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Lynda Johnson’s Campaign Manager Worked For Financial Advisors Involved With School District Bonds

Lynda Johnson

 

By Brian Hews

Hews Media Group-Community News has learned that ABCUSD Trustee Area 3 incumbent Lynda Johnson’s campaign manager Alan Gafford, who has been seen at several ABC meetings lately conversing with district administrative officials, was a former Vice President at George K. Baum & Co., and was involved in the process of Baum issuing some of the costliest bonds in California public agency history.

The bonds sold by Baum, known to Wall Street traders as capital appreciation bonds, do not require principal or interest payments for 35 years. Interest is charged on a growing pile of unpaid interest, causing the principal balance to balloon.

“It was another method of pushing debt to future generations, ” state Treasurer Bill Lockyer told the OC Register. Lockyer compared the bonds to “payday loans.”

Gafford worked for Baum as Vice-President for Strategic Planning for 15 years, from 1997-2012.

Since 2007, according to the Register, Baum has issued more than 60 capital appreciation bonds.

As a high-level VP, Gafford “developed election strategy and tactics, provided technical instruction and training for campaign staffers, and created and coordinated direct voter contact through paid and earned media efforts using direct mail, television, radio, and technology.”

In short, Gafford formed and marketed bonds, including capital appreciation bonds, into a suitable package that voters would accept.

In early 2008, voters in the Placentia/Yorba Linda School District approved a $200 million bond after reading campaign fliers and being assured repeatedly that “their money will be spent wisely. ”

What happened instead was that Measure A led to a debt so large and long lasting that it has mortgaged the future of Placentia’s children’s children.

And it was not the first.

Since 2007, Baum has issued more than 60 capital appreciation bonds for California school districts, including the single most expensive loan in California history.

The Register reported, “the story of how Baum pushed California schools into complex bond deals is one of …sophisticated financiers, and laws, rules and guidelines ignored.” Baum always claimed they did nothing wrong.

In 2003 and 2010, the state’s Office of Legislative Counsel was asked whether it was legal for a school district to hire an underwriter – similar to Baum – based on the understanding that it would also provide political consulting.

In both cases, the lawyers gave the same answer: such a deal violates the law.

In 2005 , then attorney General Bill Lockyer wrote in Opinion 04-211 that school boards are banned from hiring political consultants and using public funds to implement a strategy to build support for bond measures.

 

 

Apparently no one, including Gafford, was aware of the opinions of the Office of Legal Counsel or AG Lockyer.

During the Placentia campaign, Gafford confirmed to the Register that he had worked on the campaign, including organizing volunteers, recommending designs and messages for signs and literature, and writing the script for phone bank volunteers.

Gafford said, “Executives did not try to hide their involvement. If they wanted technical and professional help, I was there to do that, there was no secret.”

Finance Laws

Under the Political Reform Act, if a company pays employees to work on a campaign, they are required to report that as an in-kind donation on the required state forms.

But while Baum, Gafford, and his team assisted on the campaign, Baum did not report the in-kind donations on the required state forms.

Baum said they relied on a well-known law firm for advice.

Plancential/Yorba Linda Struggling

Since Measure A passed in 2008, Placentia officials have struggled to find enough money to operate classrooms.

It has eliminated some elementary music programs, forced teachers to take days off without pay, and increased class sizes.

The district cut even as construction firms continued with the “massive modernization program.”

Daily costs are depleting the district’s general fund balance. No bond money can pay for teacher salaries and other operating costs.

When asked if he remained in contact with Baum, Gafford simply stated, “I separated from George K. Baum & Company in DEC 2012.”

HMG-CN sent a question via email to Trustee Johnson through the ABCUSD Superintendent’s office who forwarded the email to Johnson asking if she knew Gafford worked for Baum.

As of the time of publication, Johnson had not responded.

Meanwhile, it is well known that ABCUSD will attempt once again to pass a much-needed infrastructure bond in the near future.

And sources are telling HMG-CN that Gafford is lobbying for ABCUSD to create a Public Information Officer position.

Gafford told HMG-CN,  “I am not lobbying for a PIO job, or any other job at ABCUSD.  I’m uncertain there is even a job tile for that in the District.”

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