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Coral-killing seaweed has medicinal benefits, researchers say

Susanne Rust — Fri, 25 May 2012 07:05:03 +0000

Susanne Rust

Jennifer Smith/Scripps Institution of Oceanography The properties that allow this cyanobacteria to kill coral also make it a potentially powerful medicine.

California researchers have discovered that there may be a silver lining to an invasive and toxic seaweed that is killing some of Hawaii's coral reefs: It seems the seaweed contains compounds that could treat human diseases.

"I think this finding is a nice illustration of how we need to look more deeply in our environment, because even nuisance pests, as it turns out, are not just pests," said William Gerwick, a researcher at UC San Diego and the Scripps Institution of Oceanography. "It's a long road to go from this early-stage discovery to application in the clinic, but it's the only road if we want new and more efficacious medicines."

The study appears in today's issue of the journal Chemistry & Biology.

The seaweed, a tiny photosynthetic organism known as a cyanobacterium, was identified in 2008 on coral reefs near the Pu’uhonua o Honaunau National Historical Park, off Hawaii’s Kona coast.

Researchers say it is native to Hawaii and generally inconspicuous. Indeed, they think a little of it is always around Kona's reefs.

It was first noticed during a routine survey of the coral, said Jennifer Smith, a co-author of the study and researcher at Scripps. “It was clearly smothering the corals at one of the most popular dive sites in Hawaii.”

Research on marine cyanobacteria shows that climate change can accelerate the organism's growth. It thrives in environmentally stressful conditions, such as UV exposure, high solar radiation and temperatures, and scarce or overly rich nutrients.

And on the reefs of Kona, the cyanobacteria was thriving. According to the researchers, the bloom was growing and suffocating the coral below.

Lena Gerwick, another co-author, said she and her team were unsure of the exact reason for the recent blooms, but they suspect runoff from nearby coffee plantations could be a factor.

In any case, the scientists took some of it home to find out more about it in their lab.

Lena Gerwick said the fact that it was overtaking the coral indicated that it had ecological advantages over the coral. And there were two theories put forward. The first was that the cyanobacteria was killing a beneficial film of bacteria that usually covers the coral and protects it from disease and pathogens. The second theory was that cyanobacteria was inhibiting the coral's immune system, making it susceptible to attack.

When they got into their La Jolla lab, they found the cyanobacteria generates compounds known as honaucins, which have both the bacteria-killing and anti-inflammation properties they had predicted.

Lena Gerwick said the researchers have now shown that the cyanobacteria can be used as an effective topical anti-inflammatory ointment for mice. And they hope that the combined activity – anti-inflammatory and antibacterial properties – can be used to fight diseases such as cystic fibrosis.

"It's a long shot, but that's just the kind of thing we work for," she said.

SF 3rd-graders fight against sea lion killings

Monterey Bay Aquarium exempted from ban on wastewater dumping

In Oakland schools, chronic absence, suspension derail black boys

Joanna Lin — Fri, 25 May 2012 07:05:02 +0000

Joanna Lin

arieliona/istockphoto.com

High rates of chronic absence, suspension and poor academic performance signal that more than half of African American male students in the Oakland Unified School District are at risk of dropping out, according to new research.

The Urban Strategies Council, an Oakland-based community advocacy organization, found significant disparities between African American boys and their peers: Fifty-five percent of black boys in the 2010-11 school year were falling off course from graduation or were at risk of doing so, compared with 37.5 percent of students overall in the district.

From kindergarten through 12th grade, researchers found that black boys struggled with regular attendance and suspensions and scoring proficiently on standardized tests or maintaining grades above a C average – warning signs that they might drop out.

Among African American males who were not on track to graduate, 73 percent in elementary school were chronically absent, missing 10 percent or more of school days for any reason, according to the findings released this week. In middle school, the same percentage had been suspended at least once. Nearly two-thirds of high schoolers were chronically absent and had less than a C average; 41 percent had been suspended at least once.

"We need to understand what's going on if we're going to effectively intervene and improve outcomes and graduation and success of African American males," said Junious Williams, chief executive officer of the council.

The council's reports on dropout indicators are part of Oakland Unified's African American Male Achievement Initiative, an effort launched in 2010 to improve academic and social equity for black boys. The findings provide "a sense of urgency" for the district, said Chris Chatmon, executive director of the district's Office of African American Male Achievement.

Chatmon, who plans to hold a community meeting next month to discuss the council's findings, said improving attendance among black boys requires working with other agencies and the community and presents different challenges in different age groups.

In kindergarten and first grade, African American boys in the district were more than four times as likely as their white peers to be chronically absent, the council found.

"Five-year-olds don't miss school without an adult knowing at home," said Hedy Chang, director of Attendance Works, an initiative that seeks to improve student success by reducing chronic absence.

Families might face hurdles, such as transportation or health problems, in getting their young children to school, or they might not understand the importance of kindergarten, said Chang, who has worked with Oakland Unified to address chronic absenteeism.

"Once you miss a month or more of school, and you miss a month or more in kindergarten and first, you're not on track for reading in third grade," she said. "We've got to make sure kids have a chance to start on the right track."

One way the district has tried to target chronic absenteeism among young black students is by working with the Oakland Housing Authority. Forty percent of students at four West Oakland schools live in public housing; 30 percent of those students were chronically absent in 2010-11. Chatmon said the district saw an uptick in school registration by reaching out to West Oakland families living in public housing.

By the time black boys reach middle and high school, different factors begin to undermine attendance, Chatmon said.

"Street culture becomes more attractive than learning and school culture," he said. "How do we define school culture? What is it? What would get our students getting up at 5 in the morning, running to school? … You get school culture right, then you will produce African American boys that produce high academic outcomes."

Cultural clashes and misunderstandings also factor into high rates of suspension among black boys, Chatmon and Williams said.

"We still have a teaching and administrative body that doesn't … understand the cultural context of where our students come from," Chatmon said. "We have to do a lot of work with our adults to authentically engage with our boys, with our families, to understand our community context."

African American boys made up 17 percent of Oakland Unified students in 2010-11, yet they represented 42 percent of students suspended. Disruption or defiance of authority was the most common reason for discipline, accounting for 38 percent of their suspensions.

Subjective standards for disruption and defiance – the reason behind more than 40 percent of suspensions in California and the recent target of criticism and legislative action – could be contributing to high suspension rates among black boys, Williams said.

The council recommended that Oakland Unified carefully monitor such offenses and clearly define what constitutes impermissible behavior. The district also needs strategies for prevention and intervention so students are not suspended for single incidents, Williams said.

In many ways, Chatmon said, that work already has started.

"This is a 'we' problem," he said. "We are taking this on with the frame of full-service community schools that call out everybody, humbly. We can't do it in isolation."

