Detroit Principals Allegedly Took $900k In Kickbacks While Schools Crumbled
Blake Neff DailyCaller.com 6:26 PM 03/29/2016 Federal authorities have charged at least 12 school principals in Detroit with participating in a $900,000 kickback scheme involving fake school supply orders which wasted millions of dollars while district leaders begged for more state money. Businessman Norman Shy made $908,500 in payments to school principals in return for receiving a series of Detroit Public Schools (DPS) contracts to deliver school supplies, totaling about $2.7 million, according to court documents. The alleged scheme was quite involved, with principals submitting fake invoices to cover for Shy, who often never even delivered the promised school supplies. The federal probe implicates Shy and 12 current and former principals and one administrator. The least-involved member is accused of receiving $4,000 in bribes, while Cara Flowers, the assistant superintendent for DPS’s special education department, is accused of taking a whopping $324,000. The alleged kickbacks included not only cash payments, but gift cards and even free home repairs. Astonishingly, less than two months ago, one of the charged principals, Ronald Alexander, appeared on “The Ellen DeGeneres Show”, where his sad story about a crumbling school building spurred DeGeneres to make a $500,000 donation, touted as her most generous gift ever. U.S. Attorney Barbara McQuade told The Associated Press the accused principals have been cooperating with the DPS investigation, suggesting a plea bargain is likely. The kickback scheme comes as DPS officials have been arguing they need a huge boost in funding from Michigan’s state government, even as they also demand increased autonomy (DPS is currently run by a state-appointed emergency manager). Just last week, the Michigan legislature approved $48.7 million in emergency funds to ensure DPS has enough money to pay salaries through the end of the school year. Michigan Speaker of the House Kevin Cotter, a Republican, quickly released a statement saying the corruption showed the need for continued state oversight of DPS. “This is exactly why House Republicans were so adamant that strong fiscal oversight be a prerequisite to any additional state funding for Detroit’s corrupt and broken school administration,” Cotter’s statement said, according to The Detroit Free Press. “And it is why we will continue to insist that strong financial and academic reforms be a part of any long-term solution to decades of DPS failures.” Tuesday’s indictments aren’t the first corruption charges to hit DPS. Just a few months ago, former principal Kenyetta Wilbourn Snapp pleaded guilty to taking bribes while working for the Education Achievement Authority, a state agency created to help turn around DPS’s fortunes. Follow Blake on Twitter Send tips to [email protected]. Hugh Hendry: "If China Devalues By 20% The World Is Over, Everything Hits A Wall"
Submitted by Tyler Durden on 03/26/2016 21:27 -0400 ZeroHedge.com Once upon a time Hugh Hendry was one of the world's most prominent financial skeptics, arguing with anyone who would listen that the status quo is doomed and that central planning will never work. Most famously, back in 2010 during a BBC round table discussion with Jeffrey Sachs and Gillian Tett when discussing Europe's crashing experiment with the single currency, he said that we should "purge this system of its rottenness. Let's take on a recession. It's going to be tough, people are gonna lose their jobs. They are going to lose their jobs anyway. We can spread this over 20 years, or we can get rid of it over 3 years" before concluding "I recommend you panic." Ultimately everyone did panic, which led to the single biggest episode of global QE and negative rates ever seen, resulting in ever louder speculation even among the most "serious" people that central bankers are now powerless. But perhaps most notably, Hendry was one of the biggest China bears, certain that the country's massive overcapacity, insolvency and bad debt problems will result in disaster (back then China only had about 200% debt/GDP, it has since risen to over 350%). His Chinese skepticism led to his fund generating a 40% profit by late 2011.And then after a poor two year performance spell, Hendry had a historic burnout and threw in the towel on bearishness, infamously saying he can no longer "look at himself in the mirror": "I may be providing a public utility here, as the last bear to capitulate. You are well within your rights to say ‘sell'. The S&P 500 is up 30% over the past year: I wish I had thought this last year... Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending." He proceeded to buy momentum stocks and 3D printer companies. Fast forward to the present, when countless hedge funds - key among them Kyle Bass' Hayman Capital and Mark Hart's Corriente - have become China megabears, expecting the country's financial collapse and trading it by shorting the Yuan expecting a massive Yuan devaluation.It is here that Hugh Hendry has once again proven contrarian, even if it means agreeing with the dominant textbook meme of the day, namely that China can contain its economic hard landing, and in his most recent interview with RealVision's Raoul Pal, he cautions against a Chinese devaluation saying that "tomorrow we wake up, I mean, I would jump out the hotel window if this was the scenario, but we wake up and China has devalued 20%. The world is over. The world is over." What