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The crimes of David Vitale and Jesse Ruiz... Will the investigations end with Barbara Byrd Bennett and her cronies, or will the enablers be indicted, too?... One reporter's opinion -- Vitale and the Board refused to arbitrate the 'swaps' because they were covering up the fact that they knew the risk

With the July 16, 2015 revelation (not yet made official as of this writing) that Forrest Claypool and James Clark will become the CEO and President of the Chicago Board of Education, the issue now comes into focus: Will federal and state officials investigate and indict David Vitale for the various things he did to undermine and sabotage the public schools of the nation's third largest school system? It's poignant. Another angle, which for all of Chicago's prattle about "diversity," is that all of the CPS people under investigation so far (and in some cases fired, forced out, or resigned) have been women. Does that mean there are no guy crooks at the "top" in America's third largest school system? It was all the fault of the gals?...

On July 15, 2015, the Chicago Tribune reported that the Chicago Public Schools had missed the deadline for asking for arbitration over the so-called "toxic swaps" -- viz,. the variable rate bonds that the Board issued between 2003 and 2005 pushed by then "Chief Administrative Officer" (David Vitale), the then "Chief Executive Office" (Arne Duncan), and the then Mayor of Chicago (Richard M. Daley).

At every meeting of the Chicago Board of Education during the time he was President of the Board, David Vitale would lecture the public about how the Board members possessed the "true facts" about things that people were complaining about. Vitale (above left), Board members like Andrea Zopp (above right) and the other members of the Board grew more and more arrogant in their dismissal of the rights of the people in a democracy as they became entrenched in their power. Then, with the investigation of the $20 million no-bid SUPES contract, which they voted for unanimously, their actions began to be questioned, even as their power continued to grow. Substance photo at the February 25, 2015 Board meeting by George N. Schmidt.It is now clear that the reason why Vitale and Ruiz refused to go to arbitration on the bonds against the banks that issued them to CPS is that Vitale and others knew at the time that there was a significant risk involved. They also had to know, at the time, that the issuance of variable rate bonds was illegal under the rules of the Chicago Board of Education (as Substance reported, the rules on bonds were not changed by CPS until 2008 -- three years after all of the deals had been done by Arne Duncan and David Vitale with the blessings of Richard M. Daley, who was pushing the same stuff for the City of Chicago).

So on July 16 and July 17, 2015, as Chicago learns that Vitale has been dumped (according to the Sun-Times, Mayor Emanuel showed his usual lack of sensitivity by neglecting to tell Vitale the bad news until the very last minute), Chicago parents, teachers, and others (especially taxpayers) should be demanding answers rather than evasions from those who have run the schools for the past four years (the "Rahm Board") and not just do a Barack Obama-style "let's move forward..." nonsense about it.

And the fact is, Vitale blocked arbitration on the CPS bond deals because, as I've said, Vitale and the Board were covering up for their own malfeasance (not just a "mistake," but a deliberate decision).

Like others, including CTU officials (led by Jackson Potter), pension officials (led by Jay Rehak, who first exposed the variable rate bond deals at the budget hearings seven years ago!), I urged the Board publicly to "sue" (i.e. to go to arbitration on the deals, in order to recoup some of the money CPS has lost -- NOTE: the losses can still increase...). At one Board meeting, Jesse Ruiz, in his best smug lawyerly tone, lectured me about a very simplistic reality: He said that when you go to court you can "lose". You don't always "win." My first response was to be incredulous. As in "Duh! Who doesn't know that?" Over time, though, I've gone back over the utterances of David Vitale and the absolute commitment of the Board members -- all of them, in case anyone wants to get a fantasy about who should be our next senator -- to avoid arbitration despite the "budget crisis." And I realized what I've reported: The difference between CPS and all the other governmental entities that arbitrated the deals, most of which were made in the early 2000s, was that CPS did in fact know about the risk, was not misled, and went along with the risk because David Vitale, Arne Duncan and Richard M. Daley wanted to take on the risk because they were convinced that they would -- later -- come out "ahead" and be able to demonstrate to the public how brilliant they were. Instead, the toxic swaps crashed against us all, and the Board members, led by Vitale, went into a cover up mode. The last thing Ruiz was going to vote for was a two-sided litigation where the banks would have been able to prove, on the record, how completely corrupt Vitale, Daley and Duncan had been in 2003, 2004 and 2005 when they entered into the "swaps." And don't forget: Those deals were illegal before 2008. It was only after Jay Rehak and I began demanding answers about the deals at the public hearings on the CPS budget that CPS, five years after the fact, tried to retroactively make the deals "legal" under Board policies. Prior to that, the Board was not supposed to do any borrowing except for fixed rates. Hence, I will continue to report that the refusal of CPS to go to arbitration on the swaps was based on a cover up, and suggest, strongly, that David Vitale should be under investigation for criminal misconduct, along with Barbara Byrd Bennett and the BBB cronies (all of whom were hired by Vitale and the Board, as I've reported). Byrd Bennett is not the only one leading a group of corrupt public officials in this town. Three white guys (Vitale, Daley and Duncan) were doing deals against the law long before "BBB" and her silly team of flunkies were hired (at six figure salaries and with "relocation" allowanced ranging from $10,000 to $25,000) to come to Chicago and further the destruction of the city's public schools and the privatization and charterization that have been the real ruling class agenda since before Rahm and continuing to this morning, as Frank Clark becomes the next David Vitale...



