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The brick wall and another Fahner angle

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Illinois

* The Civic Committee of the Commercial Club of Chicago is refusing comment on an apparent admission by its leader Ty Fahner that he and some club members lobbied ratings agencies to lower the state’s bond ratings…

An influential group of business executives is declining to comment on the possibility it helped to lower Illinois’ credit rating. But public employees’ unions are calling for an investigation. […]

But so far, there’s been no word of anyone following up on the unions’ calls for an investigation. And the Civic Committee isn’t commenting.

* Meanwhile, our esteemed commenter Wordslinger came up with another angle on this story. Ty Fahner is the former chairman of the Mayer Brown law firm and is currently listed as a partner.

But since September of 2011, Mayer Brown has been overseeing the state’s bond disclosures…

With close to $1 million in legal fees on the line, Chicago law firm Mayer Brown LLP beat out 17 other firms to win a hotly coveted job overseeing public disclosures on bond offerings by the state of Illinois over the next two years.

So, Illinois pays Mayer Brown a million bucks for bond work at the same time its former chairman and partner essentially admits that he tried to jaw down the state’s bond rating?

What the heck?

posted by Rich Miller
Monday, Jul 29, 13 @ 10:18 am

Comments

Smart firm with lots of internal and external oversight. Look to discover a “firewall” that’s a 100 feet thick. This isn’t their first rodeo.

Comment by A guy... Monday, Jul 29, 13 @ 10:25 am
Will someone please call the ARDC?

Comment by Soccermom Monday, Jul 29, 13 @ 10:28 am
I may be old-fashioned. Whether or not they had a “firewall” in place, this stinks.

Comment by Keyrock Monday, Jul 29, 13 @ 10:29 am
Republicans are such hypocrites, always playing both sides of the fence. This is a win-win for Fahner. Lowering the credit rating, applies more pressure to get pension reform done, increases the returns for institutional investors (some of which are members of the Civic Club I’m sure). Oh, and by the way, Mayer Brown (firm with historically strong GOP ties) profits from the actual issuance bonds.

Bruce Rauner made recent comments on freezing state contributions to the State Retirement Systems until something drastic is done on pension reform, yet the private equity firm he retired from has managed tens of millions of dollars from the Illinois retirement systems over the years.

I don’t know how anyone with such obvious conflicts of interests be taken serious when speaking on such issues.

Comment by Dirt Diver Monday, Jul 29, 13 @ 10:32 am
Republicans are such hypocrites, always playing both sides of the fence.

Yeah because Democrats never play both sides of the fence… Just ask a state retiree about that because we know the Democrats have been such great defenders of the pension guarantees…

Comment by OneMan Monday, Jul 29, 13 @ 10:38 am
what the what?!? this whole thing just stinks.

Comment by Amalia Monday, Jul 29, 13 @ 10:39 am
Wow.

Just a side factoid, Bill Daley was a partner at Mayer Brown back in the 90’s.

Comment by too obvious Monday, Jul 29, 13 @ 10:40 am
Who’s running our great state anyway?

Comment by JC Monday, Jul 29, 13 @ 10:40 am
- A guy… - Monday, Jul 29, 13 @ 10:25 am:

Smart firm with lots of internal and external oversight. Look to discover a “firewall” that’s a 100 feet thick. This isn’t their first rodeo.

And you know this how? Personal knowledge or experience or just some fanciful notion that they are smart just because they are a bunch of suits in an uptown office. Enron, Morgan-Stanley and a host of other real examples would suggest that sometimes it just isn’t so. From personal experience….these guys are average at best and have a long history to verify it. Lets actually investigate this little faux pad and see how thick that “firewall” is. I suspect it isn’t really a firewall at all.

Comment by Old and In The Way Monday, Jul 29, 13 @ 10:42 am
At minimum, a complaint with the ARDC should be filed.

Comment by Sherlock Monday, Jul 29, 13 @ 10:49 am
tinkering with the State’s bond ratings to benefit your company is criminal- high flying and on a scale most thieves couldn’t conceive- but no less criminal than selling licenses or squeezing people for contributions.

Comment by Anon Monday, Jul 29, 13 @ 10:54 am
Hello ARDC. RULE 1.7: CONFLICT OF INTEREST: CURRENT CLIENTS

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

Who doles out these State bond counsel contracts? Mayer, Brown should be booted. That’ll cause Ty more grief than an investigation.

Comment by anon Monday, Jul 29, 13 @ 11:01 am
Listen to Old and in the Way.

These “firewalls” aren’t made of real stuff, obviously. They’re made of policies and people and are as good as their weakest link.

