"Luciforo" swears in Jimmy "Good Old Boy" Ruberto as Pittsfield's returning Mayor in early-January, 2008.
Andrea F. Nuciforo, Jr.
Emily Rooney - Greater Boston/Beat the Press - http://www.wgbh.org/gb/
June 20, 2008
I was up late early this morning -- around 1 a.m. -- and I was watching the re-run of yesterday's PBS-Boston news program "Greater Boston" hosted by Emily Rooney. At first, she and her guest was discussing the tragic double homicide criminal trial of Neil Entwistle:
Then, Ms. Rooney had Massachusetts Secretary of State Bill Galvin on to discuss the commonwealth's "flawed" "ethics" law. Basically, Mr. Galvin wants increased power to "persecute" Bay State outsiders by the State Legislature granting him legal powers that now belong to the State's Attorney General's Office, especially the power to subpoena financial documents in lobbyist-related activities.
I became very upset with Mr. Galvin because I have witnessed "Ethics" complaints in Massachusetts State Government. IT IS CORRUPT! The state government mostly goes after people with good intentions, private citizens who participate in public life, and non-career politicians, despite Speaker Sal DiMasi being an exception -- (please note Speaker DiMasi sank the casino gambling proposal & upset the state's powerful special interests). I have put my belief to the test multiple times, swearing out ethics complaints against Andrea F. Nuciforo, Jr.:
&, Daniel Bosley:
Each time I swore an "ethics" complaint, the state of Massachusetts denied my requests.
However, the state has mostly gone after the less significant "ethics" violators while leaving the powerful pols alone. For example, please view the following Blog page:
In closing, what upset me is that I have watched "ethics" in Massachusetts State (& local) Government, and the whole apparatus is fraudulent and UNFAIR! Lastly, please visit my Blog page:
Thank you & In Dissent!
Jonathan A. Melle
30 Hanover Street, Apartment # 209
Manchester, NH 03101-2227
Telephone: (603) 232-5538
Cell: (603) 289-0739 E-mail: email@example.com
~Former lifelong resident of Berkshire County, Massachusetts~
The Boston Herald, Editorial, Page 20, July 27, 2008
“Tax credits smell awful lot like pork”
Pork comes in all shapes and sizes in this state. Now we know some of it may even be, well, historic.
Yes, thanks to an article in the newly released summer edition of “CommonWealth Magazine”, published by “MassInc”. we at last know a lot more about where some $50 million a year in tax credits for “historic preservation” are going – and about who is calling the shots.
The program was set up in 2003 with a modest $10 million in tax credits. But this is Massachusetts, where pork proliferates, and so now it stands at $50 million, but only because efforts to DOUBLE that amount – or remove the cap entirely – have been unsuccessful.
So who have been the lucky winners? Well, as “CommonWealth” points out, this is a case of them that have, get. The biggest winners have been the new owners of the Red Sox, getting $13.3 million in tax credits – or 8 percent of the total awarded. Now, do not get us wrong. We all love what they have done with Fenway to make it more comfortable and enjoyable, but with some ticket prices hitting the triple digits (don’t you love those Green Monster seats), these folks are not exactly hurting for cash.
This is corporate welfare, plain and simple. Coming in second was the Liberty Hotel – the one crafted out of the old Charles Street Jail by developer Richard Friedman, whose other claim to fame in his role as host to the Clintons when they stay on Martha’s Vineyard. The Liberty got $9.1 million in tax credits.
Eight Winn Co. projects have been granted $28 million in credits.
While the legislation creating the tax credits gave responsibility for awarding them to the 15-member Massachusetts Historical Commission, the article notes that Secretary of State William Galvin “makes the awards personally.” The article also notes a rather high correlation between Galvin campaign contributors and recipients of the tax credits.
No! Could that be?
We tend not to give tax credits the level of scrutiny we do outright grants. And that is just plain foolish. It is still the taxpayer’s money – albeit in this case money not collected. There needs to be a better way of distributing it – and accounting for it. And no better time than now.
A BOSTON GLOBE EDITORIAL
"Disclose who benefits from special tax breaks"
November 17, 2009
WHEN MASSACHUSETTS gives out special tax breaks to foster economic development, the public deserves to know who benefits from the programs and how many good jobs they create. Do million-dollar incentives for life-sciences firms support the growth of high-skill manufacturing or merely a smattering of menial jobs? Does the state film production credit subsidize a few mansions in the Hollywood Hills, or does it foster an ecosystem of local set designers, camera crews, and actors?
To cast some light, a group of lawmakers wants to revive a proposed requirement under which state officials who administer so-called refundable tax breaks would have to identify the recipients, the number of jobs created, and the average salaries of those jobs. The rule is wise and well worth adopting.
Yet when Governor Patrick first proposed the measure earlier this year, the Legislature watered it down badly, refusing to authorize the release of data on individual recipients.
Beyond film production and the life sciences, the refundable credits also promote historic preservation, the medical device industry, brownfields development, dairy interests, and low-income housing. They function like grants, because they are available even to firms with little tax liability in Massachusetts. Some can be bought and sold on an open market. Yet if the state were making direct appropriations to companies, those grants would show up in budget documents. The tax credits don’t, out of a misplaced deference to the privacy of the recipients.
Ten other states have rules requiring disclosure, says state Senator Jamie Eldridge, a supporter of the change. Massachusetts ought to join them.
"Galvin charges UBS with fraud"
June 26, 2008, 2:39 PM
Massachusetts Secretary of State William F. Galvin said today that he has charged UBS Securities LLC and UBS Financial Services Inc. "with fraud and dishonest conduct in retail sales of auction rate securities to investors who were told by their UBS representative that the investments were safe, liquid 'cash alternatives' when UBS knew they were not."
UBS today vowed to defend itself against Galvin's allegations.
The Globe reported today that Galvin's action was expected. Please click here to read that story.
In a statement e-mailed to the Globe, UBS referred to auction rate securities as ARS.
"We are disappointed that the Massachusetts Securities Division has filed this complaint against us, as we, our peers, and the industry work toward solutions," UBS said. "We continued to support the auction rate securities market longer than any other firm. We held approximately $11 billion worth of ARS at the end of 1Q08. We have offered our clients loans of up to 100 percent of the par value of their ARS holdings at preferred lending rates. UBS, our clients, and clients of other industry participants all share the impact of this unprecedented loss of liquidity in the ARS market."
UBS also said: "We will defend the specific allegations of the complaint. Contrary to the allegations, UBS is committed to serving the best interests of our clients. We will continue to work with the industry toward broad solutions."
Galvin said in a statement today: “UBS pushed the sales of these instruments as ‘cash alternatives’ without telling their customers of their vulnerabilities. Nor did UBS tell them that the only ARS products being offered were what UBS had underwritten and that UBS was trying to unload at the eleventh hour. The game was fixed; only the customers were in the dark.”
To read the complaint that Galvin's office filed, please click here:
(By Chris Reidy and Beth Healy, Globe staff)
"State set to allege securities fraud: Complaint to cite offerings by UBS; Seeks fine, return of investor funds"
By Beth Healy, (Boston) Globe Staff, June 26, 2008
Massachusetts securities regulators today are expected to file civil fraud charges against UBS Financial Services Inc. for allegedly selling investments it claimed were as safe as cash even though the Swiss firm knew they were risky, according to a state official briefed on the case.
The complaint, to be filed by the state Securities Division, is expected to allege that UBS knowingly let its brokers sell so-called auction-rate securities - a type of bond issued by nonprofits and municipalities - without warning investors that they might have trouble getting their money back, the Massachusetts official said.
UBS spokeswoman Karina Byrne said the firm had not yet been notified of any complaint. "UBS has been providing information to the Massachusetts Securities Division and we are committed to helping our clients who have been adversely affected by the unprecedented marketwide loss of liquidity in auction rate securities," she said.
The Globe previously reported that UBS brokers were still making sales early this year, when the firm knew the multibillion-dollar trading market for these securi ties was on the brink of collapse - another victim of the credit crisis that was then sweeping financial markets.
