George Santos lied to a judge in 2017 bid to help a ‘family friend’ charged with fraud

NEW YORK — George Santos lied to a Seattle judge about working for Goldman Sachs while speaking at a 2017 bail hearing for a “family friend” who later pleaded guilty to fraud in an ATM skimming scheme, according to an audio recording of the proceeding and court records.

“So what do you do for work?” King County Superior Court Judge Sean O’Donnell asked Santos at the May 15, 2017 arraignment of defendant Gustavo Ribeiro Trelha.

“I am an aspiring politician and I work for Goldman Sachs,” Santos replied.

“You work for Goldman Sachs in New York?” the judge asked.

“Yup,” Santos responded.

The New York Republican did indeed have a political future. He was elected to the U.S. House of Representatives in a Long Island swing district last November based on a largely fabricated résumé that included the claim he worked for Goldman Sachs, one of the largest investment banks in the world.

A spokesperson for the bank told The New York Times in its original investigation into Santos’ background that there was no record of him working there. He later admitted in a New York Post interview he “never worked directly” for Goldman Sachs, but claimed a financial firm he was employed at, LinkBridge Investors, had “limited partnerships” with the bank.

Santos now faces investigations by state, federal and international agencies on a range of potential crimes from campaign finance violations to pet charity fraud. He has refused to resign from Congress despite bipartisan calls for him to step down, arguing he never broke any laws, but he did forgo committee assignments citing the “ongoing attention surrounding both my personal and campaign financial investigations.”

Santos’ attorney Joe Murray did not respond to multiple requests for comment.

Santos appeared at the 2017 hearing on behalf of Trelha using his full name, George Anthony Devolder Santos. He told the judge he would secure “a long extended-stay apartment through Airbnb” in Seattle during the case if the defendant was released on bail.

“How do you know this man?” the judge asked.

“We’re family friends. Our parents know each other from Brazil,” Santos said.

Trelha was ultimately deported to Brazil in early 2018 after serving seven months in jail and pleading guilty to felony access device fraud. In a telephone interview, Trelha said Santos lied about their relationship, too. Trelha, through a translator, said he met Santos in the fall of 2016 on a Facebook group for Brazilians living in Orlando, Fla., and that his mother died in 2012.

Trelha eventually moved into Santos’ Winter Park, Fla., apartment in November 2016, according to a copy of the lease viewed by POLITICO. Santos had moved south from New York City, after he was transferred to a new position at the hospitality website HotelsPro, according to Lilian Cabral, a coworker at HotelsPro in Orlando.

A federal prosecutor who ultimately handled the case described the fraud as “sophisticated,” saying Trelha’s three-day skimming spree in Seattle was only “the tip of the iceberg,” according to a court transcript first reported by CBS News.

A person close to the investigation who is not authorized to speak publicly said prosecutors ultimately didn’t dig much deeper. The person didn’t remember seeing any forensic reports on Trelha’s phone and said prosecutors didn’t seem eager to pursue any international or domestic co-conspirators.

New York-based lawyer Tiffany Bogosian, a former friend of Santos who helped him duck a theft charge in 2020 involving the use of canceled checks to purchase puppies from Amish farmers in Pennsylvania, told POLITICO in a Feb. 7 interview that Santos said he was an “informant” in Trelha’s case.

Santos told Bogosian a warrant for his arrest in the Pennsylvania case was somehow tied to his work as an informant in the Trelha investigation, she said. Bogosian, believing his story at the time, said she called Seattle police detective Lawrence Meyer, who didn’t verify the term “informant” but confirmed Santos had “pointed them in the right direction” and offered some names of people involved in the credit card fraud. POLITICO could not reach Meyer to confirm the exchange.

When Trelha was arrested on April 27, he was caught on a security camera removing skimming equipment from a Chase ATM on Pike Street in downtown Seattle. He had a fake Brazilian ID card and 10 suspected fraudulent cards in his hotel room, according to arrest documents. An empty Fed-Ex package police found in his rental car was sent from the Winter Park apartment he shared with Santos. Trelha declined to say who sent the package from the apartment.

His plan was to spend a week skimming numbers and making fraudulent cards using gift cards bought at stores, Trelha said, and then another week taking out the maximum ATM withdrawals with pin numbers captured by the skimmers and cameras he installed.

