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Nazareth, Pa., United States

Wednesday, November 21, 2012

Bethlehem Township to Settle Litigation Against Financial Advisers Who Recommended Streetlight Scam

Bethlehem Township Commissioners have settled litigation against a financial advice firm that recommended a streetlight purchase deal gone awry. At their November 18 meeting, Commissioners unanimously authorized the settlement, although details are under wraps until both sides have signed off.

In 2007, Bethlehem Township financial adviser, Reading-based Concord Public Finance, recommended that the Township buy its street lights from PPL through another firm, Municipal Energy Management, Inc. This firm would then shop around for the lowest electricity rates. Through Concord, the Township borrowed $1.2 million, and paid MEM $832,460 for a "fast track purchase."

But after two years of stonewalling from MEM, the Bethlehem law firm of Broughal and DeVito was hired as the Township's new Solicitors. That firm learned from PPL that the Township borrowed over one million dollars for a project that would only cost $271,180.

Bethlehem Township sued MEM in 2010. Through the discovery process, Township lawyers learned that MEM principals Robert J. Kearns and Patrick J. "PJ" McLaine spent most of the money to support their own lavish lifestyles. The matter was turned over to District Attorney John Morganelli.

In February, a grand jury indictment charged Kearns and McLaine with felony theft, misapplication of entrusted property and felony conspiracy. Their trial is scheduled for January.

Township officials also sued Concord for giving bad financial advice. In addition to the $832,460 paid to MEM, the Township paid $15,000 to Concord following a presentation by Christopher Gibbons, an employee and part-owner of Concord. According to the Township complaint, Concord never verified the financial information provided by MEM and did nothing to ensure that the $832,460 entrusted to MEM would only be used for its intended purpose.

In addition to being Bethlehem Township's financial adviser, Concord's website indicates that it has had numerous local municipal clients, including Bethlehem, Easton, Whitehall, North Whitehall, South Whitehall, Upper Saucon and Bethlehem Parking Authority.

Concord is the firm that recommended Northampton County enter into a swaption scheme that ended up costing $25 million. Concord also recommended Easton to re-finance $24 million in pension bonds, According to Mayor Sal Panto, they are non-callable bonds. "So now the city is stuck paying back these bonds at better than 7% when we can be borrowing money today at 3% and less," complains Panto.

In addition to dispensing financial advice, Concord's Christopher Gibbons is known for dispensing campaign cash to candidates seeking office. According to the state campaign finance website, he's handed out $22,060 over the past 12 years to office seekers, including Bethlehem Mayor John Callahan and former Lehigh County Executive Don Cunningham.


Anonymous said...

You know if you go back far enough, I believe that they did get contract work in Bethlehem and did perform on it. It had to do with streetlights and was in maybe 1998 or 1999.

I think they later did some work and may have had problems....around 2009 or 2010 in Bethlehem.

Anonymous said...

Yea just quick brush misappropreation of federal monies under the rug of home rule. This seems to be the norm for lehighvalleys political renew projects.

With the help of local lawyers esq recipiants can claim bancrupty and keep the entity as long as the campaign donation is made.

Anonymous said...

How did the management support such a proposal, and why did they feel the need to pay it all in one lump sum?