UPDATED (11:00 p.m.)—Members of the Baltimore County Council were briefed in 2007 about a bad investment that cost the county $21 million, according to a letter released by Baltimore County officials.
The six-page letter from County Administrative Officer Fred Homan, first reported Tuesday by the Baltimore Sun, is remarkably similar to a three-page memo given to members of the Baltimore County Council on April 16. (Read both the 2007 letter and April 16 briefing memo.)
The letter also settles questions about whether or not council members were briefed in the months after the investment failed in 2007.
Don Mohler, chief of staff to County Executive Kevin Kamenetz released the letter to Patch on Wednesday morning.
"The real issue is that the letter clearly shows there was detailed communication with the council five years ago which is what I told you last week—you chose not to believe me and preferred to suggest that the (county executive) was a liar in your article—letter clearly shows that his memory was quite accurate," Mohler wrote in an email Wednesday morning.
In the Nov. 26, 2007 memo, Homan explains that the county invested $21 million of general government funds into a mortgage-backed security known as Mainsail II LLC on July 31, 2007. By Aug. 24 of that year it became clear to the county that the fund, which was backed by subprime mortgages, was in trouble and would not pay off as expected.
"A declining housing market, in combination with homeowners with poor credit histories or heavy debt loads, caused defaults to rise significantly, reaching almost 14 percent of U.S. subprime mortgages during the first quarter of 2007," Homan wrote in November 2007.
The full value of the $21.3 million bad investment was later sold to the Police, Fire and Widows' Pension Fund—an account that currently has assets of $129 million to support 392 beneficiaries. Homan made the determination to sell the bad investment, according to the memo.
Councilmembers met in secret April 16 with county officials including Keith Dorsey, the county budget director, to discuss hiring outside counsel to pursue a lawsuit against Merrill Lynch. The county bought the Mainsail II investment from Merrill Lynch, according to county records.
Mohler has repeatedly declined to discuss the issue even as recently as in an April 21 interview. During that interview, he also declined to ask Kamenetz, on behalf of Patch, about whether or not he was briefed on the issue when he served on the council.
During that same interview, Mohler declined to release any documents related to briefings on the investment dating to the time the county discovered it.
On Sunday, Kamenetz told WBAL TV that he and the council were fully briefed on the issue. The county executive served as chair of the County Council in 2008 when the council was asked to approve changes to county investment regulations that would prohibit investments like Mainsail II again.
Minutes of the January 2008 County Council work session do not show that the $21 million loss was discussed publicly. Notes prepared by the county auditor's office do not reference Homan's 2007 memo to the council even though a copy was provided to that office at the time.
The county has not yet responded to multiple requests under the Maryland Public Information Act for related documents.