“You go at 11 p.m. so you can max it out and then when it turns midnight you take the max amount again,” he said.

A spokesperson for the U.S. Attorney’s Office, Emily Langlie, said sometimes identity and credit card thieves go far from home to collect numbers, so there is less chance of the stolen numbers being connected to the perpetrators later. Langlie told POLITICO she didn’t have any information about Santos’ involvement in the Trelha investigation.

Trelha said that after he was arrested in Seattle he reached out to a friend who contacted Santos to help him, he said. “He was American and spoke English, so we thought he could help me the most,” Trelha recalled. By then, Santos had moved back north to help care for his sick mother.

“Mr. Devolder lives in New York,” Trelha’s public defender Virginia Branham said at the bail hearing. “I have spoken to him multiple times over the last few weeks. This is the second time he’s flown out here to assist Mr. Trelha. He has arranged an extended Airbnb for Mr. Trelha to stay at during the pendency of this case,” Branham said in the recording.

Santos told the judge he’d known Trelha “for a few years,” adding they’d “lost touch [but] got back in touch in September last year in Orlando when I was relocated from New York.”

Santos said he was staying at a hotel “by the Space Needle” until the judge’s bail decision. At the hearing, Trelha’s bail was reduced from $250,000 to $75,000 — still well above the $10,000 requested by his counsel. Trelha said he was unable to post bail because he didn’t have a local guarantor.

A Google account under the name George Devolder, with reviews of Brazilian restaurants in Queens and rental car companies in Miami, left a negative review of a Seattle Domino’s Pizza location in 2017, two miles from King County Jail and close to the Space Needle.

“1 hour viewing the tracker not move! very very very slow giving the time ordered (late night) called the store was on hold for 35mins with no answer!!!! NEVER order from this store, not worth the agrevation!!!”

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Seen in East Palestine: Buttigieg, Giuliani and a total political circus

EAST PALESTINE, Ohio — Pete Buttigieg rolled into this deep-Republican village in his government-issued SUV on Thursday, looking to address the public uproar over this month’s toxic train wreck.

He found a community where the circus had arrived.

Former President Donald Trump had visited the day before, offering pallets of self-branded “Trump Water” and seeking to energize his 2024 campaign. A producer for Sean Hannity was in town later Thursday, buttonholing locals during happy hour at The Original Roadhouse. Rudy Giuliani was in town too, for some reason.

And people living in East Palestine said they were unsure about many things — whether the water was safe to drink, whether to remain in their homes, how to explain their headaches and bloody noses. And what to think about the VIPs making appearances in their hometown.

“They come for an hour or so, and they leave,” said Nora Wright, an assistant director for area nursing facilities, describing the “publicity stunts" by visiting politicians. “They don’t find out how we feel.”

“I don’t trust the government,” said Joe Botinovch, a self-employed flower shop owner who voted for Trump in 2016 and 2020 but is shopping for a different candidate now and likes Florida Gov. Ron DeSantis. He, too, hasn’t enjoyed the sudden burst of attention from former presidents and presidential candidates.

“The only presidents I want to see are dead presidents in my wallet,” he said. “They’re using East Palestine like China and Russia and the U.S. are using Ukraine. It’s a proxy war.”

Buttigieg, who offered a public mea culpa for not speaking up about the derailment sooner, said he could tell how frustrated people here are.

“You can sense, when you talk to local leaders and local residents, that they're getting pretty sick of the politics," President Joe Biden’s Transportation secretary said in response to a question from POLITICO during a half-hour news conference near the accident site.

The politics showed no signs of leaving, though.

The Feb. 3 derailment by the 150-car Norfolk Southern train triggered a flaming wreck, spewed plumes of black smoke and left lingering worries about the safety of the town’s air, water and soil, along with fierce GOP criticism of how Buttigieg’s Department of Transportation has responded to the disaster. The Biden administration, in turn, has pointed to actions by the Trump-era DOT that weakened safety standards for trains carrying hazardous chemicals — although Buttigieg has expressed hope that Republicans will now embrace tougher regulations.

The unusually persistent glare of national attention has brought a trail of big-name and less-than-famous visitors to East Palestine.

Hannity’s producer, for example, was asking residents whether Buttigieg’s visit had made a difference — though none of them had witnessed it.

