School Lawsuit Facts - News Clippings

Stifel to return $78,000 to investors, pay $130,000 in penalties

2010-03-18T12:54:00.000-07:00

Stifel, Nicolaus and Co. Inc. has agreed to return $78,000 in commissions paid by investors that were taken advantage of by their broker.

This agreement brings to a close the case involving former Stifel securities broker Girard Munsch, Missouri Secretary of State Robin Carnahan’s office said Thursday. Munsch made more than 500 trades in accounts belonging to three Missouri investors during a three-year period. Munsch admitted that he was the only one who benefited in some of the transactions he recommended.

In addition, Stifel is paying more than $130,000 in penalties, payments and costs, and its registration has been censured. The Securities Division took action against Stifel for failing to properly supervise Munsch, and not identifying and acting on Munsch’s excessive trading and unsuitable recommendations, Carnahan’s office said.

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Judge allows school districts' lawsuit over soured investments to continue

2010-01-29T09:41:00.001-08:00

By Amy Hetzner of the Journal Sentinel

Jan. 28, 2010 | Five Wisconsin school districts' legal claims can go forward against banks that district officials say misled them to invest millions of dollars of borrowed money in risky investments, a judge decided Thursday.

In an oral ruling, Milwaukee County Circuit Judge William W. Brash III denied motions to dismiss the districts' lawsuit against Stifel, Nicolaus & Co. Inc. and Royal Bank of Canada Capital Markets, RBC Europe and RBC Holdings.

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Kimberly Area School District notches important win in investment lawsuit against Stifel Nicolaus, others

2010-01-29T08:50:00.000-08:00

By Jim Collar • Post-Crescent staff writer • January 29, 2010

MILWAUKEE — The Kimberly school district and four others in Wisconsin cleared an important hurdle Thursday in their lawsuit seeking to recoup $200 million they put into failed investments.

Milwaukee County Judge William Brash III denied motions Thursday to dismiss the case brought by defendants Stifel Nicolaus and subsidiaries of the Royal Bank of Canada.

Stifel Nicolaus and the Royal Bank of Canada sought dismissal on a variety of arguments, including the insufficiency of arguments supporting district claims and the role of the global financial crisis in sparking the collapse of the overall investment value.

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Wis. schools suit over soured investments proceeds

2010-01-29T08:47:00.000-08:00

Associated Press

3:39 p.m. CST, January 28, 2010

MILWAUKEE, Wis. - A Milwaukee County Circuit Court says the lawsuit by five Wisconsin school districts against several banks over millions in soured investments can proceed.

On Thursday, Judge William W. Brash III denied motions to dismiss the districts' lawsuit against Stifel, Nicolaus & Co. Inc. and Royal Bank of Canada Capital Markets and RBC Europe.

The Milwaukee Journal Sentinel reports that school officials claim they were misled into investing millions of dollars of borrowed money in risky investments.

Read the full article....

European bank Depfa Bank threatens default on loans involving school districts in Kimberly, Kenosha, Waukesha, West Allis-West Milwaukee and Whitefish

2010-01-28T14:40:00.000-08:00

By Jim Collar • Post-Crescent staff writer • January 27, 2010

Five Wisconsin school districts including Kimberly will learn this week whether their $200 million lawsuit over failed investments has the merits to continue.

Meanwhile, the European bank that lent $165 million of that money is ramping up pressure to bring the districts back into compliance with the terms of their borrowing agreement.

Depfa Bank recently threatened actions, including default, against the districts after they declined a meeting to discuss potential settlements.

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As complex investments plunge, 5 school districts pressured over loans

2010-01-04T13:56:00.000-08:00

By Amy Hetzner of the Journal Sentinel

Posted: Jan. 3, 2010

As five Wisconsin school districts face increased pressure to return millions of dollars in loans, the $200 million in investments they undertook with money from that debt are almost entirely without value and unlikely to pay back when they mature in 2013, according to representatives for the districts.

The districts said in a statement to the Journal Sentinel that one of the investments had stopped paying interest two months ago after a dramatic decline in value. The statement did not indicate which investment had ceased paying interest, but one of the schools' attorneys, Stephen Kravit, had earlier identified it as an investment devised by the Royal Bank of Canada known as Sentinel Limited Series 2.

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Wall Street Plays Hardball

2009-11-25T08:41:00.001-08:00

Taxpayers are taking another hit as strapped local governments fork over billions in fees on investments gone bad

From Business Week
November 18, 2009, 8:10PM EST

Charm Offensive
The seeds of this looming disaster were sown during the credit boom, when Wall Street targeted cities big and small with risky financial products that promised to save them money or boost returns. Investment bankers sold exotic derivatives designed to help municipalities cut borrowing costs. ... Private equity firms, pointing to stellar historical gains, persuaded big public pension funds to plow billions of dollars into high-cost investments at the peak of the market. Many of the transactions shared a striking similarity: provisions that protected the banks from big losses and left the customers on the hook for huge payouts....

