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HSRA board member Crane may cash in on P3 deals he pushes

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    Published Friday, January 2, 2009, by the Los Angeles Times Schwarzenegger aide has ties to former employer that could benefit from state construction projects
    Message 1 of 1 , Jan 5, 2009
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      Published Friday, January 2, 2009, by the Los Angeles Times

      Schwarzenegger aide has ties to former employer that could benefit
      from state construction projects

      David Crane <http://www.cahighspeedrail.ca.gov/about/david-crane.htm>,
      who supports public-private partnerships, draws income from
      investments he made while at a financial services company that could
      receive business from state projects.

      By Michael Rothfeld and Jordan Rau

      As Gov. Arnold Schwarzenegger demands that lawmakers allow private
      interests into California's huge market for public works projects,
      a company with close personal and financial ties to the governor's
      economic advisor is positioned to benefit.

      The advisor, David Crane , has spent years promoting private-sector
      involvement in public construction projects -- one of a few issues
      holding up a deal between Schwarzenegger and legislative Democrats
      to ease the state's worsening fiscal crisis.

      Babcock & Brown, the financial services firm where Crane worked for
      a quarter of a century, hired a Sacramento lobbyist last year to
      influence the governor's office on so-called public-private
      partnerships, records show. Since joining the governor's team in 2004,
      Crane has received hundreds of thousands of dollars of income from
      deals he made while at Babcock, a firm founded in San Francisco and
      based in Australia, according to financial disclosure reports.

      Those deals included projects in areas such as telecommunications, in
      which he served as a financial advisor; personal investments in real
      estate from Babcock's public-private partnership projects in England;
      and partnerships he formed with other Babcock executives to invest in
      oil wells and an Italian restaurant chain.

      In an interview, Crane said the income he earns from deals completed
      years ago has nothing to do with Babcock today or the firm's potential
      to generate business from his support of public-private partnerships.
      He said he sold his ownership stake, which was less than 10%, when he
      left in 2003.

      "There is nothing that Babcock & Brown could do, or any company in
      public-private partnerships, that could benefit me," Crane said.

      State ethics law prohibits a public official from taking actions that
      would benefit himself or his family.

      Jessica Levinson, the director of political reform at the nonprofit
      Center for Governmental Reform in Los Angeles, said Crane appears to
      be operating within the letter, though perhaps not the spirit, of the

      "It starts to have the appearance of doing political favors for old
      friends, and that is not something that I think is illegal, but it
      still may not be fully ethical," Levinson said. "I think it all comes
      down to, is he making this decision for public good or is he making
      it to help his old business friends?"

      Babcock is one of a number of firms that compete for public-private
      partnerships with governments worldwide.

      Another major company, Macquarie Infrastructure Group, has lobbied
      the governor's office in the past.

      With 30 offices worldwide, Babcock engages in business related
      to finance, real estate, infrastructure and equipment. Through a
      subsidiary, Trans Bay Cable LLC, the company is constructing a
      55-mile electrical line for the city of Pittsburg under San
      Francisco Bay, and it has invested in California wind farms.

      As Babcock has seen its stock, listed on the Australian exchange,
      plummet in the economic downturn, executives have said they plan to
      sharpen their focus on infrastructure, a core company business. Since
      January, Babcock & Brown Infrastructure Group LLC has paid $18,000 to
      Lang, Hansen, O'Malley & Miller, a firm with offices across the street
      from the Capitol, to lobby the governor's office on public-private
      partnerships, according to filings with the secretary of state.

      Babcock executives in San Francisco did not respond to several
      interview requests. Matt Dallas, a company spokesman in New York,
      denied that Babcock was trying to influence the governor's office on
      public-private partnerships, but he was unable to explain the records
      of its lobbying activity filed with the state.

      The governor, citing the need for new construction, has long sought
      to persuade legislators and unions to accept private capital and
      expertise, but they have repeatedly rebuffed him. Now Schwarzenegger
      has injected what some see as a peripheral issue into talks on how
      to fund schools, healthcare and other services.

      "There's no credible evidence to suggest that public-private
      partnerships help to balance the budget," said Jean Ross, executive
      director of the nonprofit California Budget Project, which focuses
      on the economic plight of low- and middle-income residents.

