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Archive for the ‘Economy’ Category

Administration gives State Auditor private data on OGB study but denies access to Dept. of Economic Development records

Posted in Auditor, Contract, Contracts, Economy, Governor's Office, OGB, Office of Group Benefits, Teague, Transparency on March 19, 2011| 1 Comment »

A $49,999.99 contract between the Office of Group Benefits (OGB) and Chaffe and Associates appears to give the legislative auditor’s office complete and unfettered access to all records of Chaffe’s work for OGB, something it lacked in its recent audit of the Louisiana Office of Economic Development (LED).

Chaffe’s contract with OGB, executed on Feb. 16, calls for the New Orleans investment banking firm to prepare a “detailed report structured to provide sufficient information to permit OGB and the State Affiliated Parties (Office of the Governor and/or the Division of Administration) to understand the data, reasoning, and analysis underlying its (Chaffe’s) conclusion of value” of OGB.

Chaffe is charged with preparing and submitting a report setting forth its opinion of the current fair market value of the operations of OGB in preparation for Gov. Bobby Jindal’s anticipated attempt to privatize the office.

Capital News Service earlier reported that the Wall Street investment banking firm Goldman and Sachs was brought in for several weeks to assist in the preparation of a request for proposals (RFP) from “qualified financial advisors” to assess the market value of OGB.

The deadline for bids was March 7 with interviews of bidders scheduled to begin last Monday, March 14. The problem of timing arose when the administration realized it needed preliminary figures at least in time for the presentation of the governor’s proposed budget on March 11, three days before interviews were to begin.

Chaffe was given a contract to fast track the valuation of the agency in time for the budget presentation. The $49,999.99 contract amount was for one penny less than the minimum contract amount requiring Office of Contractual Review approval. CNS first reported that the contract was for $49,999 but upon receipt of a copy of the contract pursuant to a request under the Louisiana Public Records Act, it was learned that the contract was actually for an additional 99 cents.

While the contract was signed by Tommy Teague, chief executive officer of OGM, and Chaffe Managing Director Jonathan Briggs on Feb. 16, it was back-dated to Feb. 10 and runs through June 30, according to terms outlined in the document.

The contract also gives the legislative auditor the right to audit Chaffe’s work. “Chaffe grants to the Office of the Legislative Auditor, the Office of the State Inspector General, and any other duly authorized agency of the state the right to inspect and review all books and records pertaining to services rendered under this contract,” it says.

State auditors recently complained that the Louisiana Office of Economic Development (LED) denied them complete, unfettered access to requested documents during an audit of that agency.

The audit report said two meetings were held with LED Secretary Stephen Moret and the legislative auditor also sent two letters requesting unrestricted access to records but LED, citing workload issues and legal concerns, refused to cooperate, thereby preventing auditors from knowing to what extent documentation that was provided may have been compromised or whether or not they received complete information.

LED is a public agency, supported by taxpayer dollars, while Chaffe is a private entity.

R.S. 24:513 (I) provides that the legislative auditor’s authority to audit extends to “all documents, records, and files, whether confidential or otherwise.”

While appearing to give the legislative auditor carte blanche in the examination of Chaffe’s work product, the contract also takes careful measures to protect the firm’s report and work papers from public disclosure.

“Chaffe will not release any information to any third party about OGB or this engagement without OGB’s prior written permission,” the contract says, adding, “Chaffe’s work product or other written or electronic documentation regarding this engagement does not carry with it the right of publication without Chaffe’s previous written consent.”

The last sentence might be open to legal challenge inasmuch as once the report is submitted to OGB, DOA, or the governor’s office, it is presumed to be a public document under the state’s public records law and Chaffe would have no say in any decision to make the report public. The contract does appear to recognize that contingency in the next paragraph when it says that OGB agrees to notify Chaffe in writing “prior to the production of any Chaffe work product in response to a request pursuant to the Louisiana Public Records Act or any proceeding before a court or governmental or regulatory body.”

Payment terms of the contract calls for OGB to pay Chaffe a fee of $45,000 for the report, due upon delivery. The maximum payment, inclusive of other fees, expenses and copies is not to exceed $49,999.99, according to terms of the contract.

At the March 7 formal bid opening for the state’s RFP on the “qualified financial advisor,” an RFP in which Goldman Sachs played a major role in drafting, the only bidder was Goldman Sachs.

