgage,” said Robert Gnaizda, general counsel for the Greenlining Institute, a homeowner advocacy group. “I believe that financial institutions have a quasi-fiduciary responsibility not to mislead the borrower.”
Mr. Sandler insists that World Savings prided itself on ethical conduct and that untoward behavior was never tolerated. “We were also a family, and you expected people to live their personal and business lives in a particular way,” he said.
 
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