The old misspelled-name trick was one of the scams used by UCAN to skim money from the nonprofit.
  • The old misspelled-name trick was one of the scams used by UCAN to skim money from the nonprofit.
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‘We helped a lot of people. It is disappointing to see where the organization is now.” Thus speaks Jordana (Jodi) Beebe, onetime head of the fraud squad at Utility Consumers’ Action Network (UCAN), the once-revered watchdog organization now under a United States attorney criminal investigation, facing a state-mandated audit, and almost penniless. Just a few years ago, UCAN was on TV twice a week, had 17 part-time and full-time employees, and bragged of a cofounder, Michael Shames, who was a San Diego icon.

Charles Langley blew the whistle.

Charles Langley blew the whistle.

The watchdog’s collapse was all about greed, hubris, and a board that refused to take off blinders, even after whistle-blowers presented extremely strong evidence of financial shenanigans. Many questions remain, but one in particular has not been resolved credibly: why did hundreds of thousands of dollars move off the UCAN books to accounts with a misspelled word? Call it the “Comsumers” conundrum, although some fraud experts hardly think it’s a riddle, since misspelled financial accounts are age-old devices for hiding money.

Michael Shames skimmed over $400K.

Michael Shames skimmed over $400K.

UCAN’s original mission was to battle San Diego Gas & Electric’s sky-high profits, but the organization diversified into telecom, gas prices, consumer fraud, and privacy rights, among many things. It filed class action suits against various companies for consumer fraud and won big settlements. Frequently, its law firm was the former Milberg Weiss Bershad Hynes & Lerach, the bane of Corporate America, whose San Diego head, William Lerach, went to prison for concealing illegal payments to plaintiffs.

Mike Aguirre represents the whistle-blowers.

Mike Aguirre represents the whistle-blowers.

“Was there a tit for tat?” with anybody at UCAN, asks one skeptic who is near the top of the watchdog’s hierarchy. That’s just one question surfacing now. The person posing that query is not one of the two whistle-blowers, Charles Langley and David Peffer, who filed a suit this year against Shames and the organization’s board members, stating that Shames did not do required audits; collected unauthorized bonus income; moved money off the books into misspelled accounts; represented himself as an attorney while he was an inactive bar member; directed the movement of $1 million of corporate money through UCAN to former San Diegan Peter Navarro for the making of an anti-China movie; and lost $100,000 of the watchdog’s money speculating in a hedge fund that Navarro was deeply involved in.

Jordana Beebe laments UCAN's downfall.

Jordana Beebe laments UCAN's downfall.

Despite many warnings, the UCAN board failed to do anything about these activities, declared the suit. Indeed, the board’s response is redolent of an orchestrated cover-up. Following complex legal skirmishes, some air has been cleared. Shames rejoined the bar. On October 2, the board demanded that Shames return $474,000 of the secret 10 percent bonuses he was skimming from intervenor fees that the watchdog organization got from the California Public Utilities Commission. After holding on to $400,000 of the $1 million ticketed for Navarro, UCAN, under threat of a lawsuit, finally passed it to him.

Paul Dostart: forensic accountant hired by the board.

Paul Dostart: forensic accountant hired by the board.

There were early signs of the debacle. In 2004, Shames proposed a new organization, Internet Consumers’ Action Network, Inc. (ICAN), a nonprofit that would work with a private organization to be owned by Shames. “Michael is considering launching a new form of UCAN and ditching us,” said a key employee in an email. A person high in the organization wondered if Shames intended to merge his organization with San Francisco’s watchdog, the Utility Reform Network (TURN), to free himself up to pursue fat profits through ICAN’s connection to his private company. “Michael is notorious for doing what he wants with UCAN’s money,” said a top official in an email.

“Shames was hardly ever in the office,” says a former employee. “When he did show up, it was unannounced.” For years, a demoralized staff wondered what he was plotting.

On March 4, 2011, the board was informed of the alleged financial misconduct, including the “Comsumers” accounts. Thirteen days later, Shames warned employees that if they didn’t stop complaining to the board, he would dissolve UCAN, and the board would go along. The board hired attorney Paul Dostart, a forensic accountant, who reported on June 8, 2011, that he could not locate the misspelled account balances on the UCAN books.

