West Allis West Milwaukee School District

Report: School District Lawsuit Settlement Talks Begin

The legal counsel representing Whitefish Bay School District in a lawsuit has plans to engage in settlement talks with the financial institituions they claim bilked them out of money.

Whitefish Bay is one of five Wisconsin school districts – including Waukesha, West Allis-West Milwaukee, Kenosha and Kimberly – suing Stifel Financial Corp. and other financial institutions, alleging the districts were misled when making $200 million in investments, which have drastically decreased in value. The school districts estimated in January 2010 that the investments were worth less than $10 million.

According to a report in the Milwaukee Journal-Sentinel , Stephen Kravit, one of the attorneys representing the districts, said the schools are engaged in the mediation process and hope to arrive at a settlement.

The legal counsel for the school districts met with Stifel Financial Corp. and the Royal Bank of Canada in New York this month and asked a Milwaukee County circuit judge for time to continue those talks, according to the Journal-Sentinel.

In April, Patch reported the U.S. Securities and Exchange Commission gave notice to Stifel about the agency considering filing its own lawsuit .

Only in government will you find organizations that can lose 95% of their investment in a fund that others were walking away from because it smelled funny and that then turn around and float a bond for $21MM dollars worth of dee-luxe cafeterias and an overblown shrine to HS band practice. I have absolutely no pity for this school district or those who supported the building of these monstrosities when I hear them complaining about the effects of Madison imposed budget constraints.

The board of directors is specifically chosen to act as guardians; the school districts and all of their taxpayers put their trust into these decision-makers. It is their JOB to do the research and handle the districts' money responsibly. And now they are spending more money on a lawsuit that both wastes taxpayers' money and compounds the districts' losses.

Firm accused of defrauding 5 Wis. school districts (AP) | Business ...

WASHINGTON – Federal regulators are accusing brokerage firm Stifel Nicolaus & Co. of civil fraud in its sales of risky complex investments to five Wisconsin school districts that lost all of the $200 million they invested.

The Securities and Exchange Commission announced the lawsuit Wednesday against St. Louis-based Stifel Nicolaus and former senior vice president David Noack. The SEC said they misled officials of the school districts by telling them the investments made in 2006, which ended up failing, were safe. The investments were linked to default insurance protection on corporate bonds. The school districts’ credit ratings were downgraded as a result.

Stifel Financial Corp., the brokerage firm’s parent, disputed the SEC’s allegations and said it will challenge them in court.

In its suit filed in federal court in Milwaukee, the SEC is seeking unspecified restitution and fines against Stifel Nicolaus and Noack.

It was the latest SEC case targeting brokerage firms’ sales of complex investments in the run-up to the financial crisis that hit with full force in 2008. Last year Goldman Sachs paid $550 million to settle similar civil fraud charges. That was the largest penalty against a Wall Street firm in SEC history.

Goldman was accused of steering investors toward complex mortgage investments without telling the buyers that the securities had been crafted with input from a client that was betting they would fail. In June, JPMorgan Chase & Co. agreed to pay $153.6 million to settle the SEC’s civil fraud charges that it misled buyers of mortgage investments just as the U.S. housing market was collapsing.

An attorney representing Noack didn’t return telephone calls seeking comment.

As was the case with Goldman and JPMorgan, the investments sold by Stifel Nicolaus were so-called collateralized debt obligations, securities backed by pools of other assets. They plummeted in value after the financial crisis struck as investors fled all but the safest forms of debt.

The five Wisconsin school districts are Kenosha Unified School District No. 1, Kimberly Area School District, School District of Waukesha, West Allis-West Milwaukee School District and School District of Whitefish Bay.

The school districts themselves sued Stifel Nicolaus and Royal Bank of Canada, which put the investments together, in 2008 in Milwaukee County Circuit court.

“The districts are gratified that the SEC has issued fraud charges against Stifel and Noack,” Stephen Kravit, an attorney for the school districts, said in a statement Wednesday. “The filing by the SEC of a parallel lawsuit to our case is proof that the districts are following a just path, and that they are ever closer to recovering their losses from this fraud.

West Milwaukee

North western reporter. Second series. N.W. 2d. Cases argued and determined in the courts of Iowa, Michigan, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin

Mergent bond record

Seeds of crisis, public schooling in Milwaukee since 1920

Report of the state treasurer