4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs

Pacific Imperial Railroad opts for bankruptcy

Metropolitan Transit System plans to ride along with troubled company

(from pacificimperialrailroad.com)
(from pacificimperialrailroad.com)

Pacific Imperial Railroad, the leaseholder of the publicly owned 70-mile stretch of railroad from Campo to Plaster City known as the Desert Line, has filed for Chapter 11 bankruptcy.

As reported by the Reader on several occasions, the railroad company that entered into a $1-million-per-year lease with Metropolitan Transit System in 2011 has faced many obstacles.

Pacific Imperial Railroad and its shareholders have a much longer history with the line.

In 2007, shareholders Charles McHaffie, Dwight Jory, and Sheila LeMire seized control of the company. Before doing so, former owner Gary Sweetwood and others had been busy rebuilding the deteriorated line and managed to begin hauling sand from Campo to Plaster City. However, after the takeover, trains stopped running. Since then, numerous lawsuits have been filed from former investors claiming they were scammed out of their money by McHaffie and others.

In 2011, federal officials seized 202 pounds of marijuana on a railcar managed by then–Carrizo Gorge Railway. At the same time, county health inspectors discovered several environmental hazards at one of the train depots.

During the course of the past nine years, allegations of investor fraud have dominated discussions of the historic rail line. Despite announcing new management and a change in majority shareholders in 2015, the troubles have remained.

Since that time, former president–turned–"director of compliance" Donald Stoecklein, who has partnered with McHaffie and Jory since the 1990s, has been fined by the Securities and Exchange Commission and has been sued by his former legal secretary for not paying her wages.

The bankruptcy petition was filed on October 10 in U.S. federal court. According to the petition, the company owes investors more than $7 million in unsecured debt. The company has only $1.6 million in the bank, much of which was paid to them by Baja Rail, which entered into an agreement with Pacific Imperial earlier this year to sublease the line in order to connect the track in Mexico.

Despite the news, as well as a lack of progress on the line, transit officials have announced that the public agency is sticking with the company.

"The San Diego Metropolitan Transit System believes this gives [Pacific Imperial Railroad] a path forward to resolve creditor and shareholder disputes while continuing to make progress on improvements to the Desert Line," reads an October 14 statement.

Transit officials point to the recent sublease with Baja Rail as the reason the current lease will remain intact. The Mexican company, according to the statement, has plans to purchase the master lease from Pacific Imperial Railroad.

"...[Baja Rail] can begin work on the track, bridges, and tunnels in the U.S. This bankruptcy filing has no impact on those reconstruction efforts.

"This would ensure that the Desert Line remains in capable, responsible hands and that reconstruction progress would continue without disruption. [Metropolitan Transit System] retains the right to evaluate any proposed assignment of the [Pacific Imperial Railroad] master lease based on its best interests. All provisions of the lease are still in effect."

Here's something you might be interested in.
Submit a free classified
or view all

Previous article

San Diego squeakers

Warner school district, Santee city council, Joel Anderson vs. Steve Vaus for county supervisor
(from pacificimperialrailroad.com)
(from pacificimperialrailroad.com)

Pacific Imperial Railroad, the leaseholder of the publicly owned 70-mile stretch of railroad from Campo to Plaster City known as the Desert Line, has filed for Chapter 11 bankruptcy.

As reported by the Reader on several occasions, the railroad company that entered into a $1-million-per-year lease with Metropolitan Transit System in 2011 has faced many obstacles.

Pacific Imperial Railroad and its shareholders have a much longer history with the line.

In 2007, shareholders Charles McHaffie, Dwight Jory, and Sheila LeMire seized control of the company. Before doing so, former owner Gary Sweetwood and others had been busy rebuilding the deteriorated line and managed to begin hauling sand from Campo to Plaster City. However, after the takeover, trains stopped running. Since then, numerous lawsuits have been filed from former investors claiming they were scammed out of their money by McHaffie and others.

In 2011, federal officials seized 202 pounds of marijuana on a railcar managed by then–Carrizo Gorge Railway. At the same time, county health inspectors discovered several environmental hazards at one of the train depots.

During the course of the past nine years, allegations of investor fraud have dominated discussions of the historic rail line. Despite announcing new management and a change in majority shareholders in 2015, the troubles have remained.

Since that time, former president–turned–"director of compliance" Donald Stoecklein, who has partnered with McHaffie and Jory since the 1990s, has been fined by the Securities and Exchange Commission and has been sued by his former legal secretary for not paying her wages.

The bankruptcy petition was filed on October 10 in U.S. federal court. According to the petition, the company owes investors more than $7 million in unsecured debt. The company has only $1.6 million in the bank, much of which was paid to them by Baja Rail, which entered into an agreement with Pacific Imperial earlier this year to sublease the line in order to connect the track in Mexico.

