Alexander: Lakers firing Darvin Ham was predictable, but is that it?

• May 3, 2024

Darvin Ham was the definition of Fired Coach Walking for weeks, as it turns out. Even 47 regular-season victories, good enough only for the play-in round in a rugged Western Conference, weren’t enough to save a second-year coach from the expectations of a legacy franchise and its entitled fan base.

But the shame shouldn’t lie so much in Ham’s dismissal, made official with a one-paragraph statement by vice president/GM Rob Pelinka at 11:15 a.m. on Friday, as it is in the process that reached this point. The view here is that Ham was undermined internally, and the torrent of anonymously sourced complaints about his strategy and personnel usage and command of the locker room appeared carefully calibrated as soon as the Lakers fell behind Denver in the first-round playoff series that ended Monday night.

I don’t know who those sources were, and if I did I wouldn’t reveal them anyway, since it is a sacred rule of what we do as journalists that you don’t burn a source after agreeing to anonymity. But from the outside of that reporting process, I suspect a good share of the complaints originated from two places – the front office, i.e. Pelinka in an effort to deflect blame, and/or LeBron James and his agent, Rich Paul.

Pelinka, who had been a player agent before he was hired as Lakers general manager in 2017, inherited Luke Walton as his coach, fired him after three seasons and hired Frank Vogel in 2019, fired Vogel – who had delivered the team’s 17th championship in the 2020 COVID bubble – in 2022 after three seasons, and now has axed Ham after two.

James has played for three coaches since joining the Lakers in 2018, and – assuming he picks up his $51.4 million player option for the 2024-25 season – would be playing for his fourth coach as a Laker and his ninth coach overall in 22 NBA seasons. (The last time in his career James seemed to have less than maximum leverage was in his four seasons in Miami, with Erik Spoelstra as the coach and team president Pat Riley possessing power equal to or greater than that of his best player. That’s unusual in the NBA.)

Make no mistake. LeBron is seldom shy about using his leverage. The hourglass emoji he posted on social media after a midseason loss to Atlanta dropped the Lakers to 25-25 was a passive-aggressive reminder that time was slipping away. (Ham responded by saying, “I would’ve put out two or three hourglass emojis by now,” after which a rando fan posted on the Platform Formerly Known As Twitter: “Except the hourglass was for you, Darvin. Read the room.”)

Similarly, following Monday night’s season-ending loss in Denver, James was asked if he had given any thought to that being his last game as a Laker, and he answered: “Um, I’m not going to answer that … appreciate it,” followed by a mic drop. That could be honest uncertainty or an unwillingness to commit immediately following a season-ending loss … or it could have been one more message in the direction of Pelinka and the rest of the front office.

Much of the Lakers’ fan base likely celebrated Friday morning’s news. Ham was booed by some fans – though not a majority – during introductions before each of the Lakers’ home playoff games against Denver, but the “Fire Darvin Ham” chants at the tail end of their 112-105 loss in Game 3 were hard to miss.

The viral video of D’Angelo Russell checking his phone while the rest of the team was in a timeout huddle during Game 3, or the comment from Anthony Davis after Game 2 that “(w)e have stretches where we just don’t know what we’re doing on both ends of the floor” … those also fed the portrayal of a team in disarray or at least one that had stopped paying attention to or trusting its head coach. Only after the fact did the player gripes come out about how Russell and Austin Reaves were coming off the bench at midseason, how rotations were unsettled (injuries did play a part), and how Ham was slow to make in-game adjustments.

(The blown leads in the Denver series – particularly in third quarters, as Reaves not so coincidentally made sure to point out in his postgame remarks after Game 3 – seemed to be vivid evidence of Ham’s failure to adjust.)

As has been noted by This Space, Ham is likely going to be a far better head coach strategically a few years down the road. It was his misfortune, I guess, that his first opportunity was with a franchise and fan base that demand nothing less than competing for championships. This is the downside of Laker Exceptionalism: There is no patience and no time to ease into the job, especially when the greatest scorer in NBA history is on your roster at the back end of his career.

There’s an adage – I believe Dallas Mavericks owner Mark Cuban came up with it – that fits this situation: If you’re going to fire someone, you’d better have a replacement in place, or at least in mind.

Does Pelinka have a guy, or a plan?

