Man behind the curtain

It seemed like the 1980s and 1990s all over again, the recent Arizona Republic story about a speculator ordered to pay $86.4 million arising from a lawsuit over the "Road to Nowhere" land play west of the White Tanks. The project promised housing for 300,000 residents. It was never built.

I urge you to read the story. The labyrinthine deal and long-running court battle defy easy explanation and benefit from the authoritative writing of veteran Republic reporter Dennis Wagner. If you're outraged by a government official padding his expense account, you should see how the private sector rolls in Arizona.

Unfortunately, local journalists rarely venture into alleged wrongdoing by corporations, much less the enormously powerful elements that comprise the Real Estate Industrial Complex. When this happens, however, the curtain rises, ever so slightly on how "the system" really works, how power is used.

This is one of those rare moments. And, not surprisingly, at the center of this story is the fascinating Conley Wolfswinkel. At about age 65, he is the Energizer Bunny — or the Terminator ("That's what he does! That's all he does! You can't stop him!") — of central Arizona land speculation.

Phoenix was most transformed from American Eden to its present form as one of America's most sprawling metropolitan areas starting in the 1980s. Behind it were not builders such as John F. Long, Henry Coerver, or even Del Webb. Instead, it was a highly complex ecosystem of speculators, land brokers, developers, lawyers, and financiers, usually working behind shadowy limited liability corporations (LLCs).

Supercharged by money from newly "deregulated" savings and loan institutions, they went on a binge of leapfrog development and land assembly and flipping. It was especially helped by the abundant subsidies for sprawl, tax breaks, buying land along proposed freeways which they advocated for and tweaked alignments, and gaining commanding control of government to do their bidding. How this worked in one corner of the region in the 2000s was ably explained by Mark Flatten in the East Valley Tribune.

When the first orgy blew up in 1990, with enormous damage to Phoenix, the most notorious figure was Charles H Keating Jr. Then there was Wolfswinkel, Keating's sometime partner in business.

The public record is clear. Wolfswinkel was convicted of a felony bank fraud charge for an elaborate check-kiting scheme, trying to satisfy his investors as his empire, valued at some $450 million, was falling apart. He faced a judgment of $2 billion. Prosecutors wanted prison but Wolfswinkel was given probation. He sought personal bankruptcy protection and "lost everything."

Except that he was back by the 2000s, and not merely hanging out at Durant's like Keating. Thanks to numerous LLCs controlled by family members, with Wolfswinkel working as a "consultant, the empire controlled 80,000 acres of mostly undeveloped land in Maricopa, Pinal and Pima counties. Most of his legal troubles were worked out. His resurgence prompted profiles by Flatten and by Max Jarman in the Republic.

Of particular interest for the future, Wolfswinkel's enterprises are said to control a huge amount of groundwater in the Harquahala Valley. Hydrologists have claimed that roughly three-plus "Lake Meads" lie below the land that he and his partners own. This land sits also on the CAP canal route. Bill Levine, Dan Cracchiolo, and a major investor group based in New York City are among his partners. Of course, once the groundwater is pumped, it's gone — and intentions to recharge it are questionable given the oversubscribed Colorado River and its diminishing snowpack.

Yet Wolfswinkel is no Keating. He was raised in Mesa and his father was killed when he was a child. He graduated from Westwood High School, where he was head of the Future Farmers of America. Portly and balding, he looks like more like a farmer than a high flier. He was a dealmaker early on.

Although not a member of the LDS, he has worked well with Mormons, especially the Killian and Stapley families (the reader should know that my mother worked for patriarch Ray Killian at the Arizona Interstate Stream Commission). The LDS has been enormously influential in the development of central Arizona, especially the East Valley, so this proved to be an enormous advantage.

He is a polarizing figure, not least because of his business style. Some swear by him (even his parole officer), while others, including some family members, feel very differently. Some adversaries are hardly angels themselves. He can be irritating and charismatic, generous and penurious, insightful and clueless. The impression depends on the circumstance, person, or event. He is very complex and his rise, fall, rise, fall, and who knows what will happen next — it reflects some of that craziness about Arizona.

