In January 2004, the Illinois pension obligation program was $36 billion in the hole, the most indebted state pension program in the country. So Blago decided to refinance, taking advantage of the era's superlow interest rates to float $10 billion in "exotic" new bonds in the country's biggest pension bond offering on record. Bond Buyer named it the Midwest Deal of the Year at the time -- not just for its "complex" pricing but its use of derivatives, which had just been legalized by the state legislature the year earlier. It was the start of a new trend, the trade publication noted:
Since Gov. Rod Blagojevich took office in January 2003 faced with a nearly $5 billion budget deficit, his finance team - which includes former financial advisory professional John Filan and quantitative analyst and investment banker David Abel - has turned to more sophisticated techniques to manage state finances. Supporters have called them creative, while critics have labeled them dangerous.The deal alone netted investment banks $35 million in fees, including $8 million for the lead underwriter Bear Stearns, whose lead Chicago banker Nicholas Hurtgen in turn delivered a $890,000 consulting fee to a firm called Springfield Consultants run by lobbyist Robert Kjellander.
The fee caused much furor when Bear Stearns disclosed it in an SEC filing, especially after a hasty probe revealed the firm could not produce any evidence that Kjellander had done anything to earn the fee. The probe swung into gear after another Bear Stearns banker filed an anonymous whistleblower lawsuit alleging that Hurtgen and Kjellander -- who were, incidentally, both Republicans -- were at the center of a bipartisan pay-to-play scam that touched billions of dollars in bond offerings. According to yesterday's indictment, some of that $809,009 made its way back to Tony Rezko, who in turn split the bounty with three friends -- one of whom was Blago, according to yesterday's indictment, which refers to Kjellander as a "lobbyist" according to the Chicago Tribune:
Money for nothing was a hallmark of these black box deals and they only mention some of the disasters, such as Bill Richardson and CDR, as well as the damage done to Philadelphia. Also no mention of Bloomberg's story Broken Promises or anything on the ensuing collapse of Jefferson County Alabama. Of course since the prosecutor down there is Alice Martin, that will certainly add a wrinkle to any expose of corruption. In regards to the Alabama incident alone here are a few facts:
Mayor Larry Langford is:
- Is facing 101 counts on corruption and bribery charges
- The man who bankrupted Jefferson County Alabama
- Helped increase fees on middle and working class people
- The man who did it for designer suits and rolex watches.
- Mayor Langford's Culture of Corruption.
- Who helped J.P Morgan Chase and other Financial Groups overcharge by 100 million in fees Jefferson County.
- The same Mayor who has saddled his constituents with a billion dollar debt.
At the end of the day this story might be the ultimate democrat culture of corruption and the convergance between all of these forces could easily blow up in the left's face. As for two Illinois republicans involved, I wouldn't be surpised if they even found a few more, but this is a democrat disaster plain and simple. Of course things really might hit the fan if they grasped Obama's payoff to the banks. By the way here is a partial list of states and cities burnt by the muni-bond scandal:
- New Mexico
- Pennsylvania
- Philadelphia
- Florida
- Atlanta
- Arizona
- Birmingham, AL. (Jefferson County)
- New Jersey
- Arkansas
- North Dakota
- California
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