One popular notion among the fan base seems to be trying to steal Ty Lue from the Clippers, and never mind that the Lakers had their shot at Lue before hiring Vogel in 2019, but those talks broke down when the team demanded that Lue include Jason Kidd on his staff. Lue said no thanks.

Then there’s the speculation that J.J. Redick might be a leading candidate. His main qualification, beyond 15 seasons as a player? He does a podcast with LeBron. Seriously. So to replace a guy who had zero head coaching experience but at least had been a high-level assistant, you’d hire a guy whose only coaching experience is with fourth-graders? Why not just make LeBron player-coach?

As has often been the case with the Lakers over the last decade-plus, there’s been little to no accountability from the front office, from controlling owner/governor Jeanie Buss on down. Pelinka made the decision to run it back with most of the same faces that got the Lakers to the conference finals last season, but misfired with some additions to that core and did little to shore up the roster before the trade deadline.

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Also, the pick of Jalen Hood-Schifino at No. 17 in June’s draft becomes even more of a failure when you consider the two guys drafted behind him: Jaime Jaquez Jr. by Miami and Brandin Podziemski by Golden State, both of whom were far more significant to their teams as rookies.

So we go back to the premise above: If you’re going to get rid of someone, you’d better have a replacement in mind.

And Bob Myers, former Golden State Warriors general manager (i.e., architect of championship teams), is available. Hint?

[email protected]

​ Orange County Register 

Potential candidates for Lakers’ head coaching job

• May 3, 2024

The Lakers fired head coach Darvin Ham on Friday, ending his two-season tenure at the helm.

Here are a few of the potential candidates for the Lakers’ vacant head coaching position:

David Adelman, Denver Nuggets assistant coach

Adelman, the son of Hall of Famer Rick Adelman, is the lead assistant coach for the defending NBA champions and has been on Coach Michael Malone’s staff since the 2017-18 season.

Adelman, 42, joined the Minnesota Timberwolves as a player development coach in 2011-12 under his father for his first NBA job after previously coaching in the high school ranks.

He was a Timberwolves assistant for his final three seasons in Minnesota before becoming an assistant on Frank Vogel’s Orlando Magic staff for a season (2016-17) before moving to Denver.

Adelman received a significant endorsement to be an NBA head coach last season after serving as the Nuggets’ acting head coach in a Jan. 17, 2023 victory over the Portland Trail Blazers in which Malone was sidelined because of the league’s health and safety protocols.

“I really think that [Adelman’s] a guy who’s gonna be next head coach because he has that, I’m gonna say ‘head’ for a head coach,” Nuggets star Nikola Jokic said, according to the Denver Post. “… He knows the answers. He reads, reacts.”

Kenny Atkinson, Golden State Warriors assistant coach and former Brooklyn Nets head coach

Atkinson was the Nets’ head coach from 2016-20, with Brooklyn improving its record by at least eight wins twice with Atkinson at the helm.

Atkinson, who is considered one of the league’s top assistant coaches, has spent the past three seasons as an assistant under Warriors coach Steve Kerr, helping guide the team that won the 2022 NBA title.

Before joining the Warriors, Atkinson, 56, spent the 2020-21 season as an assistant under Tyronn Lue with the Clippers.

Atkinson has also been an assistant coach for the Atlanta Hawks (2012-16) and the New York Knicks (2008-12) after spending one season as the director of player development for the Houston Rockets (2007-08).

Atkinson was expected to become the Charlotte Hornets head coach during the 2022 offseason, but he decided to remain with the Warriors.

Mike Budenholzer, former Milwaukee Bucks and Atlanta Hawks head coach

Budenholzer might be the most accomplished coach available to the Lakers in this cycle: he won a championship at the helm of the Milwaukee Bucks in 2021.

The two-time NBA Coach of the Year (2014-15, 2018-19) has a regular-season head coaching record of 484-317 and a 56-48 mark in the playoffs.

Teams led by Budenholzer reached the playoffs in nine out of 10 seasons, made it to at least the second round six times, made the conference finals three times and made it to the NBA Finals once.

Budenholzer, 54, was the head coach for the Atlanta Hawks from 2013-18 and the Bucks coach from 2018-23 after working under San Antonio Spurs legend Gregg Popovich for 17 years (1996-2013), where he won four NBA titles (1999, 2003, ’05, ’07) as an assistant coach.

