Tag Archives: bond

History of Felons in Office Means No Bond for New Trustee

Felonies and criminal charges from past Knox County trustees are preventing the interim trustee from obtaining the bonding she needs to fully operate, according to the News Sentinel.
The Hartford, the bonding company for the Knox County Trustee’s Office, notified the county that it wouldn’t bond Kristin Phillips, the county’s acting trustee, until the county provided more information on the position.
“That causes great consternation,” Tony Norman, chairman of the Knox County Commission, said. “That affects their daily practices there.”
The lack of the $18.5 million bond for the seat keeps the trustee from investing the county’s tax money and similar jobs. The bond, required for the officeholder, is intended to protect the public from failure to perform duty or malfeasance.
…Phillips became acting trustee after the resignation of the previous officeholder, John J. Duncan III. Duncan pleaded guilty on July 2 to a low-level felony for paying himself and staffers more than $18,000 in bonuses he knew they didn’t earn.
Before him, Mike Lowe, who was trustee from 1994 until being term-limited by the state Supreme Court in 2007, surrendered to authorities in April 2012 following grand jury indictments on multiple counts of felony theft of more than $60,000. The grand jury indicted four others who worked in the county’s tax collection department. Lowe’s trial is set for 2014.

Haslam Optimistic About State’s Bond Rating

NASHVILLE, Tenn. (AP) — Gov. Bill Haslam said meetings with three credit agencies this week went well and he is optimistic about the outcomes.
Tennessee currently has triple-A credit ratings from Moody’s Investors Service and Fitch Inc. and a double-A-plus rating from Standard and Poor’s.
Haslam said in a conference call Tuesday from New York City that credit agency officials were impressed by the state’s low per-capita debt and revenue that has exceeded expectations.
He said officials wanted to know how threatened federal cuts would affect the state.
Department of Finance and Administration Commissioner Mark Emkes said the state could lose about $40 million for education and more in indirect federal spending.
However, Haslam said that Tennessee officials feel the state is in a good position to weather cuts compared to other states.

TN Gets Part of $34 Million Bond Derivatives Settlement

News release from state attorney general’s office:
Tennessee Attorney General Bob Cooper and 26 other state attorneys general announced a $34.25 million agreement with GE Funding Capital Market Services, Inc. (“GEFCMS”) as part of an ongoing nationwide investigation of alleged anticompetitive and fraudulent conduct in the municipal bond derivatives industry.
As part of the multistate agreement, GEFCMS has agreed to pay $30 million in restitution to affected state agencies, municipalities, school districts and not-for-profit entities nationwide that entered into municipal derivative contracts with GEFCMS between 1999 and 2005. In addition, GEFCMS agreed to pay a $1.25 million civil penalty and $3 million in fees and costs of the investigation to the participating states.
Tennessee entities will receive approximately $742,776. Eligible Tennessee entities include the Memphis Shelby County Airport Authority, Metropolitan Health and Educational Facilities Board and the Knox County Health Education & Housing Facilities Board.
Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest proceeds of bond sales until the funds are needed. They may also be used to avoid fluctuating interest rates. In April 2008, the multistate working group began investigating allegations that some large financial institutions, including national banks and insurance companies, and brokers, engaged in various schemes to rig bids and commit other deceptive, unfair and fraudulent conduct in the municipal bond derivatives market.
The states’ investigation developed evidence that certain traders at GE Funding, in concert with certain brokers, engaged in conduct that allowed the broker to determine in advance that GE Funding would win a bid for a guaranteed investment contract by allowing GE Funding to receive a “last look” and arrange for other financial institutions to submit purposely non-winning courtesy bids. On many occasions, due to the “last look”, GE Funding was able to lower its bid to the issuer and still win the transaction.
“This is an ongoing effort,” Attorney General Cooper said. “We will continue working to ensure there are no financial entities benefiting at the expense of taxpayers through anticompetitive activity. We appreciate the cooperation GEFCMS has demonstrated in this ongoing matter.”
The multistate task force agreement is part of a coordinated global $70 million agreement that GEFCMS entered into today. The financial institution also reached agreement with the U.S. Department of Justice’s Antitrust Division, the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Internal Revenue Service
UPDATE: Josh Flory has more on the Knoxville angle.