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Stifel Charged With Fraudulent ARS Sales In Colorado, Indiana

2009-10-01T14:18:00.000-07:00

OCTOBER 1, 2009, 2:15 P.M. ET
From the Wall Street Journal

Regulators in Colorado and Indiana have charged brokerage firm Stifel Financial Corp. (SF) with fraudulently selling auction-rate securities in those states, a Colorado regulator said.

The states' securities divisions filed complaints accusing the St. Louis-based broker-dealer of giving investors a false sense of security about the investments without disclosing the risks, according to a statement from the Colorado Department of Regulatory Agencies.

In recent trading, Stifel shares were down 3.2% at $53.12 amid a broad market decline.

ARS are debt instruments whose interest rates are meant to be reset periodically at daily, weekly or monthly auctions. But as the auctions began failing in February 2008, interest rates rose while investors were locked into long-term investments that had been promoted as safe and liquid. Dozens of states have reached settlements with the nation's largest financial institutions in the past year to resolve charges they misled investors about the liquidity risks of the ARS they underwrote.

Stifel, Nicolaus & Co. presented ARS as "liquid, short-term investments" to Colorado investors "without discussing the risks," said Colorado Securities Commissioner Fred Joseph. The broker assured investors the investments would "always be liquid" when ARS in fact faced "significant, inherent liquidity risks," according to the complaint.

The Colorado commissioner accused Stifel brokers of "repeatedly and persistently" misrepresenting the ARS liquidity risks, comparing them to money-market funds. The company had told customers "they would always be able to retrieve their cash."

A Stifel official couldn't immediately be reached for comment.

-By Mike Barris, Dow Jones Newswires; 212-416-2330; mike.barris@dowjones.com

BROKER RAN PONZI SCHEME AT STIFEL

2009-08-10T13:07:00.000-07:00

EX-STIFEL BROKER BANNED FROM INDUSTRY FOR PONZI SCHEME

FINRA Permanently Bars Broker.

Kenneth George Neely, a former employee of Stifel Nicolaus, has been permanently banned from the securities industry for running a $600,000 Ponzi scheme.

According to sltoday.com of July 28, 2009:

The Financial Industry Regulatory Authority announced Monday that broker Kenneth George Neely took $600,000 from at least 25 victims, claiming he would invest it in a fictitious investment club and a nonexistent real estate investment trust.

Neely also signed up his brokerage clients, while trying to hide that fact from his employers, regulators said. FINRA records show that Neely moved from UBS to Stifel Nicolaus and finally to AXA in Clayton.

Finra Press Release link.

Kenneth G. Neely, CRD# 1586038

Was employed at Stifel October 2002 to January 2007. Some of the frauds occurred while he was employed there.

http://overregd.lindquist.com/admin/trackback/14799

Q&A with Les Leopold, author of The Looting of America

2009-06-11T11:51:00.000-07:00

Posted By: Lisa Kaiser

What was more horrifying than last year’s financial implosion: That it happened, or that the average person couldn’t make sense of it?

Fortunately, Les Leopold was already looking into the complex financial instruments that nearly brought down the economy and, incidentally, the retirement funds of five Wisconsin school districts, which may be on the hook for $200 million in bad investments. The result of Leopold’s work, The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity, is an easy-to-understand explanation of what went wrong, and why. How clear and confident is Leopold’s prose? I finally feel like I understand what the Wall Street masters of the universe were up to—and I’m angry. I highly recommend this book.

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School districts have spent $765,000 on suit over investments

2009-05-19T12:21:00.000-07:00

By Amy Hetzner of the Journal Sentinel
Posted: May. 18, 2009

Five Wisconsin school districts suing to reverse investments they made in 2006 already have spent more than $765,000 on attorney fees, even though the case is barely under way, billing records show.

The fees are being paid by the school districts - Kimberly, Kenosha, Waukesha, West Allis-West Milwaukee and Whitefish Bay - proportionate to the share of the $200 million investment they are seeking to have returned to them.

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Wi School lawsuit case remanded to state court

2009-04-30T13:31:00.000-07:00

Written by Lisa Loring
Friday, 10 April 2009

Hear this article

Claims Could Reach $200 million

Milwaukee: April 10, 2009 - Hon. Rudolph T. Randa, Chief Judge of the United States District Court for the Eastern District of Wisconsin today remanded Case No. 08-931; 08-932 “School Districts v. Stifel et al” to Milwaukee County Circuit Court.

Five Wisconsin school districts filed the suit last year in Milwaukee County against Stifel, Nicolaus & Company, Inc., its CFO James M. Zemlyak, and the Royal Bank of Canada Europe Ltd. The districts claim losses of $200 million from investments marketed by the defendants to fund the districts’ Other Post-Employment Benefit [OPEB] liabilities.

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Kimberly Area School District's investment tumbles

2009-04-24T13:08:00.000-07:00

Firm used by district blames financial crisis

By Jim Collar • Post-Crescent staff writer • April 24, 2009

KIMBERLY — A complicated investment at the center of a lawsuit involving Kimberly and four other Wisconsin school districts has now lost more than 95 percent of its value, attorneys say.

