Wisconsin "School Lawsuit Facts" Site Posted by PR Firm

"School Lawsuit Facts":

MILWAUKEE, WI, September 30, 2008 . . . Five Wisconsin school districts (the "Districts") filed suit in Milwaukee County Circuit Court yesterday seeking to rescind their $200 million investment with Stifel Nicolaus & Company, Inc. ("Stifel") and the Royal Bank of Canada ("RBC"). They allege $150 million in losses to date.

The Districts contend Stifel and RBC either knowingly or negligently misrepresented and omitted crucial details in transactions made by the Districts to secure funding for their Other Post-Employment Benefit (OPEB) liabilities by failing to disclose or concealing their true risks. The Districts contend such investments were unsuitable for a public trust fund. They further allege Stifel and RBC collected large fees and realized massive cost savings while effectively positioning the Districts as guarantors of an ultra-risky portfolio of assets.

The school districts include: Kenosha Unified School District; Kimberly Area School District; School District of Waukesha; West Allis - West Milwaukee School District and Whitefish Bay School District. In addition to Stifel Nicolaus and RBC, the school districts have also included James M. Zemlyak of Elm Grove in the complaint. During the time of the transaction Zemlyak was the Chief Financial Officer and Co-Chief Operations Officer for Stifel.

Madison Assistant Superintendent of Business Services Erik Kass was most recently with the Waukesha School District. Amy Hetzner and Paul Soglin have more.

Roger Frank Bass on Two Crises: Wall Street & Education:

One, $700 billion is peanuts. Low-end estimates of educational outlays are more than $400 billion per year -- that's $5.2 trillion during a child's K-12 education, more than seven times what the government will spend to prop up "free" enterprise. (The Global Movement for Children, using United Nations data, states that the 80 million children not receiving education could be schooled for about $15 billion per year.) And, like our financial institutions, U.S. education performs less well than in virtually all developed countries despite per-student outlays that are some of the highest anywhere. In military terms, this is a clear and present danger.

Along with bankrolling failures, the parallels include lax oversight. Just as Wall Street was craftily packaging collateralized debt obligations and hedge funds, state- and local-education agencies were bundling worthless test scores into triple-A public relations.

Just as the Securities and Exchange Commission and other regulatory agencies failed to monitor their charges, Departments of Public Instruction and those responsible for our children's education never demanded the transparency needed to evaluate the substandard data behind ever riskier instructional methods. When a stock market falls apart, at least we can pick ourselves up and keep going. When education falls apart, we won't have the intellectual capital to move forward. Economic growth begins with knowledge, not money. Ask India.

These events provide timely and useful dinner conversation fodder with our children:

• "What do you think happened to the baby-sitting money deposited into the bank yesterday?"
• "What will you do one day if the money is not there?"
• "Where does the money come from?"

Posted by Jim Zellmer at October 1, 2008 4:03 PM
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