Judge Vacates SEC Fraud Judgment against Allen Park, San Bernardino and Stockton Woes and Being Thankful…

CURRENT EVENTS

SEC News this Week…

 Judge Vacates SEC’s Allen Park Fraud Judgments
(B Buyer, November 19, 2014)

As a follow up from the article a couple of weeks ago, this week a judge has vacated the fraud settlement order, which was signed just the day before.

Why?

 The judge said, “no mention is made in the complaint in this case …. of the role of financial advisors, underwriters, and law firms, etc.,.”

On Nov. 6, the SEC charged, in a first of its kind enforcement action, the Detroit suburb of Allen Park and two former officials – Mayor Gary Burtka, , and City Administrator Eric Waidelich, — with fraud tied to $31 million of 2009 & 2010 GO bonds to finance a movie studio which failed.

The judge further stated that “The court should not approve a consent judgment without full knowledge of all the relevant facts,” A hearing is scheduled for this week.

The SEC investigation was sparked by an Allen Park resident who said the city lost a lot of money and asked “How could it get past bond counsel? Why didn’t anyone take a closer look? If the [Burtka fine] is only $10,000, does that really stop future city officials?”

 More Bankruptcy News…

Bondholders Seen Bearing Brunt of San Bernardino Bankruptcy (BBuyer, November 20, 2014)

We may want to watch how the next California Bankruptcy plays out.  Based on current negotiations, it appears that bondholders will, again, fall far behind pension plans and employee unions in getting the best deal.

Of note is the recent interim agreement with CalPERS, which essentially makes the pension plan whole.

Karol Denniston, a partner at San Francisco-based Squire Patton Boggs. “Paying the pension obligations doesn’t bode well for the other parties in the case.” 

The feeling is that bondholders are “Wall Street” bad guys and pensions are “Main Street” good guys.  A couple of interesting editorial questions that keep coming to mind:  Many pension funds hold municipal bonds as part of their portfolio as do small businesses as part of their 401(k) plans.

Additionally, if bondholders continue to fall under the axe in municipal bankruptcies, how willing will they be to fund future infrastructure projects?

Attorneys and finance experts are already lining up – the expectation is that, unless the City walks away from the current CalPERs arrangement, there will be a “battle royale” with bond and pension fund insurers when it comes time for confirming the bankruptcy plan next May.

Franklin Appeals Stockton Bankruptcy Confirmation (B Buyer, November 14, 2014)

As a followup from the recent Stockton Hearings, Franklin Investments, the large creditor who stands to receive basically about a 1% payout on the 35 million in bonds it is holding, is appealing the City’s confirmation whereby the CalPERs system is largely untouched.

The judge calculates that, with payment of a secured debt, Franklin’s payout was closer to 12% on the dollar.  Stacey Coleman, a Franklin spokesman, said in a statement. “Many of those investors are individuals and retirees who rely on us to protect the value of their investments and provide retirement income.”

“The appeal raises important questions regarding the nature, extent and scope of a municipality’s ability to impose an adjustment of bond debt upon a dissenting creditor in a Chapter 9 proceeding, while at the same time leaving vastly-larger liabilities for unfunded pensions untouched and unadjusted,” Franklin’s attorneys argued.

OUT & ABOUT

It will be rather quiet “out and about” as you head into the holiday week.  As Issuers head to the wire for MCDC, they will continue to review their options – likely without further insights from the SEC.  The deadline is next Monday, December 1st.

On the market side, new deal volume is expected to be very light this week – likely under a billion dollars.  This tapering of offerings is normal for this time of year.

Conferences/Events for the rest of 2014:  No conferences or events in December 2014

Conferences in early 2015:

The Bond Buyer’s National Outlook 2015 Conference, January 27, 2015
Metropolitan Club, New York, NY

The Bond Buyer’s Texas Public Finance Conference, February 9-11, 2015
Omni Barton Creek Resort & Spa, Austin, TX

Plenty to be Thankful For…

As we prepare this week for Thanksgiving and the start of the Holiday Season, I wanted to take a little break from all the financial and compliance hustle that we’ve been dealing with this year…

2014 has been hectic with the MCDC and other increased scrutiny and enforcement actions by both the IRS and SEC.  However, even as we come down the MCDC Initiative wire this week, there is plenty to be thankful for.

As shared last week in our member e-mail, November 17th was a momentous day for my family.  Doug and I celebrated our 3oth wedding anniversary, surrounded by our beautiful daughters and friends.  We renewed our wedding vows on a lovely Bahamas cruise, spent quality time together connecting as a “grown up family” and met many new friends from all over the world…

It also allowed me time to reflect on everything that has been happening and what is truly important – as a person, as a professional and as a citizen of this great nation.

While in the Bahamas, I briefly experienced a differing view of culture and how people live.  The opulent riches of Atlantis and Paradise Island were situated literally a ship’s-length walkway to obvious poverty.

While we have been experiencing many financial struggles in our own country, it can be harder to see as we are more geographically dispersed – while the US provides well-funded social safety programs.

However, dark challenges still exist.   But there is light as well…if we take the time to see them…

In the middle of the challenges, I also experienced the immense sense of thankfulness and contentment in meeting many residents who, while they were not well off financially – were working hard, making a difference and very well connected with their community and families.

They were smiling and happy.  Money was obviously not the source of their happiness…

Interestingly enough, one of their officials had passed away and his funeral was the day we were in port.  We witnessed a small parade with an honor guard, a processional and most of the residents turned out to pay their respects and share how this official had impacted their lives.

On the ship, we met several families from all over the country.  I lost count of how many times we sang “happy birthday” – with celebrations ranging from 1 to turning 100.   Two other couples also celebrated anniversaries…one celebrating their 30th and another couple their 25th on the same day as ours.  There was much to be thankful for…

Just yesterday, I met a young woman who had lost her 3 year-old son to brain cancer a few weeks ago.  An amazingly scary yet inspiring story of courage and tenacity, they shared how brave their son Harlan was and what a joy he was in their lives for the short time they could spend with him.

This young couple is now committed to helping families who have children dealing with cancer – by making a difference and honoring their son.  Yes, they are grieving, but what really struck me was their thankfulness and sense of purpose.

Birth, death, milestones, experiencing adventures with those we love…and making a difference.

We get so busy dealing with “stuff” that sometimes (or even quite often) the small, but important things in life can be right under our noses and we completely miss them in our hustle to “get things done” or reach that next level of whatever we are so determined to achieve.

Is what we are trying to get worth more than what we are missing?  Don’t let that happen…

In closing, as you prepare for Thanksgiving this week, I hope you can take a little time to rest, enjoy time with loved ones and think about all of the blessings in your life.  Step away from the hustle.

Stop and take a breath – find out what is going on around you in the lives of your family and friends.  Share the big things in your life too – and what you are thankful for.

Over the last several months, we have been blessed to share resources and tools with you, research and help you overcome issues, and together, work toward making your bond compliance program stronger.

We thank you for placing your trust in us and allowing us the opportunity to help lighten your compliance workload.   It’s been harder work than we thought, but the rewards and satisfaction have been an amazing blessing for our entire team.  For that we thank you!

If you allow yourself the time, you can truly be blessed…by connecting, relating, sharing, caring, growing, overcoming, experiencing and being thankful for all that life has to offer…and achieving it.

Happy Thanksgiving from our families to yours!

We hope you enjoyed this week’s edition of the Monday Muni Minutes.  As always your comments are welcome…

To your compliance success,
Debbie

 

 

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P.S.  Next week, we will share the results of our survey and our next steps in compliance…stay tuned!

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