makes this interview doubly ironic is not just that Hendry is wildly contradicting everything he himself believed in a few short years ago, but disagrees with his interview host himself - recall that one month ago, we showed an excerpt from a Raoul Pal interview in which he previewed "the Big Reset" and laid out how the Kondratieff Winter would unwind, one in which China would play a prominent part. Whether Hendry is right or wrong remains to be seen: for now he has the powerful People's Bank of China at his back which has been especially active recently especially after the PBOC stated recently it intends to crush all hedge funds who have shorted the Yuan even if it means slamming Chinese trade and the economy once again (as a reminder, one of the biggest reasons why China needs a weaker Yuan is not just the stronger dollar to which it is pegged but because its exports have been crashing against all of its trading partners making the need for a weak currency paramount). For now, as we showed just ten days ago, those short the Yuan have swung to wildly profitable to losing money as both the USD has slid and the Yuan has spiked, although both of these trades appear to be reversing now.Needless to say, Hendry disagrees with the China contrarians and believes that the way to fix the Chinese economy is through a stronger currency, even if there is no logical way how that could possibly work when China's debt load is 350% of GDP while its NPLs are over 10% and rising.So, borrowing form a favorite Keynesian trope, one where when the countrfactual to his prevailling - if incorrect - view of the world finally emerges, Hendry is convinced that a 20% devaluation would lead to global devastation; the same way if Paulson did not get Congress to sign off on his three page term sheet that would lead to the "apocalypse." Only unlike Paulson who only hinted at a Mad Max world, for Hendry the alternative to him being right is a very explicit doomsday scenario, as he explains in the following excerpt from his RealVision interview: Tomorrow we wake up and China has devalued 20%, the world is over. The world is over. Euro breaks up. The world is over. The euro breaks up. Everything hits a wall. There's no euro in that scenario. The US economy, I mean everything hits a wall! Everything hits a wall! The dollar strength that you imagined is devastation because you just eliminated dollars. They're a scarce commodity. You've wiped them out. And China is a pariah state. It's a 'Mad Max' movie, right. OK, China gets to be the king in 'Mad Max' world. How appealing is that? There is no world after the tomorrow where China devalues by 20%. There is no world. Yeah, it's looney tunes to believe that, people say, 'oh wow, they needed to catch a break.'Their share of world trade has never been higher. They're facing no pressure, immense terms of trade improvement, and you would destroy world trade. World trade is down 25%. You would probably have passport restrictions, the world is over. And while it is clear on which side of the Yuan Hugh is currently positioned (Hendry's Eclectica is down 2.1% through March 18 and -5.9% YTD) either directly or synthetically, we can't wait to see who is right in the end: China and its central bank (as well as Hugh Hendry) or reason and common sense (as well as some of the smartest hedge funds in the world).
Behind U.S. GDP Data Is Reason for Recession Worry: Weak Profits
Rich Miller RichMiller28 Bloomberg.com Alexandre Tanzi atanzi
Yet beyond the headline number, there is a reason for some concern. Corporate profits plunged 11.5 percent in the fourth quarter from the year-ago period, the biggest drop since a 31 percent collapse at the end of 2008 during the height of the financial crisis. For 2015 as a whole, pretax earnings fell 3.1 percent, the most in seven years, according to the Commerce Department. That’s “bad news,” said Nariman Behravesh, chief economist for IHS Inc. in Lexington, Massachusetts. History shows that when earnings fall, the economy often follows them downward into recession as profit-starved companies cut back on hiring and investment. There are, however, some caveats to such a gloomy conclusion. Last quarter’s numbers were unusually depressed by a $20.8 billion penalty payment by BP Plc to settle claims over the 2010 oil spill in the Gulf of Mexico. Taking that into account, earnings fell about 7.6 percent, according to Bloomberg calculations. That’s still weak but not as bad as the 11.5 percent slump. Behravesh also pointed out that the decline was heavily concentrated in the petroleum and coal industries, where profits plummeted by more 75 percent in 2015 as energy prices collapsed. That makes it less worrying from the point of view of the overall economy. "Greater profits are a growth engine for the economy, but we are looking past this data today as it seems to be related to the big decline in oil," Chris Rupkey, chief financial economist with Bank of Tokyo Mitsubishi UFJ Ltd. in New York, said in an e-mail. Jesse Edgerton, an economist with JPMorgan Chase & Co. in New York, was less sanguine. Yes, the poor earnings outturn was due to energy companies struggling with lower oil prices and manufacturers hit by a strong dollar, he said. "But it also likely reflects the beginnings of a profit-margin squeeze driven by tighter labor markets, rising wages and weak productivity," he added in an e-mail to clients. And that, he suggested, is something to fear. |
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