A Journey Through Oligarch Valley, Pt 5: Resnicks (Exit 253)
Previously: Pt 4: Moron (Exit 225)
Driving north at NASCAR speed takes me to the home turf of one of Oligarch Valley’s newest and oddest landlords: Beverly Hills agri-billionaires Lynda and Stewart Resnick.
You might not recognize the name, but you’ve certainly seen their luxury Fiji Water bottles at your local 7-Eleven, or maybe you’ve seen Palin family dropout Levi Johnston hawking the Resnicks’ Paramount brand pistachio nuts on TV. If nothing else, you’ve eaten their Sunkist oranges.
Fiji Water comes from Fiji, but just about everything else the Resnicks sell comes from Oligarch Valley, where they preside over several hundred square miles of land. A large chunk of their of their empire straddles Highway 33, just north of Taft and right next to the gas station where James Dean stopped for a Coke right before ramming his souped-up Porsche racer head-on into a hapless university student driving a Ford Tudor.
The Resnicks bought this land from Mobil and Chevron decades ago, and transformed the oil-stained desert into lush farmland filled with hundreds of miles of leafy green almond and pistachio orchards. The trees are planted with space-age precision—a perfect grid as far as the eye can see, whose countless rows recede endlessly in the horizon. At the center of it all is a giant factory with rows and rows of gleaming metallic silos where the company preps, packages and distributes its foodstuffs.
The scale of their farm numbs the mind. It’s a small self-sufficient settlement and includes its own small airport—how else do you expect Oligarch Valley farmers to get around? And this piece of farmland is only one small part of a diversified global agribusiness operation that brings in $3 billion in revenue a year.
But here’s the fun part: the continued economic viability of this piece of Oligarch Valley depends on Iran being kept in a state of a permanent economic blockade. It depends on it so much that the Resnicks have joined forces with raving neocons and hardcore rightwingers, funding thinktanks and lobbyists that hype the Iranian threat and push all out war.
I stumbled onto Stewart and Lynda Resnick almost as soon as I started investigating California’s billionairedominated public water system. The Oligarch Valley family that had made an easy $74 million selling water to the desert subprime suburb of Victorville was closely connected to the Resnicks.
Both families owned shares of the Kern County Water Bank, a natural aquifer at the southernmost edge of the Central Valley that had been converted into a privatized waterstorage facility.
The water bank was designed by California’s Department of Water Resources to function as an emergency reservoir. In wet years, it would collect excess water shipped down the California Aqueduct from Northern California and hold enough water to keep Los Angeles hydrated nearly two years in case of prolonged drought. The water bank was supposed to serve as a last-line defense to protect urban users. But in 1995 California water bureaucrats tweaked a couple of arcane water regulations and handed the water bank over to a small clique of Oligarch Valley landlords.
Once water entered the water bank, it stopped being a public resource. From that point, the owner could sell it to the highest bidder. “This means they become middlemen making profits on state-supplied water,” reported Redding’s paper Record Searchlight. “If they choose to, they can dry up vast areas of productive agriculture and ship the water to municipalities south of the Tehachapi range.”
Stewart Resnick masterminded the scheme, and emerged with a majority stake in the new Kern County Water Bank. In fact, the Resnicks dominated and controlled the water bank so thoroughly that it’s become a de facto extension of their private agribusiness. They run it out of one of their corporate offices near Bakersfield, California.
Resnick’s scheme did more than privatize a single piece of public infrastructure. It created a novel legal framework that gave Oligarch Valley famers the power to create nonexistent water out of thin air. Resnick created “paper water.”
Like the leveraged subprime-backed securities and exotic debt instruments dreamed up by Wall Street, “paper water” was built on pure fantasy and innovative accounting fraud. The simple fact was that half of California’s “paper water,” water able to be sold, bought and traded on the market, simply does not exist, and never has.