Notably, Ham was an assistant coach under Budenholzer with the Hawks and Bucks from 2013-22.

Ty Lue, Clippers head coach

It’s unclear if Lue will be available for the Lakers.

Especially with ESPN’s Adrian Wojnarowski reporting on Friday that the Clippers are planning to pursue a contract extension with Lue, whose final year of his current contract is for the 2025-2026 season.

But If Lue somehow becomes available or doesn’t reach an extension with the Clippers, the Lakers would be expected to have interest in the 47-year-old.

Lue notably won an NBA title as the Cleveland Cavaliers’ head coach in 2016 – a team starring LeBron James. Those Lue-led Cavaliers teams also reached the NBA Finals in ’17 and ’18 before falling to the Warriors. The Lue-led Clippers also reached the Western Conference finals in 2021.

Lue has a 312-217 regular-season record as a head coach and a 54-36 record in the playoffs going into the Clippers’ Game 6 matchup against the Dallas Mavericks on Friday night. Lue-led teams have made the playoffs in six of seven full seasons he’s coached and had a winning record all seven seasons.

He won two NBA titles with the Lakers as a player in 2000 and ’01.

Notably, Lue was the frontrunner for the Lakers’ 2019 offseason coaching search, with Frank Vogel eventually taking the job after Lue turned down the Lakers’ offer at the time according to ESPN. Lue has also been an assistant coach for the Boston Celtics (2011-13), Clippers (2013-14, 2019-2020) and Cavaliers (2014-15).

Charles Lee, Boston Celtics assistant coach

Lee, who The Athletic reported is an option for the Lakers’ coaching job, has been an assistant coach in the NBA for a decade.

He was an assistant on Budenholzer’s staff in Atlanta (2014-18) and Milwaukee (2018-23) before joining the Celtics last offseason as Joe Mazzulla’s lead assistant.

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Lee was also the lead assistant under Budenholzer during his final season with the Bucks (2022-23).

Like Adelman, Lee has been part of multiple recent interview cycles for head-coaching positions, including the Hornets’ current opening and the Detroit Pistons’ and Toronto Raptors’ openings last offseason, according to ESPN.

JJ Redick, ESPN analyst/broadcaster

Redick, who played in the NBA for 15 seasons and retired in 2021, doesn’t have any professional coaching experience.

But he’s been interviewed for multiple head-coaching vacancies recently: the Raptors’ last offseason and the Hornets this spring.

Redick became an analyst/broadcaster for ESPN immediately after retirement and has hosted a podcast since 2016, including, “The Old Man and the Three” which is part of the ThreeFourTwo Productions company he co-founded.

Notably, Reddick has also been co-hosting a podcast, “Mind the Game” with James since March.

​ Orange County Register 

The Sand Bar, Sammy Hagar’s Cabo Wabo extension, opens in Huntington Beach

• May 3, 2024

One year after opening Cabo Wabo Beach Club inside the Waterfront Beach Resort in Huntington Beach, Sammy Hagar, the restauranteur and noted frontman of such aural outfits as Van Halen and Montrose, has softly opened the Sand Bar, a beachside extension of his nearby restaurant.

The Sand Bar, located a stone’s throw from the sand, features a 2,100-square-foot patio with 100 seats, which offers full-service dining. Counter service is also available for to-go meals.

Menu highlights include such starters as grilled esquites, Caesar salad and coctel de camarones. Heartier fare like sandwiches (brisket, sausage and turkey breast) and thin-crust pizzas (cheese, vegetable and pepperoni) also make appearances. And a coconut tres leches cake ($6) and churros funnel cake ($10) round out the dessert menu. The lil’ surfers menu offers the wee ones a choice of a burger ($10), chicken tenders ($10) or a turkey sandwich ($12).

SEE ALSO: SeaLegs at the Beach and Sahara Sandbar & Pizza reopen in Huntington Beach

A seating area for 100 inside the 2,100-square-foot patio. (Photo by Bob Hodson, courtesy of Cabo Wabo Beach Club)

The roster of libations include crafts cocktails, like the Purple Rocker ($16), a violet-hued libation of rum, ube and orgeat syrups, fresh lime and mint; slushy cocktails ranging from virgin to tequila-, rum- or vodka-spiked ($8-$16), beers; tequilas and other strong spirits.

