State receiver wants probes in Harrisburg bond deals

David Unkovic, the veteran bond attorney appointed with the blessing of (corrected) PA Gov. Tom Corbett to reorganize over the city of Harrisburg's finances, says he's asking for state and federal investigations of “possible illegal activities” surrounding the incinerator bonds that have left the city insolvent, Bloomberg LP reports here.

At a press conference in Harrisburg yesterday, Unkovic cited a report his office published in January saying the city and its paid professionals should have realized the incinerator wasn't likely to make enough money to pay back the bonds they were selling to fund it.

Unkovic asked the US Attorney's Office and Pennsylvania Attorney General Linda Kelly “to investigate possible illegal activities in connection with the matters described” in the report.

The audit detailed the roles of financial advisor RBC Capital Markets, Public Financial Management Inc. of Philadelphia, and Investment Management Advisory Group of Pottstown in helping the city prepare the bond deals. 

At his press converence, Unkovic also"criticized [Dauphin] County Commissioner Jeff Haste, State Sen. Jeffrey Piccola, [bond insurer Assured Guaranty Municipal], financial group RBC Dain Rauscher and Royal Bank of Canada and Stan Rapp, who heads Greenlee Partners, a prominent lobbying firm that represents AGM, the county and RBC in the debt crisis," reports the Harrisburg Patriot News via here.

Unkovic's call for investigations reinforces earlier demands by Harrisburg's City Council, whose attempt to seek Chapter 9 federal bankruptcy reorganization was thwarted by the state's takeover. Mark Schwartz, lawyer for the council, told me Unkovic has changed his position "180 degrees," and that a bankruptcy filing is now more likely.

Council wants to raise taxes and cut bond payments to ease its financial crisis; state officials have favored selling city assets instead. But in his report Unkovic added that Harrisburg's limited tax base will make it tough to pay its future bills even if its current bond debt is eased by asset sales.

Bloomberg lists the receiver case as TD Bank, NA, V. The Harrisburg Authority, 2010-CV-11737, Court of Common Pleas, Dauphin County, Pennsylvania (Harrisburg); and the abortive bankruptcy case as In re City of Harrisburg, Pennsylvania, 1:11-bk-06938, U.S. Bankruptcy Court, Middle District of Pennsylvania (Harrisburg).