Posted on Friday, December 21 2007 by Heather Brandon
Among many items addressed at yesterday’s marathon Springfield Finance Control Board meeting, the city has initiated a process for two significant lawsuits.
One suit represents a major grievance against the city’s sole cable provider, Comcast, for passing on disallowed charges to city customers. The other suit, which has not yet been filed, is against Merrill Lynch (details forthcoming) for mishandling the city’s free cash reserves, investing in illegal securities collateralized by sub-prime mortgages.
When the city entered into its last ten-year contract with Comcast, Mayor Charles Ryan said during the meeting yesterday, certain costs were not supposed to pass through to city customers. In the intervening years, Ryan indicated, Comcast instead charged more than is allowed.
Efforts to work with the cable company, Ryan said, did not yield cooperation or adherence to a prior agreement.
A roughly $11 million lawsuit—which has not yet been filed—executive director Stephen Lisauskas (pictured) told the board, could yield more than $30 million in triple damages. More information will be shared as it becomes available, including any litigation documents ready to be made public.
The suit against Merrill Lynch relates to a loss of roughly ten percent from the value of the city’s cash reserves, an amount equivalent to about $12 million, board chairman Christopher Gabrieli (pictured) said during yesterday’s meeting. As of November 30, Lisauskas said today, “The investment value had dropped $12.3 million from the original $13.9 million.”
Mayor Ryan said that company representatives essentially lied about the nature of the investment of public monies in illegal securities backed by sub-prime mortgages.
Ordinarily, Ryan emphasized, public funds are handled in a conservative manner and there are laws regulating how they can be invested. Efforts to confront Merrill Lynch about what appeared to be illegal investment resulted in what amounted to denials that there was any wrongdoing, although Ryan indicated that there is evidence that the company knew full well about the limits of the law in how to handle the investments.
Ryan blamed “greed” as the foundation of the problem, saying that the people in charge of illegal investments and sub-prime mortgage scandals get annual bonuses that are “greater than the salaries of all the people in this room combined,” and that they only want more and more money.
Similar problems are happening elsewhere, board members told the audience. Nearly $150 million in a state treasurer’s fund was mishandled in the same manner.
Ryan indicated that the public will be hearing a lot more about this type of fiscal crisis in the handling of public monies, devolving from the national predatory lending and sub-prime mortgage fiasco, and related domino-effect concerns.