Especially after his 1990 fall, he has surrounded himself with able people. He has an eye for talent. Interestingly, Wolfswinkel is anti-Arpaio: He claims the Badged Ego has hurt the construction trades and the economy. Cornell University called him "an authentic entrepreneur."

And maybe all this is true. I remember covering Carl Lindner Jr., the Cincinnati financier and mentor of Keating (and perhaps who kicked Keating out of the Queen City of the West). Lindner was a ruthless dealmaker. He got the better of Karl Eller, a man of great integrity. In Cincinnati, Lindner was loved, despised, and feared. He completely avoided the press (this did not prevent us from running a groundbreaking five-day series on him) My best guess was that Lindner was a master of the game as it was played, especially going right up to the edge of the law if that helped him get the better end. He also grew up poor in working-class Norwood and was never, for all his wealth and power, really accepted by the Cincinnati blue-bloods.

The analogy is imperfect.

Wolfswinkel is a wheeler-dealer in the only thing central Arizona has going for it: land and the hope of continued population growth. He is both representative and unique. He is probably the last of the old-school players who made the leap to the new.

Unfortunately, the game, while profitable for a few, didn't include saving the city or the oasis or much of what made old Phoenix so magical. Equivalents of Wolfswinkel didn't emerge in other sectors, with the means to create an economy worthy of a huge metropolitan area. This "hunter-gatherer, use-it-up-and-move-out" extraction game doesn't offer a Plan B to create these assets or address competitiveness, sustainability or climate change. Indeed, it actively works against it by insisting on continued single-family housing sprawl above all, devil take the hindmost. And he will.

 

 

Comments

[Ken Buxton]

Wow. I learn something every day.

[Cal lash]

I shall return.
Ned Warren

[Ramjet]

Ned Warren now there is a name to remember. I consider myself one of the few people to have "scammed" old Ned and lived to tell about it. That is a long story better told at another time.

[Mark in Scottsdale]

Thank you for an informative and educational post. I guess it's just me being an American, or the descendant of homesteaders (ranchers and farmers both), but I have always held a high esteem for "the land" and I value highly its wise use and preservation. The state and federal governments are imperfect stewards, but the inaction of bureaucracy and democracy in action have at least preserved tremendous amounts of the wild land in the West for the future, and I think we are probably better off for it. There is still, clearly, plenty of privately held land in play for development and speculation.

[Cal lash]

Mark I just as soon my hero Teddy would have declared Arizona a roadless wilderness but he mistakenly gave us a dam.

Ramjet, Jr is still here.

[soleri]

We all want to live in Eden, and by the time our Free Market buccaneers are done, we all will. Except it won't be Eden anymore. It will be Hell.

You don't have to go the Full Malthus (or Abbey) to see the problem with letting "markets" decide something as critical as water use, the built environment, transportation, and economic development. What you end up with are the lowest-common denominator practices That is, whatever makes some rich hustlers even richer.

There is no substitute for political will and public power. You either exercise it or you turn your Eden over to snakes like Keating and Wolfswinkel. The apple came with worms shaped like dollar signs, and it's too late to unbite the tantalizing poison of extravagant wealth. This story is as old as time and, at long last, as fundamental to our fall. Arizona handed itself over to the highest bidder for no better reason than greed. Not to worry, however. The remediation costs will be socialized.

[Rob Spindler]

Wolfswinkel gets 104 hits in the Relevant series of the American Continental Corp. Records at ASU Libraries Arizona Collection. Available by appointment. Relevant series contains files deemed by Judge Bilby and attorneys to be relevant to the MDL-834 bundled case prosecution of Charles Keating and ACC. https://repository.asu.edu/items/25672

[wkg_in_bham]

Interesting read; I find nothing that surprising.

There’s one thing Christianity, or at least the traditional version of it, get right: we are all natural born sinners; All of us. Some of us are just bigger sinners than others. Rather than be surprised that people will act like pigs and gluttons it should be expected.

