Tuesday, May 26, 2015

Elorza 5 year forecast GIGO Garbage in Garbage out

                   How in the world did Mayor Elorza think the 5 year forecast for Providence wouldn't include paying off a $62 million dollar swindle of the pension plan plus interest owed,. The answer is likely that he didn't disclose those facts to the company he hired. If those facts were not incorporated the five year forecast isn't valid and not useful. It also adds to the growing roster of providence Officials releasing misleading financial data to taxpayers, and municipal Bondholders. I am sure this wasn't the Mayors self guide idea and project and most likely the city official who worked with PFM on this project was well aware of the Auditor Ruling re a false asset on the Pension funds book of $62 million dollars.The auditor says this is due by June 30.2015 or the asset will be "written off.and Providence pension liability will immediately increase by $62 million dollars, In addition once this "loan/asset is written off there is the question of interest owed to the pension fund for having illegally annually commandeering at least $50 million  dollars in order to finance city operations. The interest owed to the pension would be the Discount rate used by the Pension fund of 8.5% compounded. The incredibly stupid plan of the mayor borrowing from its own pension fund at 8.5% for a decades is ample evidence that Providence is broke and being operated by thieves.
              Shortly after Mr Elorza issued this misleading report from PFM ,we called them and asked if they had considered the $62 million due in 45 days as part of the money due in the the next 5 years  or were they even aware of the  fact the Auditor found the city had created a false asset. We asked the same question regarding the interest owed to the pension fund which could be another $100 million. We were told that they could not speak to us without the permission of their client:Providence,
              So if a municipal bondholder read that report issued by Elorza and authored by PFM it would constitute yet another effort to mislead municipal market participants and ratings agencies as to the true Financial health of Providence.

Sunday, May 24, 2015

John Simmons, Dan Sherman and buck consultants

         This week we investigate the genesis of Providence Pension Fraud. Someone designed this scheme in the last decade and made a deliberate decision to borrow from the pension fund to cover a dangerous drop in the city's operating cash flow. The likely start of the scheme is somewhere between the  "Category 5" revelation by Angel Taveras in 2011  and his predecessor David Cicilline's fond farewell to John Simmons as his Director of Administration a few years earlier where they both claimed victory over budget, union and pension issues.

      Here's how David Cicilline put it in 2007:

Mayor's Chief Architect in Restoring Fiscal Integrity to City Government to Step Down   November 8 2007

Mayor David N. Cicilline today announced that the City’s Chief of Administration, John Simmons, will step down at the end of the year to take on the role of Executive Director of the Rhode Island Public Expenditure Council (RIPEC). The Mayor hailed Simmons as “one of the foremost authorities on public finance in the northeast” and credited him with playing a major role in getting the city’s financial ship back on course.

“John has been an invaluable member of my team from the very beginning,” said Mayor Cicilline. “His vast experience, financial expertise and keen understanding of the intricacies of public finance have helped put our city government on the strong financial footing needed to accomplish my ambitious goals for the city,” said Mayor Cicilline. “Although John will be missed, he leaves behind a legacy of fiscal integrity, 21-Century labor agreements and “A” grades from all major bond rating agencies.”

      Here's Cicilline in 2010  in Debate with John Loughlin

Loughlin: The City of Providence is broke and you know it … 

Cicilline: The City of Providence has earned an ‘A’ rating from its agencies which are not, you know political campaigns, but are done by professionals externally on the city’s financial condition. I’m very proud of that. The city is in excellent financial condition and the suggestion by the city council auditor that was condemned by the President of the City Council as reckless and false. Representative Loughlin knows that.

Loughlin: Then why won’t you give him the data? Why? He had to file a freedom of information act!

and here is Taveras in 2011

Mayor: Providence, RI, Faces Bankruptcy

Mayor Angel Taveras painted a bleak picture Thursday of the city's finances, saying Providence faces "devastation" and could go bankrupt if retiree benefits aren't cut and tax-exempt institutions like Brown University don't pay more in lieu of taxes.

So now, of course ,we all know that Cicilline was lying through his teeth. But when? Was it in 2006-7 or 2011  or both?  The John Simmons  2007 angle is intriguing and he would certainly be a great person for the Feds to talk to. Its unclear if he was  ever  questioned by the SEC when they looked into Providence irregularities in 2011. Its pretty clear now that the SEC did not "catch" the Fraudulent assets in 2011 that Segal recently confirmed. This huge revelation  also means that the City misled the SEC during their investigation in 2011. .. (to be continued)

Wednesday, May 20, 2015

Providence Rhode Island Schematic of Pension Scam

https://drive.google.com/file/d/0BzdofmnDtEkOMnlZYVhzZDJNUGM/view?usp=sharing there is also a version on scribd

Here is how the scam works…( this probably dates back to 1999 or later)

-2007 June-July(fy2008)                                                                                                                       In 2007 beginning July the Mayor and Council divert pension dollars of $50,000,000 ARC to pay for  general operations and use instead of funding pension. From July 2007 to June 2008 the pension fund receives nothing. Pension assets decline due to lack of contribution combined with paying out to retirees. The Investment Commission complains "we dont have any assets and you "the city"  didnt contribute all year long."  City says ok we will create and asset Enron Style . Now you're fine .We'll pay you next year for having taken your funds this past year.                                                                                                                                                                                                                                                                          
  • 2008 July thru June (fy 2009)  
    The same routine happens all over again .The Mayor and Council Knowingly again divert 2008 pension dollars now equaling $55,000,000 (ARC) use for general operations in fy 2009 after making a ”late payment” to pension fund for 2007 debt of  $50,000,000. The Actuary then creates  "new asset of $55,000,000” for 2008 in Providence Pension fund which is the “late payment” to be paid  sometime in 2009.                  and   once again
    Pension assets decline by $55,000,000 due to lack of contribution. Invest Commission Complains again . Providence says they will catch up in October.   Cycle continues......

    •       This process is  repeated for at least ten years.Probably 15 years. This is clearly  a  "loan" that is never paid off or more accurately a theft of funds that is never returned. The interest rate due to taxpayers and retirees is the Discount rate of the Pension fund currently 8.25%. Segal recently correctly ruled that this asset created in year "1" is not really an asset but a late payment by a borrower perpetually in arrears.

Status in May 2015

      Providence owes $62,000,000 to the Providence Pension Plan immediately (in fact its 10 months past due) Providence also likely owes  interest on the “float” @ between 8.5% and 8.25% for as long as this scam has been running. Let’s assume 15 years. The interest owed to the pension plan on average float of $50 million dollars is between $65 and $150 million dollars. If Providence did not pay interest on this illicit loan then the City owes the pension fund between $127 million and $212 million.
This consist of the theft and then the "float" on the stolen funds. 
   $62 million + float = {$127 mil to $212 mil}