The global investment banking firm’s bid to more fully assess the fair market value of OGB and to find a buyer for the agency was for $6 million. A spokesman for DOA said that under terms of its bid, Goldman Sachs would receive the $6 million even if it is unsuccessful in securing a purchaser for the agency.

The same source said OGB’s current surplus of more than $500 million would be discounted and the state would receive $150 million to $200 million of that to help Jindal plug the gaping $1.6 billion budget gap with the purchaser retaining the balance.

Like Louisiana Music? Be sure to check out Louisiana Rocks! The True Genesis of Rock & Roll! This book is the only complete history of all genres of Louisiana rock and roll. Re-live all those great old songs that used to play late nights on WTIX, WNOE, KAAY. Learn about all the great artists like Elvis, Johnny Cash, Jim Reeves, D.J. Fontana, Floyd Cramer, and Hank Williams who got their start on the Louisiana Hayride. Check your local bookstore or log onto http://www.louisianarockstomaswell.com.

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A very (im)personal letter from Bobby Jindal

Posted in Economy, Education, Governor's Office, Higher Education, Transparency on March 19, 2011| 1 Comment »

Editor’s Note: Gov. Bobby Jindal this week sent the following email statewide. An obvious kickoff to his re-election campaign, we can’t help but wonder if this was done from a state computer. No matter. We thought we’d help him get it more widely distributed while adding a few of our own observations.

Dear Friends – (so personal)

This week we announced economic development initiatives we will pursue in the upcoming legislative session in order to keep Louisiana competitive (of course we’re competitive; we’re all scrambling for jobs that ain’t out there) and attractive (How “attractive” can the unemployment line be, really?) as we work to foster more job growth (Wait. What?). We announced proposals to extend the Quality Jobs Program, the Research and Development Tax Credit (so, do I get a tax credit for researching and developing a story on what a doofus our governor is?) and the Technology Commercialization Credit/Jobs Program, and to enhance the Digital Interactive Media Production Tax Credit (and just who gets this little tax break, a generous campaign contributor perhaps?)

These programs are critical tools that are working and helping us to bring thousands of jobs to Louisiana (and just where would these alleged jobs be, on the governor’s staff?) so our people can find rewarding careers. For the announcement, we were joined by executives from three companies – Baton Rouge Coca-Cola Bottling Company, Globalstar and Esperance – who cited the tax credits as helping to convince them to create jobs in Louisiana (Wow, I’m underwhelmed. But wait! Coca Cola no longer makes those glass bottles that we used to redeem for 2 cents each. Well, there goes that job.) These economic development programs are at work across the state helping us create jobs (again, just where are these jobs?) and we must extend and enhance them to create even more opportunity for our people (Of course.)

We also announced this week that we are protecting and fully funding the K-12 education formula. Additionally, we proposed a student-based budgeting pilot program that will help improve student achievement. As I told the Monroe News-Star, we will fight attempts to cut K-12 funding and continue to look for innovative ways to educate our kids.

This week we also traveled to Minden where we broke ground at the future site of Northwest Louisiana Technical College’s new campus. As I told the Shreveport Times, this new campus is critical because it’s all about creating jobs (maybe that will offset your being all about destroying jobs, careers and lives) and we want Louisiana to have the best-trained workforce in the country (Best trained, least employed. Cool.)

Finally, on Valentine’s Day, we were honored to host a reception for Louisiana’s Longest Married Couple. As the New Orleans Times-Picayune reported (He obviously thinks that by quoting these publications, they will be less critical of him—and it seems to be working!), Dorothy and Ralph Richards of Slidell are just shy of celebrating their 81st wedding anniversary. (And it was obviously through the efforts of the governor’s office and the Baton Rouge Business Report that this couple (a) lived long lives and (b) stayed together so long.)

Sincerely,

Little Governor Bobby

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What is LED hiding from state auditors?

Posted in Auditor, Economy, Governor's Office, Public Records, Transparency on March 16, 2011| 1 Comment »

It’s one thing when a news reporter encounters resistance from a state agency in obtaining public records. It’s quite another when the legislative auditor’s office cannot get its hands on crucial documents when conducting an audit of that agency.

Yet, that’s precisely what happened with the “most ethical, most transparent administration” when state auditors tried to examine the Discretionary Incentive Programs of the Louisiana Department of Economic Development (LED).