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“The Cabo Wabo brand was born on the beaches of Cabo San Lucas, so it only seems fitting to have it return to its roots with this new oceanfront extension,” said Sammy Hagar in a written statement. “As an Orange County resident, I have enjoyed many sun-filled days and magical sunsets on Huntington Beach, and adding great food, cocktails and music completes the experience.”

The new restaurant will offer year-round dining Wednesday through Sunday from noon until sunset. Its official grand opening will be Friday, May 17.

Hagar’s latest Huntington Beach eatery comes on the heels of restauranteur Alicia Cox’s SeaLegs at the Beach and Sahara Sandbar & Pizza, which reopened in time for the summer season.

Find it: 21351 Pacific Coast Hwy, Huntington Beach; across from the Waterfront Beach Resort and next to Waterfront Adventures

​ Orange County Register 

OC man who organized ‘fighters’ for Jan. 6 riot gets home detention and probation

• May 3, 2024

A Ladera Ranch entrepreneur who teamed up with a former Orange County police chief and four Inland Empire-based members of an extremist group to travel to the U.S. Capitol during the Jan. 6 insurrection was sentenced Friday, May 3 to three years of probation, including six months of home detention.

Russell Taylor previously accepted a plea deal in which he admitted to conspiring to obstruct an official proceeding and testified against Alan Hostetter, a former La Habra police chief-turned yoga instructor and conservative activist who became the most high-profile person with Orange County ties to be convicted for taking part in the overrunning of the U.S. Capitol.

Federal prosecutors had sought a much harsher four-year, four-month prison sentence for Taylor. They described him as a leader among those protesting the 2020 election results in the run-up to Jan. 6.

“The court has aptly explained that ‘(i)n any angry mob, there are leaders and there are followers,’” prosecutors wrote in a trial brief. “On January 6 — and just as importantly, in the weeks leading up to January 6 — Taylor was a leader.”

But the government also acknowledged that Taylor’s assistance to prosecutors was significant, particularly as a trial witness against Hostetter. That cooperation ultimately led U.S. District Judge Royce C. Lamberth to hand down the lighter sentence requested by the defense.

Taylor’s attorney, Dyke Huish, noted in his own sentencing memo that Taylor after his arrest took full, honest responsibility for his role during the Capitol riot, has cooperated extensively with the government and “has not been involved in any activities that further the false narratives presented by far too many people and organizations” regarding the Jan. 6 insurrection.

“Some defendants have continued to call January 6th a false flag, some go to trial and then later claim remorse, some have claimed to accept responsibility only to turn back to their vomit after they were stanched and some have truly accepted their proper part and a sought rehabilitation,” Huish wrote. “but scant few have done what Mr. Taylor has and maintained their remorseful actions for over 3 1/4 years.”

Prosecutors alleged that Taylor helped organize a group of “fighters” to travel to Washington D.C. on Jan. 6, when thousands of pro-Trump supporters breached Congress in a violent but failed attempt to prevent the certification of President Joe Biden’s electoral victory.

Taylor and Hostetter gained public attention for organizing local anti-mask rallies in the midst of the pandemic. The two men — who had deep ties to Orange County’s conservative protest circles — then turned their attention to Trump’s disproven claims of the 2020 election being stolen due to voter fraud.

Spurred by a tweet in which Trump wrote “Big protest in D.C. on January 6th. Be there, will be wild!,” Taylor and Hostetter decided to travel to the Capitol. Taylor, in chat messages leading up to Jan. 6, wrote about organizing “a group of fighters to have each other’s backs and ensure that no one will trample our rights,” adding that “I personally want to be on the front steps and be one of the first ones to breach the doors!” at the Capitol.

The day before the Capitol breach, Taylor told a pro-Trump crowd during a speech in front of the U.S. Supreme Court that “We will fight and we will bleed before we allow our freedom to be taken from us.” Later that day, he posted a photo captioned, “Now getting ready for tomorrow,” in which a variety of “gear” was displayed on a bed, including two hatchets, a stun baton and a knife.

Outfitted with a black plate-carrier vest with a knife in the pocket and a backpack containing a hatchet and stun baton, Taylor joined Hostetter and the crowd that marched from a Trump speech down Pennsylvania Avenue and past police barricades and a line of officers that was attempting to block entry into a restricted part of the Capitol grounds.

