12 August 2009

Cadiz, Money, Politics and Corruption

Emily Green, an experienced investigative journalist, has been looking into Cadiz, Inc. [stock: CDZI], the company that's been trying to turn its property in the Mohave desert into a source/storage site of water to be sold to urban areas -- probably via Met's Colorado River Aqueduct (there's no connecting pipeline yet).

In this post, Emily compares Cadiz's claims to the reality in the area. My favorite? Cadiz claims a recharge (sustainable yield) of 35,000 - 50,000 af; USGS says 2,500. [See posts by aquadoc and jfleck.]

In this post, Emily gets into the money. More importantly, the connection between Cadiz and Schwarzenegger, whose chief of staff was a paid Cadiz consultant only a few years ago. The key question here is how Schwarzenegger's June 4 "endorsement" of Cadiz affected the share price of a company that's 50 percent owned by 10 companies.* Lo and behold -- the announcement sent shares up by 60 percent in one day.

Note that Keith Brackpool, CEO of Cadiz, plead guilty to charges of securities fraud in the UK. Does he know how to do manipulate shares and do insider trading? Yes. Is it possible that he is doing that? Yes.

What intrigues me is that Brackpool took options on 60,000 shares on May 22. They were worth about $400,000 then and about $750,000 2 weeks later. (He only had 90,000 shares before exercising that option. Was it "in the money"? Did he sell those shares? I can't tell. Help, anyone?)

I've spoken to Emily about this situation and these are my own ideas, but the facts may be telling us an interesting story. Anyone got more to tell?

Bottom Line: It's fine to buy and sell water to make a profit. It's NOT fine to use political influence to change the value of your water trading company. I would not be surprised if Cadiz has crossed that line.
* The endorsement was highlighted in a June 5 press release, so it was issued the day before.

7 comments:

WaterSource/WaterBank said...

Strange that CADIZ would refuse to investigate for free a fresh water Source that would yield a million acre feet each year rather than depend upon occassional oversupply from the CO River ? If I were a shareholder in CADIZ, I would wonder ... why ?

WaterSource/WaterBank

Note: The new Source supply could benefit CADIZ enormously, but that would not be my choice of options available for CA & NV.

David Zetland said...

@Ray -- Cadiz may think that you're a scammer -- which would be ironic.

The Pasadena Pundit said...

I am disappointed in Dr. Zetland because he is a proponent of water markets and he has not done his homework.

The Cadiz that Zetland is mocking is the company that existed like 10 years ago. There is a new Cadiz with a new plan to harvest water from dry lake beds that will take no water from anybody, even the environment. It does not depend on recharge.

Also the new Cadiz has purchased obsolescent natural gas pipelines to bring water from the State Water Project or from farmers who want to sell water. Cadiz has contingent contracts with several water agencies already.

The former head of the U.S. Geological Survey has reviewed Cadiz's EIR and approved it.

Read more here: http://www.calwatchdog.com/2012/03/07/cadiz-water-holds-key-to-future-ca-resources/

Emily Green said...

Anonymous has been roused to write at the same time Cadiz flacks are peppering KCET and High Country News pages with false assurances about the project. Every point Anonymous makes is incorrect or unclear. The background material he offers amounts to rewritten Cadiz press releases.

In response:

“The Cadiz that Zetland is mocking is the company that existed like 10 years ago.” It is exactly the same company.

“There is a new Cadiz with a new plan to harvest water from dry lake beds that will take no water from anybody, even the environment. It does not depend on recharge.” The amount proposed for extraction is the same as the last iteration. All groundwater pumping is calibrated against recharge. The Cadiz Valley is not exempt from basic laws of physics. If you pump water from one place and send it to another, the place you take it from will miss it.

“Also the new Cadiz has purchased obsolescent natural gas pipelines to bring water from the State Water Project or from farmers who want to sell water.” False. Cadiz optioned use the pipes in a public show of vague “stage 2” plans to recharge after exporting water first.

“Cadiz has contingent contracts with several water agencies already.” It is using a string of small water companies fronted by a small group of closely allied water lawyers to front the CEQA process.

The former head of the U.S. Geological Survey has reviewed Cadiz's EIR and approved it. Who? When? Where are the comments? It's not an EIR yet but still a Draft EIR. As for USGS scrutiny, the former western regional head of the USGS and nation’s authority on groundwater, John Bredehoeft, and the former California head of the USGS, Tim Durbin, both reviewed the 2000 pumping plans and deemed them to be water mining. Hydrologists currently with the USGS found the first claims by Cadiz exaggerated recharge from 5 to 25 times. The “new” Cadiz plans to draw the same water but this time has blocked USGS scrutiny of its claims.

The article linked by “Anonymous” amounts to a rewritten Cadiz press release. Among its sheer fluff and many mistakes is the assertion that MWD backed out of the first project because of environmental concerns. Its board decided that MWD might not recoup its investment before being shut down by pumping monitors. To read scientists and not PR, read the usgs comments in the original feis/feir: http://www.pacinst.org/[…]/v2_f002.pdf

David Zetland said...

I agree with Emily (I believe "ditto" is the word), but I will add my qualification to the "fraud," i.e., if "the maximum withdrawals would be 105,000 acre-feet of water per year if imported water supplies materialize" then where will they materialize from?

The Pasadena Pundit said...

Ms. Green:

You're an hysteric who should not be listened to. Please go do your homework. And Dr. Zetland should not be posting your non-credible comments. Go interview third parties such as some of the following:

The Cadiz Stewardship Committee is composed of:

* Jack Sharp, PhD, a distinguished professor of geology at the University of Texas, Austin, and president of the Geological Society of America;

* William Blomquist, dean of the School of Liberal Arts, Indiana University, who wrote the definitive book on groundwater basin management in Southern California, “Dividing the Waters: Governing Groundwater in Southern California”;

* Andrew Stone, executive director of the American Groundwater Trust;

* Gregory Thomas, president of the Natural Heritage Institute, and a former attorney for the Natural Resources Defense Council;

* Bob Wilkinson of the Bren School of Environmental Science Management at the University of California, at Santa Barbara; and

* The eminent Chip Groat, PhD, director of the Center for Energy and Environmental Policy at the University Texas and the former director of the U.S. Geological Survey, to which he was appointed by President Bill Clinton.

In a recent letter dated March 1, 2012, from Dr. Charles Groat, member of the Cadiz Stewardship Committee and the former head of the U.S. Geological Survey, to Santa Margarita Water District’s John Schatz, Dr. Groat concluded:

“In summary, I find the project to be viable and capable of being implemented and administered without deleterious effects on the environment. The monitoring plan will ensure that any unanticipated effects are detected and dealt with.”

I have an electronic copy of the above mentioned letter to document Dr. Groat's endorsement of the NEW CADIZ project. Please stop libeling businesses in the name of investigative journalism.

David Zetland said...

@PP/Wayne -- Please refrain from ad hominem attacks, as they make you look like an idiot.

I have emailed a few of these board members to learn of their opinions first hand.