Giuliani, who was gathering social media content and audio for his Common Sense podcast, gaggled with local reporters, tooled around town with a crew of hangers-on and met with East Palestine Mayor Trent Conaway. (A Giuliani groupie handed a local two $100 Sparkle grocery gift cards.)

Conaway, a registered Republican, also met with Buttigieg. He said he and the DOT leader bonded over their shared experience as Midwestern mayors, and had a “productive meeting.”

Outside a Rite Aid, a TikTok and YouTube user from Columbus who gave his name only as Xkitzo was broadcasting live from the parking lot, with his phone ensconced on a tripod.

The environmental activist Erin Brockovich arrives for a town hall Friday.

None of this has ended the tide of rumors and conspiracy theories surrounding the derailment, Conaway said in an interview.

“There’s continuing misinformation,” the mayor said, calling the municipal water safe to drink. He also dismissed the persistent, unfounded rumor that a controlled burn of the train’s toxic cargo of vinyl chloride — one that produced a large plume and forced residents to evacuate — was unnecessary and reckless. (One local TV report on the incident produced a headline that went viral: “We basically nuked a town with chemicals.”)

“There were only two options,” Conaway told POLITICO of the train’s payload. “It was either it blew up or we blew it up.”

Mistrust was not hard to find, though.

Wright, the assistant nursing director and a mother of six grown children, said she doesn’t feel safe in her childhood home, which is within a mile of the derailment site, so she is letting the bank take it.

“If you walk into my house right now, you can smell it,” she said, describing the sulfur-like odor that lingers from the controlled burn. Her chest hurts. She has a sore throat. “I try to not spend too much time here.”

Wright also won’t drink the water here, even though Environmental Protection Agency leader Michael Regan and Republican Gov. Mike DeWine drank from the taps earlier this week to instill public confidence in the quality of EPA testing.

Neither will Courtney Miller, a mother of two, who lives with the train tracks in her backyard. She rose to viral fame after throwing a rock into a stream behind her house, turning up an oily glisten, and appeared on Tucker Carlson’s show on Fox.

On Thursday, she posed with Giuliani and recorded content for his podcast as he visited her home, decorated with “God, Guns, and Trump” and “Fuck Biden — Not My President” banners.

Signs posted through East Palestine’s downtown also capture the divided mood.

“Closed until further notice,” said a construction-paper sign on the door of a knickknack boutique called Mama’s Attic. It added that after the derailment, “my family is trying to pick up the pieces.”

“We are East Palestine,” reads another sign in town. “Get ready for the greatest comeback in American history.”

Buttigieg, who published a 224-page book called “Trust” three years ago, offered some explanations Thursday for why it’s so absent here.

One reason, he said, is the “national ideological layer” that some people have added to the derailment’s aftermath. “And there’s no question that there have been enormous amounts of both information and misinformation injected into this situation, none of which is to the benefit of the community.”

East Palestine is solidly Trump country — in 2020, the former president won 72 percent of the vote in surrounding Columbiana County. The only thing more ubiquitous here than Trump signs are the workers in bright yellow vests who dot the village.

But on this too, not everyone agrees.

Amy Britain, a Democrat and a retired physical therapy assistant, pulled through the Rite Aid parking lot to pick up some donated bottled water. She was happy about Buttigieg’s visit but rolled her eyes at Trump’s, and at the national coverage implying that the former president is the only politician welcome in the village where she grew up.

“We’re a microcosm of what’s going on in the entire country,” she said.

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Judge won’t unseal details of Trump's privilege fight over Jan. 6 grand jury

A federal judge has rejected a bid by two news outlets to obtain access to details of former President Donald Trump’s efforts to block testimony by aides to a grand jury investigating his effort to derail the transfer of power after the 2020 election.

In a ruling on Thursday, Chief Judge Beryl Howell of the U.S. District Court in Washington said a federal court rule mandating grand jury secrecy precluded the release of court opinions and other filings about disputes she has ruled on behind closed doors.

“Accordingly, [the grand jury secrecy rule] does not permit such disclosure, at least for now and perhaps forever, and so petitioners’ applications are denied,” Howell wrote in a 32-page opinion.

POLITICO and The New York Times had both petitioned Howell to unseal portions of the grand jury proceedings in October, citing the historic nature of the secret rulings she had issued. The Justice Department opposed the unsealing, prompting Howell’s decision.