Comments:

July 16, 2015 at 9:21 PM

By: Jay Rehak

The CTPF Sued and we asked the Board to do the same.

The Board of Ed should have sued and they would have either won or settled. The public did, indeed, get fleeced. I am hopeful someone will investigate why the Board didnt sue as I asked them specifically to do so at a Board meeting. They all just looked at me blankly. Meanwhile, the CTPF did sue and has recovered some (not all) of the money that banks received for very toxic instruments sold as very low risk.

Mr. Vitale has much to explain, inasmuch as he is a banker and either knew better or should have known better. The fact that the Board of Education didnt sue was and is inexcusable. It is the people of Chicago who lost by the Board of Eds inaction, and as a consequence, the children of Chicago Public (and charter) schools.

The public should be insisting on a thorough investigation of WHY THE BOARD DIDNT SUE.

July 16, 2015 at 10:55 PM

By: Rod Estvan

One possibility why CPS did not litigate the swap deals

Jay I believe that the Board was intimidated that they would have trouble with their short term lines of credit and tax anticipation warrents if they litigated. They are now what is allowing CPS to make payroll and allowed them to make them payment to the CTPF. The Ernst Young audit demonstrates the precarious situation CPS is in and how they are on life support with total dependence on financial institutions in my opinion.

Rod Estvan

July 17, 2015 at 7:58 AM

By: Jay Rehak

Estvan analysis sounds right but CPS still wrong not to sue

Rod,

I think you are right; CPS was afraid to sue the banks because they were so indebted to them and feared they'd get no more money . That said, there are always banks ready to lend at predatory rates. Why CPS didn't sue should be more throughly investigated and reviewed.

July 17, 2015 at 8:13 AM

By: George N. Schmidt

Arbitration -- Vitale and Ruiz were afraid to 'sue' because they were guilty

Like others, including CTU officials (led by Jackson Potter), pension officials (led by Jay Rehak, who first exposed the variable rate bond deals at the budget hearings seven years ago!), I urged the Board publicly to "sue" (i.e. to go to arbitration on the deals, in order to recoup some of the money CPS has lost -- NOTE: the losses can still increase...). At one Board meeting, Jesse Ruiz, in his best smug lawyerly tone, lectured me about a very simplistic reality: He said that when you go to court you can "lose". You don't always "win." My first response was to be incredulous. As in "Duh! Who doesn't know that?" Over time, though, I've gone back over the utterances of David Vitale and the absolute commitment of the Board members -- all of them, in case anyone wants to get a fantasy about who should be our next senator -- to avoid arbitration despite the "budget crisis." And I realized what I've reported: The difference between CPS and all the other governmental entities that arbitrated the deals, most of which were made in the early 2000s, was that CPS did in fact know about the risk, was not misled, and went along with the risk because David Vitale, Arne Duncan and Richard M. Daley wanted to take on the risk because they were convinced that they would -- later -- come out "ahead" and be able to demonstrate to the public how brilliant they were. Instead, the toxic swaps crashed against us all, and the Board members, led by Vitale, went into a cover up mode. The last thing Ruiz was going to vote for was a two-sided litigation where the banks would have been able to prove, on the record, how completely corrupt Vitale, Daley and Duncan had been in 2003, 2004 and 2005 when they entered into the "swaps." And don't forget: Those deals were illegal before 2008. It was only after Jay Rehak and I began demanding answers about the deals at the public hearings on the CPS budget that CPS, five years after the fact, tried to retroactively make the deals "legal" under Board policies. Prior to that, the Board was not supposed to do any borrowing except for fixed rates. Hence, I will continue to report that the refusal of CPS to go to arbitration on the swaps was based on a cover up, and suggest, strongly, that David Vitale should be under investigation for criminal misconduct, along with Barbara Byrd Bennett and the BBB cronies (all of whom were hired by Vitale and the Board, as I've reported). Byrd Bennett is not the only one leading a group of corrupt public officials in this town. Three white guys (Vitale, Daley and Duncan) were doing deals against the law long before "BBB" and her silly team of flunkies were hired (at six figure salaries and with "relocation" allowanced ranging from $10,000 to $25,000) to come to Chicago and further the destruction of the city's public schools and the privatization and charterization that have been the real ruling class agenda since before Rahm and continuing to this morning, as Frank Clark becomes the next David Vitale...