The market did indeed collapse on Feb. 13 and has remained closed since, leaving trapped investors with an estimated $220 billion worth of securities they cannot sell.
The state is looking to force UBS to return all investor funds in these investments and will seek to have the firm pay a fine.
Last month, UBS agreed to buy back $37 million worth of these securities sold to 17 Massachusetts towns and cities and to the Massachusetts Turnpike Authority, under an agreement with Attorney General Martha Coakley.
Little known before the market froze, auction-rate securities have ensnared the savings of thousands of investors across the country, many of them retirees who put their life savings into the investments on the advice of their brokers.
As reported by the Globe, UBS investment bankers were warning some large clients of the market's looming problems while, at the same time, continuing to permit brokers to sell the investments to individual investors without providing them with similar warnings.
As a result, clients seeking risk-free investments purchased securities they were led to believe would be as safe as money market funds. Indeed, even many brokers from UBS and other investment firms appear to have been surprised by the market's shutdown.
Massachusetts regulators have been investigating UBS and two other firms, Banc of America Investment Services Inc. and Merrill Lynch & Co., since March, shortly after the auction-rate markets failed. Those investigations are ongoing, according to the state official. New Hampshire regulators also are probing UBS.
Auction-rate securities are primarily the long-term debt of student lenders and municipalities. They traded for years in private markets run by brokers, where weekly or monthly auctions reset the interest rates on the securities. Typically, those rates were a little higher than those of money-market funds.
What most investors didn't know was that the auction-rate market functioned only as long as buyers and sellers placed bids for the bonds on a routine basis. The brokers who ran the auctions, including UBS, in February decided to stop trying to keep the auctions going by using their own funds to buy the bonds.
One of the many people interviewed by state investigators was Richard Stahl, a retired auto dealer in Hollis, N.H., whose ordeal was detailed by the Globe. He has $1.4 million tied up in auction-rate securities, half in bonds issued by a New Hampshire student lender. That student lender had been advised by UBS, its investment banker, to offer a sharply higher interest rate to generate demand for its bonds if the market began to shut.
The lender, the New Hampshire Higher Education Loan Corp., agreed to the higher rate deal in mid-December. It did so "at the suggestion of UBS Securities LLC, its investment banker and broker-dealer, in order to respond to disruptions in the auction-rate securities market and attempt to prevent 'failed auctions,' " the lender said in a letter to investors on its website.
But individual investors have said that UBS did not share its concerns about the market with them. Weeks later, in January, a UBS broker sold the New Hampshire group's bonds to Stahl, promising him the investments were as safe as cash. Stahl said he received no warning about the bonds' risks.
In February, Stahl learned that he could not sell the bonds because the trading market had closed.
In May, UBS stopped listing these investments under "cash" on customer statements and started listing them under the category of "fixed income," or bonds. The change is an acknowledgement that the securities were not equivalent to cash, but in fact carried risks, as do bonds, which can fluctuate in value.
UBS also has been marking down the value of these investments on customer statements. The firm has reduced the value of some student-loan and other auction-rate bonds by at least 5 percent, and sometimes by much more, according to customer statements reviewed by the Globe.
Lance Pan, director of investment research at Capital Advisors Group Inc. in Newton, said UBS and other investment banks should buy back the securities. "Investment bankers can and should take them back on the balance sheet. I don't see why they don't do that, for business reasons," Pan said.
Beth Healy can be reached at firstname.lastname@example.org
"State: Firm knew of market woes: Galvin says bank pressed its brokers to unload securities"
By Beth Healy, (Boston) Globe Staff, June 27, 2008
Executives at the highest level of UBS Financial Services Inc. knew as early as last fall that the auction-rate securities market was failing, and urged brokers to move the investments from the firm's books into the hands of individual clients, state regulators alleged in a lawsuit filed yesterday against the brokerage.
In a scathing rebuke of the Swiss banking firm, the Massachusetts Securities Division complaint charged UBS with fraud and dishonest conduct in the sales of the investments. The state alleged that UBS brokers were encouraged to sell the securities - especially debt issued by student lenders - as if they were as safe as cash, even as top management knew the market could disappear.
UBS engaged in "profoundly deceptive sales practices," the state alleged, even misleading their brokers into believing the market was safe. UBS and other firms allowed the auction-rate market to fail on Feb. 13, no longer willing to buy the investments from clients who wanted to get out. The securities have not traded since then, leaving billions of dollars trapped.
"Our goal is to make people whole, the individuals we believe have been unfairly treated," said Secretary of State William F. Galvin, who oversees the securities division. The state is looking to compel UBS to repay the Massachusetts investors who bought the securities. It is also seeking a fine.
Karina Byrne, a spokeswoman for UBS, said in a statement, "We are disappointed that the Massachusetts Securities Division has filed this complaint against us, as we, our peers, and the industry work toward solutions." She said UBS would defend itself against the allegations and added, "UBS is committed to serving the best interests of our clients."
Internal UBS e-mails and records obtained by the state in its investigation paint a different picture, however.
By last August, David Shulman, UBS's chief of municipal bonds and fixed income, was under pressure to reduce the amount of auction-rate securities on the firm's books, the state said in its complaint. He kicked off a marketing campaign that month, including conference calls with brokers to tout the investments. He held such calls 13 times from Aug. 22 through the market's collapse in February.
But while Shulman was encouraging investors to buy the securities, he was selling: On Aug. 22, he sold a large portion of his own holdings in auction-rate securities, the state alleged.
UBS declined to comment on Shulman's behalf. He could not be reached at home late yesterday. He works in New York.
By early September, Shulman, in an internal e-mail, was discussing the turmoil building in the auction-rate market and suggested that the firm consider leaving the business. He acknowledged the "many legal and reputational issues on this decision."
On Feb. 12, the day before the auctions failed entirely, a UBS risk management executive urged Shulman by e-mail: "we need to beat the bushes harder than ever to unload this paper." In the 30 days before the market froze, 237 Massachusetts investors were sold $190 million worth of the securities, according to the state.
Wall Street invented auction-rate securities more than 20 years ago, but they grew in prominence in the past few years. They allowed nonprofits, like student lenders and city and state entities, to borrow money inexpensively. The debt was long-term, with interest rates that re-set at weekly or monthly auctions run by brokerage firms. The bonds offered investors returns slightly better than money markets.
But starting last fall, with the credit crisis and a new federal law that stood to dent the earnings of student lenders, buyers began to shun the auction markets. Corporations dropped out first, when auditors warned the investments were not truly cash-like. Brokers like UBS had to use their own money to buy the securities from clients who wanted to sell, leaving them with a huge inventory of investments they did not want.
By February, UBS and the rest of Wall Street decided to stop propping up the auctions, leaving thousands of investors stranded in the investments. The state alleges that UBS should have warned investors it was the sole keeper of the market for the securities it sold, and that it could step away at any time.
Brokers were not trained about the risks of auction-rate securities, the state found, and those interviewed as part of the investigation said they had no idea the investments carried this inherent risk.
At the end of 2008's first quarter, UBS says it had $10 billion of auction-rate securities on its books. Across the country, investors with all firms have an estimated $220 billion in auction-rates.
In an e-mail to a colleague last Halloween, Shulman called the auction-rate market "a huge albatross." The hand-wringing within UBS accelerated in the following weeks and months, with one of Shulman's deputies declaring in a Dec. 11 e-mail, "The auctions aren't going to come back." Shulman sold the rest of his personal holdings the next day.
Still, the firm encouraged its brokers to sell the securities, the state alleged. Ominously, on a Feb. 8 conference call, brokers were assured that the auctions continued "to be very effective." On that advice, UBS brokers in Massachusetts alone sold $50 million worth of the securities in five days.
On Feb. 14, individual clients were stunned and trapped. But Shulman, in an e-mail to a colleague, looked at the bright side for UBS. Restructuring this $330 billion failure, he said, "is a banker's dream market."