Comment by Arthur Andersen Monday, Jul 29, 13 @ 11:02 am
Old, you may be Old, but you’re certainly not in the way. Nice to see you comment in between your business trips.

Comment by Norseman Monday, Jul 29, 13 @ 11:07 am
To pile on, Mayer Brown was not even a player in the muni bond world until 2003 when they and another Chicago firm, Pugh Jones and Johnson, landed the business for the — ta-da! — $10 billion pension obligation bond.

–Pugh, Jones & Johnson and Mayer, Brown, Rowe and Maw were new entrants in the top 10 list. A $10 billion bond issue by the state of Illinois propelled the two firms into fifth and sixth place, respectively. Before 2003, both firms were not even in the top 50.–

Guess who the chair of Mayer Brown was in 2003? I’ll give you a hint — it rhymes with “Ty.”

Google is a wonderful thing. You ask it questions, it gives you answers.

Scroll about halfway down for top bond counsels.

http://www.publicbonds.org/major_players/counsel.htm

Comment by wordslinger Monday, Jul 29, 13 @ 11:09 am
Just wondering if that Mayer Brown LLC contract with the State has a Fiduciary Commitment clause in it.

Comment by WhoKnew Monday, Jul 29, 13 @ 11:10 am
Illinois Attorney Registration & Disciplinary Commission: “How Do I Request an Investigation of an Attorney?”

– MrJM

Comment by MrJM Monday, Jul 29, 13 @ 11:13 am
JC…who’s running our state the same people running the U.S. government…bankers, lobbyists, financial gurus who all seem to get the rules written their way and when their gamble fails ask us to help them out….but when it means they have to come through on their promises that got our money to invest to tell us we have to tighten our belts

Comment by illinifan Monday, Jul 29, 13 @ 11:15 am
Rich - sometimes my comments don’t get posted, and I don’t know why. Anyhow, here’s another angle on the Civvies efforts to downgrade state bonds. BMO and some of the other banks who steer Civic League also serve as bond underwriters for the state. When the state’s bonds get downgraded, underwriters make more money. If those banks on the Civic were in any involved in or supported the Civic’s efforts to downgrade state debt, they could be in big trouble indeed. Their obligation to the state as underwriters and trustees is to save the state money. I think Jacquie Collins’ Financial Institutions Committee should investigate. She”s one of the few legislators who has the courage and the independence to take on the banks.

Comment by chicagopublius Monday, Jul 29, 13 @ 11:21 am
One thing’s certain, this story will not be plastered on the Trib/Sun Times front pages. Today’s Sun Times front page has the Metra “Mess” on it. They don’t bite their own.

Comment by Grandson of Man Monday, Jul 29, 13 @ 11:26 am
Forget it, Jake, it’s Illinoistown.

Comment by MarkT Monday, Jul 29, 13 @ 11:31 am
Old and In the Way, now you’ve thrown down the gauntlet, I’ve come to my senses and realized I’m no match for your superior wit, experience and knowledge. But, lest, I’ll make a feeble attempt. M,B and P are not stupid. This is completely different than the banking crisis and the very boring and wrong comparison lacks any credence. Enron? Really? Their Bond Counsel area would needfully have a separation from Ty and would have had to from the outset. These types don’t have a sense of humor. They do what they do. I’m not an insider there, but I have worked as an adjunct to this industry and brokerages. My best answer is “we’ll see”. Everything should be investigated when there’s any question at all.

Comment by A guy... Monday, Jul 29, 13 @ 11:37 am
Oh boy, it’s been a bad week for Mayer Brown. First the story featuring them in New Republic that’s been covered all over the place and now this. http://www.newrepublic.com/article/113941/big-law-firms-trouble-when-money-dries Glad I’m not their PR person right now.

Comment by Ann Monday, Jul 29, 13 @ 11:38 am
Such an insular little group… Keep the common folk spinning thier wheels whilst the big boys bring home most of the bacon…I am sure there are other conflicts to be found in this arena…

Comment by Loop Lady Monday, Jul 29, 13 @ 11:40 am
Interesting.
Bond counsel usually avoids risk like the plague.
Good research Word!

Comment by Jake From Elwood Monday, Jul 29, 13 @ 11:43 am
Re @chicagopublius at 11:21:

Compare a list of IL bond underwriters like this one - http://www.purchase.state.il.us/ipb/IllinoisBID.nsf/frmBidDocFrameset?ReadForm&RefNum=22022081&DocID=E0592D0D544C2CC686257906006CBA5C&view=viewNoticesClosedByDate

to the list of Civic Committee members - http://www.civiccommittee.org/members

Lots of overlap.

