The Party’s Over

Nick Basham, the poster boy for everything
 that is wrong with pawnish Portsmouth politicians

The Party’s Over

The death yesterday of singer Andy Williams and an article that appeared in the Portsmouth Daily Times today (9/27/2012) titled “Layoffs Possible After State Reviews Budget Plan,” made me think of the lyrics of the  popular song:

The party’s over
It’s time to call it a day
They’ve burst your pretty balloon
And taken the moon away
It’s time to wind up the masquerade
Just make your mind up the piper must be paid

     Yes,  the party appears to be over as far as the illegal budgetary transfer of public funds, which the City Auditor and PDT  reporter Frank Lewis continue misleadingly to refer to as “charge-offs.” Instead of calling an illegal transfer of funds an illegal transfer of funds, or an  “unwarranted allocation,”  to use the state auditor’s phrase, the city auditor has been calling  it a “charge-off” to dupe the public, and the Portsmouth Daily Times has played along with the duping, for duping helps make the party possible. According to state statutes, monies must be used for the purposes for which they were  appropriated. Charles F. Barga, Chief Auditor for the Athens Region, informed  City Auditor Trent Williams that  “Ohio Revised Code Section 5705.10(H) states that monies paid into a fund must be used only for the purposes for which such fund has been established.” Barga, incidentally,  is a Certified Public Accountant. Portsmouth City Auditor Williams is not.

What the city government has been illegally doing for years is partying on public money, using funds that were appropriated for roads, sewers,  public buildings, etc., using those largely for salaries  and benefits for themselves and other city employees. To stay in office, Portsmouth politicians have been buying off public employees by  illegally  transferring funds. Most of our elected and unelected office holders are the bankrupt pawns of local plutocrats. The denigrated  Municipal Building, a photo of which accompanied the Times article, is a dingy  monument to “charge-offs,” that is to illegal budgetary transfers. Instead of maintaining the building, the politicians for a long time  have been neglecting it.  The city council recently appropriated some six thousand dollars for engineers to make yet another study of whether or not the building is a hopeless wreck. If it is, it is a result more than anything of “charge-offs”  and recurring costs of these engineering studies of the building’s structure.

Party Pooper

The party pooper, the person who helped bring the illegal transfer of funds to the attention of  the public and state officials, is former mayor Jane Murray. Because she would not party along with the boys, because she was not a party girl, she was vilified as a witch and recalled from office. Any elected official who shows signs of fiscal sanity, and doesn’t indulge in the “charge-off” double talk,  is labeled as a head case or malcontent and is soon  out of office. Bob Mollette, who I believe may have been the most conscientious and capable city council member in the last half century, was replaced by one of the most unqualified council members in the last half century, Nick Basham, an obstreperous, bumptious, arrested adolescent who was known for throwing chairs around when he was a temper tantrum teacher and later served as the taunter-in-chief of Mayor Murray when she was in office. Now he is a budget basher.  “It really bothers me as a local elected official that first we had one plan of CIP money a local judge didn’t find palatable,” Basham is quoted in the PDT article as saying. “So we came up with another plan, and we thought this out. We worked the budget out. We came up with numbers that within years we could be back at least to a level. And now it’s almost like having the rug pulled out from under you. It’s the state telling the local government basically what you can and can’t do and at the same time telling us we can’t have a deficit. So what if we just don’t do anything with this? If we leave it the way it is, what is the State Auditor going to do?” Instead of chairs, Basham is  now throwing budgets around. How dare anyone tell us we can’t continue to do charge-offs and run deficits!

What Basham reflects is the deeply rooted distrust and dislike of outsiders and the defiance of authority that is ingrained in hill culture. Steve Hayes on WNXT and Frank Lewis on the PDT help fan this incestuous Appalachian paranoia, a paranoia that our local plutocrats profit from. They don’t want anyone restricting them in their greedy accumulation of millions.  Just as states’ rights were  used historically to perpetuate slavery,  the city charter has been used to perpetuate “charge-offs” and corruption.  Budget basher Basham is the poster boy for everything that is wrong with pawnish Portsmouth politicians, and  he is the best argument for getting rid of the city charter. He’s no longer throwing half-price drink parties for disgruntled city employees in his bar, but he continues to act as if the drinks are on the taxpayers. The party’s over my paunchy friend and the piper must be paid. 

The Municipal Building, a dingy  monument to “charge-offs”

Just Say No to Horner!

By the 2010 census, Scioto County, which covers about 616 sq. miles, has a population of 79,499. The  city of Portsmouth, on the other hand covers only about 12 sq. miles and has a population of only about 20,226. Which do you think is the more challenging job, being the sheriff of Scioto County or the captain of the Portsmouth Police Department? If Horner couldn’t handle the job of police chief, how is he ever going to handle the job of sheriff?

Scene of botched drug bust. Sergeant Horner didn't sleep here.

For some time  Horner has screwed up royally as the Portsmouth police chief. In fact, he was a screw-up even before he was chief. He was screwing up royally back in 1992, when he was only a sergeant.  In that year  plainclothes officers under  Sergeant Horner’s command mistakenly broke into the home of an elderly couple in Portsmouth who had just returned from evening church services. Had Sergeant Horner been on the scene he might have been able to point out the house where the bust should have been made, but for some reason he wasn’t there. Was the reason he wasn’t there because he didn’t want to put himself in the line of fire? Once he was told  that the wrong house had been broken into, the incompetent Horner, in an attempt to cover his own ass,  rushed over to the house his men had broken into and practically got down on his knees to beg forgiveness from the traumatized couple. Would they sue him? Would they cost him his job? That’s what he was obviously worried about. He offered to sleep overnight on their living room couch if it would make them feel safer. They declined his offer. Would it help them to sleep knowing the incompetent sergeant was sleeping on their couch, the same sergeant whose men, even after they had broken in the door and saw they were an elderly couple, continued to treat them like drug dealers? (For more on the botched drug bust, click here.)