Bay Area residents sue process servers for failing to deliver lawsuits

Bernice Yeung — Thu, 24 May 2012 07:05:03 +0000

Bernice Yeung

Brian Turner/Flickr

In February 2011, a process server working for ABC Legal Services filed a document with the Alameda County Superior Court saying he had personally served Fremont physical education teacher Matthew Walker with a lawsuit over an unpaid $2,340.76 personal loan.

In his proof of service, process server Richard Lowry stated that he had handed the papers to Walker at the Fremont Unified School District offices at 3:37 p.m. Feb. 15. But Walker says that he never took out a personal loan, and he was six miles away, coaching a basketball game at Thornton Junior High School, when he supposedly was served. A crowd of students and parents could attest to his whereabouts, he said.

Walker is one of 16 residents from Alameda, Santa Clara and San Mateo counties who recently sued ABC Legal Services. The residents filed 14 separate lawsuits in San Francisco federal court between June 2011 and April 2012, claiming that the firm’s process servers lied about serving court papers in debt collection cases. The lawsuits accuse ABC Legal of the “ignominious and shoddy practice of ‘sewer service,’ ” a colloquialism that stems from reports that some process servers throw court documents into sewers instead of delivering them. Individual process servers are also named in these lawsuits.

The process-serving industry in California is largely unregulated, which can leave consumers vulnerable to unscrupulous servers who often are paid per transaction. There is no systematic way to gauge how widespread improper service is, industry experts said.

San Jose attorney Fred W. Schwinn, who filed the suits against ABC Legal – one of the country’s largest process-serving businesses – estimates that there are “hundreds, if not thousands,” of these kinds of cases in California. His review of three months of ABC Legal records found multiple instances in which process servers claimed to be in two places at the same time.

In Walker’s case, B.H. Financial Services, a Los Angeles company that buys portfolios of consumer debt and then tries to collect on them, contacted the teacher about two years ago. Walker explained that his only debts were a car payment and student loans.

Walker also told B.H. Financial representatives that he had been a victim of identity theft, and he said he sent the collections company a copy of the police report. Nevertheless, the company filed a debt collection lawsuit against Walker in January 2011. ABC Legal was hired to serve the papers, and the case was assigned to Lowry.

“It’s a disturbing feeling that you’re being sued over something, and if you’re going to be sued, you want to be sued over something you know about and you did,” Walker said.

An attorney for B.H. Financial, Arash Khakshooy, declined to comment. ABC Legal, its attorneys and Lowry did not respond to repeated requests for comment.

ABC Legal’s website says its process server audit team “analyzes GPS coordinates, time/date stamped photos, process server routes and travel time, protecting you from the embarrassment and compliance risk of fraudulent service.”

According to the Federal Trade Commission and collections industry representatives, the number of debt buyers like B.H. Financial that are attempting to collect on aging consumer debt – sometimes called “zombie debt” – has grown in recent years. These debt buyers purchase portfolios of uncollected debt from credit card companies, banks or other debt buyers for far less than face value – often pennies on the dollar.

Some collection companies rely on increasingly aggressive tactics, including lawsuits. A 2010 report [PDF] issued by the FTC concluded that “certain debt collection litigation … practices appear to raise substantial consumer protection concerns,” including reports that lawsuits had been filed without enough evidence of who actually owns the debt, had been filed against the wrong person or had not been properly served.

A default judgment is entered against a debtor who fails to respond to a collection lawsuit. In the most extreme cases, consumers have had wages garnished and bank accounts levied – even if they had not been properly served and were not aware that a debt collection case had been filed against them.

Critics of the debt collection industry say litigation coupled with improper service allows debt collectors to game the system at the expense of consumers who are struggling to make ends meet.

Debt collection is a competition to “get money from people who don’t have any,” said Scott Maurer, a supervising attorney at a Santa Clara University law school clinic that works with low-income debtors. “Whether they owe the debt collector or not, the Constitution says that everyone has a right to due process and the right to appear in court to contest the debt.”

Collections industry representatives said litigation is a costly last resort, and they also have an interest in curtailing improper service.

“Making sure that consumers receive the information they need and are required by law to receive is a top concern for the industry,” said Mark Schiffman of ACA International, an association of credit and collection professionals. “We don’t do process serving; we hire process servers, and when we hire someone, we want to make sure they’re doing their job.”

In California, those servers need to meet only minimal requirements. Prospective servers must register with the county clerk where they live, undergo a criminal background check and post a $2,000 performance bond. No training is required.

Process servers also generally are exempt from being sued under the federal Fair Debt Collection Practices Act [PDF]. Additionally, state law provides immunity for virtually any statement made in connection with a lawsuit, including proofs of service filed by process servers.

Improper service can be difficult to prove in court, said Santa Clara County Deputy District Attorney Victor Chen, who handled a criminal case involving faked service of lawsuits in small-claims court.

“Short of having the documents that show it’s factually impossible to be served, the process server’s word is going to win out every time,” he said. “A crooked process server who is willing to bend the truth makes it very difficult. It’s rife for abuse. They know that more times than not, they will get away with it.”

Tony Klein, founder of the San Francisco-based Process Server Institute and author of several books about the industry, said servers sometimes are paid as little as $8 to $10 per service, which can create an incentive for some to lie. ABC Legal charges debt collection companies or their lawyers between $59 and $64.50 and pays its process servers between $16 and $19 per successful service, according to documents produced during legal discovery.

“Part of the problem, and I’m not saying that this justifies bad service, is that the business of process serving is to just send paper out with a server and see how cheap they can do it,” Klein said. “Some companies out there pay a flat rate to drive the cost down – they don’t pay for non-service or not-founds, and they are inducing people to fudge.”

Klein added that he thinks improper service is the exception, and process servers sometimes deal with evasive and violent litigants. “There is service going on all day long, and it’s done properly,” he said.

Litigants who believe they haven’t been properly served can file a complaint with the local district attorney’s office or the state attorney general, which can pursue criminal cases against the company or individual server. The California attorney general’s office said it does not provide information about complaints that have been made to its office.

The civil lawsuits filed by Walker and other Bay Area residents have moved forward because they have claimed in federal court that ABC Legal and its process servers should not receive exemption under the Fair Debt Collection Practices Act because they were not legitimately serving lawsuits.

Schwinn, the lawyer representing the residents, said during a time that a San Jose woman was hospitalized, ABC Legal server logs showed she was personally served at her home. In another incident, the wife of a debtor was reportedly served last February at the couple’s Santa Clara home, even though she had been dead since November 2010.

“A quick review of the logs shows that there were a number of purportedly personal serves at residential addresses between midnight and 5 a.m.,” Schwinn said, “and that there are a number of instances of what I would deem ‘Superman service,’ where a process server puts down two different addresses at the same time, as if they were in two locations at the same time.”

