August 16, 2012The Tuesday, August 14 meeting of the Guilford County Board of Education was unremarkable – except for one remark.
That remark came early in the school board meeting, immediately after the passage of the consent agenda. School board member Amos Quick said he didn't know the appropriate time to bring up the issue, but that several board members had concerns about where Guilford County Schools banks.
Quick said he and other school board members want the school system's money deposited in more banks that serve minorities.
School board Chairman Alan Duncan said the issue wasn't on the agenda and probably shouldn't be considered until the school board's next meeting. And there the matter stood.
Tuesday's meeting wasn't the first time the issue of which bank gets to keep the school system's money has come up.
On July 24, 2012, Quick and school board members Sandra Alexander, Carlvena Foster and Deena Hayes, the four black board members, wrote Guilford County School Superintendent Mo Green and recently appointed Guilford County Schools Chief Financial Officer Angie Henry, asking the school system to deposit money in the Greensboro branch of Durham-based Mechanics and Farmers Bank, which they said was black owned.
Were it not for the Rev. Quick's reputation for piety, you might think he was joking. After all, he was a professional comedian before he was ordained a minister.
But it was no joke. All four black members of the school board – more than a third of its members, none of whom have any banking expertise – were attempting to make investment banking decisions for the school system, which has a budget of $677 million for the 2012-2013 fiscal year.
Some things just shouldn't be done by amateurs without training. Brain surgery, skydiving and investment banking leap to mind. But that didn't stop the four school board members from trying to decide where Guilford County Schools should keep "its" money – in reality, the money of county, state and federal taxpayers.
The letter begins, "It has been brought to our attention that Guilford County School District does not currently have any of its operating funds deposited in the branch of Mechanics and Farmers Bank located in Greensboro, North Carolina."
That, "It has been brought to our attention" reeks of pleading for a special interest, and the letter continues in a way that sounds as if that special interest is the bank, not, as Quick said at the meeting, Guilford County residents who use the bank. And one particular bank, not just more minority owned banks.
"We believe that African-American-owned and operated financial institutions should be given the same opportunity to provide banking services to the school district that other banks are afforded," the letter continues. "According to the District's website, 'GCS is deeply committed to furthering the involvement of minority and women-owned businesses in school construction and renovation as well as other services and operational areas.'"
The letter asks for a description of the way Guilford County Schools picks the banks in which its federal, state, local and auxiliary funds are deposited.
"Secondly, we request that a fair and equitable plan be devised for depositing a reasonable portion of the District's funds into Mechanics and Farmers Bank," the letter concludes. "It is one of North Carolina's oldest and most financially secure minority-owned financial institutions, and it is the only African-American-owned bank in Guilford County."
Mechanics and Farmers Bank is headquartered at 116 West Parrish St. in Durham, not Greensboro, although it has two branches in Greensboro, one at 100 S. Murrow Blvd. and one at 770 Martin Luther King Jr. Dr.
The letter makes no mention of the bank's customers – black, white, Hispanic or Asian.
The letter to lobby Guilford County Schools to use one particular business and to override its usual process for making investments was printed on Guilford County Schools letterhead.
Henry, who replaced former Guilford County Schools Chief Financial Officer Sharon Ozment on July 1, responded to the four school board members in a Tuesday, August 14 email, which she addressed to them but copied to the rest of the school board and to Green, Guilford County Schools Chief of Staff Nora Carr, Guilford County Schools Chief Academic Officer Beth Folger, Chief Information Officer Terrence Young and Finance Department Executive Assistant Chapel Thompson.
That's the entire school board, plus all of Green's "cabinet" of top officials, plus Thompson. Henry obviously wanted there to be a clear record of her response to the letter. The email response was signed by Green as well as Henry, giving Henry backup against the request.
Henry thanked the four school board members for their letter, but said Guilford County Schools follows North Carolina General Statutes and school board policies and procedures when picking the banks that are used for its central depository, where daily deposits are made and checks are issued, and for investments.
Henry wrote that the most recent choice of a bank was in 2006, when Guilford County Schools issued a request for proposals (RFP) for the selection of a bank for the school board's District Fund, School Nutrition Services Fund and After-School Care Enrichment Services (ACES) Fund.
The 2006 RFP went to nine banks in Guilford County, and Guilford County Schools received four proposals by the Sept. 15, 2006 deadline. On Oct. 23, 2006, the school board awarded the banking services contract for a four-and-a-half year period, from Jan. 1, 2007 to June 30, 2011, to Wachovia, now Wells Fargo.
The school board's contract with Wells Fargo includes an option to renew the contract yearly for five more years ending June 30, 2016.
"All funds for which the GCS finance office has custody, beyond the amount needed for daily operations, are invested in a Short Term Investment Fund (STIF) Account through the North Carolina Department of State Treasurer," Henry wrote. "Historically, the yield we receive from the STIF account has exceeded what has been available in other investment opportunities."
At Tuesday's meeting, Henry said that individual schools also have bank accounts, which they use for athletic event receipts and other income.
In her email, Henry wrote that the "finance officer," presumably the chief financial officer, has oversight over the bank accounts of schools, but that each school is free to pick its own bank. She wrote, "Most schools make that decision based on