But on August 24, 2011, Dostart claimed to whistle-blower Peffer that the misspelled accounts had been tied back to UCAN’s financial records and the “account name misspellings were inadvertent oversights.”

Peffer replied disdainfully that six such misspelled accounts had now been traced to five separate financial institutions. While Dostart had claimed that the accounts involved only nominal amounts, there was one for more than $262,000.

Whistle-blower Langley says it strains credulity to believe that these accounts could have been traced in less than three months. Moreover, UCAN management still has not recovered records of misspelled accounts that landed in financial institutions prior to 2008 and recently sent out letters to retrieve them. Mike Aguirre, attorney for the whistle-blowers, was told by a UCAN accountant that there was only a spot check of the misspelled accounts — not a full audit. The board “decided to go into dissolution rather than do an audit,” says Aguirre.

On September 22, 2011, Dostart wrote to Belinda Johns of the Attorney General’s Registry of Charitable Trusts. Dostart said that the board had decided on liquidation — hopefully in a deal that would permit TURN to take over UCAN assets without acquiring possible large liabilities.

It looked then as if Shames had won: UCAN would be dissolved, the whistle-blowers fired, their allegations buried, and the board let off the hook. But TURN apparently smelled a rat, and so did the United States attorney’s office. In February of this year, UCAN filed for dissolution and claimed it would cooperate with the United States attorney’s investigation. But the dissolution attempt failed, and the probe is now intensifying.

Dostart won’t comment. Richard Kipperman, court-appointed receiver who declared that he had found no wrongdoing, says the court never ordered him to do a forensic audit. The United States attorney may have to locate those “Comsumers” accounts. ■

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Founder Oct. 17, 2012 @ 1:21 p.m.

Kudos to Don Bauder for all this information!

This could not come at a worse time for ratepayers since SCE/SDG&E are in the middle of a 1.2 Billion Dollar rip off of ratepayers because of SCE's SORE (San Onofre Reactor Emergency) Debacle!

More on the CPUC Investigation here: http://www.utsandiego.com/news/2012/oct/17/cpuc-readies-probe-san-onofre-its-costs/ by UT/Morgan Lee snip State utility regulators are preparing a possible investigation in to whether Southern California utilities can continue to bill customers for a nuclear plant that has not produced electricity for nearly nine months.

The San Francisco-based California Public Utilities Commission on Tuesday published a draft investigation order regarding the idled San Onofre Nuclear Generating Station. It will take up the matter at a public meeting Oct. 25 in Irvine. Bolding added!

Under the proposed investigation order, regulators would consider whether or not a utility rate reduction should be made and, if so, when and to what extent.

Customers of San Diego Gas & Electric and Southern California Edison are paying about $835 million a year for the operation, maintenance and capital costs at San Onofre. and The full DRAFT investigation Order here: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M030/K511/30511880.pdf

many more of the San Onofre Papers, here: https://docs.google.com/folder/d/0BweZ3c0aFXcFZGpvRlo4aXJCT2s/edit

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tomjohnston Oct. 17, 2012 @ 6:51 p.m.

Actually, next week the commission will vote on whether or not to open the proposed investigation. Let's see if these three most recently appointed commissioners are actually fed up enough to vote together and get the ball rolling now. I would also like to point out that state law requires the commission to open an investigation if a plant remains out of service for nine months, to determine if a rate rollback is warranted.

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SurfPuppy619 Oct. 17, 2012 @ 1:42 p.m.

If I were Shames I would be worried about going to prison.

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dwbat Oct. 17, 2012 @ 2:09 p.m.

Shames is an appropriate surname for him.

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Don Bauder Oct. 17, 2012 @ 4:53 p.m.

Founder: Yes, it would be preferable if a robust UCAN could spend a lot of time making sure that San Onofre isn't reopened, and the costs are not passed on to ratepayers. Unfortunately, we cannot let UCAN off the hook just because its representation is needed on the San Onofre scandal. Best, Don Bauder

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Don Bauder Oct. 17, 2012 @ 5:08 p.m.