Beth Healy can be reached at email@example.com.
"Galvin makes income tax ballot petition Question 1"
The Associated Press, Thursday, July 10, 2008
BOSTON (AP) — The ballot question proposing to repeal the state's income tax will appear on the November ballot as Question 1.
Secretary of State William Galvin also announced today that a petition making marijuana possession a civil and not criminal offense will be Question 2, while the third question will be whether to ban dog racing in Massachusetts.
Galvin, who oversees state elections, has discretion over the order of questions on the ballot. A spokesman would not immediately say why he ordered the three questions that way.
Question 1 would eliminate the state's 5.3 percent income tax levy, which would cost the state about $12 billion annually in revenues.
The Boston Globe, Op-Ed, W. JAMES ANTLE III
"A place on the ballot"
By W. James Antle III, August 15, 2008
BOB BARR, a former Republican congressman from Georgia, has performed better in national polls than any Libertarian Party presidential candidate in history. In July, he reached 6 percent nationally in a survey conducted by Zogby International. More recent polls have found him in the 2 to 3 percent range, which may not make for a landslide but is comparable to Ralph Nader's decisive 2000 showing.
In Massachusetts, polls have showed Barr winning as much as 5 percent of the vote - 2 points more than Libertarians need to regain automatic ballot access - and Channel 7/Suffolk University pegged his support at 1 percent earlier this month. But the Commonwealth's voters may not get the opportunity to choose Barr in November, although they were able to vote for lesser known Libertarian candidates like Andre Marrou, Harry Browne, and Michael Badnarik before him. Contemporary Internet sensation and Republican Representative Ron Paul of Texas also made it onto the Massachusetts ballot as a Libertarian in 1988.
Yet the secretary of state's office insists that Barr should be, well, barred. The Massachusetts Libertarian Party listed its state chairman, George Phillies, as a stand-in presidential candidate before the Libertarian National Convention in May. Phillies was seeking the national party's nomination, but told state election officials he wanted the actual nominee to be listed on the ballot if he lost.
Phillies was in fifth place, but after six ballots Barr won. Massachusetts election officials nevertheless refused to put him on the ballot, saying in effect that their policy is like that of a strict restaurant - no substitutions. But the precedents are on the Libertarians' side.
According to Richard Winger of Ballot Access News, Massachusetts allowed vice-presidential substitution for John Anderson in 1980 and was willing to offer it to Pat Buchanan in 2000 and Ralph Nader in 2004. In 1996, the Commonwealth reportedly told the Constitution Party that presidential substitution was also allowed. Bay State Libertarians have claimed that they were initially told the same thing during this election cycle, only to have state election officials reverse themselves in June - after the national convention was over and less than two months before the petitioning window was to close.
The American Civil Liberties Union filed suit last week to help get Barr a place on the ballot. Unfortunately, the intransigence of state election officials has been compounded by mixed messaging by some supporters of the ACLU lawsuit - especially Phillies himself.
Almost immediately after Barr secured the nomination, Phillies told Reason magazine that the Massachusetts Libertarians might hold a state convention to nominate a separate candidate. "Nominating this man," he is quoted as saying of Barr, "is the equivalent of nominating an Imperial Wizard of the KKK to lead a party of African-Americans." He repeated a variation of this statement on the state party's website shortly afterward.
Phillies recently told a newspaper that Barr is a "right-wing Republican," saying that although he would keep his word and support the ACLU's drive to replace him with the Georgian on the ballot, "I think most of the state members of the party will not be heartbroken if this suit is not settled until after Nov. 4."
While Phillies is certainly entitled to object to Barr's policy positions, especially as they relate to the religious and cultural concerns of his state committee members, Massachusetts Libertarians need ex-Republicans like Barr. When the GOP's statewide candidates have been weak or nonexistent it has benefited Libertarian Party candidates.
Republican-leaning voters helped Carla Howell win nearly 6 percent in her race for state auditor in 1998 and 12 percent in her campaign for US Senate in 2000. In the second race, Howell finished just a point behind GOP candidate Jack E. Robinson and received four-fifths as many votes as the Libertarian presidential nominee did nationwide. In 2002, Republicans failed to field a challenger for Senator John Kerry, and Libertarian Michael Cloud received 19 percent of the vote.
Barr is another candidate who could win over disgruntled Republicans and improve Libertarian vote totals. His party has earned a place for its official nominee on the ballot. And even third-party voters and right-wing Republicans deserve a candidate of their choice.
W. James Antle III is associate editor of The American Spectator magazine.
The Berkshire Eagle - Editorial
Wednesday, August 20, 2008
The filming of the Ang Lee movie "Taking Woodstock" is giving a welcome boost to the small businesses, motels and restaurants of New Lebanon, New York. Massachusetts, primarily the Boston area but to an extent the Berkshires, has benefited from visits from Hollywood over the years, but the concept of increasing tax credits to encourage movie productions to come to the state has met with some resistance on Beacon Hill. Tax credits are only worth employing when there is a likelihood of a financial return larger than the money lost from the tax rolls, and the film industry generates revenue while it is generating publicity for a community. With so many states competing to attract filmmakers, tax credits are a wise investment in encouraging them to come to the Bay State.
Fidelity Investments founder Edward C. ’Ned’ Johnson.
"Galvin rips Ned on bonds: Urges Fidelity CEO to buy back securities"
By Greg Turner, Wednesday, August 20, 2008, www.bostonherald.com, Business & Markets
Secretary of State William Galvin is taking his auction-rate securities case straight to Ned Johnson.
The state’s top securities regulator fired off a letter to Fidelity Investments’ chairman yesterday, expressing “grave concern” about customers of the brokerage whose cash is now frozen in the auction-rate market.
Galvin urged Fidelity, which he said had presented the bonds as “safe, liquid principal-protected investments,” to repurchase the securities.
“I am sure that Fidelity understands the seriousness of this situation to its customers,” Galvin wrote. “I request that Fidelity take immediate steps to resolve this matter on behalf of those customers.”
A Fidelity spokeswoman, Anne Crowley, said the company needed to review the letter and would respond directly to Galvin’s office.
She added that only a “very small number” of Fidelity retail customers own auction-rate securities.
Galvin’s direct approach is part of a shift in regulators’ strategy from squeezing settlements out of big Wall Street brokers to targeting the secondary securities market where Fidelity and other firms operate.
“Nobody is getting a pass,” said U.S. Securities and Exchange Commission Chairman Christopher Cox. “Secondary dealers, other primary dealers that aren’t part of the settlements are being investigated.”
The SEC has “over a dozen pending investigations,” Cox said at a news conference in Washington, D.C., yesterday. New York Attorney General Andrew Cuomo said Friday he would now go after brokerages, including Fidelity and Charles Schwab Corp.
Regulators have won pledges from Citigroup Inc., UBS AG, Morgan Stanley, JPMorgan Chase & Co. and Wachovia Corp. to repurchase $34.8 billion of the securities. State regulators imposed $360 million in fines on the companies.
Auction-rate securities had long been popular with towns and nonprofit groups because they were considered to be almost as safe as bonds with slightly better returns. Brokerages had sold them aggressively but in February the $330 billion market seized up amid the widening credit crunch.
Crowley said Fidelity did not market or underwrite these securities and has warned its customers of the risks since it started selling them in September 2006.
“We were executing orders on behalf of our customers,” she said. “We believe the underwriters should stand behind their securities.”
Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1113939
The Boston Globe - ON THE HOT SEAT
"Still sorting out the auction-rate mess: Galvin's office addresses conflicts"
Sunday, August 31, 2008
Massachusetts Secretary of State William F. Galvin oversees the state Securities Division and has long been an ally of ordinary investors. He spoke recently with Globe reporter Beth Healy about Wall Street's latest scandal, involving auction-rate securities, and the division's investigation of a number of firms involved in that business. Firms have agreed to buy back more than $50 billion of these investments from customers following lawsuits brought by Galvin's office and other state and federal regulators.
