Column in Harrisburg Paper: Corruption Needs to be Rooted Out of PA. Political System

[JPZenger]

Harrisburg formed an Authority to build and run a huge trash incinerator, along with other projects. The expansion was funded with huge amounts of debt, and went terribly wrong. The plant has had huge financial losses, and debt payments will be missed. These losses are a major factor in the City of Harrisburg tottering on the edge of bankruptcy. Harrisburg would have declared bankruptcy earlier this year, except the Republicans rushed a law through the Legislature that prohibited it.

David Unkovic was the court-appointed Receiver to sort out this mess. A forensic audit was completed that pointed the blame at many sources - including conflicts of interest, the hiring of a contractor who was not fully qualified, and highly paid lawyers, financing advisors and consultants who had financial self-interests in keeping the doomed project going.

When Unkovic started saying that he wanted to use his powers to go after some of the people responsible, he says that the Corbett administration called him into a meeting and hinted to him that Corbett was about to fire him. Unkovic then quit.

Here are excerpts of the column he just published in the Harrisburg Patriot-News:

http://www.pennlive.com/editorials/index.ssf/2012/06/david_unkovic_disdain_for_the.html

"The city would not be in its current dire financial situation if Harrisburg officials had acted more responsibly. Similarly, if the lawyers, financial advisers and financial institutions had given the city better advice, the city would not be in its dire financial situation...the worst of its problems — the mountain of issued debt combined with its huge structural operating deficit — could have been avoided...

Many in the capital have treated the law simply as an “object” or a “hurdle” to be manipulated as necessary to accomplish a political goal. I believe the disdain for the law is so embedded in Harrisburg’s political culture that it constitutes a very insidious form of corruption. The tentacles of this corruption stretch into many corners. And this degree of corruption is usually difficult for the public to perceive — such tentacles are often hidden from the average citizens.

..The public could not have understood there was a highly sophisticated, multi-hundred million dollar debt scheme going on, as shown now in the forensic audit. They did not know about — much less could have understood — the inappropriateness of the interest rate swaps, as revealed now in the forensic audit.

It is fundamentally unfair to inflict the nightmarish results of these decisions on the backs of the citizens of Harrisburg. The corruption that ended up financially strangling Harrisburg needs to be rooted out of our democracy. There must be a renewed respect for the law in Harrisburg and across PA."

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A related issue involves interest rate swaps. Many school districts, counties, cities and other jurisdictions in Pa. were scammed into agreeing to these deals. They involved high risk gambling with tax dollars, and the payment of huge fees to the people who put together the deals. Many went horribly wrong, and tens of millions of dollars in local tax revenues had to be paid to get the local governments out of the deals.

The legislature allowed this gambling of tax dollars in 2003. Some of the worst losses were when Street was Mayor of Philadelphia:

http://pennbpc.org/bank-swap-deals-continue-cost-philadelphia-city-school-district

"Swap deals negotiated with banks such as Wells Fargo, Morgan Stanley and Goldman Sachs have cost the city and school district $331 million in net interest payments and cancellation fees, according to the report, "Too Big to Trust? Banks, Schools and the Ongoing Problem of Interest Rate Swaps.” If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments"

The Bethlehem Area School District had to pay $12.3 million to terminate a swap deal that the previous school board members had made with JP Morgan Chase.

http://online.wsj.com/article/SB10001424052748703775504575135930211329798.html

[Curmudgeoness]

1. Good luck with getting corruption out of the equation in PA.

This is the only way any of them know how to operate. It is so ingrained in PA politics that it would take a revolution to get it out of our government. But I lived in Texas for years, and it was the same there too---so I can only assume that corruption and politics cannot be separated.

Speaking of interest rate swaps, those were being done in all areas of our local government a few years back. All everyone could say was how great they were---and I remained skeptical. How is it that some dumbass regular citizen knows more than the people who are running our government???? Funny, when I think about it, I have heard nothing about them for years---if they worked to save all the money we were promised is not talked about. I will have to look into it.

[HopeHoops]

2. I didn't get to that article yet. One of the kittens was "helping me read" this morning.