Prosecutors described Taylor as among the initial group of rioters who clashed with officers. At one point he paused during the chaos to film a selfie video in which he shouted, “Move forward Americans!” to the rioters. Hours after the breach of the Capitol, Taylor posted a chat message saying, “I was pushing through traitors all day. WE STORMED THE CAPITOL! Freedom was fully demonstrated today!”

Asked by someone else what would happen next, Taylor replied “Insurrection!”

Hostetter — who acted as his own attorney and publicly turned on Taylor and other former allies after his arrest — blamed Taylor for their shared legal peril, claiming Taylor was “the one primarily engaged in making extreme comments and taking extreme actions at the U.S. Capitol.”

See also: List: Southern California residents accused or convicted in the Capitol insurrection

Huish, Taylor’s attorney, told the judge that Taylor was not a politically active man prior to the Covid-19 outbreak, and had no real involvement in protests prior to the pandemic restrictions implemented by California leaders. He met Hostetter at “beach church” meetings where such restrictions were often discussed. Since returning from Jan. 6, Taylor has distanced himself from Hostetter and from political activism, the defense attorney added.

“It would be unfair to say that all his political beliefs have shifted, they have not,” Huish wrote. “He still has a conservative based conviction of the “Shining City on the Hill” view of America. But he does not believe that one should cross the lines that were crossed on January 6th. This type of action runs the risk of dimming the light, even for a moment, on what is still the greatest beacon of hope in human history.”

Hostetter was convicted for his role in the Jan. 6 insurrection and was sentenced last year to 11 years and three months in federal prison.

The four Inland Empire Three Percenters militia members who were charged alongside Taylor and Hostetter were also convicted, and sentenced to shorter stints behind bars.

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​ Orange County Register 

Peloton CEO steps down as company cuts 15% of staff

• May 2, 2024

By Michelle Chapman | The Associated Press

Peloton is cutting about 400 jobs worldwide as part of a restructuring effort and its CEO Barry McCarthy is stepping down after two years as the company continues to work on turning around its business.

Shares slid 12%, to $2.81.

Peloton has been working on a significant rebranding since last year, shifting its identity as a seller of luxury exercise bikes and equipment to health technology for all.

The New York company experienced incredible sales growth during the height of the coronavirus pandemic. Its share price multiplied by more than five times in 2020 amid lockdowns that made its pricey bikes and treadmills popular among customers who pay a monthly fee to participate in interactive workouts.

But sales began to slow in 2021 as vaccines allowed people to roam more freely from their homes, including visits to the gym.

The company lost $1.26 billion in the fiscal year ended in June and an additional $350 million in the six months ended in December. Free cash flow, or the money left over after paying the costs of running the business, was a negative $470 million in fiscal 2023.

The losses continue. Peloton reported Thursday that for the third quarter it lost $167.3 million, or 45 cents per share, While that’s better than the loss of $275.9 million, or 79 cents per share, that it reported a year earlier, the performance fell short of the loss of 39 cents per share that analysts polled by Zacks Investment Research expected. Revenue totaled $717.7 million, below Wall Street’s estimate of $719.9 million.

It lowered its full-year revenue guidance by $25 million to a range of $2.675 billion to $2.7 billion, a dip from last year’s $2.8 billion in revenue.

Peloton Interactive Inc. said Thursday that the job reductions amount to approximately 15% of its global headcount. The restructuring efforts, which are expected to lower its annual run-rate expenses by more than $200 million by fiscal 2025’s end, also include continuing to close retail showrooms.

The job cuts are just the latest round for the company, which announced in October 2022 that it was cutting about 500 jobs on top of the nearly 800 layoffs it made in August of that year.

McCarthy, who is also stepping down from his president and board member posts, will remain with Peloton as a strategic adviser through the end of the year.

McCarthy had taken over the CEO post from founder John Foley to right a business that had suffered from numerous stumbles, from marketing missteps to recalls. During his tenure, he made a hard push to shift Peloton’s focus from high-priced hardware, to software and a fee-based app.

In a note sent to Peloton’s team this morning, McCarthy said that the newly announced job cuts were a moment of “dealing with the world as it is and not as we want it to be.”