According to ABC Legal server logs, one server claimed to serve two people simultaneously on 18 occasions during a three-month period in 2010; another server logged 16 serves between midnight and 5 a.m. in a seven-month period during 2010 and 2011.

Schwinn said that although these cases specifically involve debt collection, they also address a larger, underlying legal issue.

“The legal system completely breaks down if these unregulated people don’t do their job,” Schwinn said.

Group promoting third-party candidates faces rebellion

Will Evans — Thu, 24 May 2012 07:05:03 +0000

Will Evans

plherrera/istockphoto.com

Americans Elect – the innovative effort to jolt the political system with a third-party presidential candidate – is facing a democratic uprising of its own.

A hastily organized contingent of Americans Elect activists is agitating to reverse the group's decision last week to pull the plug on its nomination process after failing to generate sufficient interest in its candidates. Complaining that the group’s leadership hasn't listened to the membership, the insurgents are pushing for Americans Elect to forge ahead. They don't want the $35 million the group raised to get on the ballot in 29 states, including California, to go to waste.

Involved in the effort is a Bay Area activist and filmmaker who ran for the Americans Elect nomination and came in third place, after former Louisiana Gov. Buddy Roemer and former Salt Lake City Mayor Rocky Anderson. Michealene Risley, a resident of Woodside in San Mateo County, said she was shocked when she heard – via press release – that Americans Elect was shutting down the nomination process.

"People feel really used and manipulated," said Risley, who ran on a platform of campaign finance reform.

"Without a viable candidate added to the national stage in this election, the brand name of AE will be tarnished," Risley wrote to the group's board. "Instead of being the prototype for high tech democracy, it will be stigmatized as the latest example of third party failure."

Americans Elect had bulldozed through the tremendous hurdles alternative parties face in getting on ballots, gathering more than a million signatures to become the first new official party in California since 1995. But in its announcement last week, Americans Elect explained that its rules mandated an end to the process because no candidate achieved the "national support threshold" necessary to enter its online convention in June.

Roemer, for example, needed 10,000 supporters among those who registered as Americans Elect delegates online, but he came up with only 6,293. Risley and Anderson needed to collect 50,000 supporters – more than Roemer because they didn't have high-level political experience.

Anderson decried the higher requirements as "discriminatory" and said he would have redoubled his efforts to qualify if he had a lower bar.

"We were extremely frustrated that they had set the bar at an impossible level for those that they apparently consider second-class candidates," Anderson said.

Anderson, who is also running as a Justice Party candidate, endorsed the Americans Elect mutiny and would like to see the top six candidates move on to the next stage in the nomination process.

"I think that the more choices voters can have, the healthier it is for democracy," he said.

Andrew Evans, an Americans Elect delegate from North Carolina, is rallying support to resuscitate the process under the banner "Americans of Americans Elect." While maintaining that "it's not a revolt," Evans and his cohorts are trying to activate a provision of Americans Elect's rules that would give delegates a chance to reverse a board decision.

"We feel we really didn’t get the proper say in the decision that the board made," said Evans, who also leads the Modern Whig Party. "It’s extremely frustrating because we feel that our voices were not heard."

Americans Elect's CEO, Kahlil Byrd, said in an e-mail to California Watch: "We honor and appreciate all delegates. They are part of a growing national community hungry for real change in our political system."

David King, a member of Americans Elect's advisory board and a lecturer at Harvard's Kennedy School of Government, said the group made the right decision.

"I think the rules were well understood from the beginning, and Americans Elect didn’t have candidates that seized the opportunity, so it doesn’t seem right to change the rules this late in the game," King said. "A wonderful stadium was built, but not enough players got on the field. The next time there’s a major-league season, we’ll see what happens."

Americans Elect always faced long odds in its quest to field a viable, centrist presidential candidate who would shake things up. The group also drew criticism for not disclosing the donors who bankrolled the effort. In a previous story, California Watch found that one of the main funders, board Chairman Peter Ackerman, once had to pay millions of dollars in delinquent taxes and penalties for an alleged tax shelter scheme.

"They haven't been the most transparent group from the outset," Anderson said. "Nobody really knows how the rules were set from the beginning or how Americans Elect has been financed."

Even Americans Elect die-hards had their share of gripes. One of the main complaints was that prospective voters had a hard time registering as delegates through the website.

Risley said the Americans Elect model gave her "hope for the first time in a long time." But as she held campaign gatherings at her home and reached out to like-minded activists at Occupy protests, she became frustrated with the group's online system. Some supporters couldn't get through the site's intensive verification of whether they were registered voters or didn't want to provide the last four digits of their Social Security numbers, she said.

"Why make it so hard for people?" Risley said.

Ileana Wachtel, Americans Elect's press secretary, said only 300 out of tens of thousands of people had problems with the website that couldn’t be resolved, mostly because of inaccurate voter registration data.

"When dealing with voters most precious franchise, the vote, there cannot be any compromise on the issue of security," she said in an e-mail. “Bottom line, AE's created the first ever secure online nominating process, preparing the pathway that is just the beginning."

Americans Elect still might shake up the political landscape in 2016 or 2020, said Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California.

"But absent a viable candidate in 2012, it’s difficult to see what the benefits of moving forward quickly rather than gradually would be," Schnur said.

"Instead of being the political version of Facebook, it could end up being the political version of Friendster," he said. "But you wouldn't have gotten Facebook if there wouldn’t have been a Friendster first."

In order to continue, though, Americans Elect must face the challenge of delegate dissent.

Risley said the group's top-down decisionmaking "feels like more of the same" instead of an alternative to the traditional two parties.

Evans said he appreciates the work and money the group's leaders have provided, but said he has lost faith in the way the organization is run.

"Some of the delegates, they’re fed up with Americans Elect," he said. "They’re like, once bitten, twice shy."

Workplace fatalities rise in confined spaces

Bernice Yeung — Thu, 24 May 2012 07:05:02 +0000

Bernice Yeung

XAOC/Shutterstock

From a Napa winemaker to a paint manufacturing employee in Fullerton, seven Californians died last year while working in a confined space – an uptick in a category of workplace fatalities that are readily preventable, experts said.

“We’ve learned enough over the years that there’s no reason that people should be dying in confined spaces,” said Michael Wilson, director of the Labor Occupational Health Program at UC Berkeley's School of Public Health.

Confined spaces are enclosed areas that are hard to get in and out of, and they can present health and safety risks, such as limited oxygen supply, toxic chemical fumes, or materials or machinery that could trap workers. These spaces, such as silos or tanks, are not meant for continual employee occupancy.

Between 2008 and 2010, there were two such deaths each year.

Last year's deaths in part prompted the state Division of Occupational Safety and Health – commonly referred to as Cal/OSHA – to launch a special program in February to step up efforts on training and compliance with state and federal standards related to confined spaces.