“The continued secrecy of certain details about that investigation is required for the sake of grand jury witnesses and the government’s investigation,” Howell wrote.

Both POLITICO and The Times indicated they were considering whether to appeal.

“POLITICO is committed to the principle that a government of, for and by the people is transparent with the people on such an important matter,” company spokesperson Brad Dayspring said. “We are reviewing the decision and evaluating next steps.”

A spokesperson for The Times, Danielle Rhoades Ha, said: “We are disappointed in the ruling. We will make a decision about whether to pursue further legal steps once we've had time to process the opinion that sets forth the rationale for the decision.”

In recent months, aides to former Vice President Mike Pence have appeared at the courthouse to testify behind closed doors after Howell rejected an effort by Trump to claim privilege over their testimony. Other top Trump allies have been seen heading into the federal courthouse’s sealed grand jury rooms — including former White House Counsel Pat Cipollone and his onetime deputy Pat Philbin.

Press reports, typically attributed to people familiar with the proceedings, have also detailed a series of fights over legal privilege issues and a bid by Trump to assert executive privilege to keep some aides from testifying.

One grand jury-related dispute, involving an objection by Rep. Scott Perry (R-Pa.) to prosecutors’ seizure of his cellphone last year in an election-related probe, was argued before the D.C. Circuit Court of Appeals on Thursday in a session held partly in public and partly in secret. POLITICO revealed the details of that grand jury fight ahead of the appeals panel’s decision to partially unseal the arguments.

Howell seemed to evince discomfort about aspects of her latest ruling, particularly what she termed the “ironic” result that because cases of significant interest to the public often draw extensive news coverage and speculation about grand jury activities, the governing legal standards can require courts to withhold information in such cases even though court rulings on grand jury subpoenas in routine cases are often released with the names of those involved blacked out.

Redaction would be ineffective in the current dispute, the chief judge said, because it would simply be too easy for those reading the opinions or filings to infer the identities of those involved in the litigation.

“Redacting information in those materials would not sufficiently uphold that secrecy because matters occurring before the grand jury are so deeply intertwined with non-secret information would prove useless, or worse, misleading,” the chief judge wrote.

Howell, who will hand over the chief judge’s post and decision-making authority in grand jury matters to a colleague next month, also dinged the Justice Department for failing to address how Attorney General Merrick Garland’s public announcement in November of the appointment of special counsel Jack Smith might have undercut the justification for secrecy in the ongoing probe.

“When asked to address the impact of this DOJ announcement on grand jury secrecy in the instant applications … the government simply ignored this portion of the Order and chose not to respond to the fact of the Special Counsel’s appointment,” Howell wrote.

Howell used her 32-page opinion to throw considerable shade at a 2019 decision in which the D.C. Circuit overruled her and held that judges lack discretion to release grand jury materials for reasons not specifically enumerated in a federal court rule governing disclosures. In that ruling, the appeals court said historical interest was not a sufficient basis for a judge to make grand jury-related information public.

Howell pointed to what she portrayed as a series of oversights in the appeals court’s decision, even as she acknowledged that it binds her legally.

The Supreme Court declined to review the D.C. Circuit ruling, leaving it as the established law for federal grand juries in Washington.

However, then-Justice Stephen Breyer issued a statement noting that three other federal appeals courts had found more flexibility for judges to release grand jury-related records. Calling it an “important question,” Breyer urged a federal panel overseeing court rules to dive into the issue and determine whether changes to the policy are appropriate.

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Trump-allied group wants J6 committee staffers blacklisted

A conservative non-profit group allied with former President Donald Trump urged “Hill staffers and their colleagues” to cut off meetings with any former Jan. 6 committee staffers who have since joined firms that lobby.

In a letter sent to hundreds of recipients on the Hill, the dark money group American Accountability Foundation listed the names of the former committee staffers and their titles — along with their new employers and links to their firms’ clients — all of whom they urged to blacklist.

“AAF has put together a cheat-sheet below outlining their new firms and the firm's clients so you can be sure you (and your staff) aren’t inadvertently taking a meeting with a company that hires staff that hates your boss,” says the memo sent by Thomas Jones, the group’s president and founder. In his letter, Jones noted recent reporting by POLITICO on the January 6 committee staffers being hired by law and lobbying shops.

