Friday, June 27, 2014

It's Rhode Island Who gives a crap about $57 million?

            So this story is typical of politicians and the media in Rhode Island...I have accused  Mayor Taveras  and city of Providence  several times of deceitful and illegal accounting practices  starting in 2013. I did this in print.They (providence and Taveras) never responded . Then in January this year the city auditor Segal issues an audit and warns Providence they can no longer" asset pump" and they should no longer include $57 million in their Stated Assets, because it isn't really there. So what does Providence and the Media do ? They  continue to recite the plan  assets as Providence has falsely done for years and willfully  ignored the Auditors warning and my accusations. I wrote several pieces about this purposeful  overstatement of assets of $ 57 million in the pension plan that will now  just go poof in a few weeks because it was a  really a lie/trick. It was completely  dishonest and highly unusual which is how i caught it, but where is the Rhode Island Media?.. ....crickets.. 
        Just two days ago WPRI used those same false figures about pension liabilities and UAAL . No doubt Projo will also continue to quote the phony numbers . Who gives a shit about lying about $57 million in the Providence Pension Plan . Right?  Well guess what happened this week when I threatened to expose the new bond offering by Providence as Misleading to the SEC.

      Suddenly an addendum disclosing the misstatement of assets, $57 million , is added to the bond offering,
.    type :providence in search  and download

No news stories , no Rick Perry "Whoops" , no nothing.They  just quietly admit the lie because they had to. This is the behavior that makes Rhode Island suck. It s why we are 50 th. No one is accountable. The game  plan for when someone exposes corruption is for the wrongdoer to roll up in a ball and say nothing. The media will go away in a few hours anyway and our medias  investigative reporting is so bad they wouldn't know an Inside Trade if it hit them in the face. I am watching real time a candidate for Governor in Rhode Island ,Angel Taveras  lie for years about his pension plan and then ignore accusations of wrongdoing and then ignore their own auditor. I mean how sleazy can you get? now after we all know he has slipped this in a bond document the main stream media will ignore it. The pension plan will be missing $57 million dollars . The liability and ARC will go up. and he wont be mayor anymore because the voters will move him on to Governor or he'll just disappear for a bit. This behavior and the pattern of deception from Providence is outrageous. Every pensioner and taxpayer should be asking WTF? but not here in last place Providence and  in last place Rhode Island where lowering the bar and still failing is a sport.

Tuesday, June 24, 2014

Is it really fair and just?

                                                              Morality Rhode Island Style

      The following events are true.

In early June Gordon Fox former Speaker who's Statehouse Offices were raided in March voted to pay bankrupt curt Schillings 38 Studios Bonds even though they are insured because of a "moral "obligation.Taxpayers were hit with $12.5 million.The campaign to pay was orchestrated by Governor Chafee who lied about forming a "forensic investigation". When his director testified before the House Finance Committee he was asked what happen to the "forensic investigation" into 38 studios promised in 2012. He  simply said "it just didnt happen". That director, Richard Licht , was made a supreme court Justice days later. Gordon  Fox resigned as speaker in March  yet voted last week  and is under investigation by multiple authorities but strangely not yet charged. Just weeks after that  on June 20 ,2014 Representatives from  Central Falls introduced and passed the following bill that obligates State taxpayers to bail out  Central Falls public workers and guarantee no less than 75% of what they think they are due.

Here is the bill

(4) It is fair and just that the state appropriate sufficient funds to the city to supplement  the city's funding of the pension benefits to the Central Falls retirees to ensure that the Central  Falls retirees continue to receive seventy-five percent (75%) of the base pension benefit, after  taking into account all applicable cost-of-living adjustments, for their lifetime and to the extent  applicable, for the life of their beneficiaries,

               This is what just passed in Rhode Island late session last day June 20 2014. Bill # H 7776a . Sponsored by well known labor leaders. Here is the plain language explanation:

                                              A N     A C T
                              RELATING TO TOWNS AND CITIES -                                                                       RETIREMENT OF MUNICIPAL EMPLOYEES IN CENTRAL FALLS