Lawyers for the school districts filed an amended civil complaint Wednesday in Milwaukee in their case against investment firms Royal Bank of Canada Europe Ltd. and Stifel Nicolaus & Co. The districts seek to undo the 2006 investment and have $200 million returned.

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New Allegations in Reopened School Districts V. Stifel Case

2009-04-24T09:45:00.000-07:00

Districts Were Not "Accredited Investors" or "Qualified Institutional Buyers"
Calls for Rescission of $200 Million Transaction
also
New Book, "Looting of America," begins with Chapter on Whitefish Bay's OPEB Crisis

Special to the Readers of Milwaukeeworld.com

By Michael Horne

And The Milwaukee World Hound Dog Team

The first salvo has been filed in the reopened Kenosha Unified School District et al v. Stifel Nicolaus & Company, Inc., Royal Bank of Canada, Europe, et al. "School District Lawsuit," [Milwaukee County Case No. 2008CV013726].

In a court filing yesterday, Wednesday, April 22nd, 2009, Plaintiff's attorney Stephen E. Kravit [Harvard U '75] added new counts against the St. Louis investment house. It is the first development since federal judge Rudolph A. Randa [U Wisconsin '66] remanded the case to state court on April 17th, 2009. The case is being argued before Hon. David A. Hansher [U Wisconsin '68] of Branch 42, Milwaukee County Circuit Court.

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Lawyers: School districts' lawsuit better off in Wisconsin court system

2009-04-16T10:07:00.000-07:00

Kimberly may see quicker verdict in state courtroom

By Jim Collar • Post-Crescent staff writer • April 14, 2009

KIMBERLY — Experts say speed is among several advantages five Wisconsin school districts gained when a federal judge moved their $200 million investment lawsuit back to the state court system.

Districts, including the Kimberly Area School District, are suing a group that includes two investment firms for the return of investments made in 2006. U.S. District Judge Rudolph Randa granted a motion last week to return the lawsuit to Milwaukee County, where it was originally filed.

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Randa's Remander: School District's Suit Back to State Court...

2009-04-16T09:57:00.000-07:00

From Milwaukee World
April 10th, 2009:

Move Seen as Victory for Taxpayers in Five Districts;
Setback for Stifel Nicolaus and Royal Bank of Canada

Special to the Readers of Milwaukeeworld.com

By Michael Horne

And The Milwaukee World Hound Dog Team

The lawsuit of five Wisconsin school districts against Stifel Nicolaus & Company and the Royal Bank of Canada alleging a $200 million fraud in a scheme to fund employees' Other Post-Employment Benefits [OPEB] has been remanded to State court by the order of Hon. Rudolph T. Randa, Chief Judge of the United States District Court for the Eastern District of Wisconsin.

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School investment lawsuit won't go to federal court...

2009-04-10T13:27:00.000-07:00

By Amy Hetzner of the Journal Sentinel

Posted: Apr. 10, 2009 2:32 p.m.

A lawsuit filed by five Wisconsin school districts over investments that have gone sour should be tried in Milwaukee County Circuit Court, a federal judge ruled Friday.

Attorneys for two investment banks named in the lawsuit, Stifel Nicolaus & Co. and Royal Bank of Canada, had tried to have the case removed to federal court after it was filed in September.

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Latest Update: Teachers Find Retirement in Jeopardy

2009-04-06T13:33:00.001-07:00

From ABC News, 04/06/09

In Wisconsin, toxic investments could jeopardize teachers' retirement benefits.

To watch the video of this broadcast please click here.

Economy slows Kenosha school construction

2009-03-20T08:50:00.000-07:00

Dustin Block, dustin.block@dailyreporter.com

Posted March 19, 2009

The economy, not a faulty $37.5 million investment, will slow construction in the Kenosha Unified School District.

Patrick Finnemore, the district’s director of facilities, said Kenosha likely will not seek approval to build additional schools for at least four years. It's a significant slowdown for a district that had been opening a new school about every 14 months.

"The economy has affected home sales in the county," Finnemore said. "Enrollment growth hasn't been the same as the past 17 or 18 years."

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Missouri Sues Stifel Nicolaus

2009-03-13T13:43:00.000-07:00

Thursday, March 12, 2009, 2:54pm CDT

Kansas City Business Journal

Missouri Secretary of State Robin Carnahan and the state attorney general’s office filed a civil enforcement action Thursday against Stifel Nicolaus & Co. Inc. alleging that the investment firm misled its customers who bought auction-rate securities.

The action, filed Thursday in Franklin County Circuit Court, alleges that St. Louis-based Stifel Nicolaus and parent Stifel Financial Corp. (NYSE: SF), as well as certain individuals, violated the Missouri Securities Act and Missouri Merchandising Practices Act.