It sounds nuts, but it’s true. And it all has to do with the California State Water Project started by Governor Pat Brown. The project involved a series of dams, aqueducts and massive water pumps to siphon water from Northern California and to send it down through Oligarch Valley and into Southern California. When the system started being built in the 1960s, the state allocated guaranteed water rights to farmers throughout Oligarch Valley. These contractual obligations were not based on reality, but were worked out using the estimated capacity of a fully built-out state water system. And that was the problem: the State Water Project was never fully completed. Attempts to dupe California voters into paying for the final parts of the system have been tried on many occasion, but have yet to succeed. Contractually, the state was obligated to deliver 4 million acre-feet a year. But in reality, the state could only deliver half the water it promised. In the 1990s, the conflict came to a head when a coalition of Oligarch Valley farmers headed by Stewart Resnick threatened to sue the state for breach of water-delivery contracts.
What to do?
Stewart Resnick proposed a solution that involved a simple but ingenious bit of Wall Street-style accounting: Instead of delivering the water, California could simply pretend that the water existed and then allow Oligarch Valley to sell it. It’s that simple. And that’s exactly what California did!
As we learned back at Tejon Ranch, state law mandates that every large real estate development in California must prove that a secure water source will be available for the occupants. Water supplies are already over-tapped and it’s not like you can just pick up the phone and get Alhambra water delivered to your doorstep. Paper water resolved this problem once and for all. From the mid-1990s, developers could satisfy planning requirements by securing “paper water” rights for their projects. They weren’t getting a real supply of water, nor were they transferring any. It was all virtual: a simple accounting trick that said they had legally secured a certain amount of water to be delivered sometime in the future when the development was complete.
What if the water wasn’t there, say in the case of an extreme drought? Not a problem. California would simply have to bail a city’s residents out. The new paper water agreements made the state explicitly responsible for its original water contracts, regardless of whether there was water or not.
Stewart Resnick’s paper-water market was the envy of every finance conman in the country. It was so brilliant and innovative that the snake-oil experts at Enron couldn’t help trying to get in on the racket. In the early 2000s, Enron bought a chunk of land in Oligarch Valley atop a natural underground reservoir and started working on a water bank of its own. Enron promised to herald the brave new future of paper water commodities with an Internet-based operation called Azurix that was going to become the etrade.com of H2O. Water day traders would log in from around the world, buying and selling water, hedging bets, trading waterbacked securities.
Here’s how Chris Wasden, the mastermind behind Azurix, explained it.
“…the way that water trading works is that you’re really not trading the actual molecule of water that you own with someone else’s water molecule. So I have this amount of water, and now let’s swap it in such a way that I get access to water when I need it but it’s not the actual water that’s going there, it’s an allocation of water.”
Enron’s water speculation utopia crashed and burned, in large part because the owners of Oligarch Valley didn’t like outsiders crowding their territory. Mr. Wasden landed on his feet, though. He’s now at PriceWaterhouseCoopers, managing director of “healthcare strategy and innovation.”
So it didn’t quite work out for Enron, but paper water boosted Lynda and Stewart Resnick to a whole new level of wealth and power. With access to cheap, abundant water, they opened up thousands of acres of new farmland in Oligarch Valley, nearly doubling their cultivated land holdings just in the three years after hammering out California’s historic paper water agreement. They’ve been so successful that jealous Oligarch Valley neighbors—including the Vidovich family—have called on the state to intervene and distribute the Resnicks’ water wealth.
And they just keep on growing. Their private holding company, Roll Global, brings in nearly $3 billion in revenue annually, up from $2 billion five years ago. It has grown to become perhaps the largest agribusiness operation in Oligarch Valley. They have a near monopoly on almonds and pistachios and dominate a huge section of the orange and mandarin market. Along the way, the Resnicks managed to single-handedly create a pomegranate health-food craze and to make tons of money sucking water out of the small impoverished nation of Fiji, which is ruled by a neoliberal military junta. Most Fijians are miserably poor and lack access to clean drinking water, but the Resnicks threatened to pull out of the country after the Fijian government attempted to impose a tiny tax of eight cents per liter.
Sucks for Fiji, but the Resnicks plunder water from their countrymen just as easily as they do from abroad…
For all their wealth, power and shameless scheming, Lynda and Stewart are clearly not your run-ofthe- mill Oligarch Valley billionaire farmers.