This act would provide for the state to appropriate sufficient funds to the city of Central  Falls for payment to Central Falls' city retirees so that those retirees would continue to receive seventy-five percent (75%) of their base pension benefit, after taking into account all applicable cost-of-living adjustments, as of July 31, 2011, for their lifetime, and to the extent applicable, for the lives of their beneficiaries.
This act would take effect upon passage.
======== LC004900/SUB A/2 ========


   This act sets a precedent and a line in the sand as to what is "appropriate and just" to be taken from Rhode Island State Taxpayers and then  redistributed to public employees. Thus, it has now been declared and passed that  in Rhode Island  75% of liabilities owed to public employees in municipal pension and OPEB . , shall be guaranteed  & if necessary paid by State Taxpayers. Meanwhile  GASB 68 goes into effect next week. Under GASB 68  neighboring Providence Rhode Island has a pension liability exceeding $2.1 billion with just $300 million in assets. This " insane " act  orchestrated by Mattiello ,says that the public employees are entitled to a minimum of 75% of pension liability as fair and just and the State will by law  appropriate the amount to keep it at 75%. This 75% threshold means  that state taxpayers  are guaranteeing or will be taxed $1.3 to $1.5 billion and that will go to Providence public employees. The resulting chaos is that People in Tiverton and Burrillville will be paying for Providence firemen retirements. Johnston RI is also a basket case and the town of 29,000 owes  an additional $250 million.Its fireman make over $100,000 a year in retirement. The total for all the cities is between $3 to $4 billion. There are 410 thousand households in Rhode Island . This will cost  every household more than $7500 dollars.

     This insanity occured just days after our Governor Chafee  and Speaker Mattiello convinced us to pay  bankrupt 38 studios bonds that are  fully insured and RI doesn't legally owe.This will eliminate any insurance company investigation into corruption. Rhode Islanders were told that all  that Chafee and Mattiello and Fox were trying to do is avoid a ratings downgrade and   theoretically save taxpayers $100 million over 20 years. They said it was a question of "morality".

Michael G Riley

Rhode Island Shrugged: Budget 2015. How does RI get it so backwards?

Rhode Island Shrugged: Budget 2015. How does RI get it so backwards?:     A big part of the  answer to "How does Rhode Island persistently get it so wrong ?" is the willful  acceptance of an  extr...

Friday, June 20, 2014

Budget 2015. How does RI get it so backwards?

    A big part of the  answer to "How does Rhode Island persistently get it so wrong ?" is the willful  acceptance of an  extraordinary level of group think whether its from RIPEC or organizations like  The Providence Chamber of Commerce . This was on full display during recent hearings at the statehouse as one right after another a group or economist read the talking points of  Nicholas Mattiello and Lincoln Chafee.  This rote  ,"off the shelf "analysis has proven  deadly in the past to Financial growth in Rhode Island  and those two organizations are indicative of lazy analysis as they have an unparalleled knack for being wrong for decades . On the trading floors we call this thinking. "back-asswards" .

   The Connecticut study below entitled "the economics of ethics and the cost of political corruption" is timely and relevant.We all know Rhode Island is corrupt. The bond markets know it also. This study's  conclusion was that  "Among the negative factors in job growth, the effect of corruption was
30% greater than that of taxes, implying that honest government may be even more
important than a favorable tax environment in sustaining strong economic performance"

             Lets examine the 2015 budget and what Governor Chafee  , House , Senate  and local Chamber of Commerce are so proud of as this assembly closes its 2014 session.

                 1) Assembly and Governor displayed huge -pride in paying off 38 studios bonds  without producing promised forensic investigation.
                 2) minimum wage .. the analysis shows wage correlation to job growth below...its zip

                 3) Taxes : we have members of our State financial team arguing increasing taxes will help job  growth? was expressed outright in sales tax testimony and reiterated by RIPEC, and the perennially confused Leonard Lardaro

                  4) Everyone in Government argues for more educational dollars to support the same broken system ..the correlation of education to job growth  is shown below as nil

            And the three areas with the most impact on job growth? 

            Reducing corruption - our governor and assembly spent significant time and effort embedding the latest round of corruption and consequently a cost to state borrowing that may take decades to reduce. The RI  Governor and Assembly's refusal  to investigate 38 studios will cost many times the supposed hit from a threatened ratings downgrade and last much longer. This is clearly harmful for job growth prospects.Political corruption undercuts free markets and hampers efficiency.