Hundreds of Missourians bought investments that Stifel told them were safe, “same as cash” or “like a money market,” according to a release from Carnahan’s office. More than 1,200 investors were left holding $180 million in frozen securities they have been unable to access for more than a year, according to Carnahan’s office.

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Corrections and Clarification from the Milwaukee Journal Sentinel

2009-02-10T12:19:00.000-08:00

February 9th, 2009
Milwaukee Journal Sentinel

Following the story headlined, "Federal bailout funds sought for 5 school districts," on February 8th, 2009 in the Milwaukee Journal Sentinel, the newspaper published a correction the following day. It reads as follow:

A headline on an article Monday about school districts and federal bailout funds misstated who requested the money. The Kenosha Education Association, not the five school districts that suffered investment losses, asked Wisconsin federal legislators to request the funds.

See the source...

5 state school districts request bailout for investments gone bad

2009-02-09T08:16:00.000-08:00

By Amy Hetzner of the Journal Sentinel

Posted: Feb. 8, 2009

First came the banks, then came the car manufacturers, now federal assistance is being sought for five Wisconsin school districts that made bad investments.

At the urging of the Kenosha Education Association, U.S. Rep. Paul Ryan and Sen. Russ Feingold have forwarded to the Treasury Department and Federal Reserve Bank a request that the government buy $200 million worth of "troubled assets" purchased by the districts in 2006.

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CDO hot topic at board forum

2009-02-06T12:10:00.000-08:00

Candidate discuss issues before public

By Gary Kunich, Kenosha News
February 6th, 2009

"We continually asked, 'Are we getting AA and AAA rated bond?' and they continually said, 'Yes." I asked if any of this was going into a subprime mortgage and was told, 'Absolutely not.' We were lied to." Olson said.

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News Archive: KUSD's CDO Investments

2009-02-06T12:06:00.000-08:00

By Joe Kinacki, Executive Director
February 6th, 2008 - Glue, Official Publication of the Kenosha Education Association

The CDO issue comes up everywhere we go. It is a problem for the Kenosha Unified School Disctrict that has the potential to have yet another slam on Kenosha taxpayers. In their own defense the School Board made a decision to file a lawsuit along with four other Wisconsin School Districts.

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CNN Money Airs School Lawsuit Segment

2009-01-22T09:17:00.000-08:00

More National Publicity for State Case
Extra!! Regulators Probe Stifel Nicolaus Role Extra!!

Special to the Readers of Milwaukeeworld.com
By Michael Horne
And The Milwaukee World Hound Dog Team

CNN Money anchor Poppy Harlow writes to say her segment entitled "Wisconsin Schools Hit by Crisis" is airing today, Tuesday January 21st, 2009, on her nationally televised show.

Harlow spent January 2nd, 2009 in Wisconsin, en route to her New York home after a holiday visit with her family in the "Twin Cities" of Minneapolis and Saint Paul, Minnesota.

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Five School Districts Thrust Into National Spotlight Over Lawsuit

2009-01-22T08:53:00.000-08:00

Heather Shannon, Today's TMJ4
Story Created: Jan 21, 2009

The effects of Wall Street are being felt on Main Street right here in southeastern Wisconsin. Bad investments could cost some area school districts millions of dollars.

The Whitefish Bay, Waukesha, West Allis-West Milwaukee, Kenosha, and Kimberly School Districts are all suing their investment adviser, claiming they were misled, and are out millions of dollars. Now the districts are being thrown into the national spotlight.

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Or watch the video...

Wall Street crisis snares Main St. schools

2009-01-21T07:59:00.001-08:00

Five Wisconsin school districts claim they were misled by advisers and could lose most of $200M investment.

By Poppy Harlow, CNNMoney.com Last Updated: January 21, 2009: 10:34 AM ET

WHITEFISH BAY, Wis. (CNNMoney.com) -- Lehman Brothers. Washington Mutual. And now ... Whitefish Bay Schools?

The global financial crisis that claimed some of the world's biggest banks now has this suburban Milwaukee school district and four others on the brink of losing a hefty $200 million investment.

Two years ago board members from the districts signed off on an investment to fund their teachers' retirement and health care benefits.

Shawn Yde, business director for the Whitefish Bay School District, says he and his board members were told they were making a conservative investment in "AA" and "AAA"-rated bonds. Mark Hujik, from the Kenosha school board, says he and other board members were told they were investing in highly rated, and relatively safe, corporate bonds.

Read full story...

Watch Video at CNN Money...

School districts dispute financier's residency

2008-12-15T08:17:00.000-08:00

Claim is part of lawsuit over risky investments

By Amy Hetzner of the Journal Sentinel

Posted: Dec. 12, 2008 10:24 p.m.

The chief financial officer for an investment bank targeted in a lawsuit over risky investments made by five Wisconsin school districts razed a home he bought in Elm Grove for $307,500 in 2004 to make way for an 8,467-square-foot mansion worth $1.8 million, according to court filings this week.

