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Pay To Play In School Bond Elections?
Thursday, May. 3, 2012
Bonds are an essential part of raising money for local government and school districts. But what few people know is that major financial institutions in California are regular contributors to school bond elections – and then are selected to handle the transactions.
According to a report by California Watch, “ underwriters gave 155 political contributions since 2007 to successful bond campaigns for school construction and repairs.” “If this isn’t proof of pay to play, then pay to play doesn’t exist,” says Glenn Byers, assistant treasurer of Los Angeles County.
Although he does not handle the hiring of the underwriters, Byers is knowledgeable of the process. “The timing of the payment is irrelevant. You paid and you got the job. That’s pay to play.”
The practice is banned in some states, but in California, major underwriters are regular contributors, and “overwhelmingly, bond underwriters who donated to these campaigns were granted contracts by the school districts.” The study shows that underwriters usually are contracted by the districts before the election, and then give money to help support the actual political campaign.
At least one firm, O’Connor & Co. Securities does not donate. “As a firm policy, we avoid participation in campaign contributions solely to avoid the appearance of a conflict of interest, even though at times this could put us at a competitive disadvantage,” according to President Will O’Connor.
The Municipal Securities Rulemaking Board is now requiring underwriters to “report bond measure donations to the self-regulatory agency. The board is analyzing the data reported so far (since 2010) before determining whether additional regulations are necessary.”
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