The audit report focused on three discretionary incentive programs of LED: Mega Project Development (Mega Fund), Rapid Response Fund (RRF), and the Economic Development Award Program (EDAP)/Economic Development Loan Program (EDLOP).

The Mega Fund is a special fund created to fund large-scale economic development projects to secure the creation or retention of jobs.

The RRF is also a special fund created within the State Treasury for the immediate funding of economic development projects that may be necessary to secure the creation or retention of jobs. RRF project funding requires the approval of the governor and the LED.

EDAP’s purpose is to finance publicly-owned infrastructure for business development projects that require state assistance. EDLOP is a program that provides loans for site and/or infrastructure improvements for projects. Its purpose is to assist in financing privately-owned property and improvements to promote economic development.

The audit report did not cite any financial irregularities, but five pages into the report the problem of obtaining needed documents from LED was addressed.

“R.S. 24:513(I) states that the legislative auditor’s authority to audit extends to all documents, records, and files, whether confidential or otherwise,” the report said. “However, throughout the audit, LED resisted fulfilling some of our document requests and never gave us complete, unfettered access to all documentation. For example, LED reviewed files for all three programs before allowing us to see them. For RRF and Mega Fund files, LED would not provide some of its internal analyses used in decision-making processes concerning whether to offer awards to specific businesses.”

Auditors said two meetings were held with LED Secretary Stephen Moret. In addition, the legislative auditor sent two letters requesting unfettered access to records. “However, LED cited workload issues and legal concerns in not wanting to provide us with documents,” the report said. While unfettered access to records was never granted, LED eventually provided auditors with specific documents but only in response to specific questions on each objective, a practice auditors said limited the effectiveness of their audit. “For example, problems with programs may exist at LED that we were not able to identify because of lack of access to information in files. Also, we cannot know to what extent documentation furnished us may have been compromised or is incomplete,” auditors said in their report. “In addition, these access problems also affect the efficiency of our work as the audit took longer than planned.

“According to state law (R.S. 24:513), LED should furnish all documents and files requested by the legislative auditor. LED officials should work to ensure that LED provides requested information in a timely manner when requested by the legislative auditor,” the report said.

Moret, the $320,000-a-year LED secretary, said in his response to the report that requested information should be provided but he did so with a caveat: “LED agrees that it should provide requested information, including documents and files, in a timely manner when requested by the legislative auditor in accordance with state law, including…constitutional separation of powers, and lawful privileges, as recognized in Kyle v. Louisiana Public Service Commission (LPSC).”

In that case the Public Service Commission withheld documents from state auditors in 2003 until documents could be reviewed “to determine whether or not they contained privileged communications,” Moret said. “This action taken by the commission’s counsel was reasonable, and probably required. Our review of the cases leaves no doubt that the LPSC has the right to assert both the attorney-client and the deliberative process privileges to prevent access to its records.”

Moret added that LED “acted per state law in providing requested information to the legislative auditor for this audit, and made it a priority to provide information to the legislative auditor as quickly as possible. Specifically, LED worked diligently to provide the legislative auditor with files on over 40 EDAP/EDLOP, Mega Fund, and Rapid Response projects identified as part of the audit.

“In summary,” Moret said, “the legislative auditor had access to all pertinent LED documents and a detailed body of publicly available information for the projects included in its audit. LED worked to ensure that the files were made available to the audit team in a timely manner,” he said.

The furor might well mean little were it not for Gov. Bobby Jindal’s repeated insistence at fundraisers throughout the U.S. that he has created the most transparent administration in the nation and that he has strengthened the state’s ethics laws.

The otherwise obscure controversy might give one pause to wonder what it is the administration does not want the legislative auditor—or the public—to know. How sensitive can economic development efforts really be, after all?

In fact, the LED web page touts what it considers to be three major reasons for an industry or business to relocate to Louisiana and one of those is that the state is “First in ethics disclosure laws.”

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Socialism’s economic effects depend on your perspective

Posted in Economy, Taxes, Transparency on March 11, 2011| 2 Comments »

By John Sachs
Guest Columnist

Is socialism good or bad? Let me give you something to think about. My answer to that question is this: it depends on who benefits from it.

There are those folks who say that socialism in any form is always bad because it is communism in its infancy.