“Hard as the decision has been to make additional headcount cuts, Peloton simply had no other way to bring its spending in line with its revenue,” he wrote.

Peloton said that Chairperson Karen Boone and director Chris Bruzzo will serve as interim co-CEOs while a search is conducted for its next CEO. Board member Jay Hoag will become the new chairperson.

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​ Orange County Register 

IRS addressing wide disparity in audit rates between Black taxpayers, other filers

• May 2, 2024

By Fatima Hussein | The Associated Press

The IRS said Thursday that it has taken steps to address a wide disparity in audit rates between Black taxpayers and others filers, and is more closely examining the returns of larger numbers of wealthy people and major companies.

“We are overhauling compliance efforts to advance our commitment to fair, equitable, and effective tax administration and hold ourselves accountable to taxpayers we serve,” according to an annual update from the agency.

A study from January 2023 involving university researchers and the Treasury Department found that IRS data-driven algorithms selected Black taxpayers for auditing at up to 4.7 times the rate of non-Black taxpayers. The study said the IRS disproportionately audited people who claim the Earned Income Tax Credit, which is aimed at low- to moderate-income workers and families: While Black taxpayers accounted for 21% of the claims for that break, they were the focus of 43% of the audits concerning the credit.

“We have taken swift initial action to dramatically reduce the number of those audits. We have also made changes to the selection criteria for those audits,” IRS Commissioner Daniel Werfel said.

Werfel, who was sworn in a little more than a year ago, has testified before Congress about the issue and last September he wrote to the Senate Finance Committee that the IRS would make changes.

The discriminatory audits, he told reporters, “degrade trust in our tax system.”

Werfel and the IRS have tried over the past year to show how money from the Inflation Reduction Act, President Joe Biden’s big climate, health and tax law, has helped to modernize the agency and improve taxpayer services, and that people making less than $400,000 per year would not be subject to more audits due to the new funding.

Noting the promise to keep audit rates for people making $400,000 per year and less at 2018 levels, he said on Thursday that “we haven’t in any way exceeded that rate.”

He added: “There is no new wave of audits coming for middle and low income” taxpayers — “that is not in our plans in any way shape or form.”

The IRS is focusing the next year on using the funding boost to conduct higher rates of audits on suspected wealthy tax cheats after having collected hundreds of millions of back taxes this year.

Ensuring that people pay their taxes is one of the tax collection agency’s biggest challenges. The audit rate of millionaires fell by more than 70% from 2010 to 2019 and the rate on large corporations dropped by more than 50%.

The IRS plans to raise audit rates on companies with assets above $250 million to 22.6% in 2026, from an 8.8% rate in the tax year 2019. It also plans to increase audit rates by tenfold on large complex partnerships with assets over $10 million.

“While the IRS has accomplished a lot so far with IRA funding,” he said, “we need to do much more to make improvements and transform the IRS for the benefit of taxpayers.”

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​ Orange County Register 

Irvine-based Rivian cutting more jobs with woes mounting for EV market

• May 2, 2024

By Ed Ludlow and Isis Almeida | Bloomberg

Irvine-based Rivian Automotive will cut an another 1% of its workforce, the second round of layoffs this year as the electric vehicle industry grapples with flagging consumer demand.

“We continue to work to right-size the business and ensure alignment to our priorities,” the company said in an emailed statement. “This was a difficult decision, but a necessary one to support our goal to be gross margin positive by the end of the year.”

The move comes about two months after Rivian slashed 10% of its salaried staff as high interest rates and economic headwinds compounded the company’s ongoing challenges with scaling production. The prior round of cuts focused on product teams and those working on its commercial EV business, while the latest move will mostly affect support and back-office workers.

Also see: Rivian beats EV production estimates with shipments rebounding

Rivian had 16,790 workers as of Dec. 31, suggesting the latest cuts could amount to 150 or more jobs.

The company also said Thursday that it will receive incentives valued at $827 million from Illinois to expand its electric-vehicle plant in the state after the company halted work on a separate facility in Georgia.

The 30-year package is mostly tax benefits under the Reimagining Energy and Vehicles in Illinois program, according to a statement Thursday from the governor’s office. Rivian is set to receive $75 million in capital funding under a separate state initiative. The automaker also announced the state package in a separate release.