Horner has been masquerading  lately as a sheriff, as sheriff Matt Dillon of Dodge, Kansas, but back in 1992, he did a much better imitation of Inspector Clouseau. As police chief, Horner was asleep on the job as Portsmouth gained notoriety as one of the ten most dangerous American cities to live in and as the Oxycontin capital of America. He has been figuratively sleeping on the couch as the city has gone to hell. Now he wants to sleep on the couch of the county. Neither the city nor the county should be burdened any longer by this man and his physical and psychiatric ailments. He is offering his services to the county, but like the couple in Sciotoville, the voters should, to coin a phrase, “Just say no to Horner.”

Just say no to Horner masquerading as Matt Dillon

Jesus Walking on Water on Grandview Avenue

Jesus Walking on Water on Grandview Avenue
1. Jesus  2. Wastewater Director  3. Rat  4. Devil's Disciple  5. Auditor  6. Solicitor              
7. Unelected Mayor   8. Hepzibah

O, shit! Not another flood?

Haven’t they got it under control?

No, fixing downspouts was a dud,

Money poured down a rat hole.

O say can you see

The solicitor in this spoof?

The pawn of the S.O.M.C.—

He’s mortgaged through the roof.    

Duncan’s been fired more than once.

He only knows how to sue.

The rat chews out the dunce

Up to his neck in do-do. 

A preacher of pretense,

In the rear is our unelected mayor,

Because he’s terminally dense,

He doesn’t have a prayer.

Unable to add, subtract, or think 

About accounting rules he loves to flout, 

The auditor’s drowning in red ink, 

But charge-offs bail him out.

And what of that sourpuss,

The devil’s disciple, giving us the finger?

We wish, like Christ, we could walk on water, 

But we’re just recycled through the wringer. 

Waste Water Dunces

This is a paragraph from an unsigned notice sent out by the city falsely claiming that the U.S. EPA has ordered 63 residents of the Grandview area to disconnect their downspouts. Neither unelected mayor Malone, Wastewater Dunce Duncan, nor City Solicitor Jones was apparently willing to sign the notice. For more on this issue, see former elected mayor Jane Murray's website (click here).

"With all due respect, Mr. Duncan, in your Power Point presentation, you say 'downsprouts' are causing Grandview's flooding problems, but I don't think you know a downspout from a horses's ass."

CoreLogic Monopoly in Portsmouth?

Mortgage Monopoly in Portsmouth?

In the comparison between Portsmouth, Ohio, and Westlake, Texas, that I made in my previous post, I emphasized the differences between the two towns. They don’t make things in Westlake, and they never have. They skipped the commercial and industrial stage that Portsmouth and many cities in the Northeast and the Midwest went through. What is now Westlake was for most of its history north Texas cattle country, but fairly recently, after a struggle between residents and developers over the future of the town, dramatized on NPR’s This American Life (click here). Westlake came to life economically as an “information-based” community.  Well west of the Rust Belt, Westlake is where they make money, or where,   more accurately, they make money on mortgages.

The way Westlake’s second largest employer, CoreLogic, claims it makes money is supplying information about the risks involved in selling or buying mortgages and insurance. But at least where Portsmouth is concerned it appears that CoreLogic’s main business is not selling information about but rather buying Portsmouth mortgages from local banks, including, and perhaps particularly, from American Savings Bank.  By rough estimate, in the last ten years or so about eighty per cent of Portsmouth mortgages were CoreLogic. Though it is not a Fortune Five Hundred company, it appears CoreLogic is  mopping up the floor in Portsmouth with the likes of Fortune Five Hundred mortgage companies like Bank of America, Wells Fargo, and Fifth Third, which rank nationally among the top mortgage giants. CoreLogic looks like it’s well on its way to monopolizing mortgages in Portsmouth.

City Officials: Portsmouth and Chillicothe

Who holds CoreLogic mortgages in Portsmouth? City officials, among others. Portsmouth’s unelected  mayor doesn’t have a mortgage because he bought his house at so low a price that he didn’t need one. But the city auditor, the second most important city official, has a CoreLogic mortgage on a $134,000 house. The  city solicitor, the third most important city official,  has a CoreLogic mortgage on a $192,000 house on Willow Way, in the Hill section of the city. The solicitor paid $192,000, or about $50,000 more than the $142,820 valuation that the county auditor  placed on it. The $192,000 figure is puny by the standards of Westlake but is way up there by Portsmouth’s.) The $50,000 is a much larger disparity (35%) than usual between the county auditor’s valuation and what a home sells for.  Incidentally, there  are five other houses on Willow Way,  a short street, that have CoreLogic mortgages. Of the three members of city council who have mortgaged homes, two are with CoreLogic and the third is with American Savings Bank (ASB).  Former police Charles “Matt Dillon” Horner’s home on 28th Street does not have a mortgage, but a dozen other houses on the street do, and eleven of the twelve are with CoreLogic while the twelfth is with Bank of America.

In the past I’ve compared Portsmouth and  Chillicothe because the two cities have a lot in common. Do they have  CoreLogic in common? Apparently not, at least not among city officials. Looking at the real estate records of Chillicothe city officials, I found a wide variety of mortgages, but CoreLogic was not among them. The Chillicothe mayor has had a number of mortgages, all with Chillicothe banks, especially with the Chillicothe branch of National City Bank, whose corporate name is now PNC. It’s what I would expect a politician to do—support the local economy by patronizing local businesses, especially for an automobile or mortgage.  All other things being equal, whether you are a politician or ordinary citizen, why wouldn’t you want to support the local economy? The Ross County recorder has an extensive real estate history, which began  back in 1973. Her mortgages usually had direct ties to Ross County and Chillicothe. In the last ten years, she has mortgages almost exclusively from  the Chillicothe Fifth Third Bank. So for some time, with their mortgage choices, Chillicothe public officials have been supporting Chillicothe’s economy, not Westlake’s.