“It is important to remember that even if one of these former J6 investigators is not listed as a lobbyist on this specific account, the billings brought in by the clients listed below benefit all staff at the J6 investigator’s new firm,” he added.

It remains to be seen how effective the gambit will be, as the letter was sent only this past Wednesday. K Street firms have a major presence on Capitol Hill and their hires include figures on all sides of the political spectrum. But the group’s play illustrates the intense desire that exists among some conservatives to exact political retribution for those staffers who helped unearth extraordinary evidence of Donald Trump’s bid to subvert the 2020 election.

Jones confirmed the authenticity of the memo in an email to POLITICO. He railed against the January 6 committee’s use of investigative power, claiming that the committee and the F.B.I. forced some to “spend tens — sometimes hundreds — of thousands of dollars defending themselves from an overreaching and weaponized government.” He argued that conservatives should not be taking meetings with these lobbyists’ clients.

“My email was just a short list of people and companies they should stop working with,” he said.

“Until conservatives are willing to fight back against the swamp — in this case cutting off the lifeblood of lobbyist access — the swamp will never be drained,” he contended.

Among those listed on the memo include Casey Lucier, former investigative counsel for the committee, who was hired at McGuireWoods, a firm that represents Hertz Global, Perdue Foods, Sinclair Broadcast Group, and others. Other names listed were Kevin Elliker, another former investigative counsel, who was hired by Hunton Andrews Kurth. That firm represents Koch Companies Public Sector, NCTA – The Internet & Television Association, and Southern Company Services. Former committee staffers Marcus Childress, Heather Connelly, and Michelle Kallen had all been hired by Jenner & Block, the email noted, which represents T-Mobile and the Cherokee Nation of Oklahoma.

In his message, Jones also noted that the memo’s recipients were free to send over additional names.

Led by Jones, an alumnus of Sen. Ted Cruz’s (R-Tex.) presidential campaign, and Matt Buckham, a veteran of the Trump White House, the American Accountability Foundation has taken on controversial tactics to undermine Biden’s nominees. The New Yorker reported links between the American Accountability Foundation and the Conservative Partnership Institute, which has been affiliated with former White House chief of staff Mark Meadows and attorney Cleta Mitchell. Notably, Meadows' attorney George Terwilliger works for McGuireWoods, one of firms listed in the memo.

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DeSantis blasts immigration laws once popular with Florida Republicans

TALLAHASSEE, Fla. — Gov. Ron DeSantis is using his sway over the Republican-dominated Legislature to urge lawmakers to repeal state laws that offered additional legal rights to undocumented immigrants, protections that less than a decade ago were popular with many Florida Republicans, including DeSantis’ own lieutenant governor.

The new proposals were outlined in an immigration package DeSantis unveiled Thursday during a Jacksonville press conference. DeSantis has focused on immigration as he prepares for a likely 2024 bid for president and in the process changed how the issue is treated by many Florida Republicans. Not that long ago, they were voting to give additional legal protections to undocumented immigrants.

“Florida is a law and order state, and we won’t turn a blind eye to the dangers of Biden’s border crisis,” DeSantis said. “We will continue to take steps to protect Floridians from reckless federal open border policies.”

Included in DeSantis’ proposal is the repeal of a 2014 law sponsored by Lt. Gov. Jeanette Nunez when she was a member of the Florida House that offered out-of-state tuition vouchers to some eligible Dreamers, those brought to the United States illegally at a young age. It applied to Dreamers who attended a Florida high school for at least three years.

The proposal received wide-ranging Republican support at the time, including from CFO Jimmy Patronis, DeSantis-appointed Education Commissioner Manny Diaz, former House Speaker Jose Oliva — whom DeSantis recently appointed to the Board of Governors of the State University System — and Agriculture Commissioner Wilton Simpson, each of whom were members of the Legislature when lawmakers first approved the bill.

None returned a request seeking comment about whether they support repealing the law or if they regret their 2014 vote.

At Thursday’s press conference, DeSantis touted Florida’s low cost college or state university system but said the law still needs to be repealed to keep down tuition costs.

“If we want to hold the line on tuition, then you have got to say ‘you need to be a U.S. citizens living in Florida,’” DeSantis said. “Why would we subsidize a non-U.S. citizen when we want to make sure we can keep it affordable for our own people?”