SurfPup: Shames has a lot of explaining to do. So does the board, which would not listen to the whistleblowers, and may have engaged in a coverup. One theory on the CoMsumers misspelled accounts is that money was being moved off the UCAN books to avoid an independent audit. Under California law, charitable corporations with gross revenues of $2 million or more must prepare annual financial statements audited by a CPA. Since there was a lot of dubious activity going on -- e.g. the $1 million mysteriously run through UCAN for a movie by Peter Navarro, the $100,000 lost on a Navarro-related hedge fund, etc. -- there appears to have been motivation to avoid an audit. There could have been other reasons, too. The most dubious explanation of all was that these accounts were "inadvertent oversights." But the board bought that so-called explanation, and one has to wonder if the board -- not just Shames -- wanted to avoid an audit, too. Best, Don Bauder

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Don Bauder Oct. 17, 2012 @ 5:11 p.m.

dwbat: Shames had the board eating out of his hand. But it looks less and less that the board was conned or apathetic. Best, Don Bauder

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Don Bauder Oct. 18, 2012 @ 1:09 a.m.

tomjohnston: The law is one thing. Common sense is another. It makes no sense to reopen San Onofre now -- or possibly ever. It has always been a time bomb, sitting on an earthquake fault. Best, Don Bauder

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tomjohnston Oct. 18, 2012 @ 8:23 a.m.

I'm not sure that I understand the point of this comment. Please explain.

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Don Bauder Oct. 18, 2012 @ 9:07 a.m.

tomjohnston: What I mean is that legal issues are only part of the picture with San Onofre. The non-legal issues -- safety, in particular -- are as important as or possibly more important than whatever CPUC says the law is. Best, Don Bauder

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tomjohnston Oct. 18, 2012 @ 10:15 a.m.

OK. Since your comment was directed to me, I didn't understand it as I did not address the issue of reopening San O in my previous comment. I agree that San O should not be reopened. I protested it's opening before construction was even completed. My reference to the "law" was to simply point out that in terms of an investigation into whether rates should be rolled back or not, it's up to the CPUC in some sense as to WHEN to look into it, but not IF they should look into it. The law requires them to do so once the plant has been offline for 9 months. That comes as of October 31st, 9 months after Unit 3 was shut down after the leak was detected; Unit 2 was taken down on Jan. 9th for "planned" maintenance. The commission can investigate and determine whether or not to immediately remove all costs related to San O from the ratepayers and look into refunding San O costs collected since January. As I said in my previous comment, let's see whether or not the three most recent appointees are truly "fed up" enough to do the right thing. If ANY of them vote in favor of SCE, then we will fave seen their "true colors". However, that said, that the CPUC is the final authority on if or when San O reopens. I would have to guess that probably lies with the NRC, which of course brings into play a whole new set of influences, influences that are probably considerably more powerful than those in Ca.

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Don Bauder Oct. 18, 2012 @ 2:11 p.m.

Some people think the three new Brown appointees want to clean up the CPUC board, but others haven't seen evidence of it. I am hoping for a long overdue deterging. Best, Don Bauder

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tomjohnston Oct. 18, 2012 @ 2:52 p.m.

"We must accept finite disappointment, but never lose infinite hope" But after a year and a half into their terms, if it hasn't happened yet, I'm not going to hold my breath waiting for it.

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Don Bauder Oct. 18, 2012 @ 4:06 p.m.

tomjohnston: Yes, it is hard keeping one's hopes up these days -- agreed. Best, Don Bauder

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Founder Oct. 18, 2012 @ 10:31 a.m.

I'd like to ask what it would take for a new group, with a new board to take over the "duties" of UCAN and start to really promote for rate payers instead of themselves?

SDG&E must be ROTFL now because UCAN is so dysfunctional!

I also agree that the SORE (San Onofre Reactor Emergency) should not be restarted since CA has a 40% energy surplus without either SanO or El Diablo in operation!

It just does not make any sense to take any chances just to have SCE's shareholders make a profit?

