The Fallout of Corruption

• In Event: Teaching, Learning, and Curriculum I

Abstract

The Fallout of Corruption

Case Abstract

Briston County was under a Consent Decree because the Environmental Protection Agency had mandated extensive work on a sewer system that served 23 different municipalities in the area surrounding Kerrville, Montana. Estimates to do the work ranged from $250 million to $1.2 billion. The situation led to graft, corruption, bribery and illegal activities. The President of the Commission had an unusual amount of discretion with respect to certain financial transactions. The financial crisis of 2008 along with a judgment by the Montana Supreme Court that the County’s occupational tax was deemed unlawful significantly reduced revenues. Debt covenants were violated creating an escalation of debt payments. That resulted in reduced funding for County operations and bond payments. More than twenty people were prosecuted in association with the illegal activities involved in the financing and construction of the sewer system and four of the five County Commissioners were sentenced for their involvement in the corruption. JP Morgan Chase was involved in the corruption and received fines from the Security and Exchange Commission. Five new Commissioners were elected and determined that filing bankruptcy was the only way out given the down-grade of the bonds and warrants; the reduced revenues; and the corruption. Bankruptcy was filed in November 2011. The problem now faced by the President of the Commission was to convince the court to accept the terms of the petition to exit bankruptcy when the public and one commissioner were not in favor of the terms of the petition. He realized the public would pay the price for the corruption and he felt that was not right either. Was his plan to exit bankruptcy best for all parties? Would the public and businesses react in a hostile manner to the increase in rates they would have to pay? Would the entire Commission support him? Could political corruption be prevented in the future?

Author

• Aundrea Kay Guess, Samford University