Portsmouth has a PNC branch and a Fifth Third branch in Portsmouth. but they are also-rans compared to CoreLogic. The Portsmouth Fifth Third branch resembles a poor cousin of the Fifth Third family. Because it can’t afford the spacious downtown building it now occupies, Fifth Third, under the coaxing of developer Jeff Albrecht,  has tried to persuade the city government to  move its offices to floors above the bank. But like the Marting building, the First Third building hides its age behind a deceptive façade. The facade ain’t really brick at Marting’s and neither is at Fifth Third. The heating and cooling systems in Fifth Third are reportedly a problem, as is the roof. Though it is not nearly as old as the Marting’s, the Fifth Third Building is unsuitable for city offices. The taxpayers of Portsmouth would be taking not much less of a screwing if Albrecht, acting like a procurer, is able to bring Fifth Third and the city government together.

Questions Remain

Questions remain: why is so much of Portsmouth’s mortgage money ending up about a thousand miles away in Westlake when branches for Fortune Five Hundred companies, such as Fifth Third Portsmouth are  hungry for business, including mortgages. What other banks besides American Savings Bank, acting as intermediaries, and subsequently as agents, are selling mortgages to CoreLogic? Is CoreLogic paying that much more than its competitors? Shouldn’t CoreLogic’s shaky financial situation and peculiar relationship with its former partner First American be a warning sign? If there was some tacit separation agreement between First American and CoreLogic that the latter’s main business would be selling information about mortgages and First American’s would continue to be buying and selling mortgages, or mortgage notes, CoreLogic’s footprint in Portsmouth constitutes evidence to the contrary. Furthermore, First American acknowledged in its 2011 filing with the Securities Exchange Commission that the fact that it  and CoreLogic were now competitors, not partners, posed serious potential financial risks.  There is an executive, Parker Kennedy, who occupies the same position at both companies! Isn’t that a clear conflict of interest?

Is there somebody in the financial circles in Portsmouth involved in a conflict of interest, at least where mortgages are concerned? Is there some suit in some hypothetical bank in Portsmouth who, in selling mortgages to CoreLogic, is selling out the citizens of Portsmouth, and is that hypothetical bank as financially shaky as CoreLogic? And do those homeowners in Portsmouth with CoreLogic mortgages understand that they are helping make Westlake the most prosperous community in America while Portsmouth remains among the poorest? Where’s the logic in that? 

The city official who has most to explain is solicitor Mike Jones because his mortgages with CoreLogic, American Savings Bank, and the now defunct and disgraced Southern Ohio Growth Partnership are as illogical as any one person’s could be. Jones has proven as incompetent in the donut business as he has in the courtroom. He appears to be a sucker for overpriced mortgages, and it would not be a surprise to see him declare bankruptcy, following in the footsteps or our  former mayor Jim Kalb, our current unelected mayor David Malone, and the next in line to be mayor, city council president John Haas. 

Somebody who might be able to unravel the mystery of Jones’s mortgage with the SOGP is Bob Huff, that defunct organization’s director, but he is not talking about Jones, CoreLogic, or anything else. Maybe he is waiting for his day in court.  On the day the new Grant Bridge opened, our hip angel of the airwaves, Steve Hayes, reported that Bob Huff, in the manner of Neal Hatcher, was giving passing motorists the finger. Now it may be Huff, left holding the bag, who is getting the finger. Huff’s home on North Hill Road, incidentally, has a CoreLogic mortgage.

Bob Huff, yet another CoreLogic mortgagee, fired for allegedly cooking the books at the SOGP

The Illogic of CoreLogic

Even Einstein couldn't figure it out

The Illogic of CoreLogic

It doesn’t make sense. Why would a troubled company whose main business is supposed to be advising others on whether or not to buy or sell mortgages, why would such a company itself go into the business of buying and selling mortgages when it itself was apparently a high risk company that those in the mortgage field should be wary of?  Core-Logic, in other words, was in a Catch-22 situation. If CoreLogic was doing its job properly it would  have warned itself that  CoreLogic was a risky company to be doing business with.  

First American, CoreLogic’s predecessor  had a troubled history. That may be why it rebranded itself with the awkward name of one of the companies it had acquired, CoreLogic. Two prominent officers of First American helped give the corporation a bad name. The septuagenarian director of First American, D. Van Skilling, was rumored to no longer have his Midas touch, and after CoreLogic lost $66.5 million in 2011, the second consecutive year of red ink, there was a board shakeup and Van Skilling announced his retirement. Then the chief financial officer of First American/CoreLogic, Anthony “Buddy” Piszel, resigned under a cloud in February, 2011, after it became known that he was under investigation for possible wrongdoing when he had been chief financial officer of Freddie Mac, the controversial quasi-governmental agency that had been accused, at least by Republicans, of helping bring about the so-called Great Recession. It did not help Piszel’s reputation, or First American/CoreLogic’s either, when his replacement at Freddie Mac committed suicide. The liberal online tabloid, the Huffington Post, reported that Piszel, while at Freddie Mac, instead of behaving like a Certified Public Accountant, had been living it up in a luxurious Maryland shore home, of which it provided a provocative  photo spread, not of nude women but of old money country club opulence. What  is expected above all of CFO’s, many of whom are glorified Certified Public Accountants, is financial probity, not profligacy. But Piszel proved to be a Jet-Setter in CPA clothing. “Some of the fancy toys on the property,” the Huffington Post pointed out, “include a $230,000 38-foot Fountain Sportfish Cruiser, ironically named ‘A Better Decision,’ powered by three fuel-sucking outboard engines, two high-end Jet Skis, a house Jeep and a few horses.” But the stock market crash that precipitated the Great Recession turned Piszel into a pretzel financially and  put his palatial coastal pad into the hands of a real estate agent. The asking price was just under $5 million.

