Category Archives: Business

Tax Fraud?

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Vermont’s public service commissioner David O’Brien said the City of Burlington broke the law when it used $17 million of city money to set up a city-owned telecommunications service. Commissioner O’Brien also said statements by the city officials trouble him because the mayor and city administrator have admitted they knowingly disobeyed the law. “Taxpayers are not risk investors,” he said.

Burlington Telecom is a city-built, city-owned, city-operated, and now city-financed telecommunications company that is a division of the city government. It offers television, telephone, and broadband internet services to residents throughout the City of Burlington, Vermont.

It’s a nice system other than that little issue that “Taxpayers are not [supposed to be] risk investors.”

Bernard Sanders, (I-VT) and now the junior senator from Vermont, was Burlington’s mayor in the 1980s. The self-described democratic socialist formed the Progressive Coalition, the forerunner of the Vermont Progressive Party. Mr. Sanders was first to put forth the concept of a network that could connect every home and business of Burlington.

It’s a nice idea other than that little issue that the U.S. Congress has ruled that public entities like the National Guard may not compete with private businesses.

Burlington Telecom has an attractive and competitive cable TV plan that offers with 152 channels, 45 digital music channels, Local-On-Demand, Video-On-Demand plus 57 High Definition channels available on an optional package and a la carte access to premium channels. The free channel cable TV offerings include local channels plus Al Jazeera English on channel 132 and Fox Business News next door on channel 133. They even have the Speed Channel, a crucial offering for my friend Rufus, and Food Network, equally important to my friend Kay Ace now that she has all that time on her hands. The system operates on a city-wide fiber-optic network. Their “Triple Play Bundles” include free access to BT’s city-wide Wi-Fi hot spots and a telephone Call Block option that allows subscribers to create a blacklist of numbers that can’t connect to your phone. That would eliminate at least some spam calls that sneak around the Do Not Call list.

It’s a nice program other than that little issue that Comcast has the license to provide those services in Vermont.

Burlington’s Chief Administrative Officer Jonathan Leopold didn’t bother to inform anyone that BT was financing its activities with city funds. He is presently urging the city to relax its rules so BT can grab more city money to expand the system outside city limits which means the system could arrive in North Puffin sometime soon. Mr. Leopold said the money shouldn’t be regarded as “taxpayer” money because it comes mostly from other city “business activities.”

Right.

Commissioner O’Brien says the city violated the promise that taxpayer money would not be used to start a telecommunications company. With a wink and a nod, Mr. Leopold called the promise “overly optimistic.”

It’s a nice system other than that little issue that “Taxpayers are not [supposed to be] risk investors.”

Current mayor Bob Kiss (Progressive-Burlington) defended his actions and the business. “Commissioner O’Brien’s statements … are inaccurate, inflammatory, and totally inappropriate,” he said. I suspect that Commissioner O’Brien is on Mayor Kiss’ Call Block list now.

Mayor Kiss is right to be outraged. After all, Commissioner O’Brien chose to publicly excoriate the Chosen Ones of Burlington for using tax money to take over businesses and we now know that is perfectly legitimate behavior. After all, Mayor Kiss has the President of the United States and the United States Congress as bright and shining examples.

Or not.

Out of Work

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When you’re out of work
the unemployment rate is 100%

Kay Ace (not her real name) lost her job on her birthday Friday. She filed an unemployment claim and began a new job search this morning.

The MegaInsuranceCo had cut her hours to part time last year but the falling real estate market and her rising salary (and age) made her too expensive to keep around. Her now former boss was told to hire a cheaper worker in her place.

U.S. job seekers now outnumber openings six to one, a new record and the worst ratio since the government began tracking open positions in 2000. According to the Labor Department’s latest numbers, from July, only 2.4 million full-time permanent jobs were open, with 14.5 million people officially unemployed.

With more people at home, only two indices have risen: the number of television hours watched and the birthrate. It seems we are making more unemployed workers naturally and taking in more “bright and shiny buy me now” advertising.

Vermont’s Unemployment Trust Fund will run out of money soon, most likely in January. The state expects to borrow about $160 million from the Federal government to keep the Trust Fund afloat through 2010.

“That won’t affect your Ms. Ace,” Representative Liana Leger (D-North Puffin) told me. “We have added employees at the offices to handle the increased unemployment claims and benefits will be paid on schedule.” Rep. Leger has held office since 1996.

