Former Desert Line railroad prez penalized

The former president and chief operating officer (now “director of compliance”) for Pacific Imperial Railroad, the company that leases the rights to the binational railroad from Metropolitan Transit System, is in trouble with the Securities and Exchange Commission.

On June 2, the commission announced the settlement agreement between the federal agency and San Diego–based attorney Donald Stoecklein for falsifying registration documents for a Nevada-based gold-trading company called NuGold Resources.

According to the commission's investigation, Stoecklein and his firm registered the company for another individual when in fact it was Stoecklein who directed operations, controlled the company's bank account, and was responsible for taking the company public. In doing so, Stoecklein violated several provisions of the Securities Act of 1933.

While not admitting guilt, Stoecklein agreed to pay an $80,000 fine. He is also permanently barred from serving as an officer or director of any public company and is not allowed to issue or play a role in offering any penny stocks. The attorney is also suspended from practicing law before the Securities and Exchange Commission and prohibited from "representing clients in [Securities and Exchange Commission] matters, including investigations, litigation, or examinations, and from advising clients..."

For Stoecklein, the commission's investigation and subsequent settlement agreement is the latest violation that has come to light since jumping on board as an executive for the long-delayed binational railroad.

As reported by the Reader, the Desert Line is a 70-mile stretch of railroad that runs from Tecate, Mexico, to Plaster City, California. Originally built by John D. Spreckels in 1919, the line has been dubbed the "impossible railroad" in recent decades due to the harsh terrain and natural disasters that plagued it since opening.

After years of abandonment and neglect, the line was resurrected in 2004 by former owner Gary Sweetwood. The company, then called Carrizo Gorge Railway, was then bought out by what later become known as Pacific Imperial Railroad.

In 2012, Pacific Imperial entered into a 99-year-lease with San Diego's Metropolitan Transit System to reconstruct and operate the Desert Line. As part of the lease agreement, Pacific Imperial agreed to pay $1 million a year for rights to the line.

But, since entering into that agreement, the company has been embroiled in legal battles filed by disgruntled investors and has been busy warding off allegations of fraud and mismanagement, as well as fines for the transportation of marijuana and environmental violations.

Stoecklein's name first appeared as the person who registered Pacific Imperial Railroad as a business under then–majority shareholder Dwight Jory and his cohort Charles McHaffie. Stoecklein and his Securities Law Institute had worked with the pair before, registering what appeared to be several shell companies that later went bankrupt.

McHaffie, who until recently served as a consultant for Pacific Imperial, has been named in a number of lawsuits for bilking investors out of cash, some of which included Junior Seau's widow Gina, as well as developer Corky McMillin, Qualcomm's Gary Jacobs, and others.

In recent years he has been the focus in several Securities and Exchange Commission investigations and lawsuits. Back in 1995, the commission accused the attorney of “violating the securities registration and the anti-fraud provisions of the federal securities laws.”

In March 2015, the Securities and Exchange Commission filed a complaint against Stoecklein for failing to pay back "ill-gotten gains" he received in the sale of stock in a Nevada-based company known as SoftPoint, Inc, in 1997.

Then, in October 2015 Stoecklein was named in another complaint, this time from the state's Labor Commission, for refusing to pay his legal secretary Jennifer Trowbridge $90,152 in wages.

More recently, questions regarding the latest string of investors have surfaced.

Executives at Metropolitan Transit System declined to comment on the recent investigation and settlement.

Stoecklein did not respond to a request for comment. It is also unclear what Stoecklein's role will be with Pacific Imperial now that he is no longer allowed to serve as an officer or director of a public company.

On Thursday, June 9, Metropolitan Transit System's board of directors will meet to discuss whether to give the struggling railroad company another year to meet the performance milestones to rehabilitate the line. That meeting will be held at the transit agency's headquarters in downtown San Diego at 9 a.m.

UPDATE 6/8, 10:30 a.m.

Donald Stoecklein’s attorney said his client is prohibited from commenting due to a gag order enforced by the SEC on all investigations/settlements. He also said that Stoecklein did not admit any wrongdoing or guilt in the matter (which was stated when this article was originally published yesterday).