Comment by Reality Check Monday, Jul 29, 13 @ 11:48 am
Reality Check, that’s quite an overlap. I sent the overlap to the governor’s budget office for a response. Stay tuned and thanks.

Comment by Rich Miller Monday, Jul 29, 13 @ 12:15 pm
–But, lest, I’ll make a feeble attempt. M,B and P are not stupid. –

Who said they’re stupid?

They’re cashing six-figure checks for state bond work while stabbing their client in the back.

Many adjectives other than stupid come to mind, but the rules of the house prevent me from using them.

The whole idea of outside bond counsel for a state GO bond issue is absurd, anyway. It’s the Vanilla of Vanilla, the Pinstripiest of Pinstripe Patronage.

There are complex public finance deals, but a state GO bond ain’t one of them. You should be able to pick up a form at Kinko’s that says “This is a state GO bond,” get it notarized and be done with it.

Same with “underwriting.” For last month’s $1.3 billion “negotiated” GO bond sale, a syndicate led by Wells Fargo took home $5.525 million in fees for an issue that was oversubscribed by a factor of nine and sold out 12 minutes after it hit the market.

What, exactly, are these guys getting paid for?

They’re highly compensated anachronisms from a time when the height of communications was the postman and the telegraph and transparency was dusty ledgers in some state office building basement.

Good work, though, if you can get it.

Comment by wordslinger Monday, Jul 29, 13 @ 12:45 pm
==Who’s running our great state anyway?==

No, Who’s on first.

Comment by Anon. Monday, Jul 29, 13 @ 12:47 pm
It seems timely that I ran across this PBS Newshour story today quoting a recent study that found that the rich, as well as those that deem themselves “rich”, exhibit higher levels of unethical behavior than the general population. To quote the reporter doing the story, “The rich are way more likely to exhibit characteristics that we would stereotypically associate with, say, *ssholes.” Pardon my French, but I thought the reporter’s comment was well stated.

Comment by kimocat Monday, Jul 29, 13 @ 12:55 pm
Reality Check, the gang’s all there, aren’t they?

And let’s not forget Farmer Bruce, a member in good standing who likes to take that 2% off the top investing employee pension funds (plus 20% of earnings).

They all take the cream right off the top, and complain others are getting fat on skim milk.

Comment by wordslinger Monday, Jul 29, 13 @ 12:56 pm
Is MB “firewall” the same one used to soak up state legal fees fighting remap?

Comment by CircularFiringSquad Monday, Jul 29, 13 @ 1:06 pm
A guy@1–I don’t understand your firewall argument. If a partner at Mayer, Brown does compensated bond work, that sum goes to the revenues of the firm as a whole. What kind of wall could prevent the entire firm from having a conflict of interest? None that I can see.

Comment by Quiet Sage Monday, Jul 29, 13 @ 1:19 pm
“I sent the overlap to the governor’s budget office for a response. Stay tuned and thanks.”

How much of a non-comment comment can the gov’s office make? watch and find out!

Comment by Dee Lay Monday, Jul 29, 13 @ 1:22 pm
Just imagine what a populist governor facing a tough reelection campaign might do with this kind of plutocratic back-stabbing…

– MrJM

Comment by MrJM Monday, Jul 29, 13 @ 1:23 pm
This sure seems to be past the point where the Trib, Sun-Times, et al., can continue to ignore the myriad questions raised by Ty’s admission on video.

Granted, it doesn’t just write itself - a la Madigan and Metra, etc. But how difficult is this?

“The head of a group representing the state’s most powerful and influential business leaders admitted on camera that he and some of the group’s other members actively worked to damage the state’s credit rating.

“The state’s rating did in fact plummet during the period of time in which these executives reportedly lobbied the agencies that determine the state’s credit rating, and that reduced rating put taxpayers on the hook for millions in additional interest to support the state’s borrowing.

“The executives’ lobbying to downgrade the state’s credit rating also raises questions about whether these executives or other members of their group, which comprises a who’s who of the state’s top investors, enriched themselves or their peers by compelling the state to pay more to investors loaning the state money.

“Additionally, same executive who admitted on video that he and others worked to downgrade the state’s credit rating, thereby potentially driving up the state’s interest payments and boosting the fees it pays to underwriters, is a partner with the law firm that the state retains to manage its bond sales.”

And on and on …

Seriously, the apparently lack of interest by others in the media (save WTTW and WUIS) is appalling. And have we seen a single statement from any elected official or any interested party other than labor?