Next, they say that almost all government programs should be privatized and administered by and for the benefit of a capitalistic, free enterprise system rather than for the general population.

Next, they say that any government regulation of free markets serves only to advance communism and that it restricts the effectiveness of any benefits to be derived from unfettered capitalism. Now hold on to that thought as I’m coming back to it.

Do you think that these folks really mean that all socialism is bad and even evil? Do you think that they really want government totally out of the free market system? The answer is a resounding NO. Then when do these same pure free enterprise advocates find themselves solidly in favor of socialism? When do they cry out FOR rather than against “socialist” programs?

We only have to look back to 2008 and the $700 billion dollar bailout of Wall Street to see a perfect example of free enterprise advocates praising socialism. When we 300 million middle-class American citizens bailed out the greedy, incompetent, scions of Wall Street, none of them complained of socialism. Certainly not! When the masses of taxpayers were rescuing the financial industry from crushing losses created by the free enterprise system, that was just fine and dandy. Socialism, for that purpose worked perfectly—for the super wealthy.

Skip forward only one year to 2009 when Wall Street had been restored to comparatively good health by the massive infusion of government capital. What did Wall Street say and do then? They said for the government to get out of their way and let them manage their industry as they saw fit. In addition, (are you ready for this?) they paid themselves billions in bonuses with the taxpayer rescue funds as though they had done something to deserve it. That defies not only logic, but also defies understanding how the American public —Republicans, Democrats, and Independents alike– could stand aside and allow this to happen.

How could 99% of American taxpayers accept this? How could our elected representatives be allowed to do this to us so they can get personal re-election donations from the super wealthy? Why haven’t we en mass recalled or impeached or better yet imprisoned (in one of their own privatized hellhole prisons) each and every official responsible for allowing this to happen? It just defies logic and understanding. Yet the unthinking American public buys into the lies we are fed as to why we should absorb capitalism’s losses and applaud those officials who caused it. To socialize Wall Street’s losses but privatize their gains just won’t cut it with me. Does it with you?

If Wall Street is too far away for you to relate to, look at Farmerville. $50 million rightfully belonging to Louisiana taxpayers went to bail out the private enterprise poultry plant there. And another $11 million in federal aid bailed out the chicken production folks. If this isn’t socialism, what is it?

The next time you hear or mistakenly think that socialism or socialistic programs or government-run programs are bad, remember the examples mentioned above. Your view of socialism as to whether it’s good or evil really depends on who benefits. That sword cuts both ways. Both the goose and the gander must be allowed or denied its benefits equally.

Do you think this topic is important? If not, then you had better ask yourself why the people of Tunisia, Libya , Egypt, Yemen, Bahrain, Iran, etc. are demanding back what is rightfully theirs but was stolen by their respective dictators and their top1% super-wealthy supporters. If by the use of purchased political favoritism and deceit, the super-wealthy top 1% of Americans continue to gain ownership of the assets rightfully belonging to the other 99% of us, then we in America are heading down the path that Egypt took.

In case you are wondering how close you are from being included in the top 1% super-wealthy in our country, understand If you don’t earn an average $2,700 per hour or $5.4 million per year, you aren’t there yet. Thus, when the federal government or a state governor and legislature sell national or state assets or privatize almost all public services, you are being robbed while at the same time you are paying for the “privilege.”

Join in demanding a stop to the privatizing of those assets that belong to you and the others of us in the 99% category.

Hurry! Congress is now in session and the Louisiana legislature convenes April 25.

So are you against socialism? Is it inherently evil? Funny thing isn’t it, that the answer is not a resounding YES. Your answer must depend upon whether or not YOU benefit. If your government gives you special benefits denied to the rest of us, then stop calling the government programs that help the rest of us “socialistic” or you are a hypocrite. The only solution is for you to refuse to accept any assistance of any kind from your local, state and federal governments. In my book, you’ll be an okay kind of guy. But a hypocrite? Not acceptable. Not at all.

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Too Big to Fail

Posted in Business, Economy on February 4, 2011| Leave a Comment »

By John Sachs
Guest Columnist

In his book Too Big To Fail, Andrew Sorkin provides the reader a blow-by-blow account of the words, actions, and intrigue surrounding the financial crisis in the fall of 2008. The book does not delve into the financial products and practices that led to the crisis. Sorkin has left that task to others, including me, as you will see in the text below. He deals extensively with the personalities of the participants who managed the crisis by providing details as to what each one said and did in the heat of battle. This particular battle, like all battles, revealed the real measure of each man or woman.

