7:28 a.m. May 22, 2013

A Journey Through Oligarch Valley

"The food business is far and away the most important business in the world. Everything else is a luxury. Food is what you need to sustain life every day. Food is fuel. You can't run a tractor without fuel and you can't run a human being without it either. Food is the absolute beginning." -- Dwayne Andreas, CEO of ADM

I'm sitting in my apartment a few blocks away from Venice Beach. I can almost hear the surf, but my mind is in a different place. In a few days, I'll be on the road for my next NSFWCORP assignment, driving out past Malibu, past the ritzy hills surrounding Santa Barbara, climbing the wide Tehachapi Mountains and dropping into the Central Valley, a giant ovular tub that stretches for 450 miles through the heart of California...

If you've ever driven between San Francisco and Los Angeles on Interstate-5, you know the Central Valley as a place where you set the cruise control to 90 mph and gun through as fast as possible. The highway runs in an absolute straight line for 250 sleep-inducing miles, bisecting an endless plane of farmland, orchards, arid dirt, howling winds and spooky rural desolation. Probably the only things you notice are the gas stations and the In-N-Out burger joints are, as well as the periodic regions marked by the foul smell of cow shit that signal the high-density feedlots and slaughter yards that provide that tasty In-N-Out ground beef. That awful smell, by the way, is what inspired Michael Pollan to write his great anti-agribusiness bible, The Omnivore's Dilemma.

But the region is about a lot more than just shitburgers, migrant workers and toxic pesticides. This stretch of the Central Valley should really be called Oligarch Valley. It ain't Park Avenue, so you won't see any huge mansions. But just about all the land running along the highway and as far as you can see to the horizon is owned by a small clique of billionaires and oligarchs, many of whom trace their roots back to the landholdings of America's most notorious industrialist vampires: the Union Pacific Railroad octopus, John D. Rockefeller's Standard Oil, the family of belligerent Los Angeles Times publisher Harry Chandler... Some of these illustrious farmers come from old Southern plantation families that had diversified their agricultural operations into California over a century ago using the next best thing to slave labor: migrant workers.

Their offspring still run the place like their very own banana republic. They fly in to inspect their businesses on private jets, buy politicians, own entire towns, import migrant slave labor, pollute and plunder with impunity and bend everything and everyone to their will. They wield enormous political power, and the vast tracts of land under their control boggles the mind. You can drive for an hour at 80 mph and only trace one side of a single oligarch-family farm. And yet, they are nearly invisible to the general public.

Yep, most people zoom by Oligarch Valley completely oblivious to the rich, fetid life outside their windows. And that's what I'm gonna remedy. I'll be heading down to Oligarch Valley to provide NSFWCORP readers with a guide to the oligarchs of Interstate 5, the billionaires who own the land and feed us…

My interest in the Oligarch Valley developed purely by accident: I stumbled onto it after moving to the subprime desert suburb of Victorville in 2009. At the time, California was in the grips of a minor drought and the local water agency was forced to augment its dwindling supply by buying $73 million worth of water from a Central Valley family farm. The water, which was to be shipped in from the Bay Area hundreds of miles away via the State Aqueduct, was enough to fill up a kiddie pool the size of San Francisco and sustain up to 30,000 families for an entire year.

The scheme seemed more in line what Bechtel was trying to do in Bolivia than anything that could happen here in sunny, liberal California. And it piqued my curiosity. Who the hell were these farmers, and how the hell did they have so much water to spare during a drought? Were they going out of business and giving up their water? And if so, why did they get to sell it? After all, California's constitution defines water as a public resource…

And the more I looked, the more I realized that Bolivia and California might not be so far apart.

The farmer selling the water was no "farmer" at all, at least not in the dirty overalls and banjo-playing kind of way. Rather, the farmer was a private Silicon Valley company called Sandridge Partners owned by the Vidovich family. The Vidoviches own cotton fields and almond orchards in the Central Valley. They also control a small real estate empire in the Bay Area, complete with office complexes, condominiums, mobile home parks, hotels and shopping centers. John Vidovich, the current family patriarch, lives in a $11.4 million home in the Los Altos Hills, a ritzy wooded area overlooking the bay just south of San Francisco sitting in the 8th most expensive zip code in America. To top it all off, the Vidovich clan is among the biggest welfare queen-farmers in the country, taking in $11 million in subsidies since 1995.

The Vidoviches inherited their land and water wealth. But as I quickly understood, they were just bit players in Oligarch Valley. They look almost poor compared to some of their neighbors.

Towards the top of the pack is the family-owned J G Boswell Company, founded by the now-deceased James G. Boswell II and estimated to control 300 square miles of land in Oligarch Valley. Boswell was born into an "old-time cotton clan whose Georgia roots went back to the 18th century" that in the 1920s moved to California because "the government was encouraging farming in part through massive water projects."

In time, the Boswells established what is now the largest cotton farm in the country—a "farm" that Supreme Court Justice William O. Douglas described as a "corporate kingdom undreamed of by those who wrote our Constitution." At some point, James Boswell married into the Chandler family, joining California's aristocracy not just in wealth but also in name.

