Business
Column: California's most improbable water project rebrands itself as a crusader for environmental justice
It’s hard to think of a California company that carries more toxic baggage than Cadiz Inc.
The Los Angeles firm has been trying for more than 20 years to advance a plan to siphon water from under the Mojave Desert and pump it to users throughout Southern California. It has long been stymied by environmental objections, but kept on life support by wielding political influence and regular financings such as private stock placements and junk bond-rated debt.
Now Cadiz is trying a new tack. Under its newly installed chief executive, the veteran government aide Susan Kennedy, it has affiliated itself with the so-called human right to water movement, which ties the inaccessibility of clean water for disadvantaged communities to other social justice quests such as developing more affordable housing.
Kennedy has a long and distinguished record in government, including stints working for former Govs. Gray Davis and Arnold Schwarzenegger, and service on the state Public Utilities Commission and on the board that oversees Covered California, the state’s Affordable Care Act exchange.
I have a long way to go to change opinions.
— Cadiz CEO Susan Kennedy
Kennedy, who joined the Cadiz board in February 2021, became its chair a year later and took over as CEO on Jan. 1, freely acknowledges that this is a heavy lift for a company with Cadiz’s lengthy and discreditable history.
“In Sacramento, the Cadiz name is a poison pill,” she told me. Upon becoming CEO, she says, “the first thing I had to do was change the company so people think about it differently.”
That approach, Kennedy says, includes dumping the company’s long-term lobbyist firm, which was closely connected with the Trump administration, and placing more community activists on its board.
Most important, in her view, is refashioning Cadiz’s water project from one aimed at serving urban users throughout Southern California to a narrower goal of filling the admittedly serious gaps in the accessibility of clean water in San Bernardino County.
“The problem before,” she says, was that the Cadiz project involved “taking water out of the Mojave Desert and shipping it halfway across California to fill swimming pools in Los Angeles.”
That left locals in the lnland Empire with little reason to favor the company’s proposal. “This is very different,” she says. “This is keeping water local — Mojave water staying in the Mojave basin. It’s a key solution for the area,” which has limited access to water from the Colorado River or the State Water Project, two of the principal sources of water in California.
Kennedy says Cadiz’s new focus will initially be on converting an old natural gas pipeline running 86 miles between its desert acreage and Barstow to carry its water. The recipients would be “severely disadvantaged communities” currently dependent on the state water project, supplies from which are heavily impact by drought.
It’s an understatement to say that California environmentalists, who have fought the company tooth and nail for more than 20 years, are skeptical.
“Cadiz is conducting a rebranding effort because its project has been a massive failure for decades, it carries significant financial risk, and it stands zero chance of securing numerous required federal and state permits,” says Neal Desai, senior regional program director of the National Parks Conservation Assn.
To best understand this conflict, let’s start at the beginning.
The Cadiz desert water scheme was the brainchild of its CEO Keith Brackpool, a British former stock trader with a checkered history — in 1983 he pleaded guilty to criminal charges including dealing in securities without a license, and in 1993 had been forced out of an executive role with a British food company for some dealings with a direct competitor.
Cadiz owned 35,000 acres overlying a desert aquifer. Cadiz‘s proposal to the giant Metropolitan Water District in 1997 “had a charming 25-words-or-less simplicity,” I wrote in 2006: The MWD would store its surplus water beneath Cadiz’s acreage in wet years and retrieve it during droughts, paying Cadiz a fee at both ends.”
Difficulties soon surfaced. The storage site was 35 miles from the MWD’s Colorado aqueduct, requiring a $150-million pipeline to be strung over environmentally sensitive territory.
The proposal committed the district to buy huge quantities of groundwater from Cadiz’s aquifer, but experts disagreed about how much could be safely extracted from the site; Cadiz estimated 30,000 acre-feet a year, but the U.S. Geological Survey and other independent sources regarded the estimate as optimistic by at least a factor of 10. The persistent drought in the West raised doubts over whether there would ever be much surplus for the MWD to store.
Then there were the company’s finances. One doesn’t wish to be churlish, but if you decide to open its most recent financial statement covering the first nine months of 2023, I’d advise doing so in a well-ventilated space.
The company reported an operating loss of $24.7 million on revenue of $1.3 million for that period, compared with a loss of $17.9 million on sales of $927,000 a year earlier. All the revenue comes from a farming operation on its desert landholdings. Cadiz hasn’t reported a profit since its first public financial disclosure in 1994; its accumulated deficit reached $603.3 million in 2022.
