Accountability

Citizens have the right to expect that their government can account for how all taxes and fees collected are spent. There should never be an "I don't know" answer by any city official in response to a citizen asking "What happened to the City's money?"

When I served on City Council from 1996-2001, I advocated for a sounder financial investment policy and more financial disclosures to restore oversight to the City's investments after a City employee risked millions in derivatives. In particular, I questioned the advisability of the City participating in a risky investment scheme known as "securities lending". I encouraged City Council to obtain an advisory opinion from the City's investment advisor at the time, Hough and Company.

Hough recommended against securities lending of the City's operating funds, unless the City wanted amend its investment policies to allow for riskier investing. I was opposed to securities lending of City operating funds. Nonetheless, after I left City Council, the Council approved of this risky investment scheme and never instituted appropriate oversight measures to evaluate this strategy.

Unfortunately, the City increasingly lent more of its operating funds. By the end of 2007, the City had loans out on $194 million of the City's operating funds. As the market began to crumble, city administrators sought an audit of the City's investment policies. Unfortunately, city administrators never submitted the findings of the auditor, KPMG, or to City Council.

Instead, they began to secretly unwind the risky mess. Over 9 months after the audit, and one week after Lehman Bros. filed bankruptcy, the City unwound the rest of its securities lending, instantly losing approximately $800,000, in addition to $15 million of Lehman Bros. paper.

Rather than hold any city employee accountable, the City gave the employee responisble for the situation a BONUS. As Mayor, I will hold employees accountable for their actions.

Click here to view Kathleen's Letter to the St. Petersburg Times and additional documents.