Yesterday, the agency announced that it had issued 36 citations totaling $38,895 in penalties to American Reclamation, a Southern California waste and recycling company, for various health and safety violations, including failure to follow state standards for confined space entries. Cal/OSHA spokeswoman Erika Monterroza said there are other open investigations related to confined space incidents, including one involving a Dunnigan man who was partially buried in a grain silo this month.

Garrett Brown, a senior safety engineer and subject expert on the confined space program for Cal/OSHA, noted that “there are a lot of near misses" that employers are not required to report to the agency.

“Activity flies under the radar, and it affects a wide array of industries,” Brown said. “This is a hazard found in agriculture, manufacturing, construction, wineries, oil refineries – almost every area. It also affects big and small companies.”

Robert E. Downey, owner of Orangevale-based RED Safety Consulting, said employers are not always aware of the dangers related to confined spaces.

“Generally speaking for the employers with whom I work, confined space hazards are known and acted upon,” Downey wrote in an e-mail. “But my clients are general contractors and union employers. As for other employers, you can draw the conclusion that employers and employees are unfamiliar with the definition of confined space and thoroughly unfamiliar with the hazards of confined space.”

In an investigation [PDF] completed this month, Cal/OSHA fined Vista Paint, a Fullerton paint manufacturer, $159,040 for violations related to the November 2011 death of Roberto Ramirez Magdariaga. The employee was asked to clean one of the factory’s 3,000-gallon tanks with paint remover made primarily of methylene chloride, a chemical that can be toxic if inhaled.

Magdariaga soon passed out from the fumes in the tank. His co-worker, Gary De La Pena, tried to rescue Magdariaga, but he, too, was overcome by fumes. About half an hour later, a paint maker saw Magdariaga and De La Pena sitting and lying down in the tank and presumed they were taking a break and sleeping.

When another employee went to wake up Magdariaga and De La Pena, he discovered the men were unconscious. Magdariaga died of chemical asphyxiation, and De La Pena was hospitalized.

John Long, Vista’s director of corporate environmental health and safety, said, "We take this tragedy very seriously.”

“Vista manufacturing facilities have maintained a good safety record over the past 50 years, and we are working diligently with Cal/OSHA, outside safety consultants and internal staff in reviewing all processes and training procedures in order to enhance our employees’ safety,” Long said.

California Watch has previously reported on a case involving 16-year-old Armando Ramirez, who died from exposure to hydrogen sulfide gas while cleaning a storm drain gutter at the Community Recycling & Resource Recovery facility in Lamont, near Bakersfield. Ramirez’s 22-year-old brother also died from the fumes while trying to save him.

Downey, the safety consultant, said 60 percent of deaths in confined spaces "result from would-be rescuers entering to help a fallen buddy."

In addition to a lack of awareness about the hazards in confined spaces, insufficient emergency rescue plans also are to blame for these deaths, UC Berkeley’s Wilson said. While state and federal standards require emergency rescue plans to be in place when employees are asked to enter confined spaces, it is unclear how they have been implemented.

In a recently published study, Wilson surveyed 30 Silicon Valley companies about their confined space policies. Only 19 percent of employers had their own on-site rescue teams for confined spaces, and 57 percent said they would call 911 if there was a confined space emergency.

However, based on information from eight California fire departments and 10 senior technical rescue officers from across the state, Wilson also found that firefighters typically arrive at an emergency within five to seven minutes of a 911 call, but it can take one to three hours for someone to be extricated from a confined space because these are “low-frequency, high-risk” operations in which crews avoid rushing into a dangerous situation.

“Fire departments respond quickly to confined space accidents … but on average do not enter the confined space to rescue until they are prepared, and that may take more than two hours,” Downey said.

Wilson said his research findings suggest that most California employers are out of compliance with the state's confined space regulations.

“We found really troubling practices among sophisticated Silicon Valley companies that have full-time health and safety staff," Wilson said. "What this suggests is that across the state, the practices among small and medium-sized companies are probably much worse."

As part of its new program on confined space safety, Cal/OSHA is providing additional training and consultation services to employers on this issue. As of February, all workplace inspections by the agency now include a review for confined spaces. If one is identified, inspectors look for potential violations.

There were 247 confirmed workplace-related deaths in California in 2011, according to a report [PDF] from Worksafe, an occupational health and safety advocacy organization.

Video: Texas firm accuses hundreds of Californians of mortgage fraud

Serene Fang — Thu, 24 May 2012 00:02:53 +0000

Serene Fang, Rick Jurgens and David Ritsher

Nearly a million California homeowners lost their homes in the foreclosure crisis. Now, some are being pursued by a little-known Texas company with a controversial strategy for seeking profit in the real estate collapse.

React & Act: What is second-mortgage debt?

Sarah Springfield — Wed, 23 May 2012 22:03:37 +0000

Sarah Springfield and Ashley Alvarado

Michael Short/California Watch Oscar Trejo lives in this San Jose home. Heritage Pacific Financial sued Trejo to keep a bankruptcy judge from erasing an $88,000 second-mortgage note against a house Trejo lost through foreclosure in 2008. Trejo won, but the firm has appealed.

To understand Rick Jurgens’ article on the second-mortgage debt and one Texas firm’s aggressive collection methods, you must first look at the origins of the mortgage crisis. Here, we provide an explainer, a glossary of terms, a guide to available resources and a recommended reading list.

Explainer: The mortgage crisis

Five years after the housing bubble burst in 2007, the mortgage crisis appears far from over. More than 250,000 Californians have received notices of default in the last year, on top of the nearly800,000 Californians who lost their homes to foreclosure since the crisis began.

The mortgage crisis, which contributed to the steep decline of the state and national economies, is rooted in poor lending decisions by both borrowers and banks. Lending institutions and borrowers entered mortgage agreements counting on a housing market many believed would never stop expanding. But the overheated market turned cold. Too many homeowners found themselves committed to mortgages they could not afford and were unable to refinance or manage their adjustable interest rates once changes set in. As a result, nearly 1.5 million Californians defaulted on their mortgages, and foreclosures became rampant.

What is subprime lending?

Not everyone has good credit. Not everyone has a high-paying job. When banks loan money to these borrowers for cars, houses or other large purchases, the practice is called subprime lending. Because the loans are riskier, they often come with higher interest rates or interest rates that adjust over time – mostly up.

Many of these mortgage agreements were poorly constructed. Down payments were low – making it easy for borrowers to accept loans without much money in the bank. Many adjustable interest rates were designed to skyrocket after a short grace period. There view process for loans was minimal.

These subprime loans, specifically those with adjustable interest rates, contributed greatly to the crisis. Once housing prices began to fall and the economy tanked, new homeowners found themselves unable to sell their homes or refinance.

Why did housing values decline so quickly?

