A New Receiver of the City of Harrisburg
Receiver in two parts. Part one to create the Plan. Part two to implement the Plan.
David Unkovic did his part, and now it’s time to bring in the General.
Perhaps it’s all meant to be like this.
Anyone watching, observing, and witnessing what’s going on and what’s been going on with Harrisburg’s debt crisis can’t help but notice how perfectly dramatically fitting it all is from the characters to the timing to the ironies.
This was no less the case during Harrisburg’s latest day in Court. On Thursday, May 24th the Commonwealth Court held a hearing on the Petition for the appointment of Major General William B. Lynch as the Receiver of the City of Harrisburg. A position formally held by David Unkovic, who resigned in a stunning departure on March 30th leaving behind little more than foreboding farewell.
Since he’s been gone with no sign of his wherewithal except an April move to hire a prestigious attorney skilled in representing “whistleblowers,” the public’s curiosity has been held in suspense. Why did Unkovic leave? What did he mean by “ethical and political crosswinds”? What happened?
Commonwealth Court Judge Bonnie Leadbetter recognized the precariousness of so many restless grumbles, so she ordered Unkovic to come to Court.
He did. Bow tied and bespectacled as we love him best.
The Judge proclaimed she asked Unkovic back to Court so that “the speculation and rumors” about his sudden resignation could be addressed. She said there was a cloud over the City’s receivership and that it was necessary to put the gossip to rest, putting all of it “behind us in order to go forward.”
At the same time, Judge Leadbetter stressed that Unkovic on the stand was not an investigation. She announced her actions were “not a civil or criminal procedure about wrong doing.” That, she said, was “the purview of other authority.” Another time, another place.
After her forewarning, she said, “I would ask Mr. Unkovic to take the stand.” It was the moment the packed room of attorneys, State workers, City officials, Harrisburg citizens, and reporters had been waiting for. The room watched in anticipation as the unflustered former Receiver walked across the front of the Courtroom to the witness stand. He got in place and the Judge began to ask her questions. “On March 30th you were caused….made a determination….” She corrected herself as she went out to bluntly inquire, “Would you tell us, please, what it is that caused you to resign?”
With a deep inhale and his typical stammer Unkovic replied, “I could no longer fulfill the fiduciary duty to the citizens of Harrisburg and the Commonwealth.” Then he went on to say that it was specifically two things that caused him to decide that. Number one, he said, it was the March 22, 2012 Dauphin County Judge Hoover Order that granted a Receiver for the Incinerator, thereby establishing two receivers—one for the City and one for the Incinerator. Unkovic felt that not only did this action undermine his negotiations to sell the trash burner, but also that it was troubling to let the very creditors who made the financial deals that caused the current problems be in control of the asset they messed up.
Secondly, Unkovic said he quit because he thought he was going to be fired. “I resigned because I believe I was about to be removed as Receiver.”
Murmuring from the audience rumbled through the Courtroom.
The untenable position.
“I didn’t necessarily believe it, but I know they did.”
In the wake of that meeting, Unkovic quit his position as the Receiver of the City of Harrisburg.
Prior to his appointment as the Receiver back in December 2011, Unkovic said he had concerns about the way that the creditors were pushing lawsuits, most especially the lawsuits asking for a receiver of the Incinerator and for the City’s “first dollar.” That is, in order to pay off the Incinerator’s debt, Harrisburg as guarantor would have to turn over its first dollar of revenue to the creditors before paying any of its own services. As Unkovic saw it, it was the same parties pushing these suits as were involved in establishing Senate Bill 1151, which put municipal receivership in place. Because of the legal motions creditors were filing in November 2011, Unkovic said he felt “they were trying to put me into a box fairly quickly,” even before he was officially the Receiver. On December 10th after the Court confirmed his appointment, Unkovic publicized a few “blunt statements” about the creditors. However, based on an understanding with the State, he made no more comments about creditors until March 28th. “At that point in time, I was ready to say more about them and I did.”
He said they were making things happen in Harrisburg for their own sakes and not for the City’s sake. By the final days in March, Unkovic had a “certain view of the creditors because of the Forensic Audit.” Read the audit, he remarked. It’s all there.
