The Desert Line: Part 2

Lies, lost money, and scores of lawsuits: those are the accusations against the owners of Pacific Imperial Railroad, the company that now controls the Desert Line thanks to a 99-year lease with San Diego’s Metropolitan Transit System. However, the railroad’s new chief responds with accusations of his own.

A tiny train runs along six miles of rail outside Campo, California. It’s a tourist stop – the Pacific Southwest Railway Museum’s featured attraction. And it may be the final resting place of a railroad to nowhere; once an engineering marvel, the vision and fortune of one of San Diego’s original industrialists John Spreckles, the last piece of the last intercontinental railway built in America.

Today, ticket-buyers keep the trolleys rolling along the tracks that criss-cross San Diego, but the old Desert Line sits abandoned – an unused transportation corridor that could bring billions of dollars worth of commerce from Mexico. If only the Metropolitan Transit System that owns the tracks could find someone to rebuild the railroad.

“Ultimately, you want to be able to move 400 cars a day,” said Donald Stoecklein, a securities attorney and newest CEO of Pacific Imperial Railway. “

Stoecklein is engineering an effort to bring the Desert Line back to life. He negotiated a new lease with the railway’s landlord, the MTS. Now, the owners of PIR have the rights to this railway for 99 years although these two men are a far cry from the titan of industry who built it.

Charles “Chaz” McHaffie and David W. Jory are investors, speculators in real estate and stock deals, who have parallel histories of legal litigation and embattled entrepreneurial adventures. McHaffie is a Del Mar transplant who made news most recently when he raised campaign funds for former Mayor Bob Filner, but was caught and fined for misusing the money to run a smear campaign against Filner’s opponent Carl DeMaio. 

McHaffie has been the target of scores of lawsuits over everything, from payroll tax evasion to unpaid court judgements. His partner, Jory, is a Nevada resident who has speculated on real estate and penny stock deals, overseen the bankruptcy of at least four companies, and declared bankruptcy himself in 1994. Jory is now principal in a pink-sheet penny stock play for a company called Hemp, Inc., that supports the growing of hemp and sale of hemp products even though growing hemp is outlawed by the DEA. The two men acquired the Old Carrizo Gorge Railroad about a decade ago in a disputed take-over, then let it go bankrupt.

“They were having issues and asked me to come in and see if I couldn’t help them.”

Stoecklein did a lot more than help them: he saved them, salvaging pieces of the Old Carrizo Railway when it went into foreclosure, setting up a brand new corporation in Delaware, and legally separating it from the embattled failure of a railroad company.

Was the Carrizo Gorge Railroad the first generation of PIR?

“We don’t like to say that because we really have nothing to do with Carrizo… I treated this as a finance transaction,” continued Stoecklein, “and on December 20, 2012, obtained a 99-year lease from MTS so that we could finance it.”

So there they were: a lawyer and a pair of Las Vegas speculators with the keys to the kingdom in their hands and a 99 year lease agreement with San Diego’s Metropolitan Transit System that gave them the exclusive rights to the Desert Line. They went out and hired two men to run the company: a New York investment banker and an Ohio railroad man.

“One of the things that is rattling the economic growth is the fact that they have 3,000 trucks that are crossing the border a day that are experiencing delays,” said Ernie Dahlmen. “A railroad that could solve that, with logistics of rail versus truck, seem incredibly appealing.”

Dahlmen says he brought in nearly $6 million and David Rohal says he invested $800,000 of his own money into PIR. And they say they were on the verge of bringing in tens of millions more from Wall Street when they spotted trouble – prospective investors backing off. 

“The background of the people that own the paper is terrible,” said Rohal.

The two walked out of PIR and away from their investments. As Stoecklein begins the search for their replacements, as well as investors, he dismisses their complaints and defends his bosses as champions of the Desert Line Railway.

Do these facts raise concern?

“I think the business background of the owners, of management always has an impact on raising funds, especially from institutional investors. I don’t think in this case that is going to be a significant issue.”

“They won the majority – if not all – of those lawsuits. I think they have one pending that they filed,” continued Stoecklein. “Their business acumen is such they’re not worried about going up against people to create business. I’ve looked at the lawsuits; I don’t think it’s relevant in terms of moving this project forward. I think what’s relevant is their tenacity. And I don’t think this opportunity would exist, for either me or the region of San Diego, had they not pursued it so tenaciously.”

At the end of KUSI’s interview, Stoecklein reached across the table and handed over Pacific Imperial Railroad’s confidential management report to its board of directors. Among other things, it’s an indictment of the company’s detractors. In it’s 197 pages, the new PIR leadership lays out its case: the old leadership (Dahlmen and Rohal) abused their privileges, exceeded their authority, mismanaged money, and tried (and failed) a hostile take-over of the company – all while failing to meet self-imposed deadlines for bringing in investment funding. So there are the charges and counter-charges between people competing for control of the coveted Desert Line Railroad. 

Whom does the man believe? Paul Jablonski, CEO of San Diego’s Metropolitan Transit System, answers our questions about this latest dispute over the Desert Line, Wednesday only in The KUSI News at 6 and 10 PM.