In a land dominated by old anglo families and regressive rightwingers, the Resnicks are proud Learjet Liberals. They are major Democrat Party donors, are among the biggest backers of the liberal pro-business Aspen Institute, mingle with Arianna Huffington and entertain the high society of Beverly Hills at their gaudy palace on Sunset Boulevard. They’ve expanded this house over the years by buying and tearing down three adjacent properties, which has given them room to add a greenhouse, a massive lawn studded with sculptures, a pool, a parking lot for a couple of dozen cars and an orange grove out front. Even in Beverly Hills, full of new money and ostentatious displays of wealth, the Resnicks stand out. “Exaggerated, extravagant, crude, ridiculous, a bit indecent,” is how Michael Gross described them in his book “Unreal Estate.”
The Resnicks spend quite a lot of time in their Aspen home, with its backyard mountain lake. They love that property. They love it so much that in the early 2000s, the Resnicks fought a legal battle against Aspen over an affordable housing project for local municipal employees. The Resnicks complained that the project—just half a mile from their “Little Lake Lodge” property—would devalue their land.
Compared to other Oligarch Valley landlords, though, the Resnicks are new money. They aren’t mooching off inherited wealth passed down through the generations; they have amassed their vast land holdings out here on their own. They arrived in the late ’70s, and, in the span of a few decades, cobbled together one of the largest vertically integrated agribusiness operations in the United States— bigger and more profitable than just about any other in Oligarch Valley.
Stewart Resnick was born in the mid-1930s in Highland Park, New Jersey, into a Jewish-Ukrainian immigrant family. According to Stewart, his father owned a bar and was a violent man. He was also a drinker, a gambler and had close ties to the criminal underworld and the Jewish mob. “My father was a great negative role model. The lessons I got from him were all what not to do,” Resnick told journalist Mark Arax during an interview for a biography that was never completed.
Stewart left home at age 18, moved out to Los Angeles and worked his way through UCLA law school. He started an incredibly successful janitorial business that generated $7.4 million in annual business and in the early 1970s expanded into the private security business, which was just beginning to boom. In just a few years, Stewart’s firm—American Protection Industries—grew into one of the largest private security companies in Los Angeles. API had over 1,000 armed security guards patrolling downtown and the Westside. It operated, installed and monitored burglar and fire alarm systems in thousands of homes. The company was highly connected: it employed former Secret Service agents and for a time was run by a former L.A.P.D. chief of police. Very early on, the company scored a lucrative contract to handle security at the international terminal at the Los Angeles airport: API employees ran the security screening gates—what the TSA does now—and guarded incoming international airplanes until they could be inspected by U.S. Customs.
In the mid-1970s, Resnick’s security company got tangled up in a federal drug-smuggling and organized-crime investigation after three of its airport guards were busted handing over two pounds of pure “China White” heroin to undercover officers. At the time Stewart blamed the whole thing on a few bad apples, saying that they had already been fired for misconduct. He also alleged that this was an attempted shakedown by a former disgruntled employee. But according to the Los Angeles Times, the revelations of the drug bust were serious enough to trigger a broader investigation by the federal Organized Crime and Racketeering Strike Force into “possible infiltration of airport security by organized crime.” Here’s how the paper reported it in 1976:
“The investigation grows out of a narcotics smuggling case involving three former employees of American Protection Industries, which has the security contract for the international terminal at the airport.
“Court records in the case and other sources indicate that a potentially massive fraud against airline companies is being investigated by federal, state and local agencies.
“In addition, sources close to the investigation say ‘extremely solid documentation’ of organized crime ties to API employes has been unearthed.
“Five persons, three of them identified by authorities as former API employees, were arrested earlier this week on charges they sold almost two pounds of virtually pure ‘China White’ heroin to undercover narcotics agents.
“During the five-month investigation that led to the arrests, several of the suspects told undercover agents they had access to a large supply, as much as 100 pounds at a time, of the Oriental heroin, which they said was being shipped into this country on commercial airliners.”
