The El Paso Baseball Fiasco Bonds: The Rest of the Story

As you all know the city was finally successful in selling the ballpark bonds. The ballpark is also under construction. What you may not know is, as they say; the rest of the story. There are two reasons for this; the first is the inability of the El Paso Times to properly and effectively keep you informed. The second reason is that the city, itself used a process that is not only controversial but was designed from the onset to keep the progression as secret as possible.

Here are a few things you may not yet know about the El Paso ballpark fiasco.

Is William Studer, Jr. retiring?

When the city first attempted to sell the bonds, they put out a document called the “Preliminary Official Statement”. I previously discussed how these documents are used on my post “The Ballpark Debt That Keeps on Giving”. What I noticed in the first document, the one dated June 17, 2013 was that there was a notation that William F. Studer was retiring from the city effective July 25, 2013 (page iii, footnote 2). At first I didn’t pay much attention to this as employees regularly retire.

What subsequently caught my attention was that the announcement about Studer’s pending retirement had been removed from the second “Preliminary Official Statement” dated August 13, 2013. As of September 4, 2013, Studer’s profile still appears on the city’s website. I sent in a fax asking William Studer for comment on the apparent discrepancy and I did not receive a response from him. Based on the information that I have on hand and the fact that William Studer was recently quoted in a Bloomberg report I assume that he is still with the city.

Therefore I wondered why announce he is retiring and then take it back? What does all of this have to do with the bonds, if anything? Studor has been the face of the bonds to the media for the city and was recently quoted in the news as stating that “this debt is subject to appropriation by the city council and that presented some discomfort on the part of some investors in light of Detroit” in regards to the difficulty of selling them.

As we now know the bonds failed to sell the first time and as you will see, the original bond underwriter was replaced by another. In the process, the pending retirement of William F. Studer was cancelled.

First Morgan Stanley and then Goldman Sachs, why?

Morgan Stanley was replaced by Goldman Sachs as the city’s bond underwriter. According to David Mildenberg’s report on Bloomberg on August 29, 2013 neither company wanted to comment on the reason for the change. We already know that you, the taxpayer, is saddled with an additional cost of $17 million for the stadium because investors balked at buying the city’s initial bonds.

The local media happily reports the horde’s public stance that the higher cost was the result of the Detroit bankruptcy. But is that the whole story? Although the city and its complicit news media has reported the additional cost of the bonds as a result of the Detroit filing, I think there is more to the story.

What the local media did not report is that the city changed bond underwriters in the middle of the bond deal. Why?

Notice also how the initial Official Statement from the city included that notation that Bill Studor was retiring from the city and subsequently removed that statement in the second Official Statement. These two items are related somehow, however as the city continues to obfuscate the process it is difficult to pin down how it is that they are related.

The obvious question would be why not file an open records request. The problem is that Studor’s employment at the city is a personnel matter that falls under the state’s transparency exclusion doctrine. Therefore, other than his current status at the city, everything else is off limits.

Likewise with the change in bond underwriters, the city would most likely claim executive session privilege and therefore the reason for the change is readily not available. Both Goldman Sachs and Morgan Stanley refused comment to Bloomberg.

What’s up with First Southwest Co.?

How does First Southwest Company fit into all of this? On August 28, 2012, city council appointed First Southwest Company, out of Dallas, to provide financial advisory services for the city.

Remember First Southwest? Although unindicted and the company has proclaimed innocence from the onset, First Southwest was implicated in the ongoing El Paso public corruption cases where former Bear Stearns investment bankers; Roberto Ruiz and Christopher Pak pled guilty. In the case of First Southwest, the allegation is that they were fired because they would not pay the bribes.

What hasn’t been reported by the local media is that First Southwest has been linked to municipal bond market irregularities before. In 2008, several municipalities (Municipal Derivatives Antitrust Litigation MDL 1950) filed a lawsuit alleging that several firm colluded in rigging the municipal bond market. Basically, the firms rigged the bidding process. Among the accused was First Southwest Company that was dismissed from the case, under a “stipulated dismissal” on May 10, 2013. Goldman Sachs was included among the defendants.

Therefore although we do not know exactly why Goldman Sachs replaced Morgan Stanley the process itself and the results thereof are highly suspect. What we do know, according to the Bloomberg report “El Paso Ballpark-Bond Delay Costs $17 Million Extra: Muni Credit”, by David Mildenberg, besides the higher interest is that the city had to lower the payment spread from 30 years down to 25 to make the bonds more palatable to the investors. More importantly the Bloomberg report for the first time reveals that the original bond underwriter by the city was replaced by another. This is an issue that has many questions yet there are no answers forthcoming. It needed to be addressed, and as you will see further down the city tried to distract this fact with the help from the local paper. At the same time notice how the El Paso Times is quick to reprint favorable articles about the ballpark yet it somehow missed the one from Bloomberg.

The El Paso Times showcases the article from Governing yet ignores the one from Bloomberg, why?

The El Paso Times, masquerading as the local paper had no problem adding the Governing article of September 3, 2013 by Liz Farmer to its lineup. The article, titled; “How Detroit Put a Rain Delay on El Paso’s Stadium Financing” rehashes the same old public relations mantra of “voters overwhelmingly” supporting the baseball fiasco as it lays blame on the additional $17 million in interest squarely on Detroit’s lap. In fact, the article, although it mentions the city’s predicament by forcing the sale through because of the rushed process, it nonetheless places blame on the “lead underwriter” and Detroit’s bankruptcy.

So why did the local paper ignore the Bloomberg report and yet run this other one?

I thought I’d ask the author, Liz Farmer what led her to write the article. I’m sure it’s no surprise to you that the “PR reps who were passing through D.C. this past spring” was what led her to this issue. Remember my post about how Joyce Wilson is buying good press for $326,000? Guess who Farmer interviewed for her article. Yup, that’s right Joyce Wilson.

As I always write, connect the dots. The El Paso Times ignores the Bloomberg report but nonetheless reproduces the Governing article.


I’m beginning to wonder if the El Paso Times is still paying off its obligations to Joyce Wilson for her graciously buying its building.