Details about the comfortable lifestyle of James Zemlyak of Stifel, Nicolaus & Co. were included as part of a motion filed on behalf of the school districts in U.S. District Court seeking to send the case back to the Milwaukee County Circuit Court.

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Refresh: Jurisdiction challenged in school district lawsuit

2008-12-08T12:07:00.000-08:00

December 7, 2008

What happened

Kimberly and four other Wisconsin school districts sued two financial firms for the return of money invested in a product that since lost three-quarters of its value.

The Kimberly school district invested $4.3 million in money borrowed from an Irish bank and $700,000 from the district's trust fund in 2006. District officials expected to earn $550,000 over the life of the collateralized debt obligation to build its trust fund for post- retirement teacher benefits. Officials, however, said the risk of the product was misrepresented. Officials claim they weren't told that a 4 percent to 5 percent default rate could result in a total loss, according to the civil complaint.

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News Archive: Innovating Our Way to Financial Crisis

2008-11-26T09:16:00.000-08:00

By Nobel Prize Winner, PAUL KRUGMAN
New York Times
Published: December 3, 2007

The financial crisis that began late last summer, then took a brief vacation in September and October, is back with a vengeance.

How bad is it? Well, I’ve never seen financial insiders this spooked — not even during the Asian crisis of 1997-98, when economic dominoes seemed to be falling all around the world.

This time, market players seem truly horrified — because they’ve suddenly realized that they don’t understand the complex financial system they created.

Before I get to that, however, let’s talk about what’s happening right now.

Credit — lending between market players — is to the financial markets what motor oil is to car engines. The ability to raise cash on short notice, which is what people mean when they talk about “liquidity,” is an essential lubricant for the markets, and for the economy as a whole.

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District officials reiterate investment was $1.2 million

2008-11-26T09:04:00.000-08:00

Residents confused by media reports

By JANE FORD-STEWART
jford@cninow.com
Posted: Nov. 25, 2008

Before a turnout of about two dozen people Nov. 19, the Whitefish Bay School Board and its attorney tried to set the record straight after some media reports left an impression the district holds $200 million in risky investments.

At the meeting, school officials reiterated the district has $1.2 million at risk. The district borrowed another $9.7 million that also was invested, but it is not legally required to repay.

A New York Times story earlier this month and some Wisconsin Public Radio coverage gave the impression that Whitefish Bay had $200 million at risk, Whitefish Bay School District Business Administrator Shawn Yde said before the meeting.

Read more...

Credit and Credibility

2008-11-25T14:03:00.000-08:00

Week of 11.21.08
PBS

What role did the credit rating agencies play in the current economic crisis? This week, a former managing director at Standard & Poor's speaks out on U.S. television for the first time about how he was pressured to compromise standards in a push for profits. Frank Raiter reveals what was really going on behind closed doors at the credit rating agencies the public relies on to evaluate the safety of their investments.

"During this period, profit was primary; analytics were secondary," Raiter tells NOW Senior Correspondent Maria Hinojosa.

Read more...

Kenosha School Board Members Appear on WLIP 1050 AM...

2008-11-18T14:14:00.000-08:00

On Tuesday November 18th, 2008 at 9:13 a.m., Kenosha School Board Members Eric Olson and Marc Hujik both appeared on the Lenny in the Morning Show on Kenosha'a radio station WLIP 1510 AM.

Listen to the full broadcast...

School districts call CDO action ‘delaying tactic’

2008-11-17T12:04:00.000-08:00

Judge considers motion to moveto federal court

The Kenosha News
BY GARY J. KUNICH
gkunich@kenoshanews.com

A motion to move Kenosha Unified’s multimillion-dollar lawsuit against Stifel Nicolaus and the Royal Bank of Canada to federal court is a delaying tactic by the defense, said a spokesman for the districts.

Lawyers for the investment firm and the bank made a motion Oct. 31 to move the case, but the judge has yet to rule on the issue.

Unified and four other Wisconsin districts — Kimberly, West Allis, Whitefish Bay and Waukesha — borrowed a combined $200 million to invest in a collateralized debt obligation in hopes of funding future retiree pensions, but the investment has lost most of its value.

Read more...

Stifel sued over failed global investment

2008-11-10T13:33:00.000-08:00

Wisconsin schools file suit following $150 million loss
St. Louis Business Journal - by Christopher Tritto
Friday, November 7, 2008

Five Wisconsin school districts are suing St. Louis-based Stifel Financial Corp. and Royal Bank of Canada over $200 million in investments that have lost $150 million of their value amid the global financial crisis. The districts allege Stifel and RBC sold them complex and risky collateralized debt obligations and a credit default swap after fraudulently marketing them as safe investments.

Stifel subsidiary Stifel, Nicolaus & Co. Inc. and James Zemlyak, the firm’s chief financial officer and co-chief operations officer, also are named as defendants in the lawsuit filed Sept. 29 in Milwaukee County Circuit Court.

