Sunday, December 02, 2007

Florida Fraud Files


Only in Florida would you find State government stupidly investing local school board money in high-risk mortgage derivatives, then coldy cheating the teachers when things go sour:
The state froze a $14 billion investment fund Thursday, leaving one Panhandle district searching for nearly $1 million to make good today on payroll for the county’s 220 teachers.
* * *
The fund began October with $27 billion in investments. By Thursday, it was down to $14 billion, including $3.5 billion in withdrawals made before 11 a.m.
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“We’ve got every dime of our cash in that pool,” said Hal Wilson, chief financial officer for Jefferson County schools. “What were they thinking?”

He is now short $850,000 for today’s payroll and spent Thursday afternoon alternately pleading with state officials for relief and negotiating with a local bank to cover the overdraft.

Wilson’s only other option: leave the small county’s 220 teachers and staff without money to pay their own bills.
Well, maybe there are other governments -- like Narvik, Norway. The New York Times helpfully explains Narvik is so "far north of Arctic circle" that the suns isn't rising at all there right now.

What those Norvik night-crawlers are thinking about is the Sunshine State -- for a very different reason than you might suppose:
Karen Margrethe Kuvaas says she has not been able to sleep well for days.

What is keeping her awake are the far-reaching ripple effects of the troubled housing market in sunny Florida, California and other parts of the United States.

Ms. Kuvaas is the mayor of Narvik, a remote seaport where the season’s perpetual gloom deepened even further in recent days after news that the town — along with three other Norwegian municipalities — had lost about $64 million, and potentially much more, in complex securities investments that went sour.

"I think about it every minute,” Ms. Kuvaas, 60, said in an interview, her manner polite but harried. “Because of this, we can’t focus on things that matter, like schools or care for the elderly."

Mayor Kuvaas adds, "We’re not especially stupid because we live so far in the north."

Now, just what is the mayor implying? Are we "especially stupid" because we don't live so far north? Well, if we won't pay our school teachers, maybe she has a point.

12-2 pm
Atrios over at Eschaton repeatedly refers to the growing Wall Street scandal involving mortgage derivatives as a "shitpile." Can you guess who laid that shitpile on Florida's doorstep?

Forbes is reporting former governor Jeb Bush had a large hand in gambling away Florida's education money:
A government money market debacle unfolding in Florida is raising questions about former governor and presidential brother Jeb Bush's possible involvement in the mess.
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In the past few days, municipalities have withdrawn roughly $9 billion, nearly a third of the $28 billion fund (which is similar to a money market fund) controlled by the Florida's State Board of Administration (SBA). The run on the fund was triggered by worries that a percentage of the portfolio contained debt that had defaulted.

A majority of this paper was sold to SBA by Lehman Brothers. Bush, as the state's top elected official, served on a three-member board that oversaw the SBA until he retired as governor in January.

Here's the rub: After trading away all that money in exchange for Lehman Brothers' bad paper, Bush was rewarded with a "consultant contract" with Lehman Brothers!

In August, Bush was hired as a consultant to the bank. Lehman spokesperson Kerrie Cohen, speaking on behalf of Bush, said they had no comment and would not say when the bank had sold Florida the paper. SBA did not return calls.
If you're a large brokerage like Lehman Bros., normally you wouldn't even think of hiring some lightly educated moron who just lost several hundred million dollars buying bad paper. You wouldn't, that is, unless you sort of, kind of, maybe owed him for something. Something big he did for you.

Something like relieving you of all that bad paper and sticking it to someone else.

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