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Archive for June, 2012

Former Piyush Jindal associate guilty of insider trading; both worked for consulting firm McKinsey & Co. in 1995

Posted in Uncategorized on June 17, 2012| 6 Comments »

Gov. Piyush Jindal spent all of one year in the private sector during his meteoric career.

That year of proximity to one Rajat Gupta could come back to bite him on the backside as a major political embarrassment.

Back in 1995 when he was 24 and fresh out of college, Jindal worked for the conservative consulting company McKinsey and Co.

It was during his tenure there that McKinsey presented Allstate Insurance with an elaborate plan detailing how Allstate could increase profits by denying fair settlements of home, business and auto claims. Basically, the strategy, according to McKinsey’s plan, was to switch from the “Good Hands” treatment to the “Boxing Gloves” treatment if claimants persisted in seeking equitable settlements.

It was a strategy that would serve Allstate well in the aftermath of Hurricanes Katrina and Rita as its profits soared from $82 million per year to more than $2 billion per year.

The consulting firm had other low water marks it would probably just as soon forget:

• McKinsey, in 1980, advised AT&T that cellular phones would be a niche market at best.

• The consulting company advised Swissair to gobble up small airline services instead of entering into cooperative agreements with them. Swissair followed that sage counsel and 12 years later entered into bankruptcy.

• McKinsey recommended to the Minneapolis Public School System that it could cut costs by eliminating teacher health care. In what has become an increasingly familiar trend, the firm also recommended converting 25 percent of schools that scored the lowest on standardized tests to privatized charter schools.

• Enron was one of McKinsey’s biggest clients before it went belly-up, costing hundreds of employees their jobs, their pensions and their health care benefits. Enron CEO Jeff Skilling, who was sentenced to 24 years in federal prison as a result of Enron’s collapse, was formerly a partner at McKinsey.

In 1994 Rajat Gupta was named to head up McKinsey. During his tenure, the firm quickly expanded its global influence as it moved aggressively into the emerging markets of India and China.

It was in 1995, a year after Gupta took over the helm of McKinsey, that young Piyush was brought on board putting Gupta in position to be something of a mentor to his fellow Indian-American.

Last Friday, June 15, Gupta, also a former Goldman Sachs and Procter & Gamble board member, was found guilty of passing insider information about Goldman Sachs to Raj Rajaratnam, manager of the hedge fund Galleon Group.

Gupta was convicted on four of six counts of passing confidential information to Rajaratnam, who was himself convicted earlier and is currently serving an 11-year sentence after raking in more than $50 million on insider trading.

Gupta, who was found guilty of three counts of securities fraud and a single count of conspiracy, is facing 10 years in prison. His sentencing is scheduled for later this year.

Only two days after Gupta’s conviction, CBS’ 60 Minutes re-ran a story about congressional insider trading.

The segment featured an interview with former Congressman Brian Baird (D-Wash.), who fought unsuccessfully during his 12 years in Congress to pass legislation outlawing insider trading by members of Congress.

Baird pointed out that insider trading is against the law for executives, attorneys, financial consultants and any other warm body in America—except members of Congress, who are, incredulously, exempt.

Which brings us back to Piyush Jindal.

Soon after losing his first gubernatorial race to Kathleen Blanco in 2003, Jindal decided to run for Louisiana’s First Congressional District seat then being vacated by David Vitter, who would run successfully for retiring John Breaux’s U.S. Senate seat.

Jindal won that 2004 race and took office in January of 2005. His financial report for 2004 indicated a net worth between $935,000 and $2.7 million, largely on the basis of 73 trades.

One year and 95 investment transactions later, his net worth was given as between $1.2 million and $3.2 million, an increase of between $300,000 and $500,000, according the Center for Responsive Politics.

By 2006, he logged 105 transactions and increased his net worth from a range of $1.5 million to $3.9 million—on a salary of $165,000 per year, another uptick of between $300,000 and $500,000.

The bulk of his transactions were investments made through Legg Mason Asset Management, though he also had investments through Fidelity Growth, Merrill Lynch and other companies as well. There was no indication as to what the specific investments were but each of the firms advertises a full line of investments, including, money markets, mutual funds and separately managed accounts (SMA) and Merrill Lynch and Legg Mason also traded in hedge funds.