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Wisconsin Schools Shocked By Bad Investment

2008-11-10T07:43:00.000-08:00

National Public Radio
by David Kestenbaum

All Things Considered, November 7, 2008 · Back in 2006, a group of five school districts in Wisconsin invested some $200 million on Wall Street. The school board members say they believed the money was going into safe corporate bonds.

Mark Hujik, a school board member in Kenosha, also coaches high school football for the local Tremper Trojans. Hujik describes Kenosha as the sort of place where people still leave their doors unlocked and most people wave hello.

These days, Hujik says people are stopping him in the grocery store to talk not about the football team but about the school district's investment. So far, the portfolio has lost more than 90 percent of its value.

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Or Listen Now...

Wis. Schools' Money Tied To At-Risk German Bank

2008-11-05T12:55:00.000-08:00

National Public Radio

Morning Edition, November 4, 2008 · As the global economic crisis unfolds, a group of school districts in Wisconsin has found itself at one end of a chain of exotic and risky financial products. At the other end is a troubled German bank — and smack in the middle is the school districts' $200 million investment.

When school officials plunked down the money, they believed the investments were as safe as a corporate bond, David Kestenbaum and Adam Davidson of NPR's global economics unit, Planet Money, tell host Steve Inskeep. But now they're waiting to see how — or if — their investment weathers the financial crunch.

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Kimberly Area School District's investment lawsuit moved to federal court

2008-11-04T09:43:00.000-08:00

By Jim Collar • Post-Crescent staff writer • November 4, 2008

KIMBERLY — A lawsuit filed by the Kimberly Area School District and four other Wisconsin school districts over money placed in foundering multi-million dollar investments has been moved to the federal courts.

Jurisdiction was moved from Milwaukee County Circuit Court to the U.S. District Court for Wisconsin's Eastern District on Friday, according to the state's online courts records system.

The school districts initially filed the lawsuit in circuit court in September alleging that officials were misled into a risky investment that lost a combined $150 million in two years.

Kenosha, Waukesha, West Allis-West Milwaukee and Whitefish Bay school districts joined the Kimberly Area School District in the case. The defendants listed in the civil complaint included the Royal Bank of Canada Europe Ltd. and Stifel Nicolaus & Co.

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Wis. School Investment Has Worldwide Implications

2008-11-03T09:08:00.000-08:00

National Public Radio
Weekend Edition Sunday, November 2, 2008

A story in The New York Times on Sunday, co-reported by NPR's global economics unit, Planet Money, examines how the financial crisis links some school districts in Wisconsin with banks in Europe.

In 2006, the school districts thought they were buying some of the safest bonds in the world, but in fact what they purchased were "toxic assets," or collateralized debt obligations, Charles Duhigg, the Times reporter who wrote the article, tells NPR's Liane Hansen.

Collateralized debt obligations, or CDOs, a centerpiece of the current financial crisis, are complex portfolios of diverse fixed-income assets in which buyers can invest their money.

"Unfortunately, what we thought we bought and what we bought … weren't necessarily reality or the truth," says Marc Hujik, a school board member in Kenosha, Wis.

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From Midwest to M.T.A., Pain From Global Gamble

2008-11-03T09:05:00.000-08:00

By CHARLES DUHIGG and CARTER DOUGHERTY
The New York Times
Published: November 1, 2008

“People come up to me in the grocery store and say, ‘How did we get suckered into this?’”

— Marc Hujik, of the Kenosha, Wis., school board

On a snowy day two years ago, the school board in Whitefish Bay, Wis., gathered to discuss a looming problem: how to plug a gaping hole in the teachers’ retirement plan.

It turned to David W. Noack, a trusted local investment banker, who proposed that the district borrow from overseas and use the money for a complex investment that offered big profits.

“Every three months you’re going to get a payment,” he promised, according to a tape of the meeting. But would it be risky? “There would need to be 15 Enrons” for the district to lose money, he said.

The board and four other nearby districts ultimately invested $200 million in the deal, most of it borrowed from an Irish bank. Without realizing it, the schools were imitating hedge funds.

(Pictured above: IN WISCONSIN “This is something I’ll regret until the day I die,” said Shawn Yde of the Whitefish Bay schools).

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School districts were told of investments’ risks, firm says

2008-10-15T11:36:00.000-07:00

By AMY HETZNER
Milwaukee Journal Sentinel
ahetzner@journalsentinel.com
Posted: Oct. 14, 2008

...It was the first time that Stifel has commented about the lawsuit filed last month against it and Royal Bank of Canada in Milwaukee County Circuit Court. That suit alleges the firms misled five Wisconsin school districts — Kenosha, Kimberly, Waukesha, West Allis-West Milwaukee and Whitefish Bay — in their $200 million investment into complex financial products called collateralized debt obligations, or CDOs.

CDOs, which are bundles of debt that range from corporate bonds to subprime mortgages, are at the center of the financial turmoil that has spread worldwide.

