Would officials at Metropolitan Transit System knowingly lease a public asset to a company that was penalized for smuggling drugs across the border? It appears so.
According to a “Notice of Penalty” obtained by the Reader, in August 2010, Carrizo Gorge Railway was slapped with a $1.6 million dollar fine after Customs and Border Protection officers discovered 202 pounds of marijuana stashed in an empty railcar. Carrizo Gorge Railway has since changed its name and is now known as Pacific Imperial Railroad; however, the principals for that company have remained the same.
"On August 23, 2010, Carrizo Railway Inc. manifested railcars BNSF 469335 and BNSF 473568 as empty railcars entering the U.S through the Otay Mesa Railyard. Inspection by CBP officers revealed 91.8 kilograms of Marijuana concealed in the bottom of the hoppers," reads the Notice of Penalty received on October 4, 2010.
The appearance of the penalty for smuggling drugs across the border comes one day after the Metropolitan Transit System board of directors discussed the item during their monthly meeting.
During that meeting, despite numerous allegations of fraud and no progress on getting the rail line up and running, officials and boardmembers at Metropolitan Transit System stood their ground, describing the principals as "entrepreneurs" and patting themselves on the back for entering into a $1-million-a-year lease with Pacific Imperial Railroad for rights to use a portion of the binational railroad, the 70-mile-stretch of track running from Division to Plaster City.
"[Pacific Imperial’s] principals are entrepreneurs," said Metropolitan Transit System chief Paul Jablonski at the July 17 meeting. "The contract is in good standing."
Jablonski celebrated the fact that the transit system is now making money on what is and has been an inoperable line. Boardmembers such as county supervisor Ron Roberts gave his support to Jablonski, criticizing a member of the public for questioning Jablonski's judgement.
"I am insulted by the words used in the press and insulted by the accusation that [Paul Jablonski's] job would be in danger because of some press coverage. For years, we have made no money on the Desert Line and nothing has happened despite lots of promises. $1.5 million helps our budget and I have a strong interest in seeing the payments continue. I hope they’re successful; I wouldn’t even recognize them if they were here. They are investing real money in MTS, and I hope this continues despite claims made without substantial evidence. We have an existing contract. Others can be cavalier about the finances, but we can’t. Karen [Landers] and [Jablonski] have done a tremendous job on this issue."
The new information regarding the smuggling of weed across the border, however, has never been mentioned. It is unclear if Jablonski or anyone else at MTS were aware of the incident.
Regardless of whether the MTS chief was aware of the drug bust, they have been made aware of what appears to be shady histories for those running Pacific Imperial Railroad, the same people who took part in the takeover of Carrizo Gorge Railway in 2007.
Charles McHaffie, the ringleader, has been named in dozens of lawsuits, including several for scamming investors of the railroad, namely Gina Seau and Mark Arabo and colleagues. McHaffie was also slapped with a fine by the San Diego Ethics Commission for his involvement in an illegal political action committee.
The current president, Donald Stoecklein, first showed up in 2010. Initially brought in as a securities and exchange specialist, Stoecklein has since taken the lead on the rail line. Stoecklein also has somewhat of a checkered past. He has been warned by the Securities and Exchange Commission as well as accused of wrongdoing in a stock scam involving CMKM Diamonds.
And then there was onetime CEO and attorney James Warner. Earlier this week, Warner admitted to stashing $100,000 in drug money for a client. Just two months before the drug bust at Otay Mesa, Warner served as general counsel for Carrizo Gorge Railway, according to shareholder minutes from a April 26, 2010, meeting. Following his involvement in the railway, Warner went on to specialize in medical marijuana law. He also was named in a lawsuit brought by Gina Seau for allegedly scamming her out of $2.5 million.
In recent weeks, MTS has come under fire in the media as well as from congressmen Duncan Hunter and Jeff Denham, both of whom sent letters expressing concern about MTS' handling of the line.
After learning of the drug bust, Hunter's spokesperson Joe Kasper had the following to say:
"This whole situation is proving that at times, the truth can actually be stranger than fiction. Quite often, where there’s smoke, there’s fire and it’s the Congressman’s concern that based on initial findings alone, [Pacific Imperial Railroad] needs to be seriously scrutinized — which MTS should have done but appears not to have taken much interest in doing. What needs to be put forward by MTS is [the railroad’s] qualifications to run the Desert Line, the solvency of [the railroad] and its list of assets beyond three rail cars, in order to prove they are in this for the right reason. The Desert Line is a public asset and MTS should care about more than collecting modest revenue off a lease — especially with the potential the Line presents."
Officials from MTS issued this response in time for publication: "MTS is generally aware of an incident several years ago regarding smuggling of drugs onto a train originating in Mexico and crossing the US Border at San Ysidro, where US Customs and Border Protection (CBP) officers discovered the contraband during the inspection process. MTS has no knowledge of the outcome of that case, except that the CBP inspection process worked as intended and detected the smuggling attempt. There is a risk of smuggling at all international border crossings. CBP applies significant resources for prevention and detection efforts along the San Diego-Mexico border. MTS cooperates with CBP’s efforts by giving CBP officers access to MTS property for inspections and patrols.
"In addition, the Desert Line lease agreement requires Pacific Imperial Railroad to submit an anti-smuggling and customs enforcement plan that fully complies with federal laws prior to any freight operations commencing. In compliance with that contract requirement, PIR has been in contact with CBP regarding the inspections process and requirements for the start of Desert Line operations. MTS expects there will be a continuing dialogue between PIR and CBP about how to best ensure a safe and reliable binational freight line."
Donald Stoecklein responded, "[Carrizo Gorge Railway] and [Pacific Imperial Holdings] preceded PIR. PIR only acquired the left over assets of [Carrizo Gorge Railway] in 2011. I have no knowledge of that [drug bust]. When did it occur??"
Evidence suggests that Stoecklein was present at board meetings in the months preceding the bust.
I am awaiting word from Customs and Border Protection on the investigation and whether the fine has been paid.