Jindal’s trading activity was in all probability legitimate and no one is suggesting otherwise. By its very existence, however, his trading activity might suggest that serious consideration be given to Baird’s efforts to outlaw active trading, particularly insider trading, by members of Congress who, by necessity, have access to sensitive market information that could give them and important edge in investment strategy.

It is a system that remains alluring for those who would abuse it and it should be corrected if, for no other reason, the appearance of propriety.

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Notable Quotables (in their own words)

Posted in Governor's Office, Notable Quotables, Revenue, Taxes on June 16, 2012| 3 Comments »

“It will be determined through the process of the proper procedure of rule-making.”

–Gov. Piyush Jindal mouthpiece Kyle Plotkin, trying to explain how the state will deal with pending tax credits for alternative fuel vehicles pursuant to a bill signed into law by Jindal in 2009. Instead of a $1 million cost to the state as originally anticipated, new projections indicate the cost could be as much as $100 million

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Excrement hits oscillating air circulation device in flap over alternative fuel tax credit: Revenue Secretary takes the fall

Posted in Exemptions, Incentives, Governor's Office, Legislature, Legislators, Revenue, Teague on June 16, 2012| 7 Comments »

The unlikely scenario reads like something out of a Woody Allen parody (for some reason, Sleeper comes to mind.):

State representative in 2009 introduces House Bill 110 that offers generous tax credits (up to $3,000) to those who purchase certain types of automobiles that operate on clean-burning alternative fuels.

Legislative Fiscal Office in its fiscal notes on the bill, project a total five-year cost to the state of $907,000.

Besides the original sponsor, 83 other House members sign on as co-sponsors of the bill. It passes the house, coincidentally, by a vote of 84-12. In the Senate, the vote is 34-0.

Governor, who never met a tax exemption he didn’t like, signs HB 110 into law as Act 469, creating the Alternative Fuel Tax Credit. Everyone is happy.

Fast forward two years to 2011: House member who authored HB 110 is term limited so she decides to seek a Senate seat, thus circumventing the term limitations law as so many others have done.

She loses her race despite an infusion of $2,500 from the governor himself.

The governor, nonetheless grateful for her no-taxes stance in her doomed Senate campaign, in January of 2012 awards her with a job as the second in command of the state’s Revenue and Taxation Department. This despite the fact that she has zero experience and/or qualifications in matters of revenue and taxation; her background is that of a school teacher who also once completed a course in “school principalship.”

Fast forward to April 30: Secretary of Revenue and Taxation and presumed boss of former representative-now-assistant-secretary-of-revenue-and-taxation issues Declaration of Emergency as a means to adopt a rule to administer the tax credit for conversion of vehicles to alternative fuel usage “as provided under R.S. 47:6035.”

R.S. 47:6035, of course, is the number of the state statute pursuant to the passage of HB 110 and its signing into law by the governor as Act 469 of 2009. The statute (R.S. 47:6035) says so. The statute also says in Section G: “The secretary of the Department of Revenue in consultation with the secretary of the Department of Natural Resources shall promulgate rules and regulations in accordance with the Administrative Procedure Act as are necessary to implement the provisions of this Section.”

So, on April 30, the secretary of Revenue issued her Declaration of Emergency in accordance with the statute, written by her under-secretary, passed by the legislature and signed by the governor. The declaration lists 112 models of cars and trucks that qualify, far more than originally anticipated, because of the emergence of “flex fuel” factory vehicles designed with the ability to burn ethanol.

Fast forward to mid-June: The anticipated cost to the state, originally estimated at $907,000 by the Legislative Fiscal Office is now 100 times that, or $100 million, according to the chairman of the House Appropriations Committee.

The Senate president, who voted for the measure three years before and who kept himself busy in his CPA firm filing tax amendments so his clients could claim the credit, was apparently unaware of the ramifications until after a fellow senator blew the whistle.

That senator, who also voted for the bill in 2009, says he alerted the secretary of the Department of Revenue and the commissioner of administration to the potential costs to the state if the bill were allowed to stand (after, of course, filing for his own $3,000 tax credit for a vehicle he had purchased). But neither informed the governor.

Neither did the chairman of the House Appropriations Committee–not even after he had filed for the $3,000 tax credit on each of the two vehicles he had purchased (does anyone see a trend here?).

As might be expected, the excrement hits the Westinghouse oscillating air circulation device and the governor’s office more closely resembles a chicken house invaded by an unwelcome possum than control central where cooler heads are expected to prevail. There is gnashing of hands and wringing of teeth (they can’t even seem to get that right) as everyone runs around wailing, “The sky is falling! What to do? What to do?”