There’s one aspect of this saga I find gratifying: all the principles, or at least most of them, carried the odor or past shadiness. Well, if you’re going to climb into a pit filled with vipers – well you’ve got to expect a little (or a lot) of fangs in action. It sounds like they were all screwing each other – and not the public. Who built the 30 mile road is unclear.

There has been a gradual change in society over the decades. That is the loss of the notion of shame – or its flip side honor. I don’t know that any system of written laws can prevent a slick operator from gamming a system. One can only hope that the fear of exposure would be so devastating, that most will not stray too far.

@Soleri: the record of non-market systems does not give one any solace regarding these matters.

I think there is a need for a moral background that is near-universally accepted by a society for it to function with any real success.

[soleri]

wkg, you won't be surprised to learn that I reject completely your notion that "non-market systems does not give one any solace regarding these matters". In fact, I would suggest this is a complete reality inversion. It's why every advanced nation on Earth, even including the U.S., has regulatory frameworks that attempt to keep financial mischief in check. There are no exceptions. When we start making exceptions, as during the financial deregulation mania of the late '90s, disaster ensues. Or was it black people buying houses in 1979 that caused the Great Recession? Millions of people - white and black - lost their houses in the collapse of a housing bubble that free-market types didn't even see coming. Alan Greenspan was famously vexed by the failure of the market to adequately check its own excesses. We suffered through a remarkable period of 70+ years without a major financial crash since the Great Depression, which resulted in right-wingers hating government with remarkable fury. Sadly, this misplaced fury represented the tendency of human beings to let ideology rather than experience guide their thinking.

Homework assignment: see The Big Short, Adam McKay's hilarious new movie showing what happens when market-based solutions meet morality head on. Also, tell me about this supposed golden era when America's financial elites were actually moral. Maybe Glenn Beck is offering a class in this at his online university.

I do have a question for you: why are conservatives incapable of learning? I don't mean to be prickly about this although I wouldn't blame you for thinking this about me. But let me lay it out for you: there are no free-market paradises anywhere in the world. Indeed, when I ask conservatives to name one, they hem and haw, and like Trotskyites of yore, simply suggest that the One True Faith hasn't been fully implemented yet because [insert conspiracy theory]. Your ideology's track record here is, I note with studied understatement, abysmal. I know your media is constantly portraying a cosmic battle between Godly "makers" and libtard "takers". Psst: it's all bullshit. They're playing you for rubes. They wave the flag, weep over fetuses, say blacks have a "culture problem", and suggest Mexicans and Muslims are destroying America. Yet all they seem to accomplish is reducing taxes on the wealthiest and most powerful citizens and corporations. Is it possible your ideology is just a classic con job?

[Dawgzy]

Well said, Soleri.

[Dawgzy]

WKG: her's my moral contribution: BAD POOCHPIZZLE! Hope that helps.

[Cal lash]

Soleri, Interesting and well said, except the Trotsky analogy. I think U and Trotsky had a lot in common. Particularly your Fire in the Belly convictions.
But Stalin won. And like the perpetual con men alluded to here, he is back. His name is Putin.

And I like your George Carlin nod. "It's all bullshit and it's bad for you."

[INPHX]

Soleri, of course, sets up two inane options- one is and a world or country that is a "free market paradise" and the other is something that he won't even describe or propose- I guess it's "everything else".

Of course there is room for laws, regulations, and rules. Like most progressives, Soleri does not even know what question to ask.

That question is- when confronted with choices today at the margins, do you favor more regulation or less? Do you favor the part of Obamacare that required health insurers to offer certain things or do you respect the market enough to let those choices be made by consumers and providers? Do you really think that a higher minimum wage won't effect employment? Want the government enforcing net neutrality or not? Ever get frustrated communicating with your healthcare provider? Read the HIPAA regulations sometime. Want the government regulating the sale of used firearms? Then vote that way.

Want to buy a new lawnmower without the mower safety switch pull bar? Not gonna happen.

Think extra regulation will hold back the big banks? Problem is, then little banks don't even get formed.

Inherent in any free market is the rule of law and property rights. If you're looking for the entities that the rest of the world should aim to become, read about Hong Kong and Monaco.