            2 Growth in productivity comes about by smaller government, less bureaucracy, tax friendly policy  and more certainty.This seems obvious to many as ultimately this increases and expands the whole job pie. Yet as an example ob obliviousness we saw Representative Theresa Tanzi suggest in open debate  that income should be redistributed through estate taxation to as much as 30% of the estate. The only thing we are certain about after this years budget and debate  is the unwillingness of this body to address corruption and the underlying progressive redistribution push.

            3 Population growth - our policies and single party rule are driving people from Rhode Island .The single biggest factor to job growth is a rising population.           

Factors That Explain Job Growth Across States

Variable Standardized Coefficient Description

Corruption -0.2 One additional conviction per 100 elected officials reduces job growth by 1.1 percentage points.

Taxes -0.15 A $100 increase in per-capita state taxes cuts job growth by 0.5 percentage points.

Education  0.02 An increase in education produces no statistically significant increase in jobs.

Wages -0.05 An increase in wages produces no statistically significant decrease in jobs.

Population  0.79 A one-percentage point increase in population produces a 0.8 percentage point increase in jobs

Per Capita GSP  -0.38 A $1000 increase in per-capita GSP lowers job growth by 1.0 percentage point.

Source: The Connecticut Economy based on data from Schlesinger and Meier,and from the U.S. Bureaus of Labor Statistics, Census, and Economic Analysis.

In Rhode Island "group think", combined with  monopolistic cronyism  and lack of true independent analysis have doomed Rhode Island to a socialist status quo and a thriving environment for insider corruption. Isn't it time we the people revolted against this?

Thursday, June 12, 2014

Insider Trading Mickleson vs Schilling and 38 studios

Insider Trading Mickleson  compared to Curt Schilling and 38 studios

                     Both Golfer Phil Micklesons' trades and  the recently discovered trades in World Series MVP Curt Schilling 38 studios bonds were "well timed" trades. An insider inquiry into Micklesons' trades is now two years old and publicly acknowledged by the SEC and FBI. The unknown insider in 38 studios bonds who also had terrific timing has yet to be determined and the SEC recently said they cannot confirm or deny an official investigation. The investigation into 38 Studios bond trades is much easier than the Mickleson, Icahn case and could be resolved in well less than a month but there is a big potential that high powered Rhode Island Government officials or even Curt Schilling himself could have been the “tipster”. The notable reluctance to ask for SEC investigation  and deafening silence of  RI Governor Chafee, Treasurer Raimondo , Attorney General Kilmartin and the RI House Finance Committee after they have all been notified of the well timed trades are unusual to say the least.
      Some in the local RI  media, who finally decided to cover this revelation, suggest the SEC doesn’t investigate insider trading unless the harmed party complains or damages can be shown. This is simply not true as is evident in the Martha Stewart case and recent reporting on the Mickleson case in the New York Times.RI media is oblivious to all of this. Here are  NY Times excerpts re Mickleson:
“The F.B.I. is pursuing a criminal investigation, while the S.E.C. is running a parallel civil inquiry.” 
“It is unclear why federal authorities initially suspected that Mr. Mickelson may have played a role in the Clorox trades. The S.E.C. began the inquiry into Clorox trading after finding suspicious trades in the stock just days before Mr. Icahn’s unsolicited bid. Although Mr. Mickelson is not connected to the Clorox trades, he is not in the clear on Dean Foods.
The F.B.I., federal prosecutors in Manhattan and the S.E.C. continue to investigate well-timed trades made by Mr. Mickelson and Mr. Walters in shares of Dean Foods in the summer of 2012, the people briefed on the matter said.”
        So there it is the cause of the inquiry was the unusual timing of the trades. The sale of Curt Schillings 38 studios bonds was about loss avoidance. On May 23 , 2012 a “customer sold” $ 1.21 million worth of the privately placed bonds. On May 24 Schilling announce 38 Studios had laid off all of its employees and had shut their doors forever. Actual Bankruptcy took place a month later. The firm has been liquidating or is near the end of liquidation at this date. The trade of May 23 rd loss avoidance has been calculated as $100,000 , significantly more than the Imclone/ Martha Stewart case. Micklesons' case is about gains from  unusually timely trades.
         But the 38 Studios case is significantly more sensitive because 38 studios and the financing of it is under investigation by multiple State and Federal authorities already. Several high ranking Rhode Island officials  may have been  subpoenaed, a reported 100 subpoenas are outstanding. Governor Chafee has been frantically  trying to pay the debt and “move forward” after having failed to do any of his promised “forensic investigation into 38 studios” ” of  two years ago.
     Both the ex-head of the EDC and Sony executive John Smedley paint a much different picture of Governor Chafee and his role in the collapse of 38 Studios . Stokes is seeking legal action and Smedley, head of Sony online entertainment wrote this letter to the people of Rhode Island:
"Dear people of Rhode Island. Look to your elected government for failing to protect you. That 38 studios deal just never should have been. Public funds shouldn't be backing risky things like online games."
He respects Schilling for investing his now money in the company, but said "If that idiot Governor Chafee hadn't trash talked right at the time Curt was trying to get funding you would be playing the game now."
"The idea of suing someone when Chaffe's (sic) own comments were what poisoned the well at the end is beyond the pale. All he had to do was give Curt another week and we wouldn't be here today."