Two years before Stewart’s API employees were busted smuggling heroin, he had married Lynda. She owned a small ad agency on Melrose Avenue and was the daughter of a movie producer most famous for “The Blob.” A few years earlier Lynda had been caught up in a scandal of her own. In the late 1960s, she was dating Aaron Russo, a long-haired hippy analyst working at Rand Corporation and a friend of fellow Rand employee Daniel Ellsberg. Russo rarely gets credit for his role in leaking the Pentagon Papers, but he and Ellsberg did it together. When the documents were leaked in 1973, it was Lynda’s Xerox machine that was used to copy the classified documents.
From “Unreal Estate”:
“Lynda was dating Aaron Russo, who’d worked with Ellsberg at the think tank where they got hold of the papers. Though she’d demonstrated against the war, Lynda wasn’t political. ‘She was always thinking about how to make money,’ Russo told Ellsberg’s biographer, Tom Wells. But still, ‘she was all impressed’ when they asked if they could borrow her copier and explained why. She even helped with the two weeks of all-night copying sessions, shooing away the police the first night when they accidentally set off her burglar alarm, scissoring the Top Secret stamps off the tops of the documents to ‘declassify’ them—and getting paid by the page for the use of her equipment. ‘I was so naïve,’ Lynda told Wells.”
Yep, Lynda and Stewart were quite a pair.
Not long after getting married, the two put their business minds together and got into the trinket business: They bought the Franklint Mint—which sells the fake “collectable” coins, plates and Elvis dolls to the TV-dinner demographic—and made a killing selling porcelain Princess Diana dolls. They even successfully sued Princess Di’s Memorial Fund for £13.5 million after the Fund tried to stop the Resnicks from selling the dolls.
But their real big break came in 1978, when Lynda and Resnick, who had zero experience in agribusiness, decided to get into farming. They began buying up orange orchards and a citrus packing plant, acquiring control of Paramount Citrus Association.
Stewart Resnick would later describe farming as a purely passive investment, a way to safely park his money and escape the scary wealth-destroying effects of runaway inflation of the ’70s.
The Resnicks didn’t stay passive for long. In 1979, Iran took 52 Americans hostage from the U.S. Embassy. In retaliation, President Carter levied the first of a series of economic sanctions and trade restrictions against the country. For as long as anyone can remember, Iran had been the world’s main supplier of pistachios. But Carter’s 1979 embargo on the country effectively cut off Iranian pistachio growers from the American market and created a need for alternative pistachio production, which was virtually nonexistent in the United States.
Seeing a massive opportunity, the Resnicks began to snap up thousands of acres from Mobil Oil and Texaco in order to create pistachio and almond orchards. They steadily bought up more and more acreage all through the 1980s for rock-bottom prices because a long period of drought. By the end of the decade, the Resnicks had amassed enough farmland to rival Oligarch Valley’s biggest and oldest billionaire farmer clans: 100,000 acres—nearly 160 square miles—growing cotton, pistachios, almonds, oranges, lemons and grapefruit. They didn’t just grow the crops, but packaged, processed and distributed them as well.
Economic sanctions against Iran were renewed and intensified under every single president after Carter, and all the while America’s domestic pistachio farming exploded. In the past thirty years it has grown from a couple of hobby farmers to an industry generating close to $1 billion. And the Resnicks have a near monopoly on the trade. Today, Resnicks’ Paramount Farming is the country’s largest grower, processor and marketer of pistachios, controlling something like 60 percent of the industry. Pistachios are very important to the Resnicks, bringing in at least 20% of their agricultural revenue.
Economic sanctions are what have allowed the Resnicks to create their pistachio empire, which would suffer a severe blow if relations with Iran were ever normalized. Iran’s pistachios are considered to be superior to America’s, so much so that Israelis still buy Iranian pistachios shipped in through Turkey. Surely the Resnicks would never be able to compete with Iran on the pistachio free market.