AG: TN to Get $$ from ‘Municipal Bond Derivative’ Deal

News release from state attorney generals office:
Tennessee Attorney General Bob Cooper and 26 other attorneys general announced a $58.75 million agreement with Wachovia Bank N.A. and Wells Fargo Bank, N.A. as part of an ongoing nationwide investigation of alleged anticompetitive and fraudulent conduct in the municipal bond derivatives industry.
As part of the multistate agreement, Wachovia has agreed to pay $54.5 million in restitution to affected state agencies, municipalities, school districts and not-for-profit entities nationwide that entered into municipal derivative contracts with Wachovia between 1998 and 2004. In addition, Wachovia agreed to pay a $1.25 million civil penalty and $3 million in fees and costs of the investigation to the participating states. It has not yet been determined how much Tennessee and the other states will receive from the agreement.
Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest proceeds of bond sales until the funds are needed. They may also be used to avoid fluctuating interest rates. In April 2008, the multistate working group began investigating allegations that some large financial institutions, including national banks and insurance companies, and brokers, engaged in various schemes to rig bids and commit other deceptive, unfair and fraudulent conduct in the municipal bond derivatives market.
The ongoing investigation revealed some Wachovia employees colluded with other financial institutions and brokers with whom they had working relationships to secure an unfair advantage over other firms. The defendants are alleged to have rigged bids by submitting non-competitive courtesy bids and submitting fraudulent certifications of compliance to government agencies in addition to other violations of U.S. Treasury regulations.
“We are not finished,” Attorney General Cooper said. “We will continue working to ensure there are no financial institutions or brokers benefiting at the expense of taxpayers through anticompetitive activity. We appreciate the cooperation Wachovia has demonstrated in this ongoing matter.”
The multistate task force agreement is part of a coordinated global $148 million agreement that Wachovia entered into today. The financial institution also reached agreement with the U.S. Department of Justice’s Antitrust Division, the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Internal Revenue Service.

Democratic Chair Bashes ‘Bond Rating Dog and Pony Show’

News release from Tennessee Democratic Party:
NASHVILLE — State Democratic Party Chairman Chip Forrester urged Tennessee’s top Republicans to consider a jobs plan to keep the state’s fiscal house in order.
“The surest way to strengthen our state’s fiscal house is to put 300,000 Tennesseans back to work. If Ron Ramsey and Governor Bill Haslam put half the effort they expend wooing corporate campaign donations into a common sense jobs plan, Tennessee would get there a lot faster.”
Forrester pressed Gov. Bill Haslam and Senate Speaker Ron Ramsey for action on the state’s job crisis in statement Wednesday following the Republicans’ meeting with Wall Street bond rating agencies. At 9.8 percent, Tennessee’s unemployment rate remains well beyond the national average.
“This bond rating dog and pony show for Wall Street executives looks obnoxious to the 300,000 Tennesseans who are struggling to find work and provide for their families,” Forrester said. “They’d like to see a day when the numbers we brag about are Tennessee’s low unemployment rate and high economic output.
“There’s no doubt Wall Street was impressed with Governor Haslam’s contingency plan to fire 5,000 workers and eliminate crucial services that keep families healthy, children educated and the disabled properly cared for. However, Tennesseans who’ve seen this extreme plan are not so enthusiastic,” Chip Forrester said. “Haslam’s slash-and-burn budget would send our state into an even more severe economic tailspin and prompt a societal crisis that would diminish the quality of life for every Tennessean.”
This summer Gov. Haslam instructed state department heads to plan for 30 percent budget cuts to be enacted if Tennessee receives less federal funding.

McCormick Worried About State Credit Rating

Tennessee’s governor and other officials are due to travel to New York City in September for the annual review of state creditworthiness by bond rating agencies. Joe White reports that It’s a visit usually called “,” but this year is anything but.
House Republican Leader Gerald McCormick says the annual financial review by Fitch, Standard and Poor’s and Moody’s bond rating agencies is under a cloud because of the recent downgrade of the federal government’s fiscal health by S&P.
“The state of Tennessee depends on the federal government for over 40 percent of our budget every year. So if the federal government becomes less likely to pay their bills, then naturally the bond rating agencies are going to worry about the states that depend on federal matching funds.”
State Finance Commissioner Mark Emkes and others went to New York last week in a pre-emptive strike, to pitch for the state’s continued credit-worthiness. The state’s “routine” review in September is the next step in trying to shore up Tennessee’s credit rating.
…McCormick said he hopes that the state delegation to New York will include at least one state Senator and one member of the House.
He says a downgrade of the state’s credit rating wouldn’t cripple the state, which has little long-range debt, but it would make it more difficult to issue some bonds
But that pales in comparison to the potential effect on cities and counties.
“The cities and especially the counties, really are, technically, a part of state government, and … if the bond ratings agencies are concerned about the federal government, and the state government, paying their bills, certainly they’re going to be worried about the smaller governments that don’t have…the same big tax base.”
There’s a historical precedent for these concerns, McCormick says.
“You know, we haven’t had this situation since the 1920s and ’30s, and you had a lot of defaults in those eras, and it was a lot of smaller counties that did that. They had these old drainage bonds that they issued, to have drainage ditches. And the economy went south and they literally couldn’t pay their bills, and they defaulted on those bonds….
There were a lot of years that, particularly the southern communities had a hard time getting credit through Wall Street because of those bad times. And we certainly want to avoid a repeat of that. But the smaller communities with the small tax bases are probably in more danger than anyone of having credit restricted and … have an inability to do any infrastructure work.”