Until recently, board members and school officials in the districts had defended their investments as being safe. Despite a drop in value spurred by a shake-up in global credit markets, they said they were suffering only "paper losses" and would be made whole at the end of the seven-year deals.
Kantas said his law firm was hired after district officials started suspecting the investments were different from what they had been told.
The firm - whose Web site address is www.stockbroker-fraud.com - became involved after the districts were unsuccessful in finding a large Milwaukee-area law firm that was not already a party in their deals, he said.
Kantas defended the boards and said it appeared that the nature of the investments had been misrepresented to them by Stifel, Nicolaus & Co., the St. Louis-based firm that originally brokered the deals, and Royal Bank of Canada, which devised the CDOs and is responsible for determining their value.
He did not include David Noack, the Stifel senior vice president who brought the deals to the boards, as a party responsible for misleading them. Noack now works for Robert W. Baird & Co. Inc., which referred questions to his attorney. The attorney, Jeremy Levinson, said in a voice mail message that he was representing Noack but did not comment further.
"At all times, these board members acted completely reasonably in these transactions," Kantas said. "The focus of this should be on RBC and Stifel, Nicolaus. They're the ones that created these investments. They created these investments and sold them to the districts as AA and AAA corporate bonds or their equivalents, and they were nothing of the sort."
That lets board members off way too lightly. After all, if they had been as skeptical and as diligent as their critics in the community in looking into these investments, they wouldn't have to be hiring an attorney now.
By the way, shouldn't the next question be whether Erik Kass has an attorney?