Suddenly, someone came up with the obvious answer. Too bad the person has to remain anonymous because the solution was so obvious: fire the secretary of the Department of Revenue who was so brazen as to issue such an insane directive—or at least force her to resign—but don’t leave any marks; it must be a clean kill.

Never mind the fact she has served three governors during her tenure and no matter that she was carrying out her job to the letter of the law: somebody’s gotta go and it may as well be her. The governor can then appoint the assistant secretary, his old political crony, to the post—just the way he planned to all along. Let the secretary take the fall. What could be better? Brilliant!

Of course all this leaves a few unanswered questions:

• Why did the senator not go to the governor with his concerns in the first place?

• If the secretary of the Department of Revenue has to go because of her failure to pass the word up the line to the governor, what about the commissioner of administration? Is he not equally complicit or derelict?

• What about all those high-salaried lackeys with whom the governor surrounds himself—his communications director, his chief of staff, his executive counsel? Don’t their jobs include the monitoring of pending legislation and its effects? Where were they when all this was going down?

• And the Senate president should have seen the writing on the wall with all those tax amendments he was filing on behalf of his clients—unless he was too preoccupied with making money from his fees.

• How about the governor himself? He signed the bill creating the law with which his revenue secretary was complying.

None of that matters, of course, in this bizarre script. The revenue secretary must be the scapegoat and fall on her sword.

After all, that’s the way this governor likes to do things.

Name one time he has admitted a mistake—from the ill-conceived berms, to the firing of good public servants (too many to name here as the toll keeps mounting), to the privatization of the Office of Risk Management (a fiasco in its own right), to attempts at public employee retirement reform, to issuing hundreds of vouchers to “schools” that are all but non-existent, to backing Rick Perry for president.

His is the finely-honed practice of accepting credit and assessing blame.

As a final twist to this plot, the governor now says that he can’t promise that any outstanding applications for credit on amended returns from 2009, 2010 and 2011 will be honored, leaving open the possibility of litigation by auto buyers who have filed or will file amendments in good faith in accordance with a law already on the books–that the governor signed.

Sorry, folks. Woody Allen just sent word that he has rejected the script as being far too improbable for any moviegoer to believe.

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Update: Gov. Piyush Jindal absent from civics class on Separation of Powers Day at Baton Rouge Magnet High

Posted in Legislature, Legislators, Teague, Uncategorized on June 14, 2012| 7 Comments »

Every high school student in Louisiana public schools is required to take a year of civics as part of the Department of Education’s social studies curriculum.

Gov. Piyush Jindal, who attended Baton Rouge High Magnet School (a public school), was apparently absent on Separation of Powers Day.

On Thursday, Rep. Jim Morris (R-Oil City) became the second legislator to be removed from a vice-chairmanship by Jindal through Speaker of the House Chuck Kleckley (R-Lake Charles).

In March, Rep. Harold Ritchie (D-Bogalusa) was demoted from his vice-chairmanship of the House Committee on Insurance after voting against Jindal-backed House Bill 969 that gave tax rebates for those who donate money for scholarships to private and parochial schools. Richie’s vote came while he sat as a member of the House Ways and Means Committee.

Kleckley, like any good puppet, did not have the courage or candor to explain his action, saying instead, “My discussion on the vice chairmanship will remain a personal discussion,” whatever that may mean.

On Thursday, Morris was removed from his vice chairmanship of the House Natural Resources and Environment Committee by Kleckley.

Morris was among a group of conservative House Republicans who unsuccessfully fought Jindal in the recent legislative session as the governor chose to use one-time money to fund recurring expenses in the state’s General Budget.

Morris also opposed Jindal in his efforts to secure a statewide voucher program that will use state taxpayer dollars to send children to private schools.

The dispute over the use of one-time money to balance the budget and the subsequent smack-down of Morris smacks of blatant hypocrisy on Jindal’s part. It was Jindal, after all, who in 2008, made a big deal of opposing the use of one-time for recurring expenses. He compared it to using a credit card to pay the mortgage, calling the practice fiscal irresponsibility.

Jindal mouthpiece Kyle Plotkin, naturally denied that the governor’s office had requested Morris’s demotion. Believe that, and we have some lovely beachfront property in North Dakota you may find attractive.

