Riley: Providence Rhode Island Defaulted June 30, 2015…So What

Tuesday, July 14, 2015

Michael G. Riley, GoLocalProv MINDSETTER™

The City of Providence Rhode Island defaulted midnight June 30, 2015 on a $62 million dollar debt to the City of Providence Pension plan. That very same day Greece defaulted on $1.7 billion due to the IMF. Both Greece and Providence continue to operate as governments. Fitch and Moody’s rate Greece Debt as “junk”, while Providence Rhode Island debt is rated Baa1 by Moody’s Investor Services and by Fitch as BB.

This is how several newspapers reported last week’s twin defaults as these were the front-page headlines. I thought we could have some fun and try to match the headlines with the newspaper.*

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Here is what the New York Times said about Greece’s default

“Did Greece default on its debt? “
“When borrowers — whether they are countries, companies or individuals — do not pay their debts on time, they are in default. For practical purposes, then, Greece — which on Tuesday failed to make a scheduled debt repayment of about 1.5 billion euros, or $1.7 billion, to the International Monetary Fund — has defaulted. “

So pretty much everyone agrees that Greece missed a payment and is in default, but on exactly the same day so did Providence Rhode Island. Why didn’t the City’s own newspaper and the newspaper of record report their own cities default?  First, it’s probably because the Providence Journal is generally clueless but since I had already informed the paper of this upcoming default and submitted an editorial about the City of Providence impending default, I thought they had this story ready for publication. They missed the story completely and unfortunately the letter I submitted was summarily rejected within seconds or minutes of my submission to the Journal.  The letter can be found on rishrugs my blog.

 So, the answer as to why the Providence Journal completely missed the default story or refused to report on it is wide open for discussion. Maybe, the answer is far more sinister than pure incompetence.  Could the Providence Journal actually be a mechanism for cover up of federal securities laws violations? Does the Journal have Providence officials so called “back”?  Could the Journal have been complicit with what appears to have been 15 or more years of lies and false public statements by city officials dutifully regurgitate to the citizens of Rhode Island?  Much more likely is that the Journal is a tool for insiders and insiders treat them as useful idiots. In either case, the public and Providence Journal readers have been disserved by the States only newspaper  and it is GoLocalProv  that has allowed real investigative Journalism to exist and delve into what I believe is felony criminal behavior by several Providence elected and appointed officials on a very wide scale.

Misleading the public, taxpayers, pension beneficiaries and Municipal Investors about the true financial condition of Providence and the City pension plan is a crime. The regulator is the Securities Exchange Commission and its Municipal division. The law enforcement agencies interested in public corruption such as municipal and accounting fraud would include the RI State Police, Attorney General, and the FBI.

They have all been notified by myself and others. I have included my report in those complaints, as should any of you who want a real investigation. Here is the report.

 Please take the time to read and submit if you are as concerned as I am about phony assets, fraudulent and misleading accounting, inappropriate and illegal “borrowing “ from the pension fund and the default, costing the pension fund $62 million, that occurred last week.

Attorney General Kilmartin

Strangely similar to the Providence Journal, who rejected my editorial, Attorney General Peter Kilmartin also immediately rejected my report as “not being the jurisdiction of his Office”  His office suggested that the State of Rhode Island DBR - Securities Division was the regulator. With my 45 years experience in the securities business and my many dealings with regulators, I guessed this was completely wrong. And indeed it was wrong.  So it turns out Kilmartin was completely wrong. Now what?

I have contacted U.S. Attorney Neronha‘s office but have not heard back. Recently Auditor General Dennis Hoyle and I have traded email letters. I think it’s appropriate for me to reprint his letter and my response given the decision by Dan McGowan to publish the Auditor Generals’ letter to me. These letters and the editorial rejected by the Providence Journal can be found here.

*The answer to the table quiz is to switch the daily news and Providence AP headline. Reuters headline is correct.

Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity, and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.  

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