School districts misled on risks of investments, lawyer says

Amy Hetzner & Avrum Lank:

In 2006, the five districts - Kenosha Unified, Kimberly Area, Waukesha, West Allis-West Milwaukee and Whitefish Bay - purchased complex financial vehicles called collateralized debt obligations through district-run trusts. The value of the CDOs has plummeted over the last year, triggering calls for the districts to contribute millions more dollars in collateral to avoid a drop in income from quarterly dividends.

Kantas declined to name which of the districts had hired his firm.

But officials with the Waukesha and Kimberly districts said they had hired the law firm, Houston-based Shepherd, Smith, Edwards & Kantas, although they did not know how many of the other districts also are involved.

Waukesha School Board member Joseph Como declined to say how the district was paying the law firm. But Gary Kvasnica, director of business services for the Kimberly district, said his district is paying the law firm a fee of "a few thousand dollars" for its investigation of the investment.

Posted by Jim Zellmer at July 11, 2008 1:33 AM
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