      Schwarzenegger says that giving private companies a greater role in
      construction and relaxing some of the environmental permitting rules
      will bolster the economy by speeding up these efforts.

      Crane <http://www.cahighspeedrail.ca.gov/about/david-crane.htm>, 55,
      of San Francisco, is described by associates as an idea man, bright
      and zealous -- "a philosopher," he says -- preaching the virtue of
      free market competition.

      He is one of Schwarzenegger's most trusted confidants and a longtime
      friend. In the 1990s, they did business together when Schwarzenegger
      bought a Boeing 747 from Singapore Airlines and leased it back to
      the airline, which had hired Babcock to help it replace its fleet.

      Crane, a Democrat, had been at Babcock since 1979, when it was a
      tiny firm. By the time Schwarzenegger, a Republican, won the recall
      election in 2003, it had arranged more than $250 billion in
      financings. Crane did what he said most private-sector businessmen
      would not have: He went to work for the government. The $94,500 a year
      he receives as Schwarzenegger's special advisor for jobs and economic
      growth is less than he has continued to make from his former career.

      Between 2004 and 2007, Crane reported more than $700,000 in income
      related to Babock, including deferred compensation that he described
      as fees he was still owed from former clients, and proceeds from real
      estate investments in public-private partnership projects, such as
      courthouses managed by Babcock in the United Kingdom.

      Crane has earned tens of thousands of dollars in income since 2005
      from Pangloss Oil Partners, a company formed in Texas to invest in
      oil wells that was based out of Babcock's San Francisco office.
      Crane is listed on Pangloss corporate filings as a manager along with
      his friend James V. Babcock, a company founder who remained a major
      shareholder after resigning from the Babcock board in November, and
      Robert Tomczak, a Babcock executive.

      Crane reported holding a stake in 2007 of between $10,001 and $1
      million in another Babcock-related business, Harrison Street Partners
      LP, whose investments have included Pomodoro, a restaurant chain, and
      Green Mountain Energy, a clean power company.

      He has a diverse government portfolio as well. Schwarzenegger
      appointed Crane to the Commission for Economic Development, a state
      advisory board, and to the High-Speed Rail Authority, where he has
      pushed plans for private investment along with the $10 billion in
      bonds voters approved in November.

      "I am a big fan of having that option available," Crane said of
      public-private partnerships. "I think it would produce great service
      for Californians."

      But Bruce Blanning, executive director of the Professional Engineers
      in California Government union, contends that private-sector
      partnerships often cost more. In 1989, the Legislature permitted
      the state to allow private companies to create four transportation
      projects. Two were never built.

      "They don't work in theory, and they don't work in practice, Blanning

      Though infrastructure financing is not directly connected to the
      state's budget gap, estimated to reach $42 billion by mid-2010,
      Schwarzenegger's administration has demanded that Democrats allow an
      unlimited number of public-private partnerships before he will sign
      their budget bills.

      The projects the administration wants built privately include a
      $6-billion truck tollway between Los Angeles and Long Beach and the
      $1-billion replacement of the Schuyler Heim Bridge in the Port of
      Los Angeles, according to administration documents.

      Schwarzenegger argues that those projects are needed as urgent
      economic stimuli. His spokesman, Matt David, pointed out that
      Democrats such as House Speaker Nancy Pelosi (D-San Francisco) have
      expressed support for using private-sector funding.

      The Democratic budget proposal the Legislature passed Dec. 18 would
      have allowed up to 10 public-private projects if they were to reduce
      traffic congestion and air pollution and improve safety.
      Schwarzenegger called that too restrictive.

      "The governor," said Will Kempton, director of the California
      Department of Transportation, "has been very clear he wants the
      broadest possible authority."


      [BATN: See also:

      Amtrak Capitol Corridor super commuters includes HSRA's Crane

      Legislature eyes 11th-hour tweaks to improve $10b CA HSR bond

      CA HSR hopes revived by AB 3034; HSRA may allow sprawl

      CA HSRA holds meeting to seek P3 investors
      http://groups.yahoo.com/group/BATN/message/37850 ]
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