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SurfPuppy619 Oct. 18, 2012 @ 10:58 a.m.

I believe they are doing that-right Don??? UCAN provides such a valuable service, especially to the poor and middle class who get rolled with the bogus unjustified rate hikes.

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Don Bauder Oct. 18, 2012 @ 2:44 p.m.

The whistleblowers are trying to save UCAN. So are one or two board members. I fear, however, that most of the board wants to kill UCAN so another similar operation can be set up -- possibly headed by Shames. Best, Don Bauder

1

Don Bauder Oct. 18, 2012 @ 2:15 p.m.

Founder: You have touched on the big question about the CPUC today. The current commissioners care much more about profits of the three major utilities than they do about ratepayers, or about common sense solutions to pressing utility issues, such as San Onofre. Why, indeed, should Orange County and North San Diego County take such risks because commissioners are worried about utilities' bottom lines. Best, Don Bauder

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Twister Oct. 21, 2012 @ 7:26 a.m.

The risks of any escape or release of nuclear particles or radiation are not limited to North San Diego and Orange County.

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Don Bauder Oct. 21, 2012 @ 8:10 a.m.

True, Twister. The dangers threaten a wide swath. Best, Don Bauder

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Bob_Hudson Oct. 18, 2012 @ 9:11 p.m.

This whole scandal and potential fraud makes me wonder if the ratepayers really got a good deal from Shames' representation to the PUC or was his goal merely to get enough concessions to guarantee him a good payday from intervenor fees? And you have to wonder did SDG&E know what Michael's breakpoint was and pad it's rate increase requests by the amount he'd seek to have them reduced? Were we effectively represented by UCAN or was it just a charade? When I see those misspelled accounts (and Shames posing as a member of the bar) it certainly suggests our intervenor was not guided by integrity and principle.

2

Don Bauder Oct. 18, 2012 @ 9:37 p.m.

Bob: That is the very question that many of us -- including some people quite close to the top of UCAN -- have been asking for some time. SDGE would ask the California Public Utilities Commission for a ridiculous rate increase. Shames would argue for one less ridiculous. SDGE would wind up with a rate increase far more than it probably dreamed of getting. That's one reason the profits of SDGE's parent, Sempra Energy, are among the highest in the utility industry, and SDGE's rates are among the highest in the U.S. Yes, the whole thing may have been a bit of a charade. There are interesting indications of this. UCAN, meanwhile, would get fat intervenor fees, and it turns out that Shames was taking a 10% bonus off those fees. Best, Don Bauder

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SurfPuppy619 Oct. 18, 2012 @ 10:25 p.m.

This whole scandal and potential fraud makes me wonder if the ratepayers really got a good deal from Shames' representation to the PUC or was his goal merely to get enough concessions to guarantee him a good payday from intervenor fees?

Makes you wonder, totally legit question.

1

Don Bauder Oct. 19, 2012 @ 7:37 a.m.

The state will audit UCAN and other groups that live off intervenor fees. That may shed light on whether the whole thing is a racket. Best, Don Bauder

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Twister Oct. 21, 2012 @ 7:21 a.m.

"Maximum feasible deniability" is just one tool in the box of manipulation.

Re: dbauder Oct. 17, 2012 @ 5:08 p.m.

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Don Bauder Oct. 21, 2012 @ 8:13 a.m.

Yes, Twister, and maximum plausible deniability often works, largely because law enforcement has been compromised or corrupted. Best, Don Bauder

1

Twister Oct. 21, 2012 @ 7:38 a.m.

Unfortunately, many (most? nearly all?) NGO's contain (or consist of?) apparatchick/goon-staffers and "executives" who understand, or care nothing for the actual merits of issues--only about political expediency and their fat paychecks. Show me a BIG do-gooder organization and I'll show you a once-dedicated, but now completely distorted "organization" which cynically uses the do-good image as a disguise and a sales pitch. It's a sham--all the way down.

Re: dbauder Oct. 19, 2012 @ 7:37 a.m.