Editorial: Kimberly schools get hard lesson

2008-10-14T08:35:00.000-07:00

October 8, 2008
Appleton Post Crescent

The trickle-down of "toxic debt" on Wall Street has found its way to Kimberly.

The Kimberly Area School District has been saddled with bad debt from a $5 million investment meant to build the trust fund for retiring teachers, according to a lawsuit filed in late September.

Its two-year-old investment has lost three-quarters of its value, according to a lawsuit the district filed against two financial institutions.

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Districts had some warnings about risky investments, documents show

2008-10-10T12:15:00.000-07:00

By AMY HETZNER
ahetzner@journalsentinel.com
Posted: Oct. 7, 2008

Five Wisconsin school districts suing over millions of borrowed dollars they invested to help pay retiree benefits were given some warnings of the risks involved in the transactions, documents show.

At least one document appears to contradict one contention in the lawsuit filed Sept. 29.

But it remains unclear how much school officials were told about transactions they undertook in 2006 in which they poured $200 million into collateralized debt obligations, financial instruments at the center of the global economic meltdown.

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A Look At Wall Street's Shadow Market

2008-10-06T10:08:00.000-07:00

60 Minutes: How Some Arcane Wall Street Financial Instruments Magnified Economic Crisis

Oct. 5, 2008
60 Minutes

..."It is an insurance contract, but they've been very careful not to call it that because if it were insurance, it would be regulated. So they use a magic substitute word called a 'swap,' which by virtue of federal law is deregulated," Greenberger adds.

"So anybody who was nervous about buying these mortgage-backed securities, these CDOs, they would be sold a credit default swap as sort of an insurance policy?" Kroft asks...

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Or watch the full broadcast below:

CDO suit not a sure thing

2008-10-03T07:42:00.000-07:00

Even if they win, districts may not get all funds back

Oct. 2, 2008
Kenosha News
GARY J. KUNICH

Even if Kenosha Unified and four other districts win the lawsuit against Stifel Nicolaus and others because of the collateralized debt obligation that has lost more than $150 million, they might not get back every penny.

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Investing Public Funds - Regulation and Education Is Needed

2008-10-02T11:58:00.001-07:00

October 2nd, 2008
Waxing America
Paul Soglin

Yesterday I commented on the the significant losses incurred by several Wisconsin school districts when they took public money, some from the taxpayers and some borrowed, and lost over $150 million in high risk financial ventures, Risky Wisconsin School District Investments.I am sure that most of the school board members and the respective staffs of the districts involved are bright people and probably do not deserve the agony they are presently experiencing in return for their efforts at public service.

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5 school districts sue companies for investment deal

2008-10-02T08:12:00.000-07:00

Oct 01, 2008
Trading Markets

Five Wisconsin school districts that put millions of borrowed dollars into complex investments to help pay retiree benefits have sued two financial institutions that sold and oversaw the financial undertakings.

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Wisconsin Schools Sue Royal Bank Over Losses, Post Reports

2008-10-02T08:03:00.000-07:00

By Kevin Bell

Oct. 1 (Bloomberg) -- Five Wisconsin school districts sued Royal Bank of Canada and a local brokerage over $200 million in credit derivatives that have lost about three-quarters of their value, the National Post reported.

The districts claim that they were assured by Royal Bank, Canada's biggest lender by assets, and the Stifel Nicolaus & Co. brokerage that the investments were safe even though the sellers knew they weren't, the Post said today, citing the lawsuit.

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Video: School District Sues Investment Firm

2008-10-02T07:39:00.000-07:00

Wednesday, 01 Oct 2008
FOX 11 News

KIMBERLY -- The financial mess is affecting almost everyone -- including an area school district that believes it was treated unfairly. Kimberly is one of five Wisconsin school districts suing two investment firms to recoup a combined $200 million. FOX 11's Lindsay Veremis has balanced coverage.

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Wisconsin schools sue RBC for losses

2008-10-01T12:58:00.000-07:00

Want Us$200m Back; Claim bank and local brokerage said investments 'safe'

John Greenwood, Financial Post Published: Wednesday, October 01, 2008

One of the biggest surprises to come out of the subprime meltdown is the sheer range of players who decided back when markets were soaring to put money into what are now referred to as "toxic assets," including -- it has been learned -- five suburban school districts from Wisconsin.

In a complaint filed in a U. S. court on Monday, the districts allege Royal Bank of Canada and a local brokerage called StifelNicolaus&Co. Inc. sold them US$200-million of complex credit derivatives that have racked up about US$150-million of losses to date.

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Firm files CDO suit for Unified

2008-10-01T12:56:00.000-07:00

Oct. 1, 2008
GARY J. KUNICH
Kenosha News

A law firm that specializes in stockbroker fraud has filed suit on behalf of Kenosha Unified and four other Wisconsin school districts that invested in a collateralized debt obligation which has lost more than $150 million and continues to plummet in value.

The lawsuit, filed in Milwaukee County Circuit Court, names the investment firm Stifel Nicolaus, Royal Bank of Canada, and James Zemlyak, who was the chief financial officer for Stifel Nicolaus, at the time of the transaction.