The incentives underscore the financial benefits for the manufacturer in building out an existing production site rather than building a new one. Rivian said in March that it would save $2.25 billion by pausing the Georgia factory and shifting planned production of its forthcoming lower-cost R2 vehicle to Illinois.

The company is looking to fortify its finances in the face of waning consumer demand, rising competition and production challenges.

Rivian plans to invest $1.5 billion to expand capacity at its plant in Normal, Illinois, to 215,000 units annually from 150,000. The project is expected to create more than 550 jobs over the next five years, according to the statement.

The decision represents another win for J.B. Pritzker after the billionaire governor lured a Gotion High-tech Co.’s $2 billion gigafactory to Illinois. The state, which recently renewed a $400 million fund to draw companies, is trying to position itself as a hub for new technologies from quantum computing to life sciences and EV manufacturing.

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Illinois said it will also fund a new manufacturing training academy co-located at the new facility in Normal, which will offer an apprenticeship program for high schools.

Rivian’s focus on the existing plant is not without challenges. Expansion will take time as it builds new assembly lines, and labor availability is a significant consideration. The company, which makes a pair of consumer models and an electric delivery van, employs about 8,000 people at the site.

​ Orange County Register 

LA developer accused of misappropriating millions in homeless housing funds files for bankruptcy

• May 2, 2024

Embattled Los Angeles developer Shangri-La Industries has filed for Chapter 11 bankruptcy protection on state-funded motel conversion projects to house the homeless in Redlands, Thousand Oaks and two other California communities.

The court filing Monday, April 29, at the U.S. Bankruptcy Court in San Jose affects three conversion projects — at the former Good Nite Inn in Redlands, the former Quality Inn & Suites in Thousand Oaks and the former Sanborn Inn in Salinas — funded under California’s Homekey program.

The fourth, at a former Motel 6 in San Ysidro, was funded under the state Community Care Expansion program, said Brian Sun, the attorney representing Shangri-La. That program funds the acquisition, construction and/or rehabilitation of adult and senior care facilities to serve people who receive Social Security and other government aid and are at risk of or experiencing homelessness.

Shangri-La had upgraded or was planning to upgrade each of the motels to house homeless individuals.

Officials respond

Although aware of Shangri-La’s bankruptcy filing, city officials could not immediately say how it might impact their respective Homekey projects.

“We are aware of the bankruptcy and the city will be meeting with our attorneys to discuss next steps. We have no further comment,” Redlands spokesperson Carl Baker said in an email on Wednesday.

Alexandra South, a spokesperson for Thousand Oaks, said in an email that speculating on the impact of Shangri-La’s filing would be premature.

“As these matters are in litigation, the city has no further comment regarding the status of the various matters,” South said.

Salinas Mayor Kimbley Craig said in an email that the city is considering its options regarding the fate of the project at the former Sanborn Inn. As for two other motels in the city Shangri-La also was contracted to upgrade — the former Salinas Inn and the former Good Nite Inn — they were recently purchased by lending companies at recent foreclosure sales, she said.

“The city is working with those lenders, as well as the state, toward completion of those projects for use as permanent supportive housing,” Craig said.

Problems surface in 2023

Gov. Gavin Newsom launched Project Homekey in June 2020 to protect unhoused individuals from the threat of the coronavirus pandemic. The state has allocated more than $3 billion to cities and counties to purchase motels, hotels, vacant apartment buildings and other properties to provide permanent housing for the homeless.

Problems began surfacing for Shangri-La last year, when a Southern California News Group investigation revealed that lenders and contractors were complaining about not being paid for completed work at the former Good Nite Inn in Redlands, now Step Up in Redlands, and the former All Star Lodge in San Bernardino, now Step Up in San Bernardino.

It later was revealed that dozens of mechanic’s liens totaling millions of dollars have been filed over the past year at recorders’ offices in San Bernardino, Ventura and Monterey counties, the site of other Homekey projects in which Shangri-La was involved.

At the San Bernardino County Recorder’s Office alone, more than $2 million in liens had been filed in 2023 by contractors and suppliers not paid for work completed at the Redlands and San Bernardino motels.

Shangri-La’s failure to pay resulted in more than a dozen lawsuits against the developer by contractors and lenders.

Agreement terminated

On April 16, the Redlands City Council terminated its Homekey agreement with Shangri-La amid allegations by the state Department of Housing and Community Development that the developer misappropriated $114 million in Homekey funds.