Secretary, your office has been deeply involved in investigating brokerage firms that sold auction-rate securities. How did these problems first come to your attention?
We got calls in mid-February from individuals who had a history of investing successfully in these instruments. Mysteriously, in February, all these major [Wall Street] houses stopped supporting these auctions. They said they 'failed.' That meant people were stuck. It was kind of like a game of musical chairs and the music suddenly stopped. People started calling my office, and not just individuals, some were businesses. And very quickly we started hearing about government entities having the same problem. It was widespread across the industry.
What are auction-rate securities? They were investment notes or securities or bonds - financial commitments - that had a history of paying slightly better interest rates than money markets. At the same time, they had a high degree of liquidity because of a process of periodic rebidding. People, businesses, and government entities treated these things as cash-like. The problem was, to make this work successfully, as it had for a long time, required the support of these large financial houses that were the makers of these deals. They were the ones that supported the auctions, and made sure these instruments moved.
You've brought lawsuits against UBS Financial Services Inc. and Merrill Lynch & Co., both of which have settled. What have you found in your investigations?
We began looking for documentation - e-mails, correspondence. It became clear to us that there was an inherent conflict of interest for some of these houses. And they continued to sell these instruments when they knew there was trouble in the marketplace, and the market for these instruments had dried up. Some of them, as we showed in our complaint, were trying to unload their own inventory, in other words put the risk in the hands of their customers, instead of in their own hands.
Did this freeze of the auction-rate market only affect wealthy investors?
Many of the people who were in these investments weren't super-rich. They were people who were trying to get a slightly better interest rate. Sure, they were comfortable, they were people of means. But I think it would be a mistake to envision this as people who could afford to lose the money. Oftentimes, they were people who had ceased earning money. They were trying to make the most out of their money. Consider someone who sold their house at the height of the real estate market and sold for $1 million and were living off that money. It was important that we come to their rescue if we could.
You've settled with two firms and you've said you're still investigating Bank of America. What's next?
We're still trying to deal with some of the large financial houses. And some of the settlements require payouts over some months - it still means people are without access to their money since February - so there's going to be a monitoring process required. We're also looking at the secondary sellers, like Fidelity. (Fidelity Investments denies any wrongdoing in the sales of auction-rate securities but has said it is cooperating with regulators.) They did not make the market, but they did sell them. They weren't in the same position of control as the Wall Street firms. The challenge with the secondary market is, from a regulatory point of view, greater. Did they know? Did they have a fiduciary duty? Our goal is to help everybody who got caught up in this to get access to their money as soon as possible.
Is this investigation expanding nationally? The nagging concern is where the interests of the firms are at odds with the interests of their customers. That's a bigger problem. That's a national problem, and that's something Congress may want to look at. What troubles me is, why do we continue to see these problems? Special rules for special people, conflicts of interest. We saw it in the dot-com bubble, we saw it in market timing, we've seen it with mortgages. How do you police the market effectively for people? Why is this allowed to happen? We're seeing this now in the commodities market as well. There's oil, which has had the most devastating effect. And there's wheat, and people buying up cotton commodities. There's not adequate supervision. We're all committed to a free market economy. But a free market only works when it's truly free and it's not rigged. We do keep ending up in a rigged market, where somebody constantly has their thumb on the scale against the average investor, and that's had a devastating effect on our economy.
Your office has always been aggressive in protecting investors. How have you found the process of having to coordinate this time with other state and federal regulators? Is it a help or a hindrance?
It can be helpful. It also can be challenging. Every regulator doesn't look at a case the same way. There's been an improvement at the Securities and Exchange Commission in general, especially over the last two chairmen. That doesn't mean that I'm totally satisfied, nor that other people should be satisfied. There needs to be more aggressive action. But the SEC is much better than it was even three or five years ago, when we found them ignoring problems altogether. I'm proud to say in this current case, Massachusetts led the way. We brought the first complaint in this area. There's a variation of emphasis by state regulators. It is a problem from time to time - some states are more focused on fining than return of moneys. Some states don't work as quickly as others. There are egos and personalities to be dealt with. But we're the safety net for consumers.
"Galvin asks AG to investigate undisclosed Cognos payments: Money went to DiMasi friend"
By Andrea Estes, Boston Globe Staff, November 21, 2008
Secretary of State William Galvin asked the state attorney general yesterday to open an investigation of Joseph Lally, the sales agent who represented software company Cognos ULC in its quest for state contracts.
Galvin said that Lally is refusing to explain why his company, Montvale Solutions, made hundreds of thousands of dollars in undisclosed payments to a close friend of House Speaker Salvatore F. DiMasi, Cognos lobbyist Richard McDonough, at the same time Cognos was securing $17.5 million in state contracts.
"We have an individual who is absolutely refusing to cooperate," said Galvin, whose office regulates lobbyists. "We want to make it clear: You can't say never mind and have us go away. We're going to pursue this."
Galvin's office suggested in its referral to Attorney General Martha Coakley that the payments were undisclosed lobbying fees, which would violate state law.
Because of the state's weak lobbying laws, he said, "the only option we have is to refer it to the attorney general." Galvin is backing legislation to give him broader authority over lobbyists, including subpoena power.
Coakley's office received the referral and will review it, said Coakley spokeswoman Emily LaGrassa.
Lally's lawyer, Robert Goldstein, declined to comment, saying he had just been made aware of Galvin's action. In the past, he has said that Lally and Montvale Solutions "have at all times conducted themselves in full accordance with the law."
It is the second referral Galvin has made to Coakley in recent months concerning payments made to a friend of DiMasi's. In June, Galvin asked Coakley to investigate DiMasi's accountant, Richard Vitale, after Vitale refused to explain why he was paid $60,000 by an association of Massachusetts ticket brokers who were seeking to gut state antiscalping laws. As a result, Coakley has opened a grand jury investigation of Vitale.
DiMasi has repeatedly said that he never tried to help his friends or individual companies and that actions he took to approve computer contract funding that benefited Cognos or ticket legislation were based on broad policy considerations. He has said he was not involved in any way in the state's contract awards to Cognos.
Galvin's referral of the Lally matter focuses on large payments Lally made to McDonough, which neither man has reported to regulators as lobbying fees.
Lally's Montvale Solutions paid McDonough $200,000 on Aug. 31, 2007, the same day the state paid Cognos for a $13 million technology contract that is now the focus of investigations by several agencies. Montvale paid McDonough another $100,000 in summer 2006, several weeks after Cognos won a state education contract worth $4.5 million.
Lally has failed to "provide a written explanation addressing certain large monetary payments to . . . McDonough, which appear to constitute prima facie evidence of a lobbying relationship," Alan Cote, director of Galvin's Public Records Division, wrote to Coakley.
Although Lally's Montvale Solutions also paid Vitale and his company, WN Advisors, $500,000 on Aug. 31, 2007, and $100,000 in the summer of 2006, Galvin said he did not include questions about those payments in his referral to Coakley because Coakley is already investigating Vitale.
Neither Lally nor Vitale has explained the nature of the payments to Galvin.
Galvin has also opened an inquiry into payments to a third friend of DiMasi's, Steven Topazio, a lawyer who shares a downtown office with DiMasi. Topazio collected $125,000 from Cognos in the form of a $5,000-a-month retainer for two years.
Payments stopped the month the Legislature and the governor approved an immediate-needs bond bill that provided funding for the multimillion dollar technology contract.
Even though company records indicate that Cognos paid Topazio out of its lobbying budget, his lawyer told Galvin's office that he did not lobby, Galvin said. Galvin has requested further clarification and said he is waiting for an answer.
Andrea Estes can be reached at firstname.lastname@example.org.
"They misled people and kept people in the fund." - William F. Galvin
"State alleges investment firm fraud: Galvin says failing fund gave false assurances"
By Steven Syre and Ross Kerber, Boston Globe Staff, January 14, 2009
Massachusetts Secretary of State William F. Galvin yesterday accused a New York investment firm of fraud for allegedly misleading investors over the safety a $62 billion money market mutual fund while company officials worked desperately behind the scenes to stem a tidal wave of panic selling.