Instead of improving its image, First American’s rebranding of itself as CoreLogic made it only worse. One handicapper estimated online that CoreLogic had almost a four-in-ten chance of going bankrupt in the next two years, offering the following colorful chart to illustrate its precarious predicament.

One of the problems at CoreLogic, the same handicapper explained, was  the ratio of assets to debts, as the following chart illustrates:

       Since the housing market has improved slightly in the last two quarters, so presumably has CoreLogic’s financial position, but it is not out of the woods yet, far from it, as the graph below, taken from the company’s most recent annual report makes clear, but only if you focus on the CoreLogic line, 

which shows that $100.00 invested in 2006 would have been worth only $60.00 at the end of 2011, a 40% loss. Highfields Capital, of  Boston, was CoreLogic’s unhappy, second biggest shareholder. Since Highfields was an $11 billion dollar company, it would have  invested closer to $10,000,000 than $100.00, and stood to lose not $40.00, but closer to $4,000,000.

            All these charts and figures may not have anything to do with the price of tea in China, but they probably have a lot to do with the price of mortgages in Portsmouth, where homeowners carry more CoreLogic mortgages than with all the other mortgage companies combined, by a roughly eight to one ratio, including such mortgage giants as  Bank of America and Wells Fargo. If First American is still in the mortgage business, you would not know it by Portsmouth, where it’s CoreLogic, CoreLogic, CoreLogic. It seems  illogical to me that  CoreLogic, a relatively small, financially troubled, faraway supposedly information-based company, the Portsmouth-focused branch of which is located in that odd little town of Westlake, Texas, carries the most mortgages in Portsmouth. The who, the why, and the how of it all is a mystery I will delve further into in my next post on the subject. 

Portsmouth, Ohio, and Westlake, Texas

“[Portsmouth] politicians, like Jesse James, have been holding up tax payers,
especially homeowners, for a long time.”

A Comparison of Portsmouth, Ohio, and Westlake, Texas

This is a tale of two cities, Portsmouth, Ohio, and Westlake, Texas. In most respects the two seem to have  nothing in common, but as I will show in a later posting, there is an important but somewhat puzzling link between Westlake and Portsmouth.
  

Among the things Portsmouth and Westlake don’t have in common is age. Incorporated in 1815, Portsmouth is almost two hundred years old. When Westlake was incorporated in the late 1950s, Portsmouth was already a hundred and sixty years old. Another thing they don’t have in common is population. The population of Portsmouth, though it has been shrinking for about a half century, is just over 20,000, which is twenty times larger than Westlake’s 1,000. But don’t judge a city’s vitality by the number of residents. Many Portsmouthers are old (like me), unemployed, and unemployable. A  number of them are on welfare. Westlake by contrast is known for the number of its residents who are millionaires.  In 2011, Forbes Magazine concluded that Westlake, with a median annual household income of $250,000, was the richest community in America. The estimated per capita income in Westlake is $125,000. The median household in 2009 was about $251,000.

Portsmouth, on the other hand, is one of the poorest cities in Ohio. The estimated per capita income in Portsmouth in 2009 was $17,089. In the last five years the median price of houses sold in Portsmouth, where the real estate market, like the local economy, has been sluggish for about a half century,  was about $60,000. In Westlake the median price of houses is just over $1,000,000. The unemployment rate in Portsmouth is currently at about 12%. The unemployment rate in Westlake is 6.3. (Before the Great Recession  hit in 2009, unemployment in Westlake was only 4.3.) In 2009,  33% of Portsmouth’s population lived below the poverty level. You would have trouble finding anyone in Westlake below the poverty level.

    The top employers in Westlake are financial services, with Fidelity Investments, the international financial conglomerate (headquartered in Boston) being the number one, and CoreLogic (aka First American) the number two employer. Westlake has no industry to speak of and is proud of it, boasting of its rural character, “an oasis with rolling hills, grazing longhorns, and soaring red-tailed hawks,” an oasis interspersed with “vibrant corporate campuses,” according to its official website. Westlake’s motto is “A premier knowledge-based community.” In keeping with that motto, corporations have campuses. There is the TD Auto (formerly Chrysler Financial Services) Campus; Fidelity Investment Campus; Solana Corporate Campus. The First American and CoreLogic “campus” is located on Campus Circle. This is academia with an acquisitive twist, because it’s all about money. Most employees in Westlake work with their heads rather than their hands, and their heads are good with figures.

Comparative Crime Rate Indexes for Westlake and Portsmouth

“If there were a category for illegal drug use, and Oxycontin in particular,
 Portsmouth would be off the charts.”

A comparative study of the 2010 crime rates of Westlake and Portsmouth are startling. You are eight times more likely to be the victim of a crime in Portsmouth than in Westlake, and you are sixteen more times likely to have your home or automobile broken into; five times more likely to be raped; and nine times more likely to be murdered in Portsmouth than Westlake. The burglary rate in Portsmouth as long time residents know is much higher than statistics indicate, because many burglaries go unreported, some victims feeling it’s a waste of time, because the police force—at least under chief Charles Horner—hardly seemed interested. If there were a category for illegal drug use, and Oxycontin in particular, Portsmouth would be off the charts.There was a mix-up in online national news when it  was reported that a suspicious character with a weapon arrived at a movie theater in Westlake a half hour early and sat in the back where he was suspected of positioning himself as if at a shooting gallery. It was assumed it was Westlake, Texas, perhaps because Glenn Beck had put the town in the news, but it turned out the town in question was Westlake, Ohio, just outside of Cleveland.

      As if Portsmouth’s crime statistics were not bad enough, an algorithm used by USA.com measures another kind of crime: hate crime. According to USA.com, hate crime in Portsmouth is twenty-two times the national average.