The simplest answer is supply and demand. As housing prices hit new highs between 2005 and 2006, construction of new homes was booming as well – to the point where the number of available homes was soon higher than the number of people willing and able to buy them, even with subprime lending. As homes went into foreclosure and lending institutions sought to sell them, the market was further saturated, and prices dropped even lower.

Glossary

Mortgage: A large-sum loan, usually from a bank, for the purpose of purchasing property. The property itself is used as collateral.

Promissory note: Legal document guaranteeing payment of money by a certain date. Promissory notes are signed when mortgages are taken out, promising unconditionally that the principal value of the loan plus interest will be repaid in specific intervals over a given period of time and naming the borrower as personally responsible for this repayment.

Mortgage fraud: The intentional botching of mortgage paperwork to obtain a larger loan – or any loan at all – that would not have been granted had the lender known the truth.

Default: Persistent failure to repay a loan – either principal or interest – according to the agreed-upon schedule.

Foreclosure: Seizure and sale of a property when a homeowner cannot make payments on his or her mortgage or deed of trust.

Deed of trust: A legal document giving a third-party trustee the ability to quickly initiate foreclosure on a property once a borrower has defaulted on a loan. Colloquially, the term often is used interchangeably with mortgage.

Second mortgage: Arrangement similar to the original mortgage, but riskier for the lender and more expensive for the borrower. A second mortgage is made while the original loan is still in place. In the case of foreclosure, payments are made toward the second loan only when the first mortgage has been paid off. This usually translates to higher interest rates on the loan for the homeowner.

Deficiency judgment: Court order granting a lending institution the right to claim a borrower’s other assets– cars and jewelry, for example– if a foreclosure sale does not earn enough money to repay the original loan. However, most mortgages in California are “non-recourse loans,” which do not allow for deficiency judgments.

Debt collection: Once a borrower has defaulted on a loan, the lending agency usually will sell that account to a debt-collection agency. That account is often sold at a fraction of its face value. The collection agency can then sell that debt again to another institution, or work to get the borrower to repay the loan. The federal Fair Debt Collection Practices Act establishes consumer rights and appropriate conduct required of debt collectors.

Debt-collection lawsuit: If loans remain unpaid, debt-collection agencies often sue borrowers to get them to pay.

Default judgment: A court judgment issued in favor of a plaintiff when defendants fail to appear in court or respond to a court summons.

Bankruptcy: A legal evaluation of a borrower’s assets and a determination of how much outstanding debt can be paid off in exchange for the remainder of the debt being forgiven.

Discharge: Official order removing a borrower from responsibility to repay the full amount of loan following bankruptcy proceedings.

Recommended reads

"The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis" by Michael W. Hudson
"Broke, USA: From Pawnshops to Poverty, Inc. – How the Working Poor Became Big Business" by Gary Rivlin
"The Debt Machine: How the Collection Industry Hounds Consumers and Overwhelms Courts" [PDF] by the National Consumer Law Center
"The Debt Buying Industry: A White Paper" [PDF] by DBA International

Resources

National Association of Consumer Advocates: Find a private attorney who handles debt-collection or foreclosure cases.
LawHelpCA.org: This website provides a searchable directory of legal aid providers, including Housing and Economic Rights Advocates in Oakland and the Public Law Center in Santa Ana.
DBA International and the Association of Credit and Collection Professionals provide debt buyers’ or collectors’ perspectives on their respective sites.

Texas firm targets Calif. homeowners with foreclosed 2nd mortgages

Rick Jurgens — Wed, 23 May 2012 22:03:29 +0000

Rick Jurgens

Michael Short/California Watch Oscar Trejo, pictured here at his current home in San Jose, said he had never heard of Heritage Pacific before it asked a judge not to discharge its $88,000 claim against him.

Adding new uncertainty in the state’s ongoing mortgage crisis, a Texas company is aggressively pursuing hundreds of Californians to collect second-mortgage debt – on homes they’ve already lost through foreclosure.

Many of these former homeowners believed their mortgage debt had been erased after their houses were taken by banks and lending companies. But the Texas company, Heritage Pacific Financial, has aggressively pursued collections and filed lawsuits claiming those debts still linger.

For Ahmed Abdelfattah of San Jose, debt collectors started calling in 2009, saying he owed Heritage Pacific $135,000. He said he’d never heard of the company before.

“It’s been a nightmare,” Abdelfattah said. “It’s cost me money and time, and they ruined my credit until now.”

Oscar Trejo said his first encounter came a few days before he expected to exit bankruptcy and get a fresh financial start. That was in November 2010, he said. Heritage Pacific sent Trejo, who also lives in San Jose, a letter saying it had asked a bankruptcy judge not to discharge, or erase, its $88,800 claim against him.

Trejo invested in properties in Merced and later lost them all in foreclosures. But he hadn’t done business with Heritage Pacific. “I had never seen the company’s name,” he said.

Heritage Pacific was started by identical twin brothers, Chris and Ben Ganter, who once starred in a reality TV show, “PayDirt,” about investing in the Dallas-Fort Worth real estate market.

The company’s lawsuits often accuse defendants of misstating their incomes on loan applications. While many borrowers did overstate their incomes on applications, consumer attorneys say Heritage Pacific is targeting people who filled out their forms honestly or whose mortgage brokers pumped up their applications without their knowledge.

Critics of Heritage Pacific say the company’s central tactic is forcing settlements from people who can’t afford a drawn-out legal fight and who don’t know the details of California law. The company has sued people with second-mortgage debts of less than $150,000, despite a state law prohibiting lawsuits alleging fraud on mortgages below that amount.

Heritage Pacific’s collection methods now face legal challenges, including a class-action lawsuit in Santa Clara County Superior Court that contends that the company is carrying out an “insidious and illegal debt collection scheme.”

The company doesn’t make mortgage loans, but instead attempts to collect payments on loans originated by others. Heritage Pacific launched its effort in late 2008 when it began buying – at a steep discount – second-mortgage loans that borrowers had stopped paying. Many of the loans were secured by houses that already had been sold in foreclosure by first-mortgage lenders.

By demanding payments from more than 1,000 individuals in California, the lawsuit contends, Heritage Pacific has violated “the rights of those who have already suffered the emotional and financial distress that results from the loss of their foreclosed home.”

Heritage Pacific is nothing more than “people in Texas acting as vultures,” said Will Kennedy, a lawyer in the class-action suit.

In an answer to the lawsuit, Heritage Pacific says it’s not suing “innocent home-owners who, through no fault of their own, lost their homes.” Instead, the company says it targets defendants who “made material misrepresentations to secure large loans upon which they soon stopped paying.”

Fraud claims “are the only ones we’re interested in pursuing,” Chris Ganter, the company’s chief executive and main owner, said in an interview.

