The Desert Line: Part 1

Railroad bosses have spent most of the century trying to get the Desert Line up and running. Now, a pair of Las Vegas land-and-stock speculators have come to San Diego and, despite their checkered histories and the fact they (and their companies) have never run a single train, they somehow managed to persuade the Metropolitan Transit System to give them the lease for what may be one of the most valuable rail lines in all of North America.

The company is called Pacific Imperial Railroad. You probably haven’t heard of it because it has never run a single train. What’s more, its owners are the targets of lawsuits dating back years.

The Desert Line; seventy miles of track, a century of trouble. It was 1904 when industrialist John Spreckles envisioned a rail line from San Diego Harbor to the rest of the nation, commencing at Campo, and crossing the barren desert, all the way to Plaster City near El Centro. 

Beset by calamity after calamity, including World War I, it was known as the ‘impossible railroad,’ engineered through some of the most treacherous terrain ever traversed. Fifteen years later in 1919, Spreckles drove the Golden Stake on the last transcontinental railway built in America.

For decades, hundreds of tons of freight moved along the line, but the Southern Pacific Railroad let it fall into disrepair and tried to abandon it – selling it in 1979 to what is now the Metropolitan Transit System. MTS bought the tracks for the trolleys that move people around San Diego, and with those tracks, the old Desert Line to be used for its original purpose: moving freight.

The public transit agency granted a 99-year lease to a private company now known as Pacific Imperial Railroad, and that’s where the story begins.

“It’s an afterthought,” said David Rohal, a Yale-educated career railroad man and former Senior Vice President and COO of Rail America. “It’s seventy miles from San Diego. It’s out-of-sight. It’s out-of-mind.”

Rohal came to San Diego in 2013 to run PIR from the rails up.

“San Diego is sitting on top of a neglected asset. It is ready to be rebuilt, it is ready to connect the economy of a mega-region with the markets of the United States.”

Rohal joined forces with New York investment banker Ernie Dahlmen, whose resume includes building transportation businesses. Dahlmen says he signed on as CEO of Pacific Imperial to tap Mexico’s economic growth.

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

Both men say it was the 99 year lease contract with MTS that attracted them and prospective investors.

“I went with (Dahlmen) to Wall Street, we met with the people who have the hundreds of billions of dollars to put to work and they were excited about the project, the management team. They wanted this vision to happen,” said Rohal.

Within weeks though… signs of trouble.

“I had garnered a lot of institutional and individual interest in this railroad. A lot of it kept coming to a full stop. I didn’t understand why,” explained Dahlmen.

Dahlmen says a would-be investor sounded an alarm.

“It was the day before Thanksgiving; he was planning on funding, and he came back and said ‘Ernie, I’m really sorry to tell you this, but we’ve looked into the ownership group and the stuff that we’ve found has raised some grave concerns. We’re not sure if we’ll be able to move forward.'”

Prompted by a private investigation firm’s report, obtained by KUSI News, Rohal and Dahlmen turned their attention away from building PIR to investigating its owners. The report cites scores of lawsuits naming PIR and its owners, Charles R. McHaffie and Dwight W. Jory, from plaintiffs contesting McHaffie and Jory’s control of the railway to its board’s decisions, shareholders’ voting rights, and distribution of stock. The report went on to reveal legal judgements against McHaffie for failure to pay federal payroll taxes, as well as failed real estate projects in San Diego and beyond. And there was one lawsuit, filed by the ex-wife of the late Chargers star linebacker Junior Seau. Gina Seau claimed she loaned McHaffie $2.5 million for the railroad and he spent the money somewhere else. The suit was dismissed, but Seau has reportedly never seen her money since.

“The background of the people that own the paper is terrible. They have never been a part of a successful business,” said Rohal. “They have been responsible for dozens of businesses, all of which have failed.

There are potentially billions of dollars in international commerce at stake here, and critics say it is folly and foolish to put this railroad into the hands of these two individuals. What is Pacific Imperial Railroad’s response to the accusations? Tuesday, on The KUSI News at 6 and 10 PM, part two of a three-part series of reports. A prominent San Diego attorney, who is the new CEO of the railroad, takes the tough questions. He also has some scathing accusations of his own.

Categories: KUSI