Here's how Penthouse magazine described his business operations in 1999:

Boswell's domain is the Tulare Lake Basin, comprising parts of Kern, Kings, and Tulare counties in central California. His water rights are a real gusher, all granted from the public: They are equivalent to the needs of a city of three million people and are worth nearly $1 billion, more than twice the value of the land, according to a 1989 article in Forbes magazine, thus placing Boswell in the billionaire club. He also has extensive cotton lands in Arizona, pioneered the cotton industry in Australia, and has long been involved in urban development and real estate in Southern California and Arizona.

Boswell, who helped launch the political careers of three governors--Edmund G. "Pat" Brown, Ronald Reagan, and Pete Wilson--is legendary for his behind-the-scenes ability to avoid legal problems or get water laws either interpreted liberally or simply rewritten.

Today, his son carries on the family tradition from a mansion in Pasadena.

Then there are Stewart and Lynda Resnick, Beverly Hills billionaire farmers who own up to 300 square miles of land in Oligarch Valley. The Resnicks sit on the board of directors at the Aspen Institute, hobnob with Michael Milken, are close to Arianna Huffington and keep the powerful California Senator Diane Feinstein on a very short leash. The Resnicks also own one of the largest agribusinesses in the nation and enjoy a near monopoly on almonds, pistachios and pomegranates in United States. They also own Fiji Water, sucking water out of that small impoverished nation via their own tanker. Fiji is ruled by military junta and the majority of Fijians don't have access to clean drinking water, but the Resnicks threatened to pull out of the country after its government attempted to impose a tiny 8 cent-per-liter tax.

But they don't just steal water from the Fijians. They do the same thing right here in the home state.

The Resnicks helped engineer a covert scheme that subverted the state's constitution by partially privatizing California's water supply, creating the concept of "paper water" and opening up an unregulated water market for the first time in California.

The Resnick's “paper water” market was a speculator’s wet dream. Even Enron tried to get in on Oligarch Valley's paper water bonanza in the early 2000s, opening up an Internet-based operation next door to the Resnicks in the hopes of creating the etrade.com of H20, where future traders from would around the world would log in from home and buy and sell water in between sessions on YouPorn.com. Called Azurix, it would function as an “exchange on the Internet for buying, selling, storing and transporting water in the West, hoping to make water a traded commodity much like natural gas or electricity,” the Wall Street Journal wrote in 2000.

Enron's water speculation utopia crashed and burned, but the Resnicks emerged as the biggest water traders in America. Among other things, the Resnicks made hundreds of millions of dollars selling water back to California for a 100% markup.

The Resnicks are ambitious and ruthless, tirelessly working and coming up with new schemes to expand their wealth. They have to. Because unlike most of Oligarch Valley, the Resnicks are new money and can't simply mooch off inherited wealth.

Take Henry Miller, a maniacal German immigrant who came to San Francisco, changed his name and then scammed his way to unbelievable riches as a cattle baron, supplying beef to San Francisco during the Gold Rush. At one point, Miller was considered the largest landowner in America. He used to brag that he could drive up his cattle from Los Angeles to San Francisco and never leave his property. He did most of the work so his offspring could degenerate in comfort and style.

It’s been about a hundred years since his empire crumbled, but his family retained a good chunk of his vast land wealth, including perpetual rights to a massive amount of water.

A few years ago, one of Miller's descendants, a certain Jim Nickel, joined forces with Cargill Inc.—one of the nastiest, most powerful and shadowy forces in big ag—hoping to use a part of his hereditary water rights to build a massive $6.8 billion high-density extension to Redwood City, just south of the San Francisco airport. The development, which would boost the city's population by 30 percent in one go, cramming 12,000 homes into two square miles of reclaimed marshland that's currently being used to produce sea salt. The recent real estate crash put those plans on hold, but only temporarily...

Yep, that's how the billionaire farmers of Oligarch Valley like to roll. But for all the wealth the region generates for a small low-key aristocracy, it exists in a perpetual state of third-world impoverishment and consistently rates as one of the poorest areas in the United States—rife with illiteracy, teen pregnancies and a high incidence of birth defects caused by toxic agricultural pollution:

Three metropolitan areas in California's Central Valley, the region with the highest farm revenues in the country, rank among the poorest in the state and nation . . . Fresno, Modesto and Bakersfield-Delano areas are among the top five U.S. regions with the highest percentage of residents living below the poverty line. . . . The Fresno area, ranked as the second most impoverished in the nation, trailed only the U.S.-Mexico border area of McAllen-Edinburg-Mission, Texas, the American Community Survey figures show.

It's also where Los Angles dumps the shit of its four million residents. And I mean that literally: LA trucks 200,000 tons of raw sewage sludge to a small farm in Kern County it bought a few years back. In fact, certain Southern California interests want to convert a small chunk of Oligarch Valley into a giant septic tank—with the blessing of the local billionaire farmers, of course. But more on that later…

You'll learn about it in detail soon enough. Because in few days, I'll be traveling through the dusty and irrigated pit of oligarch politics that is the Central Valley . . . I just hope I don't wind up like J.J. Gittes.