Crime Doesn’t Pay in Westlake

Statistics indicate the crime rate in Westlake, Texas, is negligible. The chief law breakers in Westlake appear to be drivers. Westlake collects more traffic fines per capita than any other town in Texas. Portsmouth might help resolve some of its financial problems if, like Westlake, it cracked down on not just drug but also vehicular traffickers, of which it has plenty, including several on the city council. The streets of Portsmouth are more like the Wild West than the streets of Laredo. Concerned not about drivers but Occupy Wall Street radicals, Fox talk show host Glenn Beck sold his mansion in New Canaan, in the country club section of Connecticut, and moved his family to Westlake, where for $20,000 a month he rented a $4 million dollar mansion in a remote, gated, golf course development. He plans eventually to build a gated mansion of his own. If avoiding crime is his highest priority, he couldn’t have done better than Westlake or worse than Portsmouth, where the politicians, like Jesse James, have been holding up tax payers, especially homeowners, for a long time. By contrast,  Westlake’s local sales tax is only 1% and it was not until 2010 that it introduced its first property tax.

If crime doesn’t pay in Westlake, servicing Portsmouth’s mortgages does, as I will show in a future posting.

Ayn Rand's Dollar Mysticism (1963)

cartoon from fishink.us

        Now that Mitt Romney has chosen Paul Ryan as his running mate, Ayn Rand (1905-1982), Ryan’s fascistic, rather kooky heroine, is in the news, with Ryan, donning Romney flip-flops,  repudiating his ties to her. She was in the news back in the early 1960s when Barry Goldwater was the Republican candidate for the presidency. Rand was credited with pointing Goldwater and the right-wing of the Republican Party down the libertarian, laissez-faire, anti-government path that it has been tripping down ever since. Nearly a half century ago, in 1963, I published a brief article on Rand in the final issue of a radical magazine that liked to think it was descended from the legendary The Masses. But the times they were a-changing, and William Buckley became the John Reed and the National Review the The Masses of the right. In “Ayn Rand’s Dollar Mysticism,” my point was that though Rand considered herself an atheist, I thought she had made a religion of the so-called Free Market. However much Ryan is now trying to deny it, Rand inspired Free Market Fundamentalists, like himself, who, a half century later, have seized control of the Republican Party in a coup orchestrated by Rupert Murdoch’s Wall Street Journal and the National Review.

Charge-off Chicanery

“The Madame Gu of Portsmouth Politics.” 

Charge-off Chicanery

In a letter dated 16 July, 2012, Charles Barga of the state auditor’s regional office, in  Athens,  notified Portsmouth city auditor Trent Williams that the city’s latest state  audit, for 2011, revealed that the city had  continued to violate statutes  regulating accounting practices.  Barga reminded Williams that “Ohio Revised Code Section 5705.10H states that “monies paid into a fund must be used only for the purposes for which such a fund has been established.” He also pointed  out that in Portsmouth  “monies [are] being paid into funds and subsequently used contrary to their restricted purposes.” Williams has not been obeying those restrictions  for some  time.  Through a procedure that he puzzlingly  calls “charge-offs,” Williams has been making  what Barga calls “unallowable allocations,” that is he has been taking money from one fund illegally to pay the expenses of another.  Why? Apparently  in order to help pay the salaries and raises for  the mayor, the city auditor, the city solicitor,  and other city employees, including the fire and police department employees.   As a result, even during Portsmouth’s chronic periods  of financial shortfalls, the Portsmouth city auditor has used unallowable allocations to  help  pay salaries and provide raises, using funds, that is, “contrary to their restricted purposes.”

Williams calls the transfers he makes “charge-offs.” He considers them  allowable but the state auditor considers at least some of them unallowable. I have looked in vain in many dictionaries to find a definition of charge-off in the sense that  Williams uses that term. What hard copy and online dictionaries do say is that a  charge-off is an uncollectable or bad debt. For example, Wikipedia defines charge-off as “the declaration by a creditor (usually a credit card account) that an amount of debt is unlikely to be collected.”  Merriam-Webster traces this sense of the word as far back as 1892. Why does Williams misuse the word? Instead of calling an unaccountable allocation an unaccountable allocation, he calls it a “charge-off,” perhaps to fool taxpayers. He appears to be  misusing the word to try to cover up his  shady accounting practices. He may have fooled the public, but he has not fooled the state auditor. In the city’s 23 July response to Barga’s 16 July  letter, which has Williams name at the bottom, the word “charge-off”  is used thirteen times, but Barga had not used it even once in his letter to the city. I am assured by a Certified Public Accountant  that “charge-off,” in the sense that Williams uses it, is not a word that is part of the accounting lexicon, except when it refers  to an uncollectable debt. Williams should stop using the word “charge-off”  and say what he apparently means—namely “indirect costs” or what Barga calls  “allocation adjustments.” Indirect costs or allocation adjustments are legal, provided those who resort to them  prove they are warranted, which too often, according to Barga, is not the case in Williams’ bookkeeping. In  Williams’ bookkeeping,  “charge-offs” are the means by which he attempts to get  around the restrictions placed upon the city’s spending practices  by Ohio Revised Code Section 5705.10H.

  

Crux of the Matter

The crux of the matter, the point in dispute between the state auditor and Williams, is the city’s abuse of “charge-offs.” The city has used funds designated for sewers, water, street maintenance, etc. to pay salaries and benefits of other departmental employees. The result is that now many of those funds are in deficit positions and the infrastructure, for which the funds were supposed to be used,  are falling into disrepair. City water, sewer, and sanitation fees have increased steadily over the years to cover ever increasing salaries and benefits. In 2010,  over $1,000,000  was transferred from the water fund to cover salaries, overtime, and benefits of fire department personnel. Only the salaries and benefits of the water and sewer departments should be paid from the Water and Sewer Funds with a reasonable charge by the General Fund for administrative expenses. The city has used the charge-off methodology to justify the increase in water and sewer fees for years by charging fire department salaries and benefits  to the Water Fund and then passing the cost to the residents in the form of higher water and sewer fees. 

