Proviso High School District 209 has $421,000 at risk and Forest Park Elementary District 91 has $176,653.60 at risk because a fund that the Proviso Township School treasurer’s office invested in was defrauded.
By law the Proviso Township School Treasurers Office (PTTO) handles money management for local districts in Proviso Township. The PTTO was just one of nearly 300 local governmental units that had money invested in a short term money market like fund offered by the Illinois Metropolitan Investment Fund (IMET), a consortium that invests money for local governments.
Recovery efforts are well underway and it is too soon to know how much money the districts will ultimately get back although it appears likely that Districts 209 and 91 will get at least a substantial portion of their money back.
Until then, the un-accessible money equals the average salaries of three teachers in District 91 and six at the Proviso high schools.
IMET’s fund, called the Convenience Fund, invested 2.8 percent of its assets, in repurchase agreements issued by a Florida based financial institution called First Farmers Financial. Repurchase agreements, in which one party buys an asset from another party only to sell it back to the original party as soon as one day later, are typically very safe investments. The assets purchased are typically collateralized. In this case the loans that IMET’s Convenience Fund invested in were portrayed as being backed by guarantees from the United States Department of Agriculture. Those guarantees turned out to be forged. IMET invested $50.4 million in the fraudulently backed securities. About $2 million of the PTTO’s investment in the Convenience Fund was affected by the fraudulent agreements.
The man behind the mess, First Financial’s, Nikesh Patel, has been arrested and charged with fraud. His personal assets, including five Florida hotels, have been seized. The PTTO said assets estimated to be worth $155 million or 87 percent of the purported value of the repurchase agreements have been seized from Patel and other co-conspirators. One-hundred and twenty million dollars of that amount is the estimated values of the hotels. These assets have been placed in a liquidating trust. . An initial attempt to sell the seized hotels was apparently withdrawn after drawing disappointing bids for the hotels, which reportedly are not in good condition. Ultimately the trust will sell the assets and the proceeds returned to investors like IMET.
It is too soon to tell how much money districts 209 and 91 will ultimately get back. For now all the local school districts can do is wait to see.
George Chirempes, the chief financial officer for the PTTO, seems confident that ultimately his office, and thus the school districts, will get all their money back.
“When push comes to shove here, and it will, we’re going to get all our money back,” Chirempes said last month in an appearance before the Riverside Brookfield High School District 208 Board of Education.
For now the school districts have not booked any losses as their money remains on their books for now.
“It’s there, we haven’t lost it at this point, but we can’t spend it either,” said Craig Schilling, the head of the Proviso District 209 financial oversight panel. Schilling said that the $421,000 potential loss might have to be listed as restricted funds on the district’s books until whatever is recovered is distributed back to the investors.
No impact on operations in the schools is expected for now.