July 17, 2015 at 12:16 PM

By: john kugler

Planned Chaos (1951)

The characteristic mark of this age of dictators, wars and revolutions is its anti-capitalistic bias. Most governments and political parties are eager to restrict the sphere of private initiative and free enterprise. It is an almost unchallenged dogma that capitalism is done for and that the coming of all-round regimentation of economic activities is both inescapable and highly desirable.

None the less capitalism is still very vigorous in the Western Hemisphere. Capitalist production has made very remarkable progress even in these last years. Methods of production were greatly improved. Consumers have been supplied with better and cheaper goods and with many new articles unheard of a short time ago. Many countries have expanded the size and improved the quality of their manufacturing. In spite of the anti-capitalistic policies of all governments and of almost all political parties, the capitalist mode of production is in many countries still fulfilling its social function in supplying the consumers with more, better and cheaper goods.

It is certainly not a merit of governments, politicians and labour union officers that the standard of living is improving in the countries committed to the principle of private ownership of the means of production. Not offices and bureaucrats, but big business deserves credit for the fact that most of the families in the United States own a motor car and a radio set. The increase in per capita consumption in America as compared with conditions a quarter of a century ago is not an achievement of laws and executive orders. It is an accomplishment of business men who enlarged the size of their factories or built new ones.

One must stress this point because our contemporaries are inclined to ignore it. Entangled in the superstitions of statism and government omnipotence, they are exclusively preoccupied with governmental measures. They expect everything from authoritarian action and very little from the initiative of enterprising citizens. Yet, the only means to increase well-being is to increase the quantity of products. This is what business aims at.

It is grotesque that there is much more talk about the achievements of the Tennessee Valley Authority than about all the unprecedented and unparalleled achievements of American privately operated processing industries. However, it was only the latter which enabled the United Nations to win the war and today enables the United States to come to the aid of the Marshall Plan countries.

The dogma that the State or the Government is the embodiment of all that is good and beneficial and that the individuals are wretched underlings, exclusively intent upon inflicting harm upon one another and badly in need of a guardian, is almost unchallenged. It is taboo to question it in the slightest way. He who proclaims the godliness of the State and the infallibility of its priests, the bureaucrats, isconsidered as an impartial student of the social sciences. All those raising objections are branded as biased and narrow-minded. The supporters of the new religion of statolatry are no less fanatical and intolerant than were the Mohammedan conquerors of Africa and Spain.

History will call our age the age of the dictators and tyrants. We have witnessed in the last years the fall of two of these inflated supermen. But the spirit which raised these knaves to autocratic powersurvives. It permeates textbooks and periodicals, it speaks through the mouths of teachers and politicians, it manifests itself in party programmes and in plays and novels. As long as this spirit prevails there cannot be any hope of durable peace, of democracy, of the preservation of freedom or of a steady improvement in the nation's economic well-being.

Planned Chaos

by Ludwig von Mises (1951)

https://mises.org/library/planned-chaos-0

July 17, 2015 at 3:45 PM

By: David R. Stoned

They all are kleptocrats

Nice ironic posting in praise of capitalism, John!

We have reached the point where the labels scarcely matter. The Chinese Communists exploit workers and despoil the environment; the "free enterprise" multi-national corporations are pushing for the Trans-Pacific Trade Agreement so they can do the same.

School privatizers tout the efficiency of the marketplace -- but some of the most anti-Union charter school organizations claim to be non-profits.

And please check my memory -- but I think that when David Vitale first joined the Board of Educoation, he declined to take a salary because he said he was only interested in public service? Did he know then how profitable the Board's borrowing would be for him and his banker friends?

-David R. Stone

July 17, 2015 at 9:28 PM

By: Sammy Hill

Leadership Change

I'm glad to see they did not promote the weak leader Annette Gurley who was BBB's second in charge. She was always walking on eggshells and was afraid to make or push for key decisions. She should be out because strong leadership is needed, not a yes-woman. The leader must have vision and the kahunas to make the vision come to fruition. Hopefully Janice Jackson has those qualities.