The amount of the charge-offs could not be justified by Williams, other than to say he has always done it that way. The first sentence of the city’s  letter (23 July 2012)  in response to Barga states, “The City of Portsmouth has used a system of payroll ‘charge-offs’  historically for as far back as at least 1993,” or about the time Williams became auditor, although it may be that cooking the books actually began when the notorious Tom Bihl was city  auditor. Regardless of when the illegal practice actually began, precedent is the main argument the city uses to justify these “charge-offs.” Not only in the first sentence, but on  page two of the city’s reply, the claim is made that “The City [in 2011] continued to use the same method [charge-offs] consistent with the past many years . . .” In the third and final page of the city’s letter, the claim is again made that “. . . the City has used a consistent methodology over many years” [emphases added]. In other words, the city has been doing it this way for so long (and getting away with it!) so Williams should be granted  some slack and not be required to change his methods immediately. But doing something wrong, unethical, or illegal for twenty or more  years doesn’t make it right or mean we have to put up with it any longer, does it?

Poisoning the Money Supply

In the New York Times (8 Aug. 2012) there was a report on  the  trial of Madame Gu Kailaithe, the wife of a prominent Chinese Communist official. She was convicted of poisoning a British businessman associate. Because she told the court there were extenuating circumstances—she claimed the British businessman had made threats against her son—she is expected to be spared the death penalty. The son is a student at Harvard’s  John F. Kennedy School of Government, so her claim seems specious. To my way of  thinking,  Trent Williams is the Madame Gu of Portsmouth politics. He is the poisonous auditor of  Portsmouth’s finances. He feels he should be granted a pardon and given more time to rectify any mistakes and balance the books.  Will the state auditor buy his argument? 

   First Ward councilman Kevin Johnson recently circulated an email reminding voters  that the City ended Fiscal Year 2011 with a deficit of $1.4 million, which the state auditor responded to by putting the city on Fiscal Watch. The deficit  projection for FY2012 is even more, $1,418,719. This is just the General Fund and does not include deficits in other funds such as Water and Sewer. At the beginning of 2012, the sewer fund had a $600,000 deficit, so, as usual, crooked politicians  in the Municipal Building city raised our sewer fees 10% to help cover the deficit.

The state auditor can place financially troubled municipalities in three  fiscal categories: Caution, Watch, and Emergency. Portsmouth was in Fiscal Caution last year, and now, even  after the city’s income taxes were increased it has moved on to the next most serious condition—Fiscal Watch. If the state auditor does not buy the convoluted excuses and veiled threat  of financial catastrophe in the city’s letter of 23 July,  Portsmouth may  be declared in Fiscal Emergency. But there could be a silver lining if that happens. If the city is placed in Fiscal Emergency, the State will take  over the finances of the city as it took over the finances of Scioto County, where there reportedly has been financial improvement. If what’s good for the goose is good for the gander, then what’s good for the county should be good for the county seat, Portsmouth.

Confucius Says 

 I have compared Williams to Madame Gu. A saying attributed to Confucius is, “Never seek illicit wealth.” Another could be, “Never resort to charge-off chicanery to hoodwink  taxpayers.” 

Lapdog Journalism

Lapdog Lewis Lauds City Solicitor

Frank Lewis of the  Daily Times wrote a column on July 25th (“Solicitor’s Speech Reminds Us to See the Good Things”) that is one of that journalistic lapdog’s most shameless, hand-licking performances  In it, he flatters the  businessmen whose advertising dollars are helping keep the sinking Daily Times afloat along with his own job.  “We have business people such as Jeff Albrecht, Andy Glockner, Chris Lute, Rick Morgan, and numerous others, working selflessly,” Lewis fawningly wrote,  Selflessley? When he isn’t trying to fix an auction in Athens, Jeff Albrecht is trying desperately to get the Municipal Building torn down and replaced by something  that  will help him pay for the new Holiday Inn he built on the site of his previous downtown mistake,  the  Ramada Inn, the “Queen of the Rust Belt,” as one traveler dubbed it. Were the Glockners acting “selflessly” when they moved their automobile dealership from downtown Portsmouth several miles out on Route 23? Was Chris Lute acting selflessly when he did the same thing just a few years ago with Lute Plumbing? Glockner and Lute were  not acting selflessly; they were acting shrewdly, as businessmen must in the competitive commercial world. They were thinking of their profits, not of downtown Portsmouth’s wellbeing. All the empty buildings and lots that Lute left behind act as a further drag on the chronically depressed downtown economy. Moving was the sensible thing for Glockners and Lutes to do, but don’t be a poodle and lick their  “selfless” fingers.

At least the Lutes and Glockners and other businessmen whom ladog Lewis praises are successful, but Mike Jones is in the tradition of the failures and bankrupts who gravitate to public office in Portsmouth, such former and present city officials as Greg Bauer, Jim Kalb, John Haas, and David Malone. Although you are not likely ever to read Lewis writing about it,  Kalb, Haas, and Malone handled their personal finances so badly that they ending up declaring bankruptcy. The only question now is whether Mike Jones will be soon joining them. In 2007, Jones paid a whopping $325,000 for the  down-at-the-heels Crispie Creme donut shop on the corner of Waller and Gallia Streets, a property the County Auditor had valued at $107,990. Paying $325,000 for Crispie Creme, a three hundred percent increase over the value the auditor placed on it, is even more inflated than the $2,000,000 of taxpayer money Bauer, Kalb, et al, illegally drew on to pay for the Marting building.Where did Jones get the money to throw away on a dying industry like donuts? When it comes to diet, according to a nutritionist at the New York Obesity Research Center, the only healthy thing about a donut is the hole. Like almost all public officials in Portsmouth, Jones was a puppet of the dishonest,  now disgraced and defunct Southern Ohio Growth Partnership, from which he borrowed $147,000. Where did Jones get the rest of the money for his financially suicidal purchase? The American Savings Bank obliged him with a $182,000 mortgage.

