South Bay bond manager's home raided; California Watch finds campaign donors get bond work in 110 out of 111 cases

District Attorney Bonnie Dumanis seems to be obsessively focused on Chula Vista politics when it comes to public integrity. It's a big county, but Bonnie seems to be limiting herself to implementing the agendas of Greg and Cheryl Cox and their friends. There are serious problems in other parts of the county. In fact, California Watch discovered that "For donors [to bond campaigns], failure is rare. In only five cases out of 111 did an underwriter make a donation and fail to receive a contract to sell the bonds. In four of those, however, more than one underwriter made donations and the contract went to the firm that had contributed a larger amount to the campaign." (See second story below.)

South Bay bond manager's home raided
Wendy Fry
UTSD
May 3, 2012

District Attorney’s investigators executed search warrants Wednesday morning at the home and former office of bond manager Gary Cabello, a financier who has done work at both Sweetwater schools and Southwestern College.

Cabello’s defense attorney, Heather Boxeth, said the investigators were searching for documents and information as part of their ongoing investigation of corruption in the South Bay. Cabello has not been implicated in any crime.

“That law enforcement showed up with a search warrant was a surprise to Mr. Cabello, as he had been previously contacted by the District Attorney’s Office and has been willing to cooperate in any fashion,” Boxeth wrote in an email statement. “Furthermore, my various phone messages, as Mr. Cabello’s attorney, left with the District Attorney’s Office remain unreturned. Mr. Cabello has over 20 years of public finance experience across the state, which is a highly regulated industry. Mr. Cabello has nothing to hide, he’s been involved in no illegal activity. The execution of the search warrant ... while inconvenient and embarrassing certainly won’t turn up any evidence of any wrongdoing on his part.”

Also searched were the Carlsbad offices of Alta Vista Financial, Inc. A spokesman for the company said of that raid, “It had nothing to do with our company. They were here looking for information on a former employee who hasn’t worked here for about three years. We cooperated with them and they left.”

Cabello, 53, worked at Alta Vista serving the Sweetwater school district prior to Proposition O, a $644 million voter-approved bond measure passed in 2006. He calculated the size of the bond measure and the tax rate needed to finance the long list of school building projects. Alta Vista contributed $25,000 to the campaign to get the bond measure approved by voters. The company then won a contract underwriting the bond.

Cabello’s current company, Chicago-based Cabrera Capital Markets, LLC., has a contract with Southwestern College to manage Proposition R bond funds. Officials with Cabrera Capital did not respond to questions Thursday.

The District Attorney’s Office is building a case that Sweetwater and Southwestern officials accepted thousands of dollars of expensive meals, entertainment and other gifts in exchange for awarding multi-million dollar contracts under a systemic “pay to play” culture. Five current and former officials face felony charges, while three contractors have pleaded out on misdemeanor charges and are cooperating with prosecutors.



With campaign donations, bond underwriters also secure contracts
May 3, 2012
Will Evans
California Watch

Leading financial firms over the past five years donated $1.8 million to successful school bond measures in California, and in almost every instance, school district officials hired those same underwriters to sell the bonds for a profit, a California Watch review has found.

The practice is especially pronounced in California, where underwriters gave 155 political contributions since 2007 to successful bond campaigns for school construction and repairs. One major underwriter, Piper Jaffray, has said it gets more requests for campaign contributions in California than in any other state where they do business.

The success rate of these underwriters is extremely high. In only five cases since 2007 has a campaign donor failed to receive a bond-selling contract from the school district.

School districts say they choose bond underwriters for their expertise and competitive rates and because they’ve served them well in the past. And underwriting firms say they contribute only after they’ve been hired to sell the bonds, avoiding any undue influence.

But critics say that no matter when the agreement is made, the campaign donations influence school districts’ business decisions. They argue that pre-arranged underwriting contracts bypass a truly competitive sale, leaving in doubt whether districts got the best possible deal.

“If this isn’t clear proof of pay to play, then pay to play doesn’t exist,” said Glenn Byers, Los Angeles County’s assistant treasurer, who oversees some school bond sales but doesn’t control the hiring of underwriters. “The timing of the payment is irrelevant. You paid and you got the job. That’s pay to play.”

Some states have banned the practice. Missouri, for one, outlaws donations to bond campaigns from companies with a financial interest in the bond sale.

In the past five years in California, five major underwriters donated $1.8 million to help pass 111 ballot measures, authorizing $15.5 billion in debt. A couple dozen other measures received underwriter contributions but failed at the ballot box.

Overwhelmingly, bond underwriters who donated to these campaigns were granted contracts by school districts.

In nearly all cases, the only underwriters that donated to a successful school bond campaign ended up working on the bond sale. Bond Buyer, a trade publication, found the same pattern in an earlier review of 2010 campaign contributions.

At times, multiple underwriting firms will donate to a single bond campaign. But even there, the success rate is high. In almost all cases in which multiple bond underwriters donated to the same campaign, they all were given contracts by the school district to market those bonds...

For donors, failure is rare. In only five cases out of 111 did an underwriter make a donation and fail to receive a contract to sell the bonds. In four of those, however, more than one underwriter made donations and the contract went to the firm that had contributed a larger amount to the campaign...

(Click on link at top to see the rest of this very detailed article.)