The original plan called for the $150-million cost to be shared by Cadiz and the MWD. Since Cadiz didn’t have the proverbial pot to, er, fill, it proposed that the MWD lend it the money for its share, largely through a “prepayment” for the storage of MWD water. But the company’s existing lenders had the right to demand repayment of their loans from any funds provided by MWD, so almost nothing would be available for construction.
The MWD rejected the plan in 2002. By any rational expectation, that should have killed the project for good.
But its critics didn’t reckon with Brackpool’s ability to endow his firm with political supporters.
Although the late Sen. Dianne Feinstein (D-Calif.) was a sworn adversary, her opposition was counterbalanced at first by advocates such as former Gov. Gray Davis, whose 1998 and 2002 gubernatorial campaigns collected $235,000 in donations from Cadiz.
In return, Davis made Brackpool his advisor on water. Their relationship put pressure on the MWD to play ball with Cadiz, which may have explained why it took the water district until 2002 to put the kibosh on the plan.
Over subsequent years, Brackpool hobnobbed with former Los Angeles Mayor Antonio Villaraigosa, who landed for a time on the company’s payroll. In 2006, he persuaded then-Gov. Arnold Schwarzenegger to endorse Cadiz as “a path-breaking, new, sustainable groundwater conservation and storage project.”
The most important support may have come from Donald Trump. He appointed David Bernhardt, a former lawyer and lobbyist for Cadiz, as his Interior Secretary in 2019, giving Bernhardt authority over crucial federal approvals the company needed for its desert pipeline.
Bernhardt came from the law firm Brownstein Hyatt Farber Schreck, which included Cadiz as a client; the company’s then-CEO, Scott Slater, was — and is — a partner in the firm. Cadiz had paid the Brownstein firm $2.75 million in lobbying fees and 200,000 shares of stock while Bernhardt was there. Bernhardt is now back at the firm, serving as a senior counsel in its Washington office. Slater, who no longer has an executive or governance role at Cadiz, is currently listed as a member of the law firm’s executive committee.
In December 2020, as the Trump administration was preparing to leave office, the Bureau of Land Management, an Interior Department subagency, abruptly approved Cadiz’s acquisition of the gas pipeline crossing the Mojave and for its conversion to carry water — ruling that the acquisition and conversion required no environmental impact studies. That was a “rushed, cursory decision,” a federal judge later found.
The Biden administration rescinded the approvals in 2021 so the BLM would have time to perform the environmental analysis required by law. Last month the agency reissued the approval for Cadiz to acquire the gas pipeline, but not to convert it for water. The latter decision, it had earlier assured Feinstein, would require “intensive environmental studies of … potential impacts,” including those caused by the extraction of water from the aquifer.
Kennedy says Cadiz no longer employs Brownstein and recognizes that the 2020 BLM ruling was vulnerable to legal challenge. Brackpool retired from the Cadiz board last year, which apparently ended his relationship with the company.
That points to perhaps the most serious obstacle to Cadiz’s project: Doubts about the environmental impact of taking water from the Mojave aquifer. Kennedy says the company has in hand technical studies indicating that it can safely extract 50,000 acre-feet of water annually for 50 years without causing environmental damage. But those studies are at odds with decades of independent and government studies placing the safe extraction level in the neighborhood of about 30,000 acre-feet and as low as 3,000. Settling this crucial technical issue could take years.
And that brings us to a linchpin of Kennedy’s efforts to change Cadiz’s image from water profiteer to responsible steward of a precious, and increasingly scarce, natural resource. She points out, accurately, that as many as 1 million Californians lack reliable access to clean water.
The question is whether Cadiz is the answer to the problem. Kennedy says it is, for inland water users. If environmental groups would only sit down with her “and map out an optimal water strategy, we would be part of that — what we’re doing would be key for that area of the state.”
Yet established organizations that have been focused on environmental justice say they haven’t heard from Cadiz. The company has associated itself with a new group called Groundswell for Water, which appears to be a coalition of community groups, few of which few have played any prior role in water policy, but which received startup funding from Cadiz.
Among the established groups that say they haven’t received outreach from Cadiz are the Environmental Justice Coalition for Water and Clean Water Action. The Sierra Club and the Center for Biological Diversity were plaintiffs in a federal lawsuit that challenged a Trump-era decision allowing the water project to move ahead.
Through its spokesman Ed Sanders, Groundswell says it’s doesn’t represent Cadiz but aims to represent “the one million Californians, primarily people of color, who don’t have access to clean water. “
The group’s major misstep may have been to imply an association with Dolores Huerta, who was a top associate of Cesar Chavez in the United Farm Workers movement and remains, at 93, an icon of progressive community activism.