The firm is Reserve Management Co., one of the founders of the money market mutual fund industry. During the credit crisis last September, its giant Primary fund became the first of its kind in more than a decade to reduce its value below the industry standard of $1 a share, adding to widespread fears that not even the safest vehicles were immune from the panic then sweeping the financial system.
The firm's initial problems were triggered by Lehman Brothers Holdings Inc. entering bankruptcy protection on Sunday, Sept. 14. Reserve's Primary fund held $785 million of Lehman debt, around 1.2 percent of the fund's assets. Over the next 24 hours nervous Primary fund investors demanded as much as $24 billion back from Reserve.
Despite being unable to keep up with demands for cash, Galvin said, Reserve Management falsely reassured investors throughout the crisis that it would keep the fund's net asset value at $1 per share. Unable to sell enough securities in the fund, and unable to find a lender to help, Reserve was forced to "break the buck," and reduced Primary's value to 97 cents a share on Sept. 16. That meant investors stood to lose 3 cents on every $1 they gave to Reserve.
A Reserve spokeswoman said the company would not comment on the complaint.
Galvin also alleged that as the crisis grew, Reserve Management failed to return shareholder money on a first-come, first-serve basis, instead redeeming accounts for big, favored clients first. He said Bear Stearns, the bankrupt Wall Street brokerage, went to the top of the list with its demand to cash out $1 billion worth of money market mutual fund shares. Other big institutions were also moved ahead to get their money back.
"They misled people and kept people in the fund," Galvin said. "Perhaps most egregiously, they allowed special investors" to get out more easily. "It makes it more offensive and outrageous."
A spokesman for Galvin said that at the time, the Primary fund had 566 shareholders from Massachusetts, with a combined $2.13 billion invested. In bringing civil charges against Reserve, Galvin is seeking restitution for the Massachusetts investors in Primary fund, a censure of Reserve's brokerage operation, and an undetermined fine.
Last month, Reserve disclosed the Securities and Exchange Commission might charge it with violating securities laws and bring actions against senior executives. An SEC spokesman declined to comment.
Since September Reserve has been slowly returning money to shareholders, who to this day are still owed about 20 cents on the dollar.
Meanwhile, Reserve company documents included in Galvin's complaint, including internal e-mails and minutes of the fund trustees' meetings, detail the nonstop actions of employees to find a way to issue refunds to shareholders, and still keep Primary's value at $1 a share.
A loss on the fund's Lehman holdings would have been a setback, but not a disaster. Reserve's bigger challenge was persuading shareholders to remain confident in the fund. Requests for large redemptions would force Reserve to sell other holdings, which included short-term company loans, government debt, and bank certificates of deposits, at a time when panicky markets had little appetite for those securities.
Galvin said Reserve Management misled investors by telling them the company would protect the value of the fund "to whatever degree necessary."
By midday Sept. 15, with fund redemptions at $16.5 billion, fund trustees authorized Reserve executives to approach the SEC about a so-called capital support agreement, backstop financing that would protect Primary fund.
To the public, Reserve Management sent messages of unwavering support for the Primary Fund's $1-per-share value. Galvin's suit included examples of employees telling clients a capital support arrangement was all set, awaiting government approval, Galvin said.
But there was no such financial backstop in place that afternoon. By the morning of Sept. 16, when fund trustees resumed meeting, the situation had worsened: Requests for redemptions had increased to $24.6 billion, and Reserve president Bruce Bent II told the board the chance they could raise enough money to keep the fund's value at $1 seemed "unlikely," according to minutes of the meeting provided by Galvin.
In fact, the Primary fund was able to repay only $10.7 billion, relying mostly on a credit line from its custodian, State Street Corp. of Boston. When investors inquired about the status of their redemptions, Galvin said, some Reserve executives claimed that the company had sufficient funds and that any delays were the fault of State Street. A State Street official declined to comment yesterday.
Running out of options, Reserve officials made last-ditch calls for help. They rang Timothy Geithner, president of the New York branch of the Federal Reserve, for emergency help. The call was returned by two underlings who told them not to hold much hope. Trustees even discussed turning over the money market fund to another firm or selling the management company but took no action.
By 3:45 p.m. on Sept. 16, shareholders' requests were up to $40 billion. With no financing in site, the trustees determined the Primary fund was no longer a going concern.
At the end of that day, Reserve Management said Primary fund had completely written off the value of its Lehman Brothers securities and would not be able to immediately return all the money shareholders had requested. The fund has since returned $40.4 billion with shareholders still owed about $11 billion.
Steven Syre can be reached at email@example.com. Ross Kerber can be reached at Kerber@globe.com
"Galvin sues Madoff feeder fund"
boston.com - April 1, 2009, 10:14 A.M.
Secretary of State William F. Galvin today sued Fairfield Greenwich Group, a feeder fund to Bernard Madoff, alleging that the firm defrauded customers, including those in Massachusetts, by leading them to believe they had thoroughly examined Madoff's investment strategy and operation.
Fairfield Greenwich's Sentry Funds had placed about 95 percent of their total assets of $7.2 billion with Madoff, collecting fees from clients without doing enough due diligence on Madoff's investing approach, according to the state's complaint. The Secretary of State's office alleged that Fairfield's "complete disregard of its fiduciary duties to its investors and its flagrant and recurring misrepresentations to its investors rises to the level of fraud."
The firm had no immediate comment on the lawsuit. In December, the company said that it was "shocked and appalled" by the Madoff scandal and had no knowledge of the fraud. Fairfield Greenwich and its clients had invested with Madoff for nearly 20 years, the firm said.
The state said that in testimony before the Securities Division, Fairfield founder Walter Noel said, “We were not involved in executing any part of the strategy or doing anything but turning money over" to Madoff.
Hedge funds typically charge high fees to wealthy clients for hands-on management and results that outperform the market. But in the case of many funds that did business with Madoff, firms were charging fees simply to hand the assets over to Madoff to invest. Fairfield was charging its customers customary hedge fund fees - 1 percent of assets plus 20 percent of investment profits. The firm said it earned about $100 million a year on those fees, according to the state's complaint.
The complaint also said that Madoff coached Fairfield officials in 2005 on how to respond to questions from SEC attorneys who were examining Madoff. The state is seeking restitution, disgorgement of fees, and a fine from Fairfield Greenwich.
Madoff is in jail awaiting sentencing in June. He pled guilty last month to conducting a massive Ponzi scheme that claimed billions of dollars in client funds. Investigations are ongoing into who else may have been involved in the fraud.
(By Beth Healy, Globe staff)
William Galvin. (Photo by Herald file)
"William Galvin hires law firm that gave big money to war chest"
By Jay Fitzgerald, Saturday, May 9, 2009, www.bostonherald.com - Business & Markets
A Boston law firm that recently landed a legal contract to help with Secretary of State William Galvin’s probe of the Bernard Madoff scandal has a long history of donating big bucks to Galvin’s campaign committee.
Attorneys at Sloane & Walsh, which has worked with Galvin’s office for years on securities-related cases, have donated thousands of dollars to the secretary of state’s political campaign, records show.
Attorneys Lawrence J. Kenney Jr. and Myles McDonough, who recently handled the issuance of a subpoena to a broker tied to the scammer Madoff, donated $3,500 to Galvin’s campaign over the last three years alone.
Other Sloane & Walsh attorneys have contributed at least $6,000 to Galvin’s coffers during the same time period, according to state campaign finance records.
Galvin defended his use of Sloan & Walsh attorneys as “special attorneys general” in securities cases, arguing they’re well-versed in complex financial matters and can act quickly to file briefs in courts.
He noted that Sloane & Walsh attorneys regularly donate to other state candidates as well.
“Many lawyers have supported me,” said Galvin.
