In the State Treasurer’s race, challenger Pete Buttigieg hammered incumbent Richard Mourdock on the waste associated with a risky investment of state money in the, at the time, foundering Chrysler corporation compounded by spending gobs of money on a wasteful lawsuit. The loss to Indiana from its payout in the Chrysler Bankruptcy was about $6 million. It invested about $18 million and got about $12 million back.
Buttigieg points out that the State used pension and Toll Road Privatization money to pick up Chrysler debt at $0.43 on the dollar, a clear sign that an investment is carrying a certain amount of risk. I have outlined in the past why Mourdock was tilting at windmills when he challenged the Chrysler bankruptcy decision – among other things, there simply wasn’t a better deal available for creditors than that received through the bankruptcy court; and, even if there was, Indiana did not get to make that decision because it had agreed to turn over decision making on such deals to a committee of creditors in which Indiana was a very minor stakeholder.
Now, Buttigieg has uncovered information about just how much good money was sent after bad to pay for the lawyers necessary to tilt at this particular windmill. The State spent $2 million trying to recover its lost $6 million with marginal legal arguments:
Buttigieg, a South Bend businessman, said the billing records raise serious questions about Mourdock’s management of state funds. He questioned why Mourdock could not have used an Indiana law firm, and noted that the New York attorneys billed the state from $365 to $1,050 per hour, with paralegals and legal assistants billing between $205 and $295 per hour.
And, he said, the costs of the pricey lawsuit was born by the funds that had lost money because of the poor investments. The Major Moves Construction Fund paid more than $427,000; the Teachers Retirement Fund paid more than $1.5 million and the Indiana State Police Pension Fund paid more than $64,000.
I really can’t say I know anything about Mr. Mourdock. I’ve heard that he is a very pleasant individual. But this Chrysler business is a debacle. To me, it looks like a questionable but not outlandish decision to invest funds in the shaky Chrysler because of the discounted price of the debt that has been aggravated by an effort to grandstand, on the public’s dime, against the Obama administration and its involvement in the Chrysler bankruptcy. Had the Bush administration been involved in the Chrysler bankruptcy, my suspicion is that the State would have borne its losses quietly and not increased them by 33% to pay out-of-state lawyers wads of money to advance long shot legal arguments.
As a practicing Indiana attorney for over 30 years, including significant time in the Bankruptcy Courts, I must say that I don’t get anywhere near what those New York attorneys are charging, more like what they are charging for paralegals.
And why in God’s name would Mourdock invest pension funds in high-risk junk bonds? That is exactly what they were at the time.
Plus, if his argument would have prevailed, the most likely outcome would have been the liquidation of Chrysler, with the loss of thousands of Hoosier jobs. It is simply unbelievable that Mourdock was that foolish with public money.
The only thing I really knew about Mourdock before the Chrysler deal was his support early in his term for ESOPs and other employee-owned plans, which I was pleased to hear. But his complete mishandling of the Chrysler deal, from his consistent dissembling on the facts around the lawsuit to his subsequent inability to admit mistakes, leads me to believe that he’s incapable of performing in this office. That office is badly in need of new leadership, and after meeting Pete Buttigieg, I’m convinced that he’s the right man for the job.
This says to me that people don’t pay enough attention to who it is that runs for these “statewide” offices. Does statewide imply ownership by many, therefore, really by none? Do the officeholders just slip in because no one really care who wins? I did know and very occasionally interact with Mr. Mourdock in my past life (as I did with other state “officials” either elected or appointed) and yes, he is a very pleasant and sincere person. But did I ever think he was “statewide material”? No it never occurred to me at all.
The State Treasurer is really just another bookkeeper in a statehouse full of bookkeepers. The office should be abolished and any discretionary decisions should be made by the Governor. After that, an elected office of Comptroller General should be created to be a watchdog over the Governor. Representative Murphy introduced A Constitutional Amendment last year to do just that.
Considering the govt.’s current activism because companies like GM and Chrysler are “too big to fail”, why is it that so many people assume that if Mourdock’s objection was sustained, the federal govt. would have given up and said “ok, we tried to work out a deal, but that damn rule of law got in the way. I guess you aren’t too big to fail.”?
Isn’t it pretty possible that the federal govt. might have brokered a new deal that paid Indiana off in full, and extracted a bit more from the union that now owns most of the company?
Piss on the federal government enough, and maybe they’ll pay us more money? Doesn’t sound like the kind of plan that’s worth increasing your losses by 1/3 on. If that was the idea, I think Mourdock would’ve been better off just putting $2 million on black at a Vegas roulette wheel.
And, for what it’s worth, I seem to recall that the State made that argument and it was rejected by either the bankruptcy court or the court of appeals – can’t recall which.
Good to know Doug. I think the argument has some merit, but recognize that others may disagree. Of course, I also believe that if I came up with this idea, and attorneys making $1000 an hour attempted a similar argument, I am vastly underpaid.