Having discovered that it was posting photographs of her and using her name as though she was a member, an infuriated Huerta issued a public letter crisply condemning Groundswell as “an astroturf group … co-opting the language of environmental justice” and that “seeks to pit organizations of color against environmental groups.”
Can Cadiz succeed in its new guise? In her favor, Kennedy can cite the undeniably intensifying water crisis, not merely in the Inland Empire but statewide. This will dial up the pressure to exploit new water sources of all varieties.
Cadiz’s ambitions have distinctly shrunk since it first sprung from Brackpool’s imagination. Kennedy says that the firm’s plan today is to turn a profit entirely from the sale of water to Inland Empire water districts. They, not Cadiz, would be the applicants for state and federal permits, which she hopes might make it harder for regulatory agencies to ignore their interests.
On the other side is a very suspect corporate history. That’s the hill Kennedy still must still climb. She says outreach to environmental and community groups is high on her agenda, but their resistance to anything labeled “Cadiz” is potent indeed. “I have a long way to go to change to change opinions,” she says.
Business
Commentary: How right-wing anti-transgender attacks led to a Supreme Court ruling upholding sex discrimination
At the Supreme Court, the unfounded fear of boys masquerading as girls in youth sports rolled the clock back on gender equality.
On the surface, the Supreme Court’s June 30 opinion upholding state laws barring transgender girls from women’s and girl’s sports teams looks like a victory for women’s rights.
The 6-3 opinion by Justice Brett M. Kavanaugh certainly presents itself that way. “Females and males have inherent physical differences relevant to athletic performance,” Kavanaugh wrote. “Therefore, in contact sports, forcing female athletes to compete against males can create significant safety risks.” He also asserted that “forcing female athletes to compete against males can undermine competitive fairness.”
The ruling applied to prohibitions enacted in Idaho and West Virginia against “biological” males’ participation on women’s teams in public schools. Federal judges in both states overturned the bans. The Supreme Court majority restored them. The ruling essentially upholds similar bans enacted in 25 other states.
There was no record of any transgender person participating in school sports in the State, let alone any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.
— Justice Sonia Sotomayor, demolishing the Supreme Court’s argument in favor of banning transgender girls from girl’s sports
Kavanaugh, like Donald Trump and others in the anti-transgender camp, maintained that one’s gender is an immutable fact of life, established even before birth.
Anything else, Trump stated in an executive order he issued on inauguration day 2025, could only be the product of “gender ideology extremism.” The U.S., his order stated, recognizes “two sexes, male and female. These sexes are not changeable and are grounded in fundamental and incontrovertible reality.” That’s a “biological truth,” he declared.
In his own version of this overconfident and factually insupportable conclusion, Kavanaugh wrote: “As all agree, females and males have inherent physical differences relevant to athletic performance.”
Science recognizes that some people are “born with sex traits that don’t fit into typical male or female patterns,” to cite a discussion on the Cleveland Clinic web page on the topic “intersex.” The condition “may involve chromosomes, hormones, reproductive organs or genitals.”
From a psychological standpoint, medical science recognizes “gender dysphoria” as a real condition often requiring counseling and medical intervention such as the use of puberty blockers and hormones to stave off the development of secondary sex characteristics until the condition can be resolved.
No one disputes that there are physical differences between the sexes. Few would dispute that on average or even at the median, males may be bigger and more powerful than females, or that in certain contact sports the difference may be telling and on occasion dangerous.
But that’s not the same as asserting that the physical differences between males and females invariably mean that men will invariably prevail over women in all competitions or that their participation will endanger women.
The International Olympic Committee — in a policy statement Kavanaugh cited incompletely — says that in “most running and swimming events,” males have a 10% to 12% advantage over women. That’s a range that would accommodate the full spectrum of outcomes — transgender females win, cisfemales win, they tie. (The “cis” prefix denotes those living consistent with their birth gender.)
West Virginia and Idaho addressed this ambiguity by banning transgender women from all girls’ teams. So under their rules transgender girls can’t play football or soccer with cisgirls. But what’s the argument in favor of banning them from the 100-yard dash, or cross-country track, or diving, or archery?
But something else is going on here. The Supreme Court’s ruling was almost preordained, given the years-long campaign by conservatives to demonize transgender individuals as if they’re members of an alien species.
It will be recalled that during his presidential campaign, Trump spun a despicable fantasy in which children were kidnapped in school and secretly subjected to sex-change operations.