Those are the best answers to the way a free market, with the rule of law and property rights, can probably optimally exist in todays world.

And what hellholes they are.....

[INPHX]

Two other things-

Why are so many jobs today part time?

Do you favor allowing consumers to choose between Uber and taxi cabs?

[soleri]

Cal, I'm tempted to accept your Trotsky comparison as a compliment except, I suspect, you're mistaking my passion for ideological certitude. It's one reason why as much as I like Bernie Sanders and his analysis of our predicatment that I can't support him. Political reality is always going to be the toughest teacher we have. We have to make deals with pigs, split the difference with thieves, and seek crumbs from entrenched power. No one wants to hear this! Most of us want to believe a high-school civics version called America the Ideal. Someone like Bernie comes along and we start believing once again in that ideal. The purist left, in this way, is every bit as naive as wkg and his Tea Party. You're neither going to levitate the Pentagon nor usher in an Aquarian Age. Politics drips with cynicism and the blood of young men sent to die in vainglorious wars. It's haunted by ghosts of massacred indigenes and rebellious slaves. We are tainted by this, each and every one of us. The last thing we need is to think we're somehow better than our own history and genes. By all means, "go Bernie", but remember there's no absolution available to us. We can try to make this nation and planet better but we'll die choking on the words "I don't know". That's life and there's no redemption from our failing efforts. That said, it beats the alternative.

[soleri]

INPHX, is this your new pose? Pragmatist?

Please, dude. You're a free-market zealot who hates the government, "takers", complexity, nuance, and anything that interrupts the free-for-all that your tribe of chirpy stooges celebrates.

Government of the rich, by the rich, and for the rich. Anything else to add?

By the way: Hong Kong and Monaco are not nations. One is part of the Communist nation known as China, even though it has operated as an open port for many decades. The other is a principality. You apparently can't name any sovereign country with diverse needs like security, agriculture, defense, and various economic interests that approximates the America we know and gnash our teeth over. But go on trying to invent a category where the name of a third-rate novelist describes a completely deregulated marketplace in some misty paradise we can only hope to emulate for our own good. Oh, I know! Somalia!

[Cal lash]

Well Lenin was more pro workers and unions than Trotsky but it was an error for Lenin to support Stalin over Trotsky. So will Hillary offer Bernie a post or send him into exile.

[Cal lash]

" He declared that Beneath the waters of "Lake Foul" was a national treasure that had been snatched away from ordinary Americans by politicians and developers in order to pursue and promote thier crackpot ideology of growth, profit and power."
Edward Abbey on Glen Canyon dam

Cal near Sedonas Secret Canyon reading by camp fire light The Emerald Mile by Kevin Fedarko.

Back next year to the lower Sonoran desert where the mighty Sajuaro stands tall. WHAT'S left of them?

[#theintellectualassassin]

So... about that free-market utopia of Hong Kong--land of public transit, high inequality, and low rates of homeownership. It does seem like we're headed in that direction.

http://www.forbes.com/sites/beelinang/2015/04/03/hong-kong-real-estate-is-the-lack-of-land-a-myth/

[INPHX]

--land of public transit, high inequality, and low rates of homeownership.

Seattle?

[ed dravo]

Having covered business for many years I agree with B'Ham, it's the recognition of shame and its relevance in a good life that keeps society decent. Enacting laws is good politics, having the will to vigorously enforce them is the test of a 'civil' society.

[#theintellectualassassin]

How can Seattle and Hong Kong have such dramatically different approaches to economic policy that they wind up having similar social conditions? I'd like to see free-market orthodoxy explain that.

[Cal lash]

10-4 Dravao. And we should be putting the likes of Navient, CEOs in prison.
Bernie and Warren for president and VP.
AND
PS
we should be doing away with the DEA.
I C Jon has a new post.
Back in a while going off trail in the Red Rocks for a while.

[Jerry McKenzie]

I've said it before and I'll say it again: free market utopias are every bit unattainable and ridiculous as free love and workers' paradises.

I'd rather have our water resources in the hands of the public than say a psycho like the Nestles CEO or a con man like Wolfswinkel.