Once you slog through the details it’s just gets more disturbing. Springfield basically gave $50 million of its hard-saved money to Merrill Lynch in 2006 for safe short term investing. From April – June 2007 Merrill Lynch invested about $14 mil of the cash in complex securities comprised of subprime mortgages. Apparently, Springfield did not get an actual description of the investments when they made them. By August the $14 million had lost 25% of its value, by Sept. it had lost 50% of its value- $7 million. It’s wasn’t until late November, when the investment was worth on paper $1.3 paper (but, actually, impossible to sell) that anybody thought to actually ask for a written explanation of what they had bought.
The next aspect of this story came to light about a month after word first broke about the disastrous investment, when City Council Vice President James Ferrara went to the Globe. It seems that Lisauskas had known Kipper for a long time. Details are somewhat sketchy (to say the least), but what is out is that the Executive Director and the broker have known each other at least since ’96-’99, when Lisauskas worked with Kipper’s wife at the New York State Comptrollers office in Albany. Anyway, here are the only initial (and only) newspaper stories about the relationship:
As this story broke, Lisauskas, Gabrieli, and the Control Board basically said they couldn’t comment because it would hurt the efforts to get the money back and anybody who did ask questions was jeopardizing chances getting it back. Shortly after Merrill Lynch decided to give the money back and fired Kipper, as well as another Merrill Lynch broker, Manuel Choy. A day or so later Secretary of State Bill Galvin filed securities fraud charges against Kipper, Choy, and Merrill Lynch.
Galvin’s suit, and especially the first few pages of the exhibits are extremely disturbing. I think Galvin is one of the few politicians who deserve praise- both for acting quickly and for making his filing easily available on the internet, open government is good. Galvin’s evidence starts off with several very chummy emails between Lisauskas and Kipper- emails that contained inside information about city operations and were sent at the time leading up to the awarding of this no-bid contract. Here is my favorite on p.2:
Sent: Wednesday, June 21, 2006, 12:12 A.M.
To: Kipper, Carl (Albany, NY)
I’ll give you a call on my way to work in the AM. Springfield recently re-did their investment portfolio to greatly increase their return on cash invested. Than will mean one of two things- they are married to their plans and won’t think about changing, or they are in the mood to pursue returns and would be delighted to pursue options.
I’m going to talk to CFO tomorrow about the work we did in Natick to see if they want to talk with the short-term investment specialist we worked who gave us very personal attention and increased our returns. Will let you know how it goes.
Yikes. What really bothers me the most about this is that Lisauskas refers to himself and Kipper and “we” and refers to Springfield as “they.” Lisauskas is apparently referring to when he encourage the town treasurer at his last job (as assistant town administrator in Natick) to invest town money with Kipper. Neither what happened leading up to the investments, not the full scope of the relationship between these two men has ever full been explained. Read all the gory details below, and don’t forget- Lisauskas is still running the city:
I’ve always generally like Chris Gabrieli, even voted for him in 2006. And like many people my opinion of him only grew after his classy display in attending Deval’s primary victory party and endorsing him for the general then and there. But the fact that he is continuing to let Lisauskas handle city finances, when Lisauskas was basically acting as a Merrill Lynch sales agent while collecting a paycheck to run Springfield and still has not revealed what happened- it just looks bizarre, weak, and really fishy. Sadly, Gabrieli looks more and more like he’s trying to sweep this under the rug- it feels like to avoid embarrassment. If anything else does come out, that strategy will badly backfire. At the very least, Gabrieli has been spectacularly tone deaf, and even caught flack for moderating at a conference sponsored by Merrill Lynch Feb. 7, right in the middle of the scandal!
The overall silence by most of the Springfield political establishment and the local paper has been deafening and pathetic IMHO. Fortunately the alternative media has picked up some of the slack. As far one can glean on the web, the only two elected officials who seem to be bothered enough by what happened to actually want an explanation are Ferrara, whose latest efforts were ignored by the paper, but were well chronicled on a local blog here:
And State Senator Steve Buoniconti (D- West Springfield), who can be heard getting fired up about the unanswered questions on a local radio show (preserved through youtube):
It’s sad what’s going on in Springfield. This situation needs more answers; it has definitely not gotten enough attention for the large dollar amounts involved and the total overall shadiness. Long term Mass politics however, Gabrieli’s failure to act could be a major blow to his credibility, and least to anyone who has followed this, and a big problem for him- assuming he wants to run for office again.