Trump’s executive order wiped out policies aimed at protecting transgender adults from discrimination. He moved to outlaw gender-affirming medical therapies for anyone under 19 by cutting off federal funding for healthcare institutions that provide such care.
He banned transgender individuals from serving in the military and ordered federal prison officials to move transgender inmates into the general populations consistent with their birth genders, which exposes them to physical assault. (Federal Judge Royce Lamberth of Washington, D.C., has blocked the government from transferring three transgender women into the male prison population or terminating their hormone treatments.)
I wrote during Trump’s first term, when his anti-transgender policies were still gestating, that the goal was to show that “one can target any community, as long as it doesn’t have a strong political voice or political power. These are the actions of bullies and cowards, pretending to be strong.”
Last year, the Supreme Court struck its first blow against transgender rights by upholding a Tennessee law banning transgender care, including puberty blockers and hormone therapy, for minors. Similar laws have been enacted in 25 other states. The majority in that ruling by Chief Justice John G. Roberts Jr. was identical to the one in the June 30 ruling — Roberts, Kavanaugh, and Justices Clarence Thomas, Samuel A. Alito Jr., Neil M. Gorsuch and Amy Coney Barrett.
Who are the targets of this ideological campaign? They number only about 1.6 million U.S. adults, or one-half of 1% of the U.S. population. About 300,000 adolescents ages 13 to 17, or 1.4%, identify as transgender, according to a study by UCLA School of Law.
In West Virginia, as Justice Sonia Sotomayor observed in her dissenting opinion, “there was no record of any transgender person participating in school sports in the State, let along any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.”
In endorsing the flat bans directed at transgender women in Idaho and West Virginia, Kavanaugh argued that any attempt to implement case-by-case judgments of students’ requests to join sports teams inconsistent with their biological gender would create “an enormous practical and administrability problem.”
Is that so? That wasn’t the case in Maine, where the annual K-12 population is more than 170,000. There, a committee was charged with determining whether a student’s participation in a sport consistent with their gender identity but inconsistent with their biological sex would “result in an unfair athletic advantage” or present a risk of injury to others. The committee held 56 hearings from 2013 through 2021, or an average of seven per year. During the entire time span, only four involved transgender girls. (The outcome of those hearings couldn’t be learned.)
It was Maine’s policy, one might recall, that provoked a confrontation between Trump and Maine Gov. Janet Mills at the White House last year, when Trump threatened to withhold federal funding from the state unless it barred transgender students from competing on women’s sports teams. “We’ll see you in court,” Mills snapped.
Whether the Idaho and West Virginia laws genuinely protect girls from unfair competition is questionable. (The Idaho law is styled the “Fairness in Women’s Sports Act.”) In practice, the laws may subject women in public schools to “invasive sex verification procedures,” as educational expert George Theoharis of Syracuse University wrote after the court ruling.
They’re also based on a retrograde view of women as fragile creatures needing men’s protection, Theoharis wrote — “the same logic that has historically been used to justify excluding women from making their own healthcare decisions and girls from rigorous math and science; that physically demanding work is simply beyond them.” (There don’t appear to be any state laws barring transgender women from competing in men’s sports.)
Becky Pepper-Jackson, the plaintiff in the West Virginia case, in which she is identified only as B.P.J., is the only transgender girl who sought to join girl’s teams — track and cross-country — in the state. That was in 2021, just after West Virginia passed its law and she was about to enter sixth grade. She didn’t appear to pose any competitive risk to others on the track and cross-country teams she applied to join — her lawyers told the Supreme Court that on those no-cut teams, she “came in near the back.”
Anyway, she had not gone through male puberty, which theoretically might have endowed her with a competitive advantage, because she had been taking puberty blockers and female hormones.
Thanks to the court’s ruling, Sotomayor observed in a dissent joined by Justices Elena Kagan and Ketanji Brown Jackson, West Virginia can deny Becky access to school sports “because it thinks they have an inherent athletic advantage, even if the facts show that they do not.”
B.P.J., Sotomayor wrote, “cannot practice on girls’ teams, even if she would not take anyone’s spot in an eventual competition, even if everyone who tries out for the team makes it, and even if having the chance to participate could aid immensely in treating B. P. J.’s gender dysphoria.”
So whose interest was really protected by the Supreme Court?
An Orange County real estate investor accused of criminally defrauding an Arizona bank of nearly $100 million pleaded not guilty Monday and remains in custody.
Mahender Makhijani, 44, of Corona del Mar — who also was ordered by an arbitrator to pay $1.34 billion in a separate civil fraud case — was arraigned in Santa Ana federal court on two charges.