Kleckley, of course, would not say why Morris was demoted, choosing instead to at once flaunt his and Morris’s constituents and to knuckle under to the governor who has taken on all the characteristics of someone who has morphed from a spoiled brat to a pouting tyrant with his despotic heavy-handedness.

In no other state does the governor have the power to dictate who will serve as Senate president, House speaker or who presides over committees. Theoretically, under the separation of powers, those are strictly legislative matters.

Author Robert Caro, in his multi-volume biography of Lyndon Johnson, noted that when Johnson was elected vice president in 1960, he intimated that he intended to continue participating in legislative proceedings as president of the Senate.

In those days the vice president did serve as president of the Senate but could only vote to break a tie. Johnson’s intentions, however, were to be more involved in the day to day activities of the Senate until senators reminded him that he was no longer a part of the legislative branch of government but the executive and thus forbidden to take part in legislative matters.

If a powerful politician such as Lyndon Johnson could not defy the Constitution, it defies logic how this petulant governor can do so.

Former Sen. Butch Gautreaux said when he served as Chairman of the Senate Retirement Committee, Jindal complained about his not supporting the governor’s agenda but Senate President Joel Chaisson “never considered removing me.”

Gautreaux said Jindal even attempted to have him evicted from his Pentagon Barracks apartment but again Chaisson refused.

“This legislature has completely forgotten that there are three branches of government,” Gautreaux said. “I’m embarrassed for them. They are too weak to be embarrassed for themselves.”

Perhaps Kleckley should grow a pair and inform Mr. Transparency and Accountability that we still have three branches of government.

Cowardice, after all, is not pretty to watch.

At least Morris had the courage of his convictions and did not allow Jindal’s $2,500 contribution to his election campaign last fall sway him from voting his conscience.

Perhaps our most ethical governor is of the belief that a bought politician should stay bought.

And just in case Piyush, aka Richard Nixon reincarnate, has forgotten, the three branches of government are Executive, Legislative and Judicial.

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The vultures are circling the carcass, aka school vouchers, as Gov. Piyush Jindal’s education reform gets off to rocky start

Posted in Education, Vouchers, tagged , , , on June 14, 2012| 6 Comments »

Gov. Piyush Jindal may have appeared to come away from this year’s legislative session with sweeping wins in his public education reform but in reality, things appear to be off to a somewhat rocky start.

It may be too early to say Jindal’s grand scheme for the revamping (read: dismantling) of public education is falling apart but it would certainly be correct to say the waste of precious state voucher dollars has begun in earnest and detractors are only too happy to cite the inexcusable lack of oversight by John White’s Department of Education (DOE).

Another possible indication that all is not well is the recent exodus of a number of DOE personnel, including a key employee responsible for putting a positive spin on department policy for the media.

Friday, June 8, was the last day on the job for DOE Public Affairs Director René Greer.

“Your questions have challenged us to do better, your reports have given our citizens the information they need to hold us accountable and your narratives have inspired individuals and groups to engage in this important work,” she said in an email to reporters.

Greer, who said she has no immediate career plans, also thanked reporters for their “patience, understanding and support on those occasions when the requests coming into Public Affairs exceeded our capacity to respond.”

Greer, who served at the pleasure of the education superintendent, may have fallen on her sword. “She worked very hard and put up with a lot of internal and external flak,” said one former co-worker. “If I had to guess, I suspect the department’s slow response to (a public records) request from The Independent (a Lafayette weekly publication) may have had something to do with her departure,” the co-worker said.

On May 2, The Independent wrote, “State Superintendent of Education John White and DOE spokeswoman René Greer have yet to respond to numerous phone calls and email inquiries from The Independent over the past 24 hours regarding the department’s No Child Left Behind (NCLB) waiver application, despite public record statutes requiring them to do so.

“They also have failed to respond to Louisiana Press Association attorney Joshua Zelden, who told both White and Greer in an email that ‘all documents created, and correspondence entered into, by government agencies in the course of their official business must be made available to all requestors immediately, unless a specific exception to the public records law is cited…”

Louisiana is one of 26 states and the District of Columbia which have requested waivers from NCLB provisions. Louisiana’s application is not immune to the federal scrutiny granted to other states. The U.S. Department of Education sent critique letters to the states in mid-April but the contents of Louisiana’s letter which lay out the deficiencies in Louisiana’s alternative plan for achieving higher academic performance are still being withheld from public scrutiny.

