Riley: Will Trump's SEC Chair Go After Misleading Mayors?

Riley: Will Trump's SEC Chair Go After Misleading Mayors?

It is well established that Mayor Elorza is truly oblivious to the financial condition of Providence. He has repeatedly shown he has no handle on the pension funding disaster that threatens the viability of the City. So we knew that.

Now Mayor Elorza is proving oblivious to the political repercussions of elections. The first evidence of his cluelessness is his willingness to forfeit federal funds just to maintain solidarity with other “sanctuary cities” like LA and Chicago. President-elect Trump has made clear that the funding is at risk. Just the thought of a mayor, who clearly thinks so little of his citizen-taxpayers, that will happily tax legal citizens and put them further into debt while blindly pursuing a progressive agenda benefiting illegals, must be enough to make Revenue Director Hull a bit queasy. Mayor Elorza has assured the Governor’s office that he is taking the potential bankruptcy seriously. This selfish political stance endangers the finances of every citizen in the State of Rhode Island.

Prior to Elorza's recent emptying of his cabinet we have seen many examples of the Mayor’s willingness to go his own way. Apparently, this Chafee-like decision making is based on Mayor Elorza’s own sense of right and wrong. The negotiations with the quirky fire department union and his failure to invest employee paychecks on time in the pension plan are both shaky ethical decisions at best. Kiting employee paychecks allowed him to claim mysterious surpluses and hold on to his dying career. Shaky and misleading pension accounting has allowed him to remain Mayor, but not for long.

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Mary Jo White is leaving

I assume Mayor Elorza is also oblivious about the regulator who monitors the pension plan managed by the Mayor. This column has written extensively about the 2015 SEC effort to go after public officials including Mayors and Finance Directors for misleading municipal bond investors about the true financial condition of cities like Providence. Mayors Cicilline, Taveras and Elorza are all guilty of misleading municipal investors. Attorney General Kilmartin refused to investigate when I presented the facts to him.

But now the election of President-elect Donald Trump has put in place a potential series of dominos that could put all three mayors in serious legal trouble. The current SEC Chair Mary Jo White has just announced she will be leaving and that opens the door wide open for the Commissioner who has been most Critical of Municipal Finance violations, Daniel Gallagher. Here is what I wrote nearly two years ago and a taste his angst, quoting Daniel Gallagher of the Securities Exchange Commission on municipalities misleading investors. 

Mr. Gallagher has been mentioned on the short list to become Chairmen of the SEC. Municipal officials managing large unfunded liabilities are in for increased scrutiny. Mr. Gallagher has even suggested overly optimistic discount rates could be considered fraud. I have written several times to Mr. Gallagher about Providence and I am quite sure he will take an interest in Mayor Elorza’s policies.

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.