July 18, 2015 at 11:03 AM

By: George N. Schmidt

Vitale's $1 per year salary -- yes, that's true...

When the Chicago Board of Education "hired" David Vitale to be an advisor to Arne Duncan, Vitale announced that he would be drawing a salary of $1 per year. The corporate media got gooey about it, with the Sun-Times doing one of those laudatory stories about how brilliant Vitale is, and how nice it is that he's going to help out the schools because of his commitment to civic betterment, blah, blah, blah...

The only thing left out of the Sun-Times hagiography on Vitale's behalf was the stuff from Mom. Careful readers will remember that the first two CEOs on mayoral control -- Paul Vallas and Arne Duncan -- received glowing endorsements from their mothers, duly reported in the Sun-Times. Of course, that was because neither of them had any right to be running a school system, so, to say the least, their resumes were "thin." By the time Arne's Mom weighed in, it was almost an editorial requirement that a "Chief Executive Officer" for Chicago's public schools have a

Momist nod.

Vitale didn't need that. The party line was that he was a millionaire who had proved his value in the private sector, that he was giving of his valuable time and efforts, blah, blah blahhhhh...

A year after the Vitale introduction, he was put on the payroll at the second or third highest salary in CPS, with the title, hitherto unknown, of "Chicago Administrative Officer." Since then, the "Chief Administrative Officer" has been the farting camel filling the big tent at the cop of the CPS leadership pyramid. The current iteration of that is Tim Cawley. To this day (july 18, 2015), CPS hasn't bothered to define what the "Chief Administrative Officer" is. That's one of those brilliant examples of the "business model." Like most of the most important stuff in America's third largest school system, its kept secret from the peasants.

Part of the administrative brilliance of Vitale's leadership was that since he has taken over, CPS has had five or six CEOs (depending upon who you count from the "interim" ones) and seven or eight CFOs -- that's "Chief Financial Officers." John Maiorca, Pedro Martinez... etc., etc., ... to the most recent two, Peter Rodgers and now Ginger Ostro!

One of the reasons CPS keeps getting its bond ratings downgraded (in addition to maxing out every credit card and calling that "business" management) is that the leadership of the system has been sabotaged by this revolving door stuff at the "top."

Twenty-seven years ago I learned a lot about this stuff while serving on the "budget transition team" at CPS when the first LSCs came in. I worked with the top budget officials, both of whom were sober number crunchers. One day I was sitting with the CFO when he got a phone call, and when I got up to leave, he said, "No. Stay." So I did. A half hour later, the call was over, with a lot of explanations on the CPS side of various things we had just done to get the CPS budget in order (by August 1989).

I asked who that had been, and he said "Moody's."

It turns out that CPS can submit boxes of documents to the rating agencies and still not be trusted. At some point, the rating agency also wants to trust one or two people at the "top" who have long established their credibility with no bullshit. That's what I learned that afternoon at 1819 W. Pershing Road.

Long before Rahm began sacrificing the city's public schools on the altar of privatization, Richard M. Daley had destroyed our credibility in those areas. Daley's crazy borrowing schemes, asset selloffs, and charter expansions was the beginning of the even crazier stuff we've been witnessing since Rahm took over in May 2011.

Playing management musical chairs is sabotage, and that's the only word to describe the program Rahm Emanuel and his "team" have imposed on the city's public schools since May 2011. Wall Street knows it, and knows not to trust these people. At any time, if you aren't paying attention, you will call for the CPS "Chief Financial Officer" and if your roladex hasn't been updated, you'll be asking for the wrong person. That's not a joke, because we're all paying for it. And it's one of the reasons why my position is that David Vitale and his "ream" should be facing the same grand jury and Barbara Byrd Bennett and that crowd of crooks she important from elsewhere with the help of those north suburban crooks at SUPES, etc., etc.

July 18, 2015 at 2:44 PM

By: Jean Schwab

Wasted

CPS wasted tax payers money, declared they were in debt and wanted teachers, the state and tax payers to bale them out. It is hard to cry poor when you have wasted money.

July 18, 2015 at 4:27 PM

By: Bob Busch

they are not

Whoever the culprits are that got the Board into this toxic mess are, they are not stupid.

Anyone that thinks they did not know exactly

what they were doing, now and then, needs their heads examined.

Does anyone think the discovery phase of a lawsuit would not provide very interesting

testimony?

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