Keeping up with the characters, the institutions they represented, and their responsibilities was confusing, or at least it was to me. Nevertheless, I found that if I kept reading and “listening” to each character, the real story unfolded. And it is a story that reveals a truth about all of us: among us, there are good and intelligent folks — and then there are those who are not so good or intelligent.

The following is my brief sketch of the origins of the financial crisis.

The crisis had been festering for a number of years. For more details, I recommend that you read Wikipedia’s account of FNMA and FHLMC, or Fannie Mae and Freddie Mac, as they are more commonly known.

Unlike GNMA (Ginnie Mae) which provides a secondary market financing source only for federally insured mortgages, Fannie and Freddie were free to provide mortgage financing funds to mortgage loan originators through the purchase of, among others, pools of risky subprime loans. And as many of you know, unscrupulous lenders were making home loans to borrowers who had little or no chance of repaying those loans unless their homes appreciated — and/or the rates on their adjustable rate mortgages stayed at or lower than the rate at origination.

Those subprime loans were combined (pooled) to form what is known as securitized loan packages. Then those securities were sold in the financial marketplace to the public: folks like you and me and our 401(k) retirement accounts, banks, mutual funds, etc.

Then along came 2006 and 2007 when many adjustable rate mortgages repriced at significantly higher rates than the borrowers could afford. That led to foreclosures. A significant number of foreclosures created a glut of available housing, and the laws of supply and demand came into play. Housing values fell. When values fell, those homeowners who needed or wanted to sell their homes found that the value of those homes had fallen below the amount they still owed on their mortgages.

Being “under water” led to more foreclosures, more of a housing glut, and then even lower home values. The line of dominos began to fall.

The collapse in the housing market then led to a collapse in the value of those securities that had as their basis the value of the pools of mortgages. Matters continued from bad to worse not only in actual home values, but also for investors who owned the securitized mortgages on those homes — as well as those who had insured the repayment of the loans. It was huge. It was unprecedented. And it continues to this day even though the federal government has come to the rescue of nearly everyone who was affected. The government’s involvement reduced a worldwide financial crisis to simply a terrible ongoing problem with which we continue to cope.

However, not everyone involved in the crisis was destroyed. Those folks not harmed had had the good judgment to recognize the risks associated with the fallacious assumptions that housing prices would always go up and that interest rates on home mortgages would always stay low. They had prudently managed their risks by not loading-up on risky, high-yield, mortgage-backed securities.

Those firms that did not get greedy and that managed their risks wisely included Bank of America, Wells Fargo, JP Morgan, and Goldman Sachs. Those that bet the bank and lost included Bear Stearns, Lehman Brothers, Merrill Lynch, Wachovia, and AIG.

This brings us to the point I wish to make and that is that all too often the virtuous suffer because of the faults of others. How so, you may ask? In this instance, the global financial markets are dominated by only a very few institutions. As much as we wish that they themselves could police this critical marketplace, they cannot and will not — if for no other reason than they are housed in and regulated by numerous countries, and in some instances managed by greedy and/or incompetent managers who cannot be controlled by others.

Then there is the matter of associated risk and its management. We know now that some financial products are too complex and involve significant risk for even the most sophisticated investors. Such products should be placed off limits to other than avowed gamblers and even then only in manageable amounts. No regulated investment banker, broker dealer, or government entity should be allowed to involve itself in such risky product markets.

In conclusion, where “Too Big To Fail” is a consideration, regulation must exist in order to manage the risks that affect everyone. We, the prudent masses, should never again be asked to bail out the greedy and incompetent few.

Like Louisiana Music? Be sure to check out Louisiana Rocks! The True Genesis of Rock & Roll! This book is the only complete history of all genres of Louisiana rock and roll. Re-live all those great old songs that used to play late nights on WTIX, WNOE, KAAY. Learn about all the great artists like Elvis, Johnny Cash, Jim Reeves, D.J. Fontana, Floyd Cramer, and Hank Williams who got their start on the Louisiana Hayride. Check your local bookstore or log onto http://www.louisianarockstomaswell.com.

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