Corruption and the Fiscal Stimulus; "Today I have a sense of deja vu" ... by gimleteye

"Today I have a sense of deja vu" US Attorney R. Alexander Acosta told reporters during the press conference detailing charges against GOP powerhouse Mary McCarty, a county commissioner in Palm Beach who will join former county commissioners in prison, Warren Newell and Tony Masilotti. In a post earlier this week on the conviction and sentencing of Miami Dade GOP powerhouse campaign contributors, the de Cespedes brothers, I expanded on information brought to light by The Miami Herald; Carlos de Cespedes was one of the signers of the 1998 letter by a group of powerful Hispanic business leaders, assembled under the banner of Mesa Rodonda. The 1998 letter was meant to be a rallying cry in Miami against corruption and listed, among its signers, names that are well-known to the continual pressure by special interests against government regulation.

The intervening decade between 1998 and 2008, marked by the biggest asset bubble in modern US history, predicts exactly what will happen if a trillion dollar fiscal stimulus plan is filtered to the states without adequate controls.

As the most severe economic crisis since the Depression unfolds, it is clear that our nation has been through one of the most excessive periods of corporate greed in US history, driven by individuals hiding behind the power of corporations. Some are going or have gone to jail: but only a very, very few.

The point here is not to be shaking fists or insults. The Obama administration has to factor adequate accounting and controls based on what happened in light of the trillions of taxpayer dollars that are going to be raining down from the US Treasury to the states and local jurisdictions, like Florida's fast growing counties where corruption is endemic.

Yesterday the New York Times, above the fold front page story dug at the heart of the issue, in: "Nationwide Inquiry on Bids for Municipal Bonds." (New York Times, January 9, 2009) The Times gets to the point quickly, "The possibility of a vast web of collusion would be sobering in any case, but the issue is of particular concern now, as Congress and the incoming Obama administration prepare a big fiscal stimulus package that may spawn infrastructure projects carried out and financed at the state and local level. States and cities issue bonds to raise money to pay for things like schools and road construction, and are supposed to follow strict rules on how the proceeds are handled for investors to receive a tax exemption on the interest."

The packaging of infrastructure projects into bondable financial events, through which commissions and fees can be scraped into personal wealth and political power, has a long history. While still in the governor's office, Jeb Bush tried to tie in a division of Enron, Azurix, into the business of "privatizing" Florida's water management infrastructure. Only the collapse of Enron prevented that from moving forward, although it is rumored that the idea is alive and well in Tallahassee. On leaving office, Bush became a "consultant" to one of the top municipal bond firms in the nation, Lehman Brothers, now destroyed in the financial crisis; a company that was manovering with the legislature to privatize the operations of the state lottery system.

The Palm Beach Post story today outlines likely charges against Kevin McCarty, formerly a high official with the South Florida Water Management District in addition to being a bond trader: "Kevin McCarty, a Delray Beach bond trader and former South Florida water manager, also is expected to plead guilty and could face as much as three years in prison. His attorney, Richard Lubin, could not be reached Friday. The McCartys' prosecutions may not be the last of the repercussions for Palm Beach County's latest political scandal, part of a string that already has sent four politicians to federal prison since 2006. In Delray Beach, past and current city leaders called for an internal investigation of the city's financial practices in light of the prosecutors' allegations. They included accusations that Kevin McCarty, with help from city staff and consultants, successfully pressured the city to award bond work to his firm at the time, Bear Stearns. At the county commission, Chairman Jeff Koons said he wants his colleagues to review their system for awarding lucrative bond deals to underwriting firms. County Clerk and Comptroller Sharon Bock called on state legislators to reform the system, which allows local governments to pick firms without any objective standards or competitive bids."

Many of the financial firms in the municipal bond business have already received huge influxes of taxpayer dollars. According to the Congressional oversight committee reviewing the disbursement of federal money, auditing standards and controls-- to monitor where the money is going-- are virtually absent.

We don't need to have any more "deja vu's" with political corruption and the influence of money. What we need is a first rate civil service and audit controls to make sure that there is no influence peddling-- which the municipal bond business has surely done in Florida, and especially with respect to water infrastructure.