Then-Gov. Rick Scott, who is now a Republican U.S. senator, signed the proposal in what was seen as a signal Florida Republicans had shifting views on immigration issues as they tried to make inroads with Latino voters, who have a much larger political footprint in Florida than in most states. Since DeSantis took office, however, he has rewired that approach, taking a much harder-line stance on immigration as he gains political support, including with Latino voters. In 2022, DeSantis won reelection by a historic 19.4 percentage point margin, including winning the Latino vote over Democrat Charlie Crist.

Scott defended the earlier legislation when asked about it in Tampa on Thursday.

“It’s a bill that I was proud to sign. I believe in it. I believe that these individuals ought to have the opportunity to live their dreams in this country,” Scott said.” It’s a bill I would sign again today.”

DeSantis last year drew widespread criticism from Democrats and immigration advocates after he transported nearly 50 migrants, mostly Venezuelans, from Texas to Martha’s Vineyard, a move opponents called a political stunt. Since then, the governor persuaded the Legislature to expand the program.

DeSantis’ proposal would also repeal a second law passed in 2014 with bipartisan support that allowed noncitizens to be admitted to the Florida Bar. The proposal was signed into law by Scott and got “yes” votes from Diaz, Nunez and Oliva. Simpson and Patronis, both of whom are seen as eyeing bids for governor in 2026, did not vote on the measure when legislators approved it on the House and Senate floors.

The law allows the Florida Supreme Court to admit noncitizens to the Florida Bar if they meet certain qualifications, including being brought to the United states as a minor and living in the country for a decade or longer. It was passed for José Manuel Godinez-Samperio, who came to the United States at age 9 with his mother and went on to graduate Florida State University College of Law with honors. He was in the House chamber when the bill passed and got direct shoutouts from Republican leadership at the time.

DeSantis said he has no idea why lawmakers at the time made that decision.

“I don’t know why they did this in Florida before I became governor, but they are letting illegal aliens become licensed attorneys in Florida,” DeSantis said at the press conference. “It’s, like, how could you be violating the law and then be practicing the law.”

During the press conference, he did not address the fact that a large number of elected Florida Republicans in the past supported some of the provisions he wants repealed and his office did not respond to questions about that situation.

Sen. Blaise Ingoglia, a Spring Hill Republican who was at the event and will be a likely sponsor of the bills, also did not return requests seeking comment.

DeSantis is also pushing lawmakers to require all Florida employers to use the E-Verify system, a federal database that allows employers to check workers’ employment status. During DeSantis’ first term, he pushed for universal E-Verify but that was opposed by the state’s business lobby. The bill lawmakers approved only required public employers to use the system.

Conservatives have been lobbying DeSantis to again try and expand the requirement to all employers, and DeSantis now has post-midterm Republican supermajorities in both chambers, which he says should make it easier to overcome opponents from the business and hospitality industries who are concerned changes could cut off their supply of cheap labor.

“It’s a different political context now having super majorities,” DeSantis said.

DeSantis’ immigration package also includes:

• Making it a third-degree felony to “transport, conceal, or harbor illegal aliens,” and a second-degree felony if the person being transported is a minor.
• Mandating that hospitals collect data on the immigration status of patients and submit reports on costs associated with providing care to undocumented immigrants.
• Requiring people registering to vote check a box affirming they are U.S. citizens and Florida residents.
• Prohibiting local governments from issuing ID cards to unauthorized aliens and invalidating out-of-state licenses issued to unauthorized aliens.

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U.N. calls for Russia to leave Ukraine

The United Nations General Assembly on Thursday adopted a resolution calling for Russia to withdraw its troops from Ukraine, almost exactly one year after it invaded the neighboring country.

In the 193-member body, 141 members voted in support of the resolution, exceeding the two-thirds threshold needed to pass.

Seven members — Belarus, North Korea, Eritrea, Mali, Nicaragua, Russia and Syria — voted against the resolution. Thirty-two members abstained, including China, India, Iran and South Africa.

The nonbinding resolution, which is largely symbolic, calls for Russia to halt its attack on Ukraine and to withdraw its troops from the region, as well as for a lasting peace.