The state will audit UCAN and other groups that live off intervenor fees. That may shed light on whether the whole thing is a racket. Best, Don Bauder

1

Don Bauder Oct. 21, 2012 @ 8:16 a.m.

Twister, it is so often true, unfortunately, that groups starting out with good intentions wind up corrupt. Greed is indeed a bitch-goddess. When we are young, we believe loves make the world go 'round. As we get wiser, we realize that it's money that makes it twirl. Best, Don Bauder

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FatCatSegat Oct. 22, 2012 @ 4:34 p.m.

Shame on you Mr. Shames! What was all that grandstanding in front of the cameras about? Maybe shame on me for trusting another public figure to use our fears and concerns only to end up like all the money grubbing bastards who tell us they work for us while only nurturing their greedy needs to be the richest merchant on the block? A wolf in sheep's..., well, you know. If you only knew what you're teaching the borderliners who teeter on the fence of good and evil. Let me tell you something! You will answer for your deeds. The forces of karma have been accelerated by your actions! Do us all a favor 'though. When your life is in turmoil and your actions have led you to to the edge of the abyss, don't you dare look up and ask, "Why is this happening to me?" Live long,.......and suffer.

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Don Bauder Oct. 22, 2012 @ 5:33 p.m.

FatCatSegat: Shames declares his innocence and the board seems to think it has been diligent. Best, Don Bauder

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FatCatSegat Oct. 23, 2012 @ 12:14 a.m.

What offends most Mr. Bauder, is the trust and confidence we put in these charlatans who claim they act in our defense by notifying us on what is really going on as they perform their slight of hand only to bring their hypocrisy to light. Really, who do we trust? Whom do we turn to without worrying if they really are concerned about our plight? History unfortunately has proven time and time again that the deception will always win over the truth. Woe unto you who makes all the evil in the world right and all the good, evil. Do the math, sit down, place your heads between your legs and kiss your asses goodbye! Paraphrased but, pulled from the pages of this week's Reader. What we support and approve of because of our enlightenment in this age only proves and demonstrates our distance from our creator. We swear that we are an advanced civilization accepting the behavior that has always been deemed evil. The laws of God haven't changed! Only our morality has. Less than five hundred years ago, merchants were the scourge of the earth, slightly higher in value than musicians and lepers. Today, animals like Trump and Turner are admired and even worshipped. Even as they act only to fill their pockets and to fulfill their personal agendas These days, the horrible truth perpetuates on as us 99%ers deal with the hard facts and create subversive movements, get arrested, become a part of the system and eventually come face to face with the puppets of corporate america only to deal with whatever punishment their system allows. When does it stop? How long you been out?

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Don Bauder Oct. 23, 2012 @ 8:19 a.m.

It seems to me that it is too late for the UCAN board to bury this, after spending $800,000 trying to defend itself and its former executive director. If SD nonprofits are not really nonprofits, but are being milked by insiders, then the public MUST learn the truth. If the US attorney tries to bury the FBI's findings, there will be a bad taste more lingering and corrosive than the Moores/Stallings government coverup. Best, Don Bauder

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Twister Nov. 14, 2012 @ 4:05 p.m.

There's no good reason that pure sunlight should not be required to shine upon all NGO (and for that matter, government at all levels), readily and easily available on their websites that clearly reveal the input and the output with no smoke and mirrors. Those which don't do this will not get one thin dime from me.

If the US Attorney knowingly tries to bury any of the public's business, he and all of the involved staff should not only have to fall on their swords, they should have to compensate the public for their violations of their responsibilities.

Bigness IS badness. Yes, the initial motives may have been noble and true, but when they have been demeaned and distorted by the "it's play-money" attitude, they should have to die a natural death like the rest of us. But when we have a SCOTUS that declares corporations to not only be "persons," but never to die, that is a distortion of the Constitution's intent, with or without the founding fathers (mothers are blameless because they were excluded--is that constitutional?).

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SurfPuppy619 Nov. 14, 2012 @ 6:33 p.m.

Don, have you had any contact with Shames, or is he still not speaking to you??????

I have a feeling he is going to be indicted by the US Attorneys office.

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