      Governor Chafee says now that anyone, meaning 2014 Gubernatorial Candidates Allan Fung and Ken Block , who suggests not paying the next $12,500,000 to 38 studios bond holders is “unfit to Govern”.
      A concerted effort has been made by Chafee and  friends of House Speaker Gordon Fox , who sits in resignation limbo after FBI and State police raided his state office and home and new house speaker Nicholas Mattielo ,a former confidant of Fox , to vote through the payment which would prevent an investigation by the bondholders  insurance company, No charge for Gordon Fox  has been made public since the March 2014 raid.
       All of the above makes the reluctance to call in the SEC on this insider trade of May 23, 2012 look very suspicious. Who knows who the seller was? Even more interesting who told the seller that 38 studios was closing its doors the next day? Lets hope the SEC isn’t waiting for Chafee or his former Democratic Majority Whip ,the now silent attorney General Peter Kilmartin, to request an inquiry. The SEC  should do exactly as they have in the Mickleson case and examine the unusual timing of that significant sale in May 2012 in 38 Studios 7.75% bonds.

Monday, June 9, 2014

GASB 68 Cheat Sheet for Chair Gallogly and Pension commission

             Apparently the  RI Pension Study Commission and its Chair don't know how to calculate and apply GASB 68 to the "crisis towns" in Rhode Island directly under their watch. After spending a year with the town of West Warwick  crafting a Funding Improvement Plan (their second one..first failed) and close to a year of  persistently warning commission members that GASB 68, after long last, was going into effect MS Gallogly decided to defraud local voters and outside municipal investors regarding the status of the pension plan and the overall financial health of West Warwick.
            Instead of calculating GASB 68 and using that rate in her 5 year plan she chose instead to use the local actuary guess of 7.5%. So , maybe the problem is that she or the  specific town finance director/treasurer  or their actuary don't know how to calculate GASB 68. To help them , we provide all the info below and 3 separate examples that include two of the RI towns that are on the Crisis Commission  Mayor Taveras and Mayor Polisena. The Municipal bond chart also.

How to Calculate your Towns appropriate discount Rate GASB 68

(funded ratio * Hired gun discount rate) + ( unfunded ratio * 20 year AA muni bond rate)

Example 1 West Warwick,RI     
 (17 % funded * 7.5%) + (83% unfunded * 3.4%) = 4.07% (that adds $90 million in liabilities)

Example 2   Johnston , RI
 ( 26% FUNDED * 7.75%) + ( 74% unfunded * 3.4%) = 4.53% 
 Adjusting Johnston to GASB 68 increases unfunded liability by $ 84,000,000 or nearly double.

Example 3  Providence Rhode Island
   ( 30% funded *8.25% ) + (70% unfunded * 3.4%) = 4.85%
Adjusting Providence to GASB  68 and subtracting $60 million from assets for accounting lie produces an unfunded liability of $ 1.813 billion . $ 1 billion more than is currently reported.