The Erie School District Swindle: Part Two

Today’s Erie Times-News carries a follow-up of an on-going
story about the Erie School District’s lawsuit against JP Morgan
Chase which the school district alleges overcharged it more than
$1 million for financial services several years ago.

Today’s article focuses on the school district's efforts to
have the case heard in federal district court here in Erie,
whereas the banking consortium wants it held in federal court
in Manhattan. What this otherwise informative story lacks is
background and context which tells us how the Erie School
District got into the dilemma described in the Times-News article.

For example, not once is the name of the person perhaps most
responsible for its predicament, nor his leading role in it
mentioned,longtime Schools Superintendent James Barker, although
a photo of him accompanies the article.

Following is a piece I posted on my blog "Erie Counter News Media"
more than a year ago, on October 14, 2007 which may provide some
helpful context.
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Times-News Reporter Ed Pallatella fell hook, line and sinker
for School Superintendent James Barker's fancy spiel about
how the school district may have paid an unknown but presumably
excessive amount in fees to the broker, J.P. Morgan, which
managed the refinancing of $37 million in bonded indebtedness
for the district back in 2003.

If Barker had couched his tale of woe in memorandum form it
could have been called what is colloquially known as a CYA Memo,
and I don't believe I have to spell that out.

Don't know if Barker ever heard the old saw "The buck stops
here," and "here" is directly on his oversized desk. Yet he
managed by inference to blame everyone but himself for the
school district's loss, whatever it is, although it appears
to be at least $750,000, or half of what the school board
was told its profit would be from the refinancing scheme,
plus whatever excess fees may have been paid to the broker,
if any, plus the $60,000 the district paid to a downstate
financial firm to advise it (badly, it appears) on how to
handle the refinacing.

But I suspect, and I believe Barker knows the loss will be
significant, or he wouldn't have gone to the lengths he
did to concoct his convoluted cover story.

Then, of course, there will also be the huge but unknown
prospective expense the school district's taxpayers will
have to bear to litigate Barker's faux pax, thus compounding
the loss, coupled with the prospect that the outcome of the
litigation may be a big fat zero for the school district.
There's no doubt Barker is the culprit here, but you'd never
know it without reading between the lines of Pallatella's story,
which provides an elaborate if convenient escape route for
the superintendent.

He's presumably the high-priced expert the board pays big bucks
plus perks to guide them through financial morasses like this one.
And it appears all he had to do in 2003 was insist on knowing what
the refinancing fee would be, a no brainer in most business
environments except, apparently, in the superintendent's suite.
But instead, he allowed himself and the school board to be stiffed
by slick New York bankers, assuming pending litigation shows that's
what happened.

A further irony is that it took an enterprising reporter with
Bloomberg News in New York City to uncover this major story in
the Times-News's own backyard