Despite the news, as well as a lack of progress on the line, transit officials have announced that the public agency is sticking with the company.

"The San Diego Metropolitan Transit System believes this gives [Pacific Imperial Railroad] a path forward to resolve creditor and shareholder disputes while continuing to make progress on improvements to the Desert Line," reads an October 14 statement.

Transit officials point to the recent sublease with Baja Rail as the reason the current lease will remain intact. The Mexican company, according to the statement, has plans to purchase the master lease from Pacific Imperial Railroad.

"...[Baja Rail] can begin work on the track, bridges, and tunnels in the U.S. This bankruptcy filing has no impact on those reconstruction efforts.

"This would ensure that the Desert Line remains in capable, responsible hands and that reconstruction progress would continue without disruption. [Metropolitan Transit System] retains the right to evaluate any proposed assignment of the [Pacific Imperial Railroad] master lease based on its best interests. All provisions of the lease are still in effect."

Sponsored
Here's something you might be interested in.
Submit a free classified
or view all
Previous article

How Nature Lovers Survive Covid on Mt. Whoville, Evanescence Live from Rock Falcon Studio, Holiday Music, Crafts, Food and Photos

Events December 3-December 5, 2020
Next Article

Tortillas star at Taquería Zapata

A shorter menu of tacos outside Pancho Villa market, still two bucks each
Comments
9

This whole thing has been a train wreck from the beginning. (Sorry--that was too easy)

Oct. 27, 2016

and, let me guess, NO one could SEE this coming? :P

Oct. 27, 2016

I can see light at the end of the tunnel. Oh wait, that's just lightning!

Oct. 27, 2016

Two drunks were walking upgrade between the railroad tracks. One of them said, "This is is longest stairway I have ever been on." To this, the other replied, "It's not the stairs that bother me, it's the low banister."

Oct. 27, 2016

This whole deal was a scam from the very beginning. Proof that even people with money are stupid. The MTA should be investigated under the RICO Act.

Oct. 28, 2016

It's the MTS (not "MTA").

Oct. 28, 2016

Well the A is next to the S on my QWERTY keyboard.

Oct. 29, 2016

It's highly unlikely the RICO Act would apply to MTS, since they only offered the lease. Investors were allegedly cheated by the railroad, not by MTS.

Oct. 29, 2016

That's not anything that I'd want to bet on. The role of the MTS CEO and his legal counsel in keeping this thing going is extensive. Their statements of support for the PIR group of questionable personalities could have been something that newer investors regarded as authoritative. In other words, MTS might have encouraged fraudulent activity by the PIR people, and if anyone defrauded relied on those statements, well, MTS was involved.

Those things could bring RICO into the picture. Not that I expect that, but ya' nevah know.

Oct. 31, 2016

Sign in to comment

Sign in

Art Reviews — W.S. Di Piero's eye on exhibits Ask a Hipster — Advice you didn't know you needed Best Buys — San Diego shopping Big Screen — Movie commentary Blurt — Music's inside track Booze News — San Diego spirits City Lights — News and politics Classical Music — Immortal beauty Classifieds — Free and easy Cover Stories — Front-page features Excerpts — Literary and spiritual excerpts Famous Former Neighbors — Next-door celebs Feast! — Food & drink reviews Feature Stories — Local news & stories From the Archives — Spotlight on the past Golden Dreams — Talk of the town Here's the Deal — Chad Deal's watering holes Just Announced — The scoop on shows Letters — Our inbox [email protected] — Local movie buffs share favorites Movie Reviews — Our critics' picks and pans Musician Interviews — Up close with local artists Neighborhood News from Stringers — Hyperlocal news News Ticker — News & politics Obermeyer — San Diego politics illustrated Of Note — Concert picks Out & About — What's Happening Overheard in San Diego — Eavesdropping illustrated Poetry — The old and the new Pour Over — Grab a cup Reader Travel — Travel section built by travelers Reading — The hunt for intellectuals Roam-O-Rama — SoCal's best hiking/biking trails San Diego Beer — Inside San Diego suds SD on the QT — Almost factual news Set 'em Up Joe — Bartenders' drink recipes Sheep and Goats — Places of worship Special Issues — The best of Sports — Athletics without gush Street Style — San Diego streets have style Suit Up — Fashion tips for dudes Theater Reviews — Local productions Theater antireviews — Narrow your search Tin Fork — Silver spoon alternative Under the Radar — Matt Potter's undercover work Unforgettable — Long-ago San Diego Unreal Estate — San Diego's priciest pads Waterfront — All things ocean Your Week — Daily event picks
4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
Close