But some former homeowners now threatened with legal action by Heritage Pacific dispute these claims. They told California Watch that the income they claimed on their mortgage applications was valid, and they stopped paying because they lost their jobs, their income plummeted and banks foreclosed on their houses. Others said they signed applications that had been prepared by brokers.

Amassing second-mortgage notes

Heritage Pacific had no trouble finding plenty of so-called non-performing second mortgages for sale. During the recent real estate boom, an estimated 25 percent of house buyers took on a second mortgage rather than make a down payment, according to a 2007 Federal Reserve study.

A giant foreclosure wave swept hundreds of thousands of Californians from their homes. They often left behind second-mortgage loans that looked uncollectible and worthless.

While lenders can sell foreclosed properties and keep the proceeds, in California theycan’t pursue borrowers if the sale falls short of the amount owed. Foreclosure also takes away most of the legal tools for creditors to seek payments on second mortgages.

Dallas Business Journal Chris and Ben Ganter, identical twins, started Heritage Pacific Financial. The brothers once starred in a reality show, “PayDirt,” about the Dallas-Fort Worth real estate market.

That’s where Heritage Pacific has stepped in.

Rather than shy away from seemingly worthless second-mortgage notes, Heritage Pacific spent millions of dollars to assemble an inventory of at least 40,000 second-mortgage notes, according interviews with company executives and deposition testimony.

Fraud accusations against former homeowners became Heritage Pacific’s tactic for restoring value to its second-mortgage notes. California law gives a lender that can prove that a borrower fraudulently obtained a loan for more than $150,000 the right to sue. A creditor also may allege fraud to prevent a debt from being erased in bankruptcy.

Abdelfattah, a 52-year-old naturalized American who was born in Egypt, said it wasn’t fraud, but a steep drop in his income as a sales manager at a local Honda dealership, that caused him to fall behind on his monthly house payments of $5,000.

In 2008, the holder of his first mortgage foreclosed on the three-bedroom, 1,170-square-foot Santa Clara house that he had purchased in 2005 for $675,000.

But to his chagrin, Abdelfattah found that foreclosure didn’t end his house-related financial woes. As the summer of 2009 faded, he started getting collection calls from two or three individuals representing Heritage Pacific. They wanted him to pay a portion of the $135,000 balance they said he still owed on the second-mortgage loan he had used in his house purchase.

The callers were “really annoying,” Abdelfattah said. One was “really aggressive, cursing on the phone.” They accused him of never having lived in the house. They sent him a letter asking him to verify his income, and another titled, “Demand for Payment of Outstanding Debt.”

In May 2010, Heritage Pacific named Abdelfattah in a lawsuit that claimed that he had used fraud to obtain a second mortgage. But on March 19, a Santa Clara County Superior Court judge threw out the company’s claim against Abdelfattah because the alleged fraud had involved a loan for less than $150,000.

Abdelfattah, who wants to buy a house, was only somewhat relieved: “They are not able to sue me, but (Heritage Pacific’s claim) still affects my credit.” Abdelfattah’s countersuit alleging violations of debt-collection law by Heritage Pacific is scheduled for a jury trial in July.

Heritage Pacific declined to comment on the details of Abdelfattah’s or other individual cases, but said, “Any court rulings against Heritage Pacific Financial will be appealed to the California Court of Appeals as soon as it is possible to do so.”

Heritage Pacific can ignore the prohibition on pursuing fraud claims related to loans for less than $150,000 because it still can get default judgments and out-of-court settlements from some defendants, said Kennedy, the attorney in the civil action.

As a practical matter, he added, “the law only applies to people who are in a position to defend themselves.”

Focusing on fraud claims

Heritage Pacific’s website portrays the company as a friend to its collection targets. It says the company wants to help foreclosed homeowners “begin again and regain financial independence without the baggage of old liens or bad credit history.”

The home page also features a link to a proclamation of the company’s intent to seek “justice against those who have perpetrated, conspired, and participated in the mortgage fraud (that) plagues our nation and our nation’s economy.”

Ganter said Heritage Pacific is pursuing appraisers and loan officers with its fraud claims. But while two lawsuits in Santa Clara County name appraisers as defendants, in dozens of Heritage Pacific second-mortgage lawsuits reviewed by California Watch, the defendants were homebuyers whom Heritage Pacific accused of overstating their incomes on loan applications.

Even Kennedy, the lawyer pursuing the class-action lawsuit against Heritage Pacific, acknowledged that the company is probably “able to find inflated incomes without too much problem, on a lot of them (but) not all of them.”

But that’s only part of the story, Kennedy stressed: “The banks knew exactly what was going on.”

Kennedy isn’t alone in identifying lenders and their agents as key drivers in mortgage market abuses.

Subprime loans were “often aggressively sold to consumers by profit-seeking lenders rather than sought out by consumers,” according to a report by the U.S. Government Accountability Office. And the U.S. Housing and Urban Development Department’s report on the root causes of the foreclosure crisis found that “most fraud is driven by mortgage brokers in their efforts to earn profits by originating loans.”

In California, aggressive lending helped inflate a housing bubble that more than tripled average house prices in the decade that ended in 2006. From 2000 through 2007, lenders originated nearly 3.3 million subprime mortgages in the state, according to the GAO.

But then the bubble burst, sending average house prices in the state down 46 percent since 2006. By March 2009, more than half of the 1.4 million subprime mortgages in California were delinquent, defaulted or foreclosed, according to GAO. By March 2012, about 835,000 homes in the state had been lost in foreclosure, according to DataQuick, which compiles real estate data.

Falling house prices and souring loans ravaged homeowners, lenders, and the housing and mortgage market in California and nationally. Among those hit by the slump was Ganter, a homebuilder who built 200 town homes in Texas suburbs and planned to build another 60.

In 2010, Ganter briefly sought bankruptcy protection for his Paydirt Real Estate Investment Trust, which listed a $6,300 rental deposit as its only asset and $572,000 in unpaid bills. Ganter said the bankruptcy did not involve Heritage Pacific and was later dropped.

Even as his real estate enterprise foundered, Ganter used money from investors to begin assembling a portfolio of second-mortgage loans. In depositions, a company executive put the total face value of the company’s claims in a range from $1.5 billion to $2 billion. To cash in on those assets, Heritage Pacific began pursuing collections from hundreds of foreclosed homeowners.

Lydia Pina was one. In 2009, Heritage Pacific’s collectors began pushing her to pay up on a second mortgage she took out in 2007, when she bought a house in Gilroy for $675,000. She lost the house in foreclosure 14 months later.

The collectors were willing to deal, according to Pina’s sworn declaration. If she would pay $29,000, they would settle their $139,000 claim. If not, they would garnishee her wages.

In May 2010, a process server came to Pina’s workplace. When the receptionist called Pina, she said she was late for a meeting and asked that he come back later. Instead, he left a summons with the receptionist. And that’s how Pina learned that she was being sued for $139,000.