Galvin said his office uses outside attorneys to help on some matters, but he claimed his staff does the bulk of the legal work.
He also said he didn’t know how many cases Sloane & Walsh attorneys have worked on with his office. Massachusetts Lawyers Weekly reported in March that, according to the state Comptroller’s Office, Galvin’s office paid the firm $140,544 for legal services last year.
Sloane & Walsh’s Kenney and McDonough could not be reached for comment yesterday (May 8, 2009).
"Lawmakers considering tougher petition policies"
By Matt Murphy, Berkshire Eagle Statehouse Bureau, 6/22/2009
BOSTON -- It can be difficult already for the average citizen group to place a question on the statewide ballot, but legislation under consideration on Beacon Hill would make it even harder for residents to play the lawmaking game.
Two bills, filed by Rep. James Fagan, D-Taunton, aim to put tougher restrictions on signature-gathering as a way to prohibit outside interest groups with deep pockets from influencing Massachusetts voters.
It currently takes more than 100,000 signatures to force the Legislature to consider a citizen petition, and another 20,000 to put that question on the ballot if the Legislature refuses to act.
One bill would prevent outside firms from being hired to collect signatures. The bill aims to guarantee that if an issue makes the ballot, it is because there is real, and not manufactured, grass-roots support.
The other bill would require gatherers to wear buttons declaring their name, affiliation and the amount that they are being paid, if anything, to gather signatures.
The legislation speaks directly to an issue that cropped up during the last statewide election that saw a massive influx of outside money pour into the state to support the decriminalization of small amounts of marijuana.
The Committee for Sensible Marijuana Policy received 30 percent of its money from the Washington, D.C. -based Marijuana Policy Project, a group that promotes legalization and over-the-counter sales of marijuana.
Billionaire philanthropist George Soros, who sits on the Drug Policy Alliance Network in New York, donated more than 60 percent of the committee's funding, throwing $400,000 into the Massachusetts decriminalization effort.
Last fall, three high-profile issues found their way onto the state ballot asking voters to weigh in on whether to eliminate the state income tax, decriminalize small amounts of marijuana and ban dog racing.
Only the income-tax repeal failed.
"It's hard enough to get something on the ballot, but trying to further encumber the process by adding restrictions is something I think should probably be studied, but not something I would likely support," said Rep. Thomas Golden, D-Lowell, vice chairman of the Committee on Election Laws.
The bills, which have been filed in years past, had a Statehouse hearing earlier this month that drew opposition from a coalition of government watchdog groups from the left to the right of the political spectrum.
"Most of this is unconstitutional and has been proven so in Colorado. These legislators are just playing," said Barbara Anderson, executive director of Citizens for Limited Taxation. "The point isn't who's paying for it. The point is it goes on the ballot and the voters get to decide. It's pure democracy."
Secretary of State William Galvin has also raised questions about the two bills, suggesting that if they ever became law, they might face a stiff challenge in court.
In 1999, the U.S. Supreme Court ruled against a Colorado law requiring identification badges, arguing that rule unlawfully discouraged participation in the petition circulation process. It did not, however, address the issue of disclosing how much a petitioner is paid and by whom.
The Supreme Court also ruled against a similar statute in Colorado that prohibited paid signature gathering, finding that such a law violates the First Amendment right to "core political speech."
Galvin suggested further study before taking legislative action.
Golden, however, said lawmakers should be encouraging participation in the political process, not discouraging it with excessive restrictions.
"This is not a spectator sport that someone should be sitting by and idly watching. If you're so enraged by what they're doing, push the opposite cause," Golden said.
"Galvin reviews ‘leveraged exchange traded funds’"
By Jay Fitzgerald, Wednesday, July 15, 2009, www.bostonherald.com - Business & Markets
Secretary of State William Galvin has launched a review of the sales practices of so-called “leveraged exchange traded funds,” saying he’s concerned about the returns and costs of the increasingly popular financial products.
Galvin, whose office oversees the securities industry in Massachusetts, stopped short of saying he’s investigating three firms that offer funds to Massachusetts investors - Rydex Investments, Direxion Funds and ProShares.
Instead, Galvin called his move an “inquiry” and a “review.”
Leveraged exchange traded funds are generally funds that seek to amplify returns of an index via use of derivatives, index futures, equity swaps and other features to increase or reduce market exposure, Galvin said.
‘They definitely do not want a hearing on this matter,’ the secretary of state said of Fairfield Greenwich.
"Galvin won’t settle Madoff case: Investment firm calls it a sideshow, but offers to pay"
By Beth Healy, Boston Globe Staff, August 14, 2009
Secretary of State William F. Galvin has rejected an offer by Fairfield Greenwich Advisors to settle fraud charges he filed against the investment firm for allegedly failing to protect clients from swindler Bernard L. Madoff.
Fairfield had offered to reimburse Massachusetts clients identified by Galvin for their Madoff losses, a little less than $6 million in total, according to a copy of the company’s settlement offer obtained by the Globe.
People involved in the case said the two sides have identified fewer than a dozen Massachusetts investors who would receive Fairfield’s offer of repayment.
But Galvin, the state’s chief securities regulator, said he is trying to determine if other Fairfield Greenwich investors in Massachusetts were victims of Madoff. He still wants to hold a hearing in Boston on the charges that’s scheduled for Sept. 9, to which he has summoned Fairfield Greenwich’s top executives to testify.
In an interview, Galvin said Fairfield appeared to be trying to avoid the hearing with its settlement offer.
“We don’t think what they filed was proper or responsive,’’ Galvin said. “They definitely do not want a hearing on this matter. We’ll insist on it.’’
In its settlement offer, Fairfield said it is willing to repay Massachusetts investors so it can concentrate on much larger claims. The New York hedge fund has acknowledged that $7 billion in client funds were stolen by Madoff, and said it faces “hundreds of millions if not billions of dollars in claims from thousands of investors because of Madoff’s massive fraud,’’ according to documents it filed with the state Wednesday.
Mark Stein, a New York attorney representing Fairfield, expressed dismay at Galvin’s rejection.
“This is a sideshow and a distraction,’’ he said of the Massachusetts case. Fairfield, he said, is “exploring all possible avenues to avoid a full-blown hearing when it involves such a small percentage of Fairfield Sentry investors.’’
Galvin’s Securities Division filed fraud charges against Fairfield in April on behalf of about a dozen Massachusetts investors, including Charles O. Wood III and Miriam M. Wood, philanthropists who are benefactors of the Harvard Art Museum. They are expected to testify at the September hearing.
Galvin is expected to use the hearing to force Fairfield to explain e-mails and other evidence he has uncovered that appear to show company officials knew about potential problems with Madoff but failed to disclose them to clients.
For example, the firm’s executives were coached by Madoff to dodge questions in a Securities and Exchange Commission inquiry in 2005, according to a transcript of a telephone conversation included in Galvin’s complaint.
More recently, as the 2008 stock market collapse gathered steam, Fairfield clients pressured the firm to explain Madoff’s operation and strategy. The executives could not answer many of these questions, and acknowledged in internal e-mails the gaps in their knowledge. Yet, according to Galvin’s complaint and pre-hearing memorandum, they continued to assure customers they had done ample due diligence.
Nonetheless, some clients did pull money from Fairfield, prompting executives to hold a meeting with Madoff in October. Madoff refused to answer many basic questions, including the names of traders working on Fairfield’s account, according to Galvin’s filings. This and other events, Galvin said, should have been red flags for Fairfield principals, who earned $300 million in fees from clients invested with Madoff in the last three years alone.
Fairfield Greenwich had an 18-year relationship with Madoff and lost more with the convicted swindler than any other firm. The company has said it was a victim of Madoff and knew nothing of his multibillion-dollar Ponzi scheme.
In its offer to Galvin, Fairfield said it admits to no wrongdoing but wants to settle the matter “to avoid the time and expense of a hearing and any subsequent appeals.’’