In 1998, the legislature increased benefits without any new revenue, Vermont Labor Commissioner Patricia Moulton Powden said last week on You Can Quote Me. “Anyone who runs a business knows that when you spend more you have to have more income coming in.”

That 1997-98 legislative session was a very productive one for this state. Howard Dean (D-VT) was governor, Peter Shumlin (D-Windham) was Senate President pro-tempore (and now is a gubernatorial candidate), Michael Obuchowski (D-Windham) was Speaker of the House, and the assembly was in a spending mood. In addition to Act 101 (the act that changed unemployment compensation), the legislature passed a health insurance mandate that required plans to provide mental health coverage without establishing “any rate, term or condition that places a greater financial burden on an insured.” They adopted public campaign financing for the offices of governor and lieutenant governor to restrict “excessive campaign expenditures.” And they passed the Equal Educational Opportunity “to make educational opportunity available to each pupil in each town on substantially equal terms.” In a stroke of the pen, that “substantially equal access” to per pupil spending moved the revenue stream from the Towns to the State general fund.

Not surprisingly the Vermont economy has sunk.

The Vermont Legislature and the Vermont State Employee Association (the union for state workers) have each been pretty boneheaded about revenues this year. The lawmakers keep spending and the employees expect raises even as the governor tries to cut $7.4 million in labor costs.

Talks between Gov. Jim Douglas and the VSEA have broken down.

The State of Vermont had about 8,262 employees in 2008 which made the State the largest employer in the state for something like the 10th year in a row. The average salary of a state employee was $50,014 last year. That’s considerably more than Ms. Ace earned.

“These are the only employees in the state I can think of who have been accepting a couple of pay raises over the past few years and won’t come to the table to help us save their colleagues’ jobs and meet the needs of the state in this challenging fiscal and economic time,” Gov. Douglas said.

Lawmakers have said they are disappointed the two sides could not agree but it appears likely the state will raise taxes to make up for the revenue shortfall.

“It’s alright. We have elves in the cellar of the Statehouse,” Rep. Leger said. “They spin good Vermont straw into gold.”

“Leger” is not a French word for “gooberhead” no matter what the conservative pundits say.

I know. Maybe Ms. Ace can get a job with the VSEA.

Fire Sale

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NEW YORK — CNNMoney reports that General Motors Corp. will sell its Saturn unit to Penske Automotive Group, owned by racing and business legend Roger Penske. The deal gives Penske the rights to the brand, but GM will continue production of the Saturn Aura, Vue and Outlook.

If anyone can make it work, Mr. Penske can.

I hope he still has his unfair advantage.

Too bad Pontiac isn’t part of the deal. The excitement of the Pontiac line comes from Australia’s Holden right now: the G8, the GTO, and the El Camino-style Holden Ute which the motoring press called the G8TR (“Gator”) but Pontiac expected to sell as the G8 ST. Since Mr. Penske will “import” his Saturns from the GM plants, he could do the same with the best of the Pontiac line and sell them all under the “no haggle” Saturn roof.

Wow.

Shares of Penske (PAG) rose 3% in morning trading.

Meanwhile, GM announced on Tuesday it would sell its Hummer line to China’s Sichuan Tengzhong Heavy Industrial Machinery Company Ltd. thus moving the U.S. Army’s primary ground vehicle production into the hands of a foreign nation.

General Motors, The Final Rant

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Auto czar and Commander-in-Thief Barack Obama has raced General Motors through a complex series of last-minute deals to speed the automaker way into the fast-track, presidentially engineered, bankruptcy they filed this morning. The company will emerge in 60 to 90 days as the nationalized U.S. Government Motors.

Oh, yeah?

What else would you call a car business that is

  • Beaten down by political maneuvering
  • Stolen from its owners
  • Handed not just in majority but almost in entirety to “your” government.

History has textbooks full of taking industries or assets into public ownership under a national government or a state. Wikipedia reports that “The motives for nationalization are political as well as economic. It is a central theme of certain brands of ‘state socialist’ policy that the means of production, distribution and exchange, should be owned by the state on behalf of the people.”

Charged with operating “in the public interest,” nationalized industries are under strong political pressure to make social goals instead of decent products (or profits).