That lawsuit remains pending in Santa Clara County Superior Court. Through her attorney, Pina declined to comment.

Debt collection methods

Ganter said he couldn’t comment on pending litigation, but said Heritage Pacific generally uses a “nice-guy strategy” to pursue collections.

In practice, the company’s collection methods don’t differ much from those used by debt buyers and collectors who search out and demand payments from borrowers on charged-off credit card accounts, student loans or medical bills.

Heritage Pacific first sends a form letter to a borrower, then follows up with at least 20 collection letters or telephone calls, according to depositions by a company executive and an attorney.

In a presentation to investors, the company said it typically offers to settle with borrowers who repay 20 percent of their outstanding balance.

Heritage Pacific’s first big foray into California came in U.S. District Court in Los Angeles, where in a three-month period beginning in December 2009, Heritage Pacific filed three lawsuits seeking $46 million in actual and punitive damages from 158 defendants who took out 143 loans.

That push yielded mixed results. One judge signed 21 default judgments ordering no-show defendants to pay $1.8 million. But a lawyer who showed up to represent one of the defendants persuaded another judge to shut down the company’s multi-party lawsuits. The defendants had “nothing in common … other than that they each applied for and received a loan that Heritage now owns,” the judge wrote.

Meanwhile, Heritage Pacific opened another front in California state courts. California Watch reviewed online records in 10 of the state’s 17 largest counties and found 365 lawsuits in which Heritage Pacific was a party.

A counterclaim filed in one of those lawsuits became a class action that seeks to keep Heritage Pacific from filing new fraud claims. The class action claims that the company goes to court “based upon a high statistical probability that the foreclosed homeowner lacks the resources to defend the lawsuit.”

When defendants fail to show up, courts can issue default judgments that affirm the validity of debts and allow creditors to seize debtors’ paychecks or property.

In a deposition, a Heritage Pacific lawyer estimated that 60 to 70 percent of the defendants in its lawsuits default, and the company has obtained about 200 default judgments.

But Ganter said default judgments aren’t very valuable. Heritage Pacific found itself paying $20,000 to $30,000 for “a piece of paper that says somebody owes you money.”

Michael Short/California Watch Santa Clara University law professor Gary Neustadter (left) is representing Trejo in his case before the 9th Circuit Bankruptcy Appellate Panel, with the help of SCU law student Jennifer Bregante.

Cases in bankruptcy courts

Heritage Pacific also has filed more than 220 cases in federal bankruptcy courts in California, including the claim against Trejo. Heritage Pacific contended that he had overstated his monthly income, but a judge ruled that while Trejo didn’t make $9,500 a month as he stated, the lender had “ignored obvious problems” with Trejo’s loan application and couldn’t block the discharge of his $88,800 debt.

Heritage Pacific has appealed that ruling to a Bankruptcy Appellate Panel, arguing that the lender’s reliance on Trejo’s undocumented assertions reflected “the custom and habit of the mortgage industry at the time.”

In the meantime, regulators in Arkansas have cracked down on Heritage Pacific’s fundraising. The Arkansas Securities Department found that in September 2010, four Arkansas investors paid $50,000 each to buy bundles of second mortgages from Heritage Pacific, and the buyers signed separate deals to pay Heritage Pacific to collect and distribute payments from their mortgages.

In December 2011, the securities department issued a cease-and-desist order directing Heritage Pacific to stop selling unregistered securities.

Ganter said that Heritage Pacific had not agreed to a settlement and that the case was “not finished up.”

Campbell McLaurin, an attorney for the Arkansas Securities Department, said he believed that his state was “not unique as far as (Heritage Pacific) seeking investors.”

In a deposition, a Heritage Pacific executive said the company had spent $20 million to $25 million buying second-mortgage notes, and the source of its funds was a “guarded secret, for sure.”

A contract disclosed in a lawsuit shows that in one instance, Heritage Pacific raised $500,000 from a company incorporated in Alaska but controlled by Guy C. Alexander III, an Orange County homebuilder.

“I can’t comment on our individual partners,” Ganter said. Alexander did not respond to phone messages left at his office.

Consumer lawyers hope that rulings in Trejo’s case and two other bankruptcy appeals, as well as the class-action lawsuit, will put a stop to Heritage Pacific’s collection campaign in California. The company hopes the outcome in those cases will leave it with the tools to make its second-mortgage loans profitable.

Meanwhile, as hundreds of lawsuits work their way through state and federal courts in California, it seems unlikely that the battles between foreclosed California homeowners and Heritage Pacific over millions of dollars of soured mortgage loans will end anytime soon.

Solano County won’t review 300 more autopsies

Ryan Gabrielson — Wed, 23 May 2012 07:05:03 +0000

Ryan Gabrielson

Courtesy of Michael McClure Dr. Thomas Gill, shown in 2004

Dr. Thomas Gill’s forensic pathology career already was scarred by numerous autopsy mistakes before he started ruling on causes of death for the Solano County sheriff-coroner in 2007.

Gill examined 332 deaths for the county in three years. Following a series of news stories last year detailing Gill’s history of inaccurate autopsy findings, Solano County Sheriff Gary Stanton ordered an outside review of 32 of the cases. The results were alarming: A respected forensic pathologist determined Gill’s conclusions on eight of the deaths were “unreasonable” and more than half had “critical errors.”

The sheriff’s office, however, does not intend to continue checking Gill’s past autopsies, said Lt. Gary Faulkner, the chief deputy coroner. None of the other 300 cases is believed to have involved foul play or illegal activity.

“During the course of those other autopsies, there was no evidence uncovered that led the pathologist, or anyone from our office, to believe that a crime had been committed,” Faulkner said.

The sheriff’s office does not have the resources to open every post-mortem examination Gill did for Solano County, Faulkner said. “In many cases, there’s really nothing left to work with,” he said.

Stanton hired Dr. Bennet Omalu, chief medical examiner for the San Joaquin County Sheriff’s Office, to re-examine 32 of Gill’s autopsies, several of which involved a death that resulted from violent crimes. Omalu found problems in more than half of the post-mortem reports, the most egregious example being the 2008 death of Ricky Meyi.

The remains of Meyi, a 50-year-old Vallejo resident, were found burned and left in a ditch. Gill performed Meyi's autopsy and concluded that the man died of “complications of blunt force injuries.”

But Gill’s initial report did not document any blunt-force trauma. During a second exam, Gill listed blunt-force injuries on Meyi’s back, though Omalu disputed that such injuries could have killed the man. Those markings might have not been injuries at all, as blood settles after death, leaving marks that Gill might have mistaken for trauma, Omalu said.