The firm also disclosed it is in settlement discussions with Irving Picard, the Madoff bankruptcy trustee. He has sued Fairfield’s Sentry Funds to recoup money for other victims of Madoff. Fairfield also is defending itself against a federal class-action suit in New York and similar cases in state courts in New York and Florida.
Stein, Fairfield’s lawyer, said the firm wants “everybody to be treated equally.’’
Beth Healy can be reached at firstname.lastname@example.org.
"State taking closer look"
By Jenn Smith, Berkshire Eagle Staff, December 7, 2009
PITTSFIELD -- A pair of independent financial research firms and now, a task force organized by the state legislature's Joint Committee on Revenue, are working to make sense of the dollars the state spends on business tax incentives.
The Massachusetts Budget and Policy Center, known as MassBudget, and the New England Public Policy Center at the Federal Reserve Bank in Boston last week presented research questioning the cost-effectiveness of tax credits the state uses to entice businesses to come, stay and hopefully boost economic development.
MassBudget reports that in fiscal 2010, the state is projected to spend $1.7 billion in tax incentives, with $1.1 billion of the pie dedicated to corporate excise tax credits. The total spending figure is up from the roughly $1.2 billion spent in 2002.
State Sen. Benjamin B. Downing, D-Pittsfield, who is the Senate chairman of the Joint Committee on Revenue, said that the group has assigned a subcommittee to take a closer look at the state's tax credits. The state currently offers tax deductions as incentives for a range of activities, from using student loans, to filming an in-state movie, to developing the life sciences industry, among other things.
"All we've asked the subcommittee to do is look, especially at a time when budgets are getting scoured over," Downing said on Friday.
Currently, the state has no standards, nor a regular review process for the tax incentives. MassBudget and the New England Public Policy Center also cited a lack of transparency in reporting publicly on tax credits.
Downing said though there is no timeline for the revenue subcommittee to conduct its investigation, the goal is to understand what credits are being used and how, and whether an activity would cease without the incentive. In the long run, the senator said he would like to see the state better align tax incentives with the most effective activities.
"We need to make sure [incentives] are targeted to sectors we think are going to grow and help people," Downing said.
According to the MassBudget report: "In 2002, the state spent roughly the same amount on economic development tax expenditures and higher education. Since then, spending on economic development tax expenditures has increased by $444 million while higher education funding has decreased by $176 million."
Findings like this have motivated watchdog groups to push for more accountability and public awareness on state tax credit spending.
Robert Tannenwald, vice president and economist at the Boston Fed and director of the New England Public Policy Center, said he recently testified for this state subcommittee for nearly an hour and was impressed by the process.
"I applaud this kind of inquiry," said Tannenwald. He said ideally, he'd like to see the state evaluate all the activities its tries to encourage with economic development tax incentives by comparing total spending with cost-effectiveness. "It's very difficult to do, and requires know how and a lot of resources," he said.
Tannenwald added, "I think the main point, regardless of the amount of spending, is that the public should be aware of the two ways the government can change the way of activity, which is through direct spending and tax incentives. Both should get the same kind of scrutiny."
"Some state tax credits go to prospering firms"
By Bruce Mohl, Boston Globe Correspondent, December 25, 2009
More than half the $25 million in tax credits doled out to 28 firms earlier this week by the Massachusetts Life Sciences Center went to three that were already prospering without extra help from the government - Genzyme Corp., Shire Human Genetic Therapies, and Cubist Pharmaceuticals Inc.
Giving breaks to private corporations when the state is being forced to slash budgets and eliminate programs might strike some as an unwise expenditure. But officials say the incentives - built into a $1 billion life science initiative signed into law by Governor Deval Patrick in 2008 - will eventually pay off.
Top officials in the Patrick administration said the 28 companies’ tax credits, which can reduce corporate tax bills or even be sold back to the state for cash, will help create 918 jobs in Massachusetts over the coming year. And within five years, officials say, income taxes generated by the new jobs should cover the cost of the credits given to the businesses.
“Even in a time of constrained resources, this is the type of thing we need to continue to do,’’ said Jay Gonzalez, Patrick’s administration and finance secretary.
Shire PLC, whose Human Genetic Therapies unit is in Lexington, reported $317 million in profit through the first nine months of this year and received nearly $6.3 million in tax credits. Cambridge’s Genzyme, with $399 million in profit over the first nine months, received $6 million in tax credits. Lexington’s Cubist, with profit of $25 million through the first nine months, won $1.74 million in tax credits.
None of the companies could be reached for comment yesterday.
Greg Bialecki, Patrick’s economic development chief who chairs the Massachusetts Life Sciences Center board with Gonzalez, said the tax credits handed out this week were targeted at some of the state’s biggest life science companies because those companies were pledging to create the most jobs in the coming year. Many of the companies are already receiving significant state aid.
There is growing concern within the Patrick administration and the Legislature about the rising cost of state tax credits and whether they are being handed out in a consistent manner. A legislative subcommittee is currently analyzing the panoply of state tax credits, and Bialecki says the administration is conducting its own review. Officials say some changes could be proposed during the budget process next year.
Tax credits have been enacted piecemeal in Massachusetts industry by industry, and they can vary quite dramatically. For example, the tax credits awarded to life science companies this week are very different from the tax breaks awarded to producers who come to Massachusetts to film movies.
The life science law, designed to keep one of the state’s strongest economic sectors growing, authorized the issuance of $25 million in annual tax credits for 10 years. Demand for the inaugural round of tax credits was far greater than $25 million. The Life Sciences Center received 88 applications for tax credits from companies seeking a total of $241 million in tax breaks.
The award process for life science tax credits lasted eight months. Applications were scrutinized and credits were steered to companies that pledged to generate jobs in 2010. Officials say companies that fail to live up to their job commitments will be subject to so-called clawback provisions, effectively the withdrawal of the tax credits. The life science tax credits can be used by recipients to reduce dollar-for-dollar their state tax bill or can be sold back to the state.
The film tax credit, by contrast, is far more open-ended. Any movie producer who shoots a film or commercial in Massachusetts is entitled to a credit equal to 25 percent of whatever they spend. The credit can be used to offset taxes owed or it can be sold to third parties or to the state to generate cash. Film tax credit recipients face no job-creation requirements and their identity or how many credits they are receiving is not revealed.
The high-wattage Tom Cruise-Cameron Diaz film “Knight & Day,’’ which filmed in Massachusetts during the summer and fall, is widely believed to be the most expensive movie shot here to date. If the budget in Massachusetts reached $100 million, the film’s producers could receive a credit of $25 million, the same amount of tax credits that the state set aside this year for the entire life science industry.
Bialecki said the film and life science tax credits are different because their purpose is different. He said life science is already a well-established industry in Massachusetts so tax credits are needed to help businesses grow. He said tax credits also supplement other support programs for the industry.
The movie business, in contrast, is an industry being grown from scratch in Massachusetts and needs tax credits generous enough to lure movie producers here, he said.
“It’s a different strategy,’’ Bialecki said. “I know Tom Cruise wasn’t here three years ago.’’
Bruce Mohl is editor of CommonWealth, a public policy magazine published by MassINC and available online at CWunbound.org. He can be reached at email@example.com. Todd Wallack of the Globe staff contributed to this report.
"Woburn city clerk to challenge William Galvin"
By State House News Service, www.bostonherald.com - Local Politics, March 9, 2010
Saying that city and town clerks are fed up with a “lack of communication” from Beacon Hill, Woburn City Clerk William Campbell is mounting a Republican challenge to Democratic Secretary of State William Galvin.
Campbell, a lawyer and former Woburn City Council president, blamed Galvin for confusion and scrambling before the 2008 presidential election to dispense special ballots for voters who had moved.
“It seems now more than ever people are looking for change, looking for a different way of doing things,” Campbell said.
Campbell also criticized Galvin’s Web site for including lengthy, complex securities decisions without explanations for the public.
Galvin, who is running for a fifth four-year term, had no comment.
