An Air of Deceit: Was Convicted Smog-Credit Swindler Anne Sholtz Part of Shady International ‘Money Repatriation’ Schemes?
By Chip Jacobs
Pasadena Weekly
08/20/2009
The demise of Anne Sholtz’s once-grand life is evident in the smaller things. It’s there in the GPS-tracking bracelet — standard issue for felons in home detention — that looped around her ankle for a year, and in her near-dormant passport. It’s evident in her pillow, which rests today in leased home miles from the $5 million hillside estate that had broadcast her transformation from Caltech economist to business phenom.
Yes, the wreckage from that existence — the economizing, the isolation from connected friends who now shun her — is graspable.
Where the picture turns as murky as whisky-brown Southern California smog is how Sholtz, a then thirtysomething go-getter, was able to deceive the very air-pollution market she helped conceive, and the lessons that holds for keeping financial crooks out of the trillion-dollar, greenhouse-gas trading system that President Obama has trumpeted as a key to curbing global warming.
Unless you’re in the arcane field of emissions trading, chances are you’ve probably never heard of Sholtz. Last April, the former Pasadena entrepreneur was convicted in federal court of fraud relating to a multimillion-dollar deal for credits in Southern California’s novel smog-exchange. Despite pleas that she sock Sholtz with years behind bars, US Central District Court Judge Audrey Collins gave her just a year in home confinement.
Fortunate with that light sentence, Sholtz nonetheless sustained heavy losses. Most notably, she squandered her chance to build a unique and lucrative pollution-trading business, with access to Obama or Gov. Arnold Schwarzenegger as an industry confidante. Those opportunities gone, she now drives her mother’s car, not the Mercedes or SUV she once did. Rather than expanding her ideas into climate change, she checks in with her parole officer.
Blown prosperity for Sholtz, it’s been no bonanza for others, either.
Between criticism over its secretive, mixed-bag prosecution of her and evidence of Sholtz’s role in a scheme to extract millions in overseas US aid assets with men purporting to be American intelligence and military operatives, the Department of Justice’s LA office probably wishes she would just fade away. Local smog regulators at the South Coast Air Quality Management District (AQMD), whose market-based regulation proved vulnerable to her deceptions, can relate.
The trouble is some events are just too big to disappear. And the Sholtz case, though little known and involving obscure and complex regulations, is important because it underscores the need for vigorous oversight of emissions markets against seemingly inevitable Wall Street-style chicanery.
Saying that she hopes to reconcile the events that dragged her from eco-visionary to convicted felon, Sholtz, 44, gave the Pasadena Weekly her first public comments in seven years. These days, she’s a freelance auditor examining white-collar fraud (ironically, for the federal court system that processed her case) and proclaims herself “happy” and “debt-free.”
Just don’t mistake that resilience for satisfaction, or expect to hear weepy remorse from her. Channeling other emotions, Sholtz said she’s “disappointed” in how prosecutors and bankruptcy officials treated her and is perplexed over why the whistleblower tips she furnished them about bank money laundering and environmental corruption seem not to have been pursued.
“Years ago I was depressed I’d made bad decisions, which led to one disastrous deal and my companies unraveling,” Sholtz said over lunch at a location she asked go undisclosed, fearing former associates she claims have threatened her. “I’ve never said anything about this whole experience until now. The only reason I’m speaking is because I’m tired of the misperceptions.”
If two Republican congressmen skeptical about Obama’s carbon-cutting plan have their way, Sholtz’s story may yet capture center stage nationally. This spring, US Rep. Joe Barton of Texas, the ranking member of the House’s powerful Energy and Commerce Committee, and Greg Walden of Oregon, ranking member of the House’s Oversight and Investigations Subcommittee, demanded the US Environmental Protection Agency provide a mass of information about the Sholtz case to them, based partly on the Pasadena Weekly’s coverage of her.
“We believe this case has great relevance in the context of the pending legislation on climate change,” Barton and Walden wrote in a statement, citing doubts that federal authorities have the money and legal punch to adequately police a national greenhouse-gas market.
It appears those doubts will be tested. An Obama-backed bill requiring industry and public utilities nationwide to buy and sell federally auctioned permits to emit carbon dioxide and other greenhouse gases under a so-called “cap-and-trade” regimen narrowly passed the House in June. Formally titled “The American Clean Energy and Security Act of 2009,” the legislation, which includes numerous new energy-efficiency standards and initiatives, represents the most substantial change in US environmental policy since passage of 1970’s Clean Air Act.
The 1,300-page bill, co-written by House Democrats Henry Waxman of Los Angeles and Edward Markey of Massachusetts, next goes to the Senate. The overriding objective is to reduce US greenhouse gases from 2005-baseline levels so that by 2020 aggregate levels are down 17 percent and by 2050 they’ve shrunk a colossal 83 percent. (Global warming is caused by the atmospheric buildup of carbon dioxide and other gases that reflect some of the Earth’s heat back towards the planet instead of being dispersed into space. Many scientists contend the phenomenon is imperiling the Arctic, biodiversity, food production and weather patterns.)
Hopeful as the White House is about cap-and-trade, even enthusiasts acknowledge that the complexities are jaw-dropping, with a market divided by geographic lines as well as industrial sectors. Roughly six billion tons of emissions could be traded yearly at first, estimated David Kreutzer, an economist at the conservative Heritage Foundation in Washington, DC. Entities discharging more than 25,000 tons of greenhouse gases annually — non-nuclear power makers, oil refiners, natural gas producers, coal-fired steel plants, among others — will participate.
Detractors believe with the money at stake, white-collar cheating is a certainty. Between now and 2035, greenhouse-gas permits may reach $5.7 trillion in value, Kreutzer said. Some investment houses are already gearing up to act as trade middlemen.
Oddly, the watchdog angle was barely touched on during congressional deliberations. Attention mainly focused on provisions allowing companies to soften emission damage offsite, even overseas, if it’s cheaper, and the initial giveaway of 85 percent of credits to carbon-heavy businesses and regions facing sharply higher energy prices.
As the bill stands, market oversight will be spread out among the Federal Energy Regulatory Commission, the EPA and several unspecified agencies. “Most of the people I talk to think [the market] will be set up for fraud,” said policy analyst Joel Kotkin. “There’s scamming and then there’s scamming.”
Simultaneously, seven Western states and parts of western Canada are considering launching their own regional cap-and-trade under a Schwarzenegger administration plan. It’s aimed at rolling back carbon dioxide emissions to 1990 levels by 2020. The Western Climate Initiative may be dissolved or modified if a national market is approved.
Until then, West Coast officials are studying how to ward off cheaters in areas such as insider-trading, excessive speculation and market manipulation.
Sometimes the threat hides in the open.
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