“I saw the creditors differently from how they saw themselves. I saw them as co-joint venturers along with Mayor Reed in the Incinerator financings.” He went on to say as the Receiver, he was trying to come up with solutions, and in the midst of that duty, Judge Hoover granted the creditors a receiver of their choice for the Incinerator. With that Order, the people “without a lot of respect for the law putting these finances in place” were now the ones in charge.
“I had a problem with that,” Unkovic testified. “I couldn’t see how I could do that.”
The untenable position.
The Judge, though, still pondered the scenario. At one point she turned to Unkovic and mused that he struck her as someone who could handle complexity. “It became much more complex than I anticipated,” he told her.
“What made it impossible for you to deal with the complexity?”
It was here that Unkovic proceeded to reference conversations between Dauphin County and Lancaster County Solid Waste Municipal Authority (LCSWMA), who thought the Incinerator was theirs based on the initial Recovery Plans. “The County and also others—Senator Piccola, Stan Rapp and others—were pushing for a quick basic endorsement of the Act 47 Plan of the Coordinator Team from summer 2011.” But, Unkovic said, he didn’t want to make assumptions about the value of the City’s assets. He wanted to make sure the sale/lease of assets took care of not only the Incinerator debt but also the structural deficit. He was looking at everything in a way not “considered by all parties in the summer of 2011, including creditors.”
Unkovic’s reflection on how to fix the City: “The solutions to Harrisburg’s problems—because of particular interests—have to come from the top of State government.” He said he hoped General Lynch had the trust and support he needed.
There was no questioning of Unkovic by anyone else. No matter City Council’s attorney’s, Mark Schwartz, protestations that the resigned Receiver be exposed to “full and robust questioning,” Judge Leadbetter merely granted submitted questions put before her to put before the witness. It was in this way she maintained some sense of control in the room. Yet in the crowd was the whisper and desire that she would take the questions further, go one more, ask him more details.
She didn’t and he was released from the Court to exit the doors only to be met by ovation. He reluctantly stepped up to the assemblage of cameras and microphones, cut the bombardment short by announcing, “I was happy to be able to testify today in front of Commonwealth Court, and I don’t have anything additional to add at this point other than what I said in the Court. Thanks very much.”
With that David Unkovic was gone, and William B. Lynch was next up on the stand.
His testimony was standard, led by the State’s attorney Cozen O’Conner asking the General to describe his timeline of career and service, from Brown University American Lit student to Iraqi reconstructionist. Lynch elaborated on his work with the Air National Guard in Pittsburgh, with the Iraq Reconstruction, and with the State as Adjutant General for three governors. There was much talk of budgets, number of employees, and lessons learned.
He said the right things such as “we were cognizant of neighbors and local communities.” He noted that the primary problem in Iraq was they didn’t consult enough with the Iraqis. He spoke of patience, integrity, and expressed, “If people trust you, they will pretty much do what you ask them, if they believe the reasons are good.”
When asked about how he would handle the disparate and conflicting groups interlaced in the City of Harrisburg’s situation, Lynch looked at the Judge and said, “Frankly, it won’t be my first rodeo.”
Sure of himself , the General spoke quick, steady, and always with an answer.
Contrary to Unkovic’s testimony, the lawyers were permitted a cross examination of General Lynch. Counsel for Harrisburg City Council walked up to the stand with a stack of documents to peruse. Schwartz began with, “Have you been given any ground rules from the Office of Chief Counsel?” No.
“Have you met with the Governor?” Yes.
“What did he say to you?”
“He said go out and do the right thing.”
From there, Schwartz queried about land deals and failed Iraqi projects and Lynch’s relationship to it all. But the most intriguing yield of Schwartz questioning was the revelation of the fact that General Lynch has yet to read the Forensic Audit.
Nor has be read any of Unkovic’s previous testimony, most remarkably, not the testimony from the day of the hearing on the Receiver’s Recovery Plan.
Lynch wasn’t even aware that this plan was “preliminary” as Unkovic emphasized over and over again. It wasn’t asked, but there was wonder in the room, Had Lynch even read through Unkovic’s Court-approved Plan?
Debt Watch Harrisburg’s Neil Grover stood and posed a series of questions to the nominee about his experience in municipal bonds, indentures, SWAPS, and the Local Government Unit Debt Act. Any experience? No. The answer was negative.