And so the Resnicks did what any smart and ruthless American would do: they made common cause with oil companies, Islamophobes, neocons and Likudniks, and began funneling money to think tanks and political advocacy groups that take a hardline approach with Iran. Economic sanctions, sabotage, vilification—all these things worked in the Resnicks’ interest. Bombing some of Iran’s pistachio fields wouldn’t be so bad, either…
Stewart Resnick and his wife Lynda are trustees of the highly influential Washington Institute for Near East Policy think tank, which was created as an AIPAC spin-off in the ’80s. In the realms of US government mid-east policy and media reporting about the region, the think tank is considered to be one of the most influential in the country. It is also ridiculously hawkish on Iran, calling for heavy sanctions and military strikes against the country. In 2005, the Resnick Foundation gave $20,000 to the Washington Institute for Near Eastern Policy. Unfortunately, the real amount of money the Resnicks have given to the institute is hard to gauge, as any funds that did not go through their personal foundation would not have to be reported on any of their IRS documents.
Stewart Resnick is also board member of the American Friends of IDC, a not-for-profit foundation that serves as the fundraising arm of the Interdisciplinary Center Herzliya, a think tank with close links to the Israeli intelligence and military establishment. Like the Washington Institute for Near East Policy, Herzliya is considered to be the most influential think tank in Israel on security matters. American Friends of IDC funneled $10 million to Herzliya in 2006. It is not clear how much money Resnick has personally contributed to this non-profit, as non-profits are not required to disclose the names and addresses of their contributors. But the fact that Resnick is on the board of directors shows his direct involvement in a powerful organization pushing a hardline anti-Iranian policy. After all, Stewart Resnick sits on the board with a long list of well known neocons, Islamophobes and Iran War boosters, including Vegas tycoon Sheldon Adelson, the founder of pro-Iraq/ Iran war group Freedom’s Watch and infamous backer of all things neocon.
Herzliya conferences have been attended by powerful political players from both the US and Israel: William Kristol, Mitt Romney, Wesley Clark, Ariel Sharon, Moshe Katsav, Richard Perle, James Woolsey and Nicolas Sarkozy are just a few big names. What’s Herzliya’s position on Iran? The Weekly Standard reported from the think tank’s annual conference in 2010:
“…Iran received much attention at Herzliya this week. Speaking two days before Netanyahu, President Shimon Peres spoke eloquently about the need to confront Iran not solely as a security issue, but as a moral concern for the West, stating that Iran was a source of evil to all seeking peace and freedom. Netanyahu’s coalition partner and defense minister, Ehud Barak, also called on the international community to institute sanctions on Iran, especially given Iran’s successful satellite launch this week.”
Documents filed with IRS show that the Resnick Foundation funneled $1.125 million to the American Jewish Committee in a five-year span between 1999 and 2004. The American Jewish Committee (which also goes by Jewish Federations) was one of the most active lobbyists pushing for a sweeping Iran sanctions bill passed in 2009. It was right up there with Halliburton, Chamber of Commerce, ExxonMobil and Lockheed Martin.
In 2008, Resnick’s Paramount Farms reaffirmed its mission to keep hacking away at Iran’s market share. “We don’t mind stealing share from the Iranians,” said Paramount’s vicepresident of worldwide sales.
The funniest thing is that enforcement has been the hardest in Israel, which has the highest per-capita consumption of pistachios in the world and imports tens of millions worth of pistachios every year. And Israelis, as much as they hate and fear Iran, love Iranian pistachios best, preferring them over America’s crop.
The Los Angeles Times in 2009:
“For years, the U.S. has been pressuring Israel to break the habit of buying Iranian pistachios from thirdparty markets such as Turkey and turning a blind eye to trade-embargo issues…
“To be sure, Israelis love pistachios. In a recent interview, President Shimon Peres recalled with nostalgia the wondrous fistouk shammi (Aleppo pistachios) he enjoyed years ago in Iran as the shah’s guest.”
“As a proud native of the golden state (California), I think Israelis should eat American pistachios, not Iranian ones,” Stewart Tuttle, spokesman for the U.S. Embassy in Tel Aviv, told the Associated Press.
Editor's Note: This article also appears in NSFWCORP: A Long Fucking Story, an oral history of NSFWCORP including interviews with former writers and previously out of print long-form features.