Like other government financial contractors in those days, Rubin was a contributor to leading politicians - in his case, prominent Democrats such as then-Gov. Ed Rendell and then-Philadelphia Mayor John F. Street.
Rubin served on Rendell's gubernatorial transition team. His firm advised Philadelphia on interest-rates swaps, complex financial contracts designed, for example, to let borrowers raise money at slightly lower interest rates and protect them from the risk of rising rates, in exchange for agreeing to pay banks and in- vestors compensation if rates fell.
Swaps and other "derivative" financial contracts became legal for Pennsylvania towns and school districts under a law Rendell signed in 2003. Wall Street swaps salesmen swarmed the state and signed hundreds of deals. But in the 2008 financial crisis, as interest rates spiked high, then collapsed to nearly nothing, swaps costs rose, prompting governments to pay to get out of the contracts and refinance their debt.
Who's counting?
Lawyers at Klehr, Harrison, Harvey, Branzburg L.L.P. and accountants at ParenteBeard L.L.C., both based in Philadelphia, spent 10 months writing a 130-page "forensic audit" for the Harrisburg Authority on how that city's incinerator turned into a $300 million financial disaster.
The audit, released last week, said Harrisburg's troubles included elected officials' failure to make sure the project could pay for itself; conflicts of interest by public officials who worked for contractors; and a string of financial swaps agreements that "added complexity, risk," and "potentially" millions in costs.