After the invasion of Feb. 24, 2022, the war has dragged on longer than almost anyone expected. Russia’s efforts at toppling the government in Kyiv have so far failed, and its military has suffered huge casualties while committing a number of tactical errors. Ukrainian forces, with weapons and ammunition supplied by the West, have held out against the larger military and regained territory in the eastern part of the country that Russia had seized.

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Newsom’s proposal to cap oil profits in California meets skepticism in first public hearing

SACRAMENTO, Calif. — Gov. Gavin Newsom’s proposal to cap oil companies’ profit margins in California met a dose of skepticism at its first public hearing Wednesday before a state Senate committee.

Senators expressed concern about high prices, but none have yet appeared willing to go as far as Newsom in imposing a penalty for what he has called “price gouging” and industry “greed.”

Sen. Steve Bradford (D-Gardena), the committee’s chair, summed up a fear held by others on the committee as they paged through charts and documents and listened to detailed explanations for prices that are typically among the highest in the nation.

“In our pursuit to address gasoline prices, we must ensure our actions that we take first [do] no harm to consumers,” Bradford said.

It was the first public sign of trouble for a key Newsom initiative as he pursues a higher national profile and a possible future run for the presidency. He announced the proposal to cap industry profits and called a special session of the Legislature last summer as gas prices spiked and national anxiety about inflation overall was at a peak.

But the idea of penalizing the industry is facing close scrutiny in a Legislature dominated by Democrats and Newsom allies.

“There is clearly a belief out there among many people that oil companies were profiting off the backs of Californians,” said Sen. Dave Min (D-Irvine). “At the same time, we don't really have a smoking gun as far as I can see, that shows intentional collusion.”

Sen. Bill Dodd (D-Napa) put it most forcefully: “What I try to look for are what the hell are the unintended consequences, the possible unintended consequences that could hurt those people to a greater extent?”

Several experts testifying before the Energy, Utilities and Communications Committee said the proposal may focus on the wrong part of the supply chain by targeting refineries because downstream market players, including gas stations, may play a larger role in prices.

“Policies intended to affect refineries are not going to get at most of the reasons Californians are paying a higher price for gasoline,” said Severin Borenstein, a Newsom appointee on the state’s power grid operator and a UC Berkeley professor.

Borenstein has characterized part of the gap between California gas prices and the national average as a “mystery gasoline surcharge.”

The surcharge, according to the Energy Commission, is the extra profits oil companies earn in California above and beyond a margin that can be attributed to the state’s higher taxes and more stringent fuel standards. That margin increased after a 2015 refinery outage and grew during recent spikes.

One thing Borenstein, other experts and even Republicans on the committee agreed on: California regulators need more information on how the complex markets work, including contracts between refiners and retailers, sales prices and other details, to understand how prices in California have soared so much higher than in other states.

“There’s something going on downstream that I think this committee should get some answers to,” said Sen. Brian Dahle (R-Bieber).

In the electricity and natural gas markets, many of those details are already available, experts noted.

Newsom’s proposal, introduced by Sen. Nancy Skinner (D-Berkeley), would enable the state Energy Commission to obtain some of the additional information the experts said is needed.

It would also place a to-be-determined cap on oil refiners’ profits, setting a penalty through which the state would collect some of the above-limits earnings and distribute the money to residents.

The penalty is meant to act as a deterrent, said Nicolas Maduros, director of the California Department of Tax and Fee Administration.

“This isn’t a tax, it’s not meant to raise revenue; it’s meant to change behavior,” Maduros said.

Maduros said the proposal would be the first of its kind in the world, differing from windfall taxes in Europe and efforts of the past due to its structure as a penalty and its focus only on profits above a set cap, rather than all earnings.

Industry representatives and some analysts have made much of the unintended consequences lawmakers asked about, saying a profit margin cap could reduce supply in the state by encouraging companies to transport more oil to markets in neighboring states and overseas rather than selling it in California, particularly as the state weans itself off oil under long-term state mandates.

“We are concerned the fuel refineries will shutter before the transition is complete, leaving the market dependent,” said David Hackett, chair of the board of consultant Stillwater Associates.

Skinner pushed back on that assertion, noting that many gas-powered vehicles will still be on the road in California even if the state meets a goal of expanding electric vehicle sales to 100 percent of new car sales by 2035.

“I still can’t see where it wouldn’t be in refineries’ interest to stop selling gasoline or refining gasoline in California,” she said.

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