As Rich pointed out in his column, the implications of this are far more vast and damaging than any patronage request.

Comment by Raymond Monday, Jul 29, 13 @ 1:59 pm
=Yeah because Democrats never play both sides of the fence… Just ask a state retiree about that because we know the Democrats have been such great defenders of the pension guarantees=

I agree that the Illinois Democrats are not perfect and they certainly have their own issues (appetite for spending for one). I also have major issues with Dem’s that rec’d contributions from labor groups, only to shortly thereafter actively support pension reform. The one thing I will say is that the Illinois Republican party is more willing to support harsher benefit cuts than the Democrats. If you think the Illinois GOP leaders are going to be better defenders of the Pension Diminishment clause, then you are going to be very disappointed.

Comment by Dirt Diver Monday, Jul 29, 13 @ 2:08 pm
Not sure why more people aren’t infuriated by this, other than the fact that the media conspires to keep it a secret (gee, why is that?). Pension fund participants have every right to outrage over the state’s lack of contributions and now the manipulation by the big boys. It’s time for taxpayers (who can seem to find outrage over the talk of increased taxation to replenish the pension funds that were raided) to find some backbone to care about this newest affront which will help to dip into their pockets. What has to happen to get the attention focused on the scammers in this state?

Comment by JC Monday, Jul 29, 13 @ 2:12 pm
Raymond @ 1:59 pm: You forgot to mention that Ty also spoke glowingly of specific cases of CC leaders telling politicians who came begging hat in hand for money that they wouldn’t get any until they were in line with fixing the states fiscal problem by cutting middle class retiree pensions. Vote my way or “get the hell out of my office”. Ref: Fahner video 24:26 to 26:01

Isnt this evidence of quid pro quo bribery?

I have often heard of politicians claiming campaign donations are not bribes, they don’t impact their votes on political positions, but this story from the donors side certainly doesn’t seem to square with that claim.

And still no reaction from any of the state’s elected politicians on all this. Makes you wonder just how toxic this is to raising big business campaign contributions.

Comment by Cod Monday, Jul 29, 13 @ 3:27 pm
If I was a teacher or state worker I would be demanding that my retirement system dismiss the investment firms that are being paid to invest retirement money or pay less in fees if they are members of the Commercial Club. Oh yea, the investment firms have a contract, not protected by the constitution, but an agreement. So why not change the agreement?

Comment by disgusted Monday, Jul 29, 13 @ 3:31 pm
And yet another public figure uses a microphone in a confined room, with tinkling glasses and tableware in the background, seemingly unaware of the world around him speaking casually and comfortably of an issue widely discussed within his circle of “friends” and is now asking, “what did I say that was so wrong?”

Does anyone think the speaker will now claim to have not said what he said?

The scary thing, these really are smart people.

Comment by nothin's easy Monday, Jul 29, 13 @ 4:04 pm
IMO, they are very wealthy, well-connected people. And they have an agenda that benefits them first and foremost, which makes them very dangerous people. But I would never accuse them all of being smart. I say that because given their connections, I have to believe they have played a big role in getting us in the mess we are in today as a nation, and as a state.

Comment by Decaf Coffee Party Monday, Jul 29, 13 @ 4:14 pm
The Metra Scandal may cost taxpayers hundreds of thousands.
The Bond Rating Scandal may cost us hundreds of millions.

“We have always known that heedless self interest was bad morals, we now know that it is bad economics.” ― Franklin D. Roosevelt

Comment by Ruby Monday, Jul 29, 13 @ 5:39 pm
Ruby: A big +1. The one percenters are ruining our country, and many middle class people still vote for the Republicans who enable this destruction.

Comment by wishbone Monday, Jul 29, 13 @ 8:07 pm
Cod he did admit that his members committed quid pro quo bribery. You can express you displeasure over a vote before of after with contributions but you cannot say I will or will not give you money for a specific vote or act like Rod did with the Childrens hospital. I would say Ty gave the feds probable cause to get phone records emails and so on ……

Comment by RNUG Fan Monday, Jul 29, 13 @ 9:04 pm
Ty had a PAC and it gave money I guess we could look at who got money from PACs of CC members too. I saw its list once and most of its candidates lost. I do remember Kay and Nekritz.
This may explain all the crickets we are hearing from the GA on this one looks like a lot more than bond manipulation

Comment by RNUG Fan Monday, Jul 29, 13 @ 9:09 pm
RNUG Fan, for what it’s worth, the state board of elections website lists 1,463 Mayer Brown contributions totaling $2.6 million.

Comment by wordslinger Monday, Jul 29, 13 @ 10:34 pm