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Waukesha School District joins $200 million lawsuit over investments

2008-10-01T12:53:00.000-07:00

By JOE PETRIE - GM Today Staff - Waukesha Freeman
October 1, 2008

WAUKESHA - The Waukesha School District, along with four other state districts, has filed a $200 million lawsuit against two firms responsible for handling investments that lost millions of dollars during the past two years.

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5 school districts sue companies for investment deal

2008-10-01T12:50:00.001-07:00

Posted: Sep. 30, 2008
Milwaukee Journal Sentinel
By AMY HETZNER,

Five Wisconsin school districts that put millions of borrowed dollars into complex investments to help pay retiree benefits have sued two financial institutions that sold and oversaw the financial undertakings.

The lawsuit, filed in Milwaukee County Circuit Court this week, seeks to rescind the deals and recoup about $200 million invested by the school districts of Kenosha, Kimberly, Waukesha, West Allis-West Milwaukee and Whitefish Bay in 2006. The investments have lost $150 million - or three-quarters of their value - to date, the complaint alleges.

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Districts' lawsuit claims they were duped into investment

2008-10-01T12:47:00.000-07:00

By Jim Collar
Post-Crescent staff writer

KIMBERLY — A lawsuit filed by five Wisconsin school districts including the Kimberly Area School District alleges that officials were misled into investments that lost a combined $150 million in two years.

The school districts seek cancellation of their investments, return of funds and punitive damages through the lawsuit, which was filed Monday in Milwaukee County Circuit Court. Kenosha, Waukesha, West Allis-West Milwaukee and Whitefish Bay school districts join Kimberly in the lawsuit. The defendants listed in the civil complaint include the Royal Bank of Canada Europe Ltd. and Stifel Nicolaus & Co.

Kimberly expected to bring in at least $550,000 over the life of its $5 million investment, which the complaint states has lost three-quarters of its value since its purchase.

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Kimberly joins other schools in lawsuit to recoup investment

2008-10-01T12:46:00.000-07:00

The Post-Crescent • September 30, 2008

KIMBERLY – The Kimberly Area School District has joined four other Wisconsin school districts in a civil lawsuit seeking to recoup $200 million in combined investments.

Kimberly joins the Kenosha, Waukesha, West Allis-West Milwaukee and Whitefish Bay school districts in the lawsuit, which was filed Monday in Milwaukee County Circuit Court. Defendants listed in the civil complaint include the Royal Bank of Canada Europe Ltd. and Stifel, Nicolaus & Co.

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Kimberly gets school budget flexibility

2008-10-01T12:42:00.000-07:00

By Jim Collar • Post-Crescent staff writer • September 23, 2008

KIMBERLY — School leaders touted the district’s “good value” Monday night at the annual meeting where electors approved a 2008-09 budget that will increase spending but reduce the tax bill paid by the average homeowner.

The tax levy — the total amount of taxes collected — will be $14.36 million, down 0.6 percent from last year. Typical homeowners will see a reduction of about $8, or 0.5 percent on their tax bills.

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Lawsuit costs divvied up

2008-10-01T12:39:00.001-07:00

2 school districts with most to gain will pay bulk of fees

Posted: Sep. 7, 2008
Milwaukee Journal Sentinel
By AMY HETZNER,

An agreement to hire a Texas law firm to represent five Wisconsin school districts in a legal dispute over complex investments calls for paying the attorneys up to $325 per hour in addition to a percentage of any monetary settlement, records released this week show.

The Waukesha and West Allis-West Milwaukee school districts, as the most heavily invested in the deals and with the most to gain from legal action, would bear nearly three-quarters of the legal expenses.

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Several Wisconsin School Districts May Sue Firms Over OPEB CDOs

2008-10-01T12:25:00.000-07:00

Wednesday August 27th
The Bond Buyer
By Yvette Shields

CHICAGO - Five southeastern Wisconsin school districts are weighing litigation against financial firms they believe misrepresented the safety of a complex investment transaction that involved collateralized debt obligations and a credit default swap to help fund a portion of their other post-employment benefit liabilities.

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Kimberly school district feels duped by ‘fraud’

2008-10-01T12:19:00.000-07:00

By Jim Collar • Post-Crescent staff writer • August 21, 2008

KIMBERLY — School officials are considering a lawsuit seeking return of $5 million invested in a product they say was far more risky than what was pitched.

The Kimberly school board on Monday will vote on whether to jointly hire an attorney with four other school districts that made investments in collateralized debt obligations.

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Five school districts consider lawsuit in investment downturn

2008-10-01T12:14:00.000-07:00

Value of investments has declined by $120 million over 2 years

Posted: Aug. 20, 2008
Milwaukee Journal Sentinel
By AMY HETZNER,

Five Wisconsin school districts could face combined losses of tens of millions of dollars in a complex investment scheme to help fund employee retirement benefits, according to investigators hired by the districts.

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