Redlands Assistant City Manager Chris Boatman told the council that the city would continue to provide $510,000 annually as an operating subsidy to house the homeless at Step Up in Redlands, which he said is now housing 132 formerly homeless residents.

Boatman said the city’s termination of its agreement with Shangri-La now gives the city full control to ensure that money is spent appropriately and toward operational expenses.

State lawsuit

In a 321-page lawsuit filed in January in Los Angeles Superior Court, the state Housing and Community Development Department alleged Shangri-La breached its obligations under terms of its agreements with the Homekey program.

After obtaining state funding, Shangri-La, according to the state’s lawsuit, granted and recorded deeds of trust to secure loans from third-party lenders without first obtaining the state’s written authorization, as required under the Homekey agreements. Shangri-La then defaulted on the loans, causing the lenders to begin the foreclosure process.

Sun said the bankruptcy filings are part of the developer’s plan to restructure and finish its commitments on the various Homekey projects.

“We will issue a statement soon after some preliminary restructuring and financing components are put into place,” Sun said on Wednesday, May 1.

Buying time

Adam Stein-Sapir, a bankruptcy expert at the New York City-based Pioneer Funding Group, said the bankruptcy will pause any state court litigation and collections actions by creditors and/or lenders, which will give Shangri-La breathing room to get its financial affairs in order.

“They will try to recover as much of the stolen funds as possible. If they are very successful, they may be able to cure defaults and emerge from bankruptcy in a timely fashion,” Stein-Sapir said. “However, if there really is a multimillion-dollar hole in their balance sheet, they may have no choice but to sell the properties to repay the lenders.”

He said the developer’s filing was essentially “bare bones” and included no financial information. Therefore, Shangri-La is required to file supplementary financial information within 45 days from the day of the filing.

“Even though they are in bankruptcy, they will do their best to operate the facilities and complete construction on the unfinished sites,” Stein-Sapir said. “However, this will likely require the consent of their lenders, whoever they are. At the very least, they should be able to continue operating the in-use facilities.”

Cody Holmes, former chief financial officer for Los Angeles developer Shangri-La Industries, and his ex-girlfriend, Madeline Witt, have been sued by Shangri-La, which alleges Holmes embezzled millions of dollars from the company, some of which was earmarked for state-funded motel conversion projects to house the homeless, and used the money to finance a luxurious lifestyle for himself and Witt. (Photo courtesy of Brian A. Sun)

Former CFO under fire

Shangri-La has accused its former chief financial officer, Cody Holmes, of embezzling millions of dollars in company money to live a lavish lifestyle, which put the developer’s state-funded projects in jeopardy, including those listed in its Chapter 11 filing.

In a lawsuit filed against Holmes and his ex-girlfriend, Madeline Witt, in February seeking $40 million in damages, Shangri-La alleged Holmes engaged in bank fraud and check kiting in 2022 and 2023 with Shangri-La’s lenders, banks and brokers. He allegedly transferred vast sums of company cash and property to bank accounts and shell companies he controlled and to Witt, according to the lawsuit.

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Holmes used the money to host extravagant parties, cover $46,000 a month in rent at a leased home in Beverly Hills, travel regularly on private jets, lease exotic cars — including a 2021 Bentley Bentayga and a Ferrari Portofino — and even $12,000 to cover a student loan payment, the lawsuit alleges.

He also purchased high-dollar luxury items for himself and Witt, including two Birken handbags valued at nearly $128,000, Chanel and Louis Vuitton handbags valued at more than $14,000, a $127,000 Riviera diamond necklace, a $35,000 Audemars Piguet diamond watch, and 20 VIP passes for the 2023 Coachella Music and Arts Festival valued at more than $53,000, according to the suit.

“The duration, nature and amount of the fraud illustrate a stunning lack of financial controls at Shangri-La,” Stein-Sapir said.

In a statement Wednesday, Holmes’ Los Angeles attorney, Ramin Azadegan, said: “We will be addressing the baseless, defamatory claims made against Cody Holmes and Madeline Witt in court. The complaint filed by Shangri-La Industries CEO Andrew “Andy” Meyers is a desperate, dishonest attempt by Mr. Meyers to dodge responsibility for his company’s current legal challenges.”

​ Orange County Register