        The donut shop was badly mismanaged under Jones, but it  probably would have failed anyway, with the heavy mortgage it was weighed down with. If only Crispie Creme had as many customers as it had cockroaches, it might have stayed in business. In an earlier posting on Crispie Creme, I asked, “Why did Jones and his partner pay $325,000 for a walking-dead donut shop?” Now that the business has gone belly up, as the For Sale in front of it crookedly proclaims, that question is even more pressing. If only there was an investigative reporter on the Daily Times, instead of a lapdog, we might get the answer.

The SOGP was Portsmouth’s shadow government, wheeling and dealing while playing with federal taxpayer dollars, doling out millions of dollars with little oversight. The American Savings Bank was not much better. In 2005, in a move that made it possible to avoid the kind of paper work and scrutiny that goes with being a publicly held company, ASB went private, buying out its shareholders. Since then, as a private company, its financial operations have become somewhat inscrutable, like they were at AIG, Bear Stearns, and Lehman Brothers. Why in the world would ASB grant a $187,000 mortgage to a business that time has proved  had absolutely nothing going for it? In 2005, ASB had granted a mortgage for a house at 2828 Willow Way for which Jones paid $192,000. The auditor had it valued at $142,820. That mortgage was apparently farmed out to CoreLogic, formerly First American, in Westlake, Texas, about which I will have more to say in another post. Jones has got to be the most highly leveraged person in Portsmouth city government. The question at the moment is will he join those other shady members of city government, Kalb, Haas, and Malone, in filing for bankruptcy? That is not a question the lapdog will answer.

Crispie Creme has gone belly-up as the crooked For Sale sign proclaims

Big Brother

Chapter 6: Big Brother

“As a lay person you would not be able to understand the science of my experiments at Harvard,” the doctor began his explanation to Madelyn.

“What experiments?

“They involved Heck. That’s all I want to say.”

“Like a guinea pig?” she asked.

“Yes, you could say that, although Heck wouldn’t like the analogy. Would you, Heck?” The doctor looked at the rat, who tilted his head, like a curious cat, squinting up at the doctor while rubbing his nose with his paws. “Fruit flies are very useful for experiments and so are guinea pigs,” the doctor continued. “But for my purposes only Rattus norvegicus, would do. Not as cute as the guinea pig, perhaps . . .” Heck made a tiny squeaking noise. “Have I hurt your feelings? I’m sorry, Heck,” the doctor said.

“He understands you?” she asked. Up to now she had thought of the doctor as being eccentric. Now she wasn’t sure what to think.

“He understands me, of course,” the doctor said proudly. Then he added, in a show of bitter humor. “He’s got an IQ well above the average Democrat.”

 “But why did you bring him to the office?”

“I received a warning that the authorities might be paying a visit to the clinic today.”

“Today?” She couldn’t believe he had waited until now to tell her. She had felt nervous when she had arrived at the office that morning because of renewed rumors circulating in the town about an imminent crackdown on the so-called pill mills.

“That’s right. Today.”

“Then why did you bring the rat here.”   

“Because I’m sure they want me to think they’re coming to the clinic when what they really plan to do is to go to my home.”

“But how would they get in?”

“My landlady would let them in. She’s easily intimidated.”

“She’d let them in?”

“With alacrity.”

“With who?”

“In a heartbeat.”

 “But what would they be looking for? What records we have are in my computer.”

“They’re not after records.”

“Then what?”

“Why, Heck, of course.”

“What would they want with Heck?” Puzzled, she looked from the doctor to the rat and back at the doctor.

“The ‘rat’ as you like to call him is the key to everything.”

“What do you mean?”

“He’s the answer.”

“To what.”

“To the single greatest threat to freedom in the world.”

“What threat?”

“Big Brother.”

“Big Brother?”

 “Precisely,” he said.

“Who’s  Big Brother?”

“You’ve never heard of Big Brother?”

“I don’t think so.”

Shaking his head and turning to the rat, the doctor said,   “What do you think of that, Heck? She’s never heard of  Big Brother.” As he continued shaking his head slowly,  Heck tilted his head and peered up at him curiously while the kittens looked down on what was happening with the  look of total incomprehension.

“Haven’t you read this pamphlet?” he asked her, picking up  one from the little pile he kept on his desk. “I distinctly remember giving you one, and one for your daughter.” The doctor opened it to one of the illustrations, showing a menacing Big Brother figure. He held it up to show her, then he laid it down on the desk, leaving it open to the same page, which the rat edged over to and looked down at, as if it  could read or at least appreciate pictures. Madelyn felt stupid. Was it possible the rat had not only heard of Big Brother but had also read about him? It couldn’t be, she told herself. She had a tee shirt, which she had worn  only once, to a Fourth of July fireworks display.  REDNECK AND PROUD OF IT! But she never could have imagined encountering a rat smarter than she was, a  show-off, smart-ass rodent which, if it had a tee shirt, would probably read SMARTER THAN A REDNECK!

“But what does the rat have to do with Big Brother?” she asked.

“Heck and I made a remarkable discovery.”

“About what?”

 “About Oxycontin,” he said.

“What about it?”

“Oxycontin is the diabolical means by which the American government is attempting to enslave us.”

“Enslave us?”

“Yes, by eliminating all resistance to Big Brother.”

 “But why are you prescribing it if it’s diabiblical?”

“Diabolical,” he corrected her. “Because the ends justify the means.”

Talk about ends and means always passed over her head, as it did now. She didn’t want to show her ignorance by asking him what he meant. She just looked at him blankly.

“I’ve discovered how to turn  Oxycontin into  Anti-Contin,” he explained.