PA’s Department of Community and Economic Development’s (DCED) Fred Reddig took the stand and assured the Court that if Lynch were appointed Receiver of the City of Harrisburg, he wouldn’t have to worry about his lack of experience in those matters. He would be surrounded by astute consultants and world-savvied experts. “An excellent cadre of individuals,” Reddig promised, such as the McKenna law firm, the Novak Consulting Group, the Public Resources Advisory Group (PRAG), and the resources of DCED (which up until this point has spent $1.2M of the DCED Act 47 fund on the City of Harrisburg).
The Judge paused and insisted, “He is to be given the independence he needs to fulfill his fiduciary responsibilities. Is that understood?” Reddig nodded, “Yes.”
Judge Leadbetter then said she understood the point Grover was making about Lynch’s lack of specific skills in municipal finance and bond work. “While that would be ideal, I do not find it necessary. He has impressed me with the kind of personal qualities that are going to be needed for this very, very daunting job.” She said she would issue the Order to confirm him. After all, the City needs a Receiver.
The City of Harrisburg’s Receiver Part Two, Major General William Lynch.
If there is anything that David Unkovic taught this City, it’s that it can’t assume all smells bad. Unkovic surprised us by being who he is. At first, we weren’t sure. We didn’t know what to make of our takeover or of who we thought we knew Unkovic to be with his apparent connections to people and companies that were on our usual suspects list. Maybe that surprise will happen, too, with Lynch. Maybe he isn’t just a man who take orders like our concept of the military he comes from. Maybe the City needs his leadership and structure. His discipline and routines. His confrontation and fearlessness.
Because more is coming at us.
A shaken press secretary gave us our first hint of what could be coming next. Steve Kratz, press secretary for DCED, became engulfed by the press after Unkovic’s testimony ended and the Court adjourned for lunch. Immediately, he was interrogated about Unkovic’s claim that he quit because he was going to be removed as the Receiver. Kratz nervously said there was never an intention to get rid of Unkovic. Rather, the former Receiver just had needed a talking to.
“It was becoming evident that the pressures of the job were getting to him. He was acting irrational as evidenced by throwing papers around, slamming his fists down, making accusations in public that were detrimental to the negotiation process. And those concerns needed to be addressed.” That’s the defense Kratz chose to take. Without conviction.
Then when pushed to expound, the flustered press secretary let himself get put into a corner on the topic of a Federal investigation into the Incinerator’s financial dealings. Why isn’t Corbett calling for an investigation?
Kratz smugly replied, “It’s already been done. Why is there a need to for somebody else to do it? It’s already being looked at by the Attorney General and by the U.S. Attorney.”
The disclosure. Dead silence. Everyone in that tight, tense space knew the impact of what had been broadcast. The pain on Kratz’s face showed his upset at what he let slip out of his mouth, but he wouldn’t say more about what he meant.
“Have the lawyers for the Office of the Receiver had any contact with the Attorney General’s Office or the U.S. Attorney,” reporter Mark Levy pressed.
“That’s something that if the hearing goes well today, and General Lynch is appointed, that he’s going to have to look into,” Kratz offered.
While that may not be much on its own, it goes significantly well with a comment made by the Commonwealth’s Chief Counsel, Stephen Aichele (who will now be the Governor’s Chief of Staff as of the May 24th resignation of Bill Ward).
On the same day as this important hearing, while at a PA Bar Association meeting of about 40 attorneys, Aichele spoke of the City of Harrisburg, its challenges, and its road to recovery. Quite optimistically he asserted the City was headed towards success. He continued by saying that Unkovic left his post too early, right before the issues of wrongdoing were to be addressed.
Issues of wrongdoing, that’s the term he used.
“Stayed tuned,” Aichele said.
It all works together to mean something, although that something is not entirely clear. “It’s already being looked into,” the press secretary confessed. Unkovic quit too soon. The City must have a Receiver. With General Lynch’s appointment, comes decisions. “Stay tuned,” Aichele alerted.
Yes, perfectly fitting for PA’s first ever Receivership to go this way in the City of Harrisburg, its forlorn capital waiting on edge until the next thing happens either to it or for it. May the latter be the case.
Roxbury News–“DCED Spokesman Steve Kratz”
Archive articles referenced in this article:
- Read–“Parties Pushing” (3/28/12)
- Read–“Harrisburg Receiver David Unkovic’s Letter of Resignation” (3/30/12)
- Read–“Unkovic Makes A Move” (4/26/12)