"Massachusetts won’t disclose plans for tax breaks"
By Todd Wallack, Boston Globe Staff, March 31, 2010
Liberty Mutual Insurance Co., Coca-Cola Co., and a half-dozen other companies could receive tens of millions of dollars in state and local tax breaks today from an obscure state economic development board.
But Massachusetts officials won’t say how much they plan to award the companies — or what the firms have promised to do in return — until after the board votes on the proposals, when, critics say, it’s too late to object.
“This is the public’s business, and it needs to be conducted in public,’’ said Pam Wilmot, executive director of Common Cause Massachusetts, a nonprofit that has fought for stronger open meeting laws. “Sometimes decision makers want to hoard the information so they don’t embarrass themselves. But that what’s it means to live in a democracy.’’
Kofi Jones, a spokeswoman for the state Economic Assistance Coordinating Council, said companies’ applications for the tax incentives “are still internal documents’’ and won’t be released until after the meeting. Staff recommendations on the size of the incentives, she said, are “not public prior to the meeting.’’
The decision comes despite complaints that the council, which awards tax breaks to com panies that promise to create jobs in beleaguered areas, has squandered millions of dollars in taxpayer money over the 16-year life of the program. A Boston Globe review published earlier this month found the council routinely approved projects that created few high-paying jobs, delivered many fewer jobs than promised, were located in affluent areas, or would have been built without subsidies.
The Patrick administration says it is addressing the problems. New legislation gives the council more discretion to steer aid to those projects likely to create a greater number of higher-paying jobs. The council can now award an investment tax credit of anywhere from 0 to 10 percent of the cost of the project, instead of the previous fixed 5 percent credit. (Applicants also typically receive a property tax break from the local government.)
Composed of state employees and gubernatorial appointees, the council has largely operated out of public view. It doesn’t post annual reports, minutes, decisions, or members’ names online, and often doesn’t release even bare-bones agendas before meetings.
At a meeting in 2006, one council member threatened to eject local activists if they tried to comment, saying “only representatives from the company [will] be recognized,’’ according to meeting minutes reviewed by the Globe.
One of the activists threatened that day was Shirley Kressel, a Boston landscape architect who closely follows development projects before government agencies. Kressel said she obtained permission to speak at today’s event, but still has trouble getting copies of project applications before the meetings.
“I would say they are not very transparent,’’ Kressel said, adding that it’s difficult for citizens to analyze and comment on proposals when they aren’t allowed to see them before the vote.
Jones, the council’s spokeswoman, said the companies’ applications for tax breaks qualify for the exemption in the Massachusetts state public records law for “inter-agency or intra-agency memoranda or letters relating to policy positions being developed by the agency.’’
However, a guide to the public records law published by Secretary of State William F. Galvin, who enforces the law, says that exemption is limited to “recommendations on legal and policy matters’’ from members of government agencies. And the guide says that financial information provided by companies to public agencies is not exempt “if submitted as required by law or as a condition of receiving a governmental contract or other benefit.’’
Galvin’s office declined to comment yesterday, as did the attorney general’s office, which enforces the state’s open meeting law. Patrick officials said they are trying to make the process more open. The council now posts meeting times and locations in advance. And members of the public are allowed to comment on proposals.
In Liberty Mutual’s case, the company could receive up to $30 million in state tax credits to build a $300 million office tower in the Back Bay. In exchange, the company, which has 4,100 jobs in Massachusetts, has agreed to create 600 more jobs over the next 20 years. Boston’s City Council approved $16 million in local property tax breaks for Liberty Mutual last week, though it needs final approval from the state today.
Liberty Mutual spokesman John Cusolito said the state subsidies and city permitting are needed to make the project viable. “We’re going to make our best case for the state’s consideration,’’ Cusolito said. “We will wait and see what they do.’’
Todd Wallack can be reached at firstname.lastname@example.org.
"Tax incentives hit $45m: Liberty Mutual gets the most from state in first round of credits under new rules"
By Todd Wallack, Boston Globe Staff, April 1, 2010
A state economic development board approved more than $45 million in state and local tax breaks yesterday for Liberty Mutual Insurance Co., Coca-Cola Co., and about a half-dozen other companies that promised to build or expand facilities and add jobs in Massachusetts.
The largest award by the Economic Assistance Coordinating Council went to Liberty Mutual, which has proposed building a $300 million office tower near its Back Bay headquarters and adding 600 new jobs. The board approved a state investment tax credit potentially worth $22.5 million and $16 million in property tax breaks from the city of Boston.
“This is a huge project,’’ said John Palmieri, director of the Boston Redevelopment Authority. “It creates jobs, and it grows the tax base for the city.’’
Liberty Mutual said the tax incentives were needed to make the project viable. The company still needs permits, but hopes to begin construction later this year and open the facility in 2012.
However, there was a discrepancy in the figures used to calculate Liberty Mutual’s tax break. Liberty Mutual promised to create 600 new jobs. But the state based its award on 750 new jobs.
Kofi Jones, a spokeswoman for the council, said state officials wanted to offer Liberty Mutual $30,000 per job, the maximum allowed under state guidelines. The state calculated the $22.5 million figure by multiplying $30,000 by 750 jobs. Had it used Liberty Mutual’s 600-job figure, the tax break would be worth $4.5 million less.
Jones said the state decided to credit the company with 150 jobs created since it first began negotiations for the tax break with the state, in addition to the 600 positions Liberty Mutual promised to create in its application.
“Bottom line: It’s 750,’’ Jones said.
Liberty Mutual spokesman John Cusolito said he did not know where the 750 figure came from. He said the company has been in talks on and off with the state for years, but has not added 150 jobs since it began negotiations over this site last fall.
Regardless, some critics said Liberty Mutual did not need any aid at all.
“This was a completely unnecessary subsidy,’’ said Steve Wintermeier, a Boston investment adviser and activist concerned about rising residential property taxes. “They would have built this property whether or not they got the subsidy.’’
Yesterday marked the first time the council used new rules enacted by the Legislature for the Economic Development Incentive Program, which is intended to encourage companies to expand in Massachusetts.
One change allows the council to give a state tax break to applicants without requiring the host community to offer a property tax break.
For example, eClinicalWorks LLC, an electronic medical records company that is expanding its Westborough headquarters and creating 100 new jobs, received a credit on its state taxes worth $1.2 million even though Westborough did not offer the company a property tax break.
The council can now also help manufacturers in struggling Bay State cities retool their plants to retain jobs. It gave a $1.2 million tax credit to Lightolier, a lighting company owned by Philips Electronics NV that plans to invest $3 million in its Fall River plant and preserve 385 jobs.
The state also has more flexibility on how much to award companies. It can now offer a state investment tax credit of up to 10 percent (it had been fixed at 5 percent) and even more to manufacturers in struggling urban areas.
Other companies that received tax breaks yesterday are:
■Coca-Cola Co., which would receive as much as $774,360 if it expands its Northampton plant to supply chilled juice to the region; the beverage giant is also considering alternate sites in New Jersey and Pennsylvania.
■New England Sheets LLC in Devens, which plans to open a paper plant in Devens that will create 59 jobs in exchange for $707,000 in state tax credits.
■Pioneer Valley Energy Center LLC in Westfield received $320,000 for a $427 million power plant expected to create 16 jobs.
■ Titeflex Corp. in Springfield got $281,900 in exchange for a $2.8 million manufacturing plant upgrade, which will retain 101 jobs and add at least one full-time job.
Todd Wallack can be reached at email@example.com.
- Jonathan Melle
- Amherst, NH, United States
- I am a citizen defending the people against corrupt Pols who only serve their Corporate Elite masters, not the people! / My 2 political enemies are Andrea F. Nuciforo, Jr., nicknamed "Luciforo" and former Berkshire County Sheriff Carmen C. Massimiano, Jr. / I have also pasted many of my political essays on "The Berkshire Blog": berkshireeagle.blogspot.com / I AM THE ANTI-FRANK GUINTA! / Please contact me at firstname.lastname@example.org
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