Confidence Game - Christine Richard [78]
The report concluded: “These are private bonds and this debt should never be placed on the taxpayers of Grady County without a vote of the people. This debt and financing risk should be shouldered by the private individuals who chose to invest in these revenue bonds.” But most of the bondholders had purchased insured bonds, meaning they expected MBIA to shoulder the losses if the issuer couldn’t pay off its debts.
To get to Chickasha, I took Highway 81 south out of Oklahoma City. The two-lane highway stopped occasionally at an intersection with a gas station, a feed store, or, more often, a building whose long-ago purpose was concealed by a faded sign, weathered shingles, and boards nailed over the windows. By 10 a.m., the temperature already was creeping toward 100 degrees. “If you think this is hot, it’s this hot in Hell for Eternity” read a sign in front of a roadside Baptist church. The first person I spoke with was Keiran McMullen, the Grady County sheriff, who oversaw the jail’s complicated financing. A small, unassuming-looking man who wears an oversize cowboy hat, McMullen said there had been a basic disagreement about the ultimate responsibility for the bonds. “MBIA always has wanted to treat the bonds as if they were general obligation bonds,” said McMullen, referring to debt backed by the full faith and credit of a local government. The way they saw it back at MBIA headquarters was that the jail provided an essential service, so the county and ultimately the state would back it up, according to McMullen.
It might be an essential service but the county couldn’t get the taxpayers to agree to fund it, McMullen said. The only way the bond payments could be made was if the jail took in enough prisoners at a high enough rate. “The whole business is a bit like running a Holiday Inn,” the sheriff said with a smile. “You just never know who’s going to turn up.”
The shortfalls were chronic, but the county always found ways to avoid drawing on its bond insurance. Then in the fall of 2004, it told MBIA that it needed help. MBIA told the Grady County Industrial Authority that unless it came up with the November bond payment, it would stop insuring any more debt across the state. “From where I was sitting, it looked like they blackmailed the state,” said McMullen. Shortly after, the Oklahoma Department of Corrections cut a check to the jail for $645,183 to help meet its November 2004 bond payment.
Chris Angel, the accountant who audits the jail’s finances, sat in his office in a small building just outside of town, tallying up all the sources the county had tapped over the last few years to meet the bond payments on the jail: “County General Fund, Grady County Housing Authority, Sheriff-Prisoner Housing Fund. And, of course, the payment from the state for $645,183 after MBIA threatened to stop insuring Oklahoma bonds.” The latest plan under discussion, said Angel, was for the U.S. Department of Agriculture to lend the jail more money so it could finish the top floor and hold more prisoners. MBIA was not one of those sources. “They came in their expensive suits and looked at the same numbers we did before they insured it,” Angel said.
So I called the Oklahoma Department of Corrections to see why they covered the November 2004 bond payment. Jerry Massie, a spokesman for the department, said he’d have to call me back on that but added, “I believe there was legislative involvement to help protect the state’s credit rating.”
While I waited to hear back from Massie, I headed down to the Oklahoma state capitol building in search of an explanation. Most of the senators’ offices were locked and empty