Seven people accepted plea agreements with prison sentences related to Meyi’s death, despite the lack of evidence proving what killed him. The Solano County district attorney based much of the case on witness statements that said Meyi was beaten by a group at a party. Julie Underwood, the lead prosecutor on the case, told California Watch that she did not read Omalu's review and dismissed it as "one person's opinion."

A joint investigation by California Watch, ProPublica and PBS Frontline last year detailed how Gill, 68, has repeatedly resurrected his career in coroners’ offices across the United States over the past two decades after autopsy errors undermined criminal cases and misdiagnosed causes of death. The California State Bar called the doctor “incompetent” in a 2006 report on a botched homicide investigation in Sonoma County.

Gill was working for a private firm, Forensic Medical Group, when he performed the Solano County autopsies. The firm provides forensic pathology services to more than a dozen Northern California jurisdictions.

Forensic Medical Group fired Gill in early 2011, saying it did not have enough cases to keep the doctor.

Omalu discovered Gill continued to struggle with identifying evidence during autopsies and interpreting test results.

In 2007, Christina Baxley, a 41-year-old woman, was shot to death while walking her dog. Although the cause of Baxley’s death was not in question, Gill’s autopsy appears incomplete, as he misidentified certain injuries and entirely overlooked a bullet hole, according to Omalu.

“Review of the scene and autopsy pictures reveals a vividly obvious gunshot wound in the left anterior chest, which was not described in the autopsy report,” Omalu wrote.

Gill also allegedly misinterpreted a toxicology report in the death of David Slaughter, who was discovered unresponsive in his cell at California State Prison, Solano in January 2008.

In the autopsy report, Gill listed Slaughter’s cause of death as “morphine toxicity.” Omalu’s review of Slaughter’s blood results determined the death was caused instead by a toxic combination of amphetamines and heroin – a significant discrepancy.

Omalu noted another key shortcoming in Gill’s work on Slaughter’s death: no visual evidence.

“Digital photographic documentation of autopsy findings are expected accompaniments of autopsy reports in this modern day, especially in homicidal cases and unique cases like this case involving sudden in-custody deaths,” Omalu wrote. “This is a critical flaw."

Omalu argues that Gill repeatedly failed to meet basic standards of the profession. In multiple reviews, Omalu wrote in all caps: “There is a constellation of critical flaws in this case.”

Libertarians fight business-labor coalition on term limits

Will Evans — Wed, 23 May 2012 07:05:03 +0000

Will Evans

ericsphotography/istockphoto.com

Out-of-state libertarians are trying to defeat a term limits measure on the June ballot, but so far, they haven't been able to match the financial heft of the coalition of unions and business interests backing it.

Prop. 28 would tweak the current term limits regime by reducing the total amount of time a California legislator can serve from 14 to 12 years, while allowing a legislator to serve any of those years in either the state Assembly or Senate. Currently, under limits set by ballot initiative in 1990, lawmakers can serve a maximum of six years in the Assembly and eight years in the Senate.

The campaign supporting the measure has raised more than $2 million from sources that are often rivals: Democratic and Republican donors, labor and business groups, and even a pair of dueling developers. On the other side, opponents of the measure have rustled up only $150,000.

The biggest anti-Prop. 28 contribution came from the Liberty Initiative Fund, a new Virginia-based advocacy organization started by longtime ballot initiative activist Paul Jacob. Jacob doesn't like Mitt Romney much better than Barack Obama and wrote of former President George W. Bush's policies: "Too few of us dubbed it 'socialism' back then."

Jacob said Prop. 28 proponents are "masquerading" as term limit supporters when, in reality, they're trying to weaken them.

"This is a very serious scam being played on the people of California, and we want to do everything we can to alert folks," Jacob said. "If the word gets out, the people will overwhelmingly defeat Prop 28."

The Liberty Initiative Fund started this year "to put measures on the ballot that will expand and protect individual freedom, economic freedom, and that will hold government accountable," Jacob said. It is working on initiative efforts in Colorado, Washington, Arkansas, North Dakota, Montana, Arizona and Nevada. Jacob declined to identify the organization's donors.

"We’re relatively a pretty small player, but we think that’s going to change, and change rapidly," Jacob said.

Howard Rich, a real estate developer famous for funding libertarian causes, gave the opposition effort $45,000. Rich and Jacob are old term limit warriors; Rich founded the group U.S. Term Limits, and Jacob ran it for many years.

Rich has been active in California before. In 2006, the San Francisco Chronicle reported that a complicated web of advocacy groups with ties to Rich funneled millions of dollars to a ballot measure that would have limited the government's ability to seize private property. The initiative failed.

Opponents of Prop. 28 blast the ballot measure campaign for being bankrolled by "special interests." The Los Angeles County Federation of Labor provided hundreds of thousands of dollars in contributions and loans, while Pacific Gas & Electric and the Los Angeles Chamber of Commerce each gave $100,000.

Former Univision CEO and GOP mega-donor Jerry Perenchio gave $100,000, while liberal billionaire Eli Broad gave $50,000. They usually have more distinct political tastes. Perenchio gave $500,000 to a super political action committee supporting Mitt Romney this year, while Broad gave $35,800 to the Obama Victory Fund last year.

Gabriel Sanchez, a spokesman for the Prop. 28 campaign, notes that good-government groups like California Common Cause and the League of Women Voters of California also support the measure.

"What we have now is a broken status quo," Sanchez said. "What we have is lawmakers constantly campaigning, looking for the next job."

Sanchez said that under the current system, legislators bounce around from the Senate to the Assembly to other political posts without being able to focus on their jobs. He objected to the notion that the campaign is snookering voters.

"It’s a simple reform," he said. "When voters look at it, I’m sure they’ll have the same conclusion. It’s very clear what it does."

Opponents, though, are especially critical of contributions to the measure from two competing developers. Majestic Realty, owned by Ed Roski, gave $400,000, while L.A. Live Properties – part of Denver billionaire Philip Anschutz's entertainment company AEG – gave $100,000. Anschutz wants to build a professional football stadium in downtown Los Angeles, while Roski aims to build one in the City of Industry.

The two prominent developers used to be partners, working together to develop the Staples Center, and both still own parts of the Los Angeles Lakers and Los Angeles Kings. Anschutz, whom The New Yorker dubbed "The Man Who Owns L.A.," also owns the conservative Weekly Standard.

The two developers have had help from state legislators. In 2009, the Legislature gave Roski's stadium project an exemption from state environmental regulations. Last year, lawmakers voted to fast-track environmental challenges to Anschutz's stadium project.

Jacob, the Prop. 28 opponent, said the fact that the developers then gave money to a measure he believes relaxes limits on legislators just "stinks."

Sanchez called the argument that the developers might be trying to reward lawmakers "completely bogus" because the measure doesn't affect current legislators.

"They’re supporting it the same as we have support from the business community, the labor community and good-government groups – because it’s a sensible law," he said.

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