Greer has not responded to an email sent to her on Sunday by LouisianaVoice which asked if her departure was related to the dispute with The Independent.

The department’s problems with The Independent notwithstanding, the biggest newsmaker has been the unbelievably sorry job of vetting voucher applicants:

• The New Living Word School in Ruston has received vouchers for 315 students, the most in the state thus far, despite having woefully inadequate facilities for those 315 additional students. The school has only 122 students and no desks, no books, no chairs and no classrooms to accommodate additional students.

• A small private school in DeRidder has been approved for 119 vouchers worth more than $400,000. Besides misspelling scholarships as “sholarships” on a sign advertising the availability of vouchers on a sign outside the school, it has been revealed that BeauVer Christian Academy has experienced past financial problems. In 2009, Maysia Coker, registered agent and an officer of BeauVer, was sentenced in 36th Judicial District Court in Beauregard Parish to a three-year suspended sentence for issuing worthless checks. She was fined $2,000 plus court costs and ordered not to have a checking account in her name or to be a signatory on any business or personal checking accounts or to hold a position of financial authority during her four-year probation. Coker registered BeauVer Christian Academy as a limited liability corporation on May 5, 2010, state records show. BeauVer had 78 students and 12 teachers last year. The school, formerly known as Beauregard Christian Academy, had seven liens and financial judgments filed against it ranging from $2,778 to $14,000 between 2007 and 2009.

• Upper Room Bible School in New Orleans also received 214 vouchers despite a 78 percent failure rate on students’ LEAP tests. Upper Room was third from the bottom in rankings of all Recovery School District and voucher schools combined.

• Eternity Christian Academy in Calcasieu Parish, which currently has 14 students, has been approved for 135 vouchers which will generate about $1 million in taxpayer funds for the school.

As if all that were not bad enough, now it seems the media, including the Washington Post, New Orleans’ Gambit and Gannett’s Louisiana newspapers are beginning to wake up and ask hard questions, albeit a little late:

• The Baton Rouge Advocate, which has largely been silent on the issue of education reform, had an editorial on Tuesday in which it questioned the legality of Jindal’s intent to raid Minimum Foundation Program funding for public schools to fund vouchers for private schools. “It is a question that the judiciary can and should weigh in on, because on its face, the MFP money is dedicated in the Louisiana Constitution to public schools,” the Baton Rouge paper said. “…the governor and his allies are whipping up the rhetoric on the unions—despite the obvious relevance of the constitutional question,” it added.

• The Washington Post, on May 31, quoted White as saying federal waivers would allow districts and schools to exercise flexibility from federal regulations in exchange for instituting rigorous accountability systems. Citing the vouchers granted to the aforementioned schools, the Post said, “All of this makes you wonder what Louisiana and the U.S. Education Department define as ‘rigorous accountability systems.’”

• Gambit, in its analysis of the voucher program, said “‘Reform’ always means ‘change’ but it does not always mean ‘improvement.’”

Finally, if proof is needed that Jindal’s voucher and charter school crusade is not profit driven, there is the Louisiana Federation for Children and its accomplice, the Alliance for School Choice.

The Alliance for School Choice is clamoring for students like a flock of vultures circling a dying carcass.

In a mail-out received by a north Louisiana family (with no children in school, it should be added), the alliance proclaims, “There is still time to apply to enroll your child in a better school for free.”

For free? Is the Alliance for School Choice for real? Just where does it think the voucher money for tuition comes from, the tooth fairy?

This is tax money paid by Louisiana citizens that will go to line the pockets of profiteers and political opportunists.

For free indeed.

The flip side of the mail-out says, “Time is running out to give your child a better education. Apply for a scholarship before June 29.”

It goes on to say, “Recently, Louisiana lawmakers expanded the Student Scholarships for Educational Excellence program statewide, which allows children trapped in low-performing schools to receive a scholarship to attend a participating private or public school in the 2012-2013 school year for free.”

There’s that word free again.

The state version of the American Federation for Children/Alliance for School Choice, the Louisiana Federation for Children, contributed more than $100,000 to Louisiana legislative and Board of Elementary and Secondary Education candidates in 2010 and 2011, state records show.

Many of those candidates also received contributions last year from Gov. Jindal’s campaign, further evidence of the philosophical and financial bonds that exist between the alliance, Jindal and the voucher program—all at the expense of Louisiana taxpayers.

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