Here are some examples of historic nationalizations:

  • The Castro government “expropriated” all private companies after the Cuban Revolution of 1959.
  • The Yeltsin government seized Gazprom assets in 1998, claiming the company “owed back taxes.”
  • In the past two years alone, Hugo Chavez stripped control of the Orinoco oil belt, nationalized the cement industry, steel mill Sidor, and much more.
  • The Obama government will nationalize General Motors today by seizing its assets. They will claim the company might default on its loans.

“We won’t keep it any longer than necessary,” President Obama said.

Have you noticed? Every thief has an excuse.

Thomas Jefferson wrote, The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

Was King George III really any worse? That poor monarch just wanted the profits on our tea.

Posted early to match the 8 a.m. filing deadline.

Guest Post: Bob says I ask you, Senator Specter–DID YOU KNOW?

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Arlen Specter (D-PA) is the correspondent’s senior United States Senator from Pennsylvania.

Dear Senator Specter:

I will make this as short as possible.

As of Monday, May 24, just 6 days ago, the federal government was supposed to get 50% of General Motors new stock, the UAW 39%, the bondholders 10% and the original stockholders the remaining 1%. (I bought GM stock based on that.)

This was sure never to fly as the bondholders would expect the courts to give them more so it was a “deal” designed to ensure bankruptcy.

On Friday, the deal suddenly changed. Now the UAW gets 17.5%, the Feds get 72.5%, and the bondholders still get only 10%, albeit with warrants to buy 15% more stock. Common stock becomes pure trash.

Why did the UAW ownership drop? Did the UAW agree because they thought that the additional money would go to the bondholders, potentially averting a bankruptcy that destroys the value of their own common stock?

I ask you, Senator Specter: DO YOU KNOW?

If you do not know. do you know anyone who does know? There hasn’t been a word breathed in the press, so I assume the media must not know (or doesn’t care since a bankruptcy would sell more copy. Even the Wall Street Journal thinks the government “sweetened the offer” to the bondholders (at the same time the government upped its own holding by almost a third, a little fact that keeps slipping through the cracks.)

If you do not know, why is this bankruptcy allowed to proceed without a timeout for hearings, so the executive branch can explain under oath what the hell they are doing to the American people?

A bankruptcy will insure that the GM stock in millions of 401Ks (actually already “201Ks” or even “101Ks” ) around the country can NEVER recover their value. Without a bankruptcy, they could eventually recover.

This government takeover leaves millions of people’s retirement prospects destroyed, including many who are already retired and unable to start over. That includes the UAW members who accepted a smaller share of the new company plus non-union GM employees, dealer employees, in addition to mutual funds that are held by people all over the country. A large number of Pennsylvania retirees and stockholders are your own constituents and voters.

I ask you, Senator Specter: What is the benefit to destroying the common stock? Why destroy business ownership if the deals in place let the GM stock in those 401Ks recover?

Is it the business of this government and the political party you joined to insure that people can never retire?

I ask you, Senator Specter: What will the impact of the bankruptcy be on the healthcare programs for GM employees and retirees? We are not just talking UAW line workers, but all GM employees, union, non-union, and professional. Is it the business of this government and the political party you joined to make sure people have poor healthcare?

Or is it the intention of this government and the political party you joined to build demand for nationalized healthcare!

I ask you, Senator Specter: Wouldn’t such an approach be fraudulent?

Ralph Nader, whom I historically have despised for the fraud he perpetrated with Unsafe at Any Speed, published an editorial in Wall Street Journal on Friday. I laud him for raising the issues and for pointing out that IT IS NOT TOO LATE TO AVOID THE BANKRUPTCY OF GENERAL MOTORS.

It will take more than that lone voice in the wilderness.

We need a major voice in the Senate to call for a time out and for hearings to that the American Public can understand what is being done in their name. YOU MUST DO THIS TODAY.

Thank you.

(signed)
Bob Post, registered voter

Footnote:
Arlen Specter (previously D-, then R-, and now D-PA) is the correspondent’s senior United States Senator from Pennsylvania. Senator Specter had been a member of the Democratic Party before switching to the Republicans to win a campaign for district attorney. Elected to the Senate in 1980, Specter rejoined the Democratic Party this year when he discovered he would lose his upcoming Republican primary.