“Anti-Contin?”

“Yes, an antidote to Statism.”

“Statism?” Statism was not something she had heard of before.

“What the Democrats believe in. ‘That government is best which governs most.’”

“That’s statism?”

“That’s right. But it won’t be much longer before I have enough money to   manufacture it in Mexico.”

“Mexico?”

“Yes. I plan to open a clinic there.”

“But you’re  not  prescribing patients Anti-Contin now?”

“No, not yet.”

“What’s so special about it?”

“It’s derived from  Heck’s urine.”

“Heck’s urine? Hoy shit!” she exclaimed.

Madelyn looked at the rat on the desk, at the kittens on top of the file cabinet, at her own fun-house reflection in the doctor’s thick Coke bottle glasses, asking herself whether this was a bad dream or, worse still, a drug induced hallucination. At the moment, she believed she possessed the ability to feel the agony of the people outside in the line, most of them, like herself, who didn’t understand means and ends or statism from Adam.

 “A rat’s urine! That sounds disgusting,” she said. 

“That’s what you all say.”

“All?”

“All who are under the influence of Big Brother.”

 “A rat’s urine! Yuck!”

“Not a rat’s urine. Heck’s urine.”

“What makes Heck’s urine so special?” she asked sarcastically.

“You could never guess,” he said, looking  up at the photo of Hayek on the wall before pronouncing solemnly: “Heck now shares the DNA of the greatest mind of the twentieth century.”

 “Up to now, I must have been blind as well as addicted.”

“What?” the doctor asked in disbelief. “You addicted, too?”

 “What about the DNA business?” she asked.

 “I obtained a lock of the Great One’s hair through extraordinary luck. If I wasn’t a man of science, I would say that providence had a hand in all this, even if it’s only the invisible hand.”

“The invisible hand?”

“The the invisible hand of the free market.”

“I don’t know what you’re talking about.”

And neither did Oxy and Contin, who were mewing and walking in circles on top of the file cabinet.  The doctor looked at his watch. “Madelyn, we have patients outside  in the throes of Statism. They’re waiting for us.”  

“I’m very much aware of them, Doctor,” she said, feeling  very attuned to them as this moment.

Are you a Democrat?” he asked.

“What’s that got to do with anything?”

“Excuse the non sequitur,” he apologized.

“ I’m not into politics,” she said.

“Whom did you vote for in the last presidential election?”

“Which presidential election?

“You didn’t happen to vote for the Black Big Brother, did you?”

“I don’t remember voting,” she said.

“You see, Heck, it’s the familiar vicious circle. One addiction leads to another, and people end up voting for  Big Brother.”

There was the sound of loud male voices with unfamiliar accents in the outer office. Huck flicked his tail nervously and the  kittens became even more agitated.

“Who’s out there?” the doctor shouted, bringing his little fist down hard on the desk. Panicked, the rat jumped off the desk and scrambled for a place to hide. Oxy overcame his fear of heights and jumped from the file cabinet  and Contin instinctively followed him. A cat may always land on its feet but the kittens tumbled over when they painfully hit the floor.

Suspecting it was a robbery, the doctor shouted, “I demand to know who’s out there?” A tense looking man in a gray suit and a striped necktie appeared suddenly in the door to the office. Behind him, looking over his shoulder, stood  a a square faced state trooper.

“Doctor Gudenoff?” the man in the suit asked.

“Yes, I am Dr. Gudenoff,” he answered defiantly. 

“I’m Special Agent Smith with the U.S. Drug Enforcement Agency.” He opened a wallet and flashed his DEA badge.

“Your Big Brother badge doesn’t impress me Special Agent Smith, do you understand?”

“This is Captain Porter of the State Police,” Smith said. “We have a warrant to search your clinic.”

“Oh, you, do you?” the doctor said contemptuously.

 “Doctor, do you have a key to the  closet in the outer office?” the trooper asked.

“No,” the doctor said sharply. “You’ll have to ask my office manager.”

Madelyn reached into her blouse pocket and took out the key. It was only then that she remembered where her purse with the Oycontin was. She kept a pair of galoshes in the locked closet. Last night she had heard about an imminent crackdown on the pain clinics. After she opened the clinic that morning, she had put her purse in the right galosh of the fur-lined pair she kept in the closet. What she was thinking as she handed the key to the trooper was that she might lose custody of Barbie when they discovered she had forged prescriptions. They would probably lock the doctor up  for a long time. She had heard that it was the case with doctors that, with the complicity  of their colleagues, who are eager to maintain the priestly status or their profession, that they got away with malpractice, if not murder. But she doubted the doctor would get away with his promiscuous  prescribing of Oxycontin. In the time she had worked for him he must have prescribed as many pills as the McDonald’s sign said it had sold hamburgers. But what would they do to her for having forged prescriptions? At that moment of uncertainty, she would have given anything for an Oxycontin and so would Oxy and Contin, cowering in a corner, as would also the doctor and his pet rat, who were as hopelessly hooked on the drug as anyone in the town. The rest of the country was about to learn  that it was ground zero of Oxycontin addiction in America.

When the doctor and Madelyn were ushered into the outer office by state troopers, Oxy saw his chance of escape. The front door was half open and he scooted for it, with Contin right on his tail and Heck not far behind. 

“Your Big Brother badge doesn’t impress me Special Agent Smith, do you understand?”

Previous chapters

1 http://rivervices.blogspot.com/2010/12/new-years-tale.html

2 http://rivervices.blogspot.com/2011/01/oxy-contin-in-line-at-pain-clinic.html

3 http://rivervices.blogspot.com/2011/03/oxy-contin-meet-barbie.html

4 http://rivervices.blogspot.com/2011/04/4-oxy-and-contin-in-doctors-office.html

5 http://rivervices.blogspot.com/2011/05/from-zanesville-to-zanzibar.html