Where Greed Leads: Lodi’s Rip-Off


Lodi, California had a water pollution problem so severe that ‘the state’s Department of Toxic Substances Control had listed the heart of Lodi as a hazardous waste site’. The perps were known–‘ Two drycleaners, a manufacturer and the city’s own aging, leaky sewer lines’–and a deal had been struck to apportion responsibility: if the firms would pay to clean up the land, the city would pay to clean up the water. So far so good.

Actually, so far not good. The real problem wasn’t the pollution, it was in the word ‘pay’. Lodi is a conservative, Republican, anti-govt, anti-tax town proud of its ‘frugality’. It didn’t want to pay. The City Council knew that if it raised its tax rate to pay for the clean-up, it would be thrown out of office in the next election and be replaced by even harder-line tax-cutting radcons. Lodi was so cheap, it preferred poisoning itself slowly to paying a few extra $$ a year on their water bill–which had been a mere $10/month for years.

So when a high-priced corporate attorney suggested a legal scam to get outside insurers to pay for the clean-up instead, the Council jumped on his plan with both feet. Except for Susan Hitchcock, ‘who was derided by colleagues and threatened with censure when she was the only city official to oppose the plan.’

‘The plan’ was a complicated swindle that involved blackmailing the city’s insurance carriers with endless lawsuits and legal delays, tying them up in court for years until they agreed to settle even though the city had never bought insurance from them that covered this situation (it would have been ‘too expensive’). But the plan needed financing to cover legal costs until such time as the insurance companies paid up. Since going to the taxpayers was off the table, the lawyer who suggested the swindle, Michael C Donovan, went to Wall Street and brought in Lehman Bros.

The plan went like this: The city would borrow $16 million from Lehman at 25% interest to finance a barrage of lawsuits. Donovan and his firm would pursue the suits, billing at rates of up to $425 an hour. Courts would shift all the costs to insurance companies. In the end, Lodi would clean up the problem without having to pay for it.

Get out your calculator and figure 25% on $$16MIL$$–Lehman Bros had poached the Lodi City Council like they were eggs. Susan Hitchcock:

“Boy, were we duped. The more I learn, the more I realize it was about greed. There is no free lunch, and everyone knows that.”

Everyone but the rest of the Council, it seems. The result of their paticipation in this scheme was predictable.

Today, the strategy is a shambles, picked apart by state and federal courts and condemned by a federal judge as “environmental litigation for profit.”Donovan has been fired, along with the Lodi city attorney who pushed the plan. Lodi has sued Lehman, alleging the deal was illegal. Lehman has countersued to collect its debt — roughly $25 million to date, city officials say — pitting some of the country’s biggest law firms against a city that once made national news for banning silly string from its downtown parade.

Lodi’s financial future is in question. Interest is accumulating at $325,000 a month. The pollution has spread. And criminal investigations are underway.

This is a cautionary tale. The anti-tax brigade is willing to poison you tomorrow to keep a few bucks in their pockets today. They’re willing to sign onto complicated fraud schemes, engage in legal blackmail, and mortgage the city–your city–to big corporate bankers rather than spend a dime of their own to clean up a mess they helped make. They acknowledge no–NO–responsibility to the society which nurtured them, and no call that society might have on their purses, however legitimate. They would rather watch you die–that’s a price they’re willing to pay.

But you go ahead and vote for them again. Vote for the fantasy, vote for their charm and ‘optimism’. Vote for how good they look on tv and how easy they make everything sound. After all, life is just a reality tv show, and if yours gets cancelled, why, there’ll be another along in a minute to take its place.

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One response to “Where Greed Leads: Lodi’s Rip-Off

  1. I think what we need here is a good dose of science! Science will solve any problem!!

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