He is accused of bank fraud and making a false statement to a bank in a June 8 case involving a $100 million real estate loan made by Phoenix-based Western Alliance Bank. He was taken into custody on June 10.
Makhijani is accused of providing bogus collateral for the October 2024 loan now in default. In a civil lawsuit, Western Alliance said the outstanding balance as nearly $99 million.
Prosecutors say he falsified title insurance policies that showed the bank would have a first lien on the underlying collateral if the loan went bad, when in fact it did not.
A trial was set for August 11 before U.S. District Judge David O. Carter in Santa Ana.
Michael Schachter, his criminal defense attorney, did not respond to messages seeking comment.
In the civil case, an arbitrator in May ordered Makhijani to pay Laguna Beach real estate mogul Mohammad Honarkar $1.34 billion after ruling he had fraudulently induced him into a 2021 joint venture — and then wrested control and lost to creditors more than two dozen properties Honarkar had owned.
Makhijani has not been criminally charged in that case, but prosecutors alleged in an affidavit in support of the bank fraud charges that he used “force and threats” in his dealings with Honarkar and others — including taking over the landmark Hotel Laguna in 2023 that Honarkar was renovating.
Prosecutors sought to hold Makhijani without bail after his arrest.
The affidavit noted he is a legal Indian immigrant with a home and bank accounts in that country, has access to private jets and threatened to “run away” if caught in a difficult situation.
The request was denied and he was granted $500,000 bail.
However, Makhijani remains in custody after a hearing sought by prosecutors last month before Magistrate Judge Autumn Spaeth.
The judge declined to accept a $450,000 cashier’s check submitted by a Makhijani associate for the bail, finding insufficient proof the source of the funds was legitimate, according to court records.
Makhijani is not prominent outside Orange County real estate circles, but he established a thriving distressed-assets business over the last decade that attracted prominent Southern California real estate investors.
Prosecutors said it paid for a lifestyle that included two multimillion-dollar homes in Corona del Mar, a luxury apartment in Newport Beach and various luxury vehicles.
As of last month, prosecutors had not fully traced his assets, which they believe are not held in his name and some of which may be in India.
The businessman employed an array of shell companies and strawmen to sign documents on his behalf, and to stand in for him as operators of his companies, according to the affidavit.
Makhijani told an associate he took extra precautions because wanted to insulate himself from litigation and that “they were sharks in the distressed world who took advantage of people,” the affidavit stated.
Business
Many indie festival films struggle to get distribution. Alamo Drafthouse is trying to change that
Dine-in movie theater chain Alamo Drafthouse Cinema is launching a new initiative to show unreleased independent films that had successful festival runs, a move that comes as specialty films have struggled to gain distribution.
The Alamo Exclusives program, announced Wednesday, will give limited theatrical runs to films that showed at festivals including Sundance, the Toronto International Film Festival, Tribeca Festival and South by Southwest festival, as well as Alamo’s own Fantastic Fest.
The idea is to help showcase films that received critical acclaim, but did not secure distribution or acquisition deals. The chain will not acquire these films, but instead will enter into agreements with filmmakers to exhibit their films on Alamo Drafthouse screens. By showing these films to audiences on the big screen, these films could get the momentum they need for further opportunities.
The program’s first film will be the documentary “Butthole Surfers: The Hole Truth and Nothing Butt,” which debuted last year at South by Southwest and chronicles the history of the punk rock band.
The film will be shown in Alamo Drafthouse theaters for a limited time later this summer.
The Austin-based chain, which is owned by Sony Pictures, has a long history of curating indie films for its audiences, giving Alamo Drafthouse confidence that its viewers want to see these kinds of movies, company chief executive Michael Kustermann said in a statement.
“Time and again, they’ve shown they’ll come out to support bold, original films when given the opportunity,” he said. The new Alamo Exclusives “gives us another way to champion filmmaker-driven films that deserve to be discovered and connect them with the wider Alamo Drafthouse audience.”
The initiative comes at a difficult time for indie films. Since the pandemic upended the movie business, traditional studios and distributors have had less appetite for risk, including betting on smaller indie films out of festivals.
And as the 2023 dual writers’ and actors’ strikes thinned out theatrical lineups, that aversion to uncertainty became a push for reliable and profitable hits.
“Too many incredible films premiere at festivals and then never receive the theatrical life they deserve,” Lisa Dreyer, director of Fantastic Fest and film innovation at Alamo, said in a statement. “We are actively searching for films across all genres, from horror to comedy, to everything in-between, to champion in this new, exciting way.”
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