Hello, California!
You are victims of the same foul money-grinding apparatus that almost capsized Michigan schools 19 years ago.
Michigan legislators awakened to the danger and banned the blight of Capital Appreciation Bonds back in 1993.
In 1988, one man — Rich Allen — led the way to make CABs a “tool” for school finance. In reality, CABs were a doomsday machine for the public, though they were a neat way for a handful of financial wizards like Allen to further their careers.
Does California have a key figure like Rich Allen?
CABs began to be issued in California back in 2000. Was any one person, or perhaps a handful of people — responsible for introducing this abomination into California?
This story is re-published with permission of the Detroit Free Press.
By Joel Thurtell
Headline: ONE KEY FIGURE HAS TAKEN THE BUSINESS WITH HIM
Sub-Head:
Byline: JOEL THURTELL FREE PRESS STAFF WRITER
Pub-Date: 4/5/1993
Memo: ; BUYING NOW, PAYING LATER
Correction:
Text: Wherever Richard Allen goes, so does the bond business.
When Allen sold bonds for underwriters Tucker, Anthony, R.L. Day in
1988-89, the firm bought most of the capital appreciation bonds issued by
Michigan schools.
When Allen switched to St. Louis-based A.G. Edwards in 1989, his old
firm dropped off the list of top CAB underwriters. Edwards jumped into first
place.
Allen decamped in 1990 for a job with Chicago-based Kemper Securities
Group. Edwards now is in second place behind Kemper.
Allen, 50, is in charge of Kemper’s Lansing office.
Kemper has “gone out and hustled to help a lot of small school districts
and towns borrow the money they need to afford their capital projects,” Kemper
public relations officer David Waymire said.
Allen, who has done that hustling, is a genial man who uses financial
jargon the way others talk about sport statistics.
“I graduated with a little over a two-point grade average,” said Allen.
“If you want to call me a whiz kid, I’ll be happy to take it.”
He has worked for the state, as a financial consultant, and ran his own
business.
Allen was a promoter of the bill that made CABs legal in Michigan in
1986.
He was vice president of the Holt school board when it picked his firm
to underwrite a 1988 bond deal, including $4.8 million of CABs. His firm got
the deal without having to submit to a competitive bidding process.
It was the first CAB deal in Michigan, and according to then-state
Treasurer Robert Bowman, it set a precedent for similar deals.
Since Holt, Allen has dominated the state’s school CAB issues. His
firms have been involved in 90 percent of the deals, according to Securities
Data Co., a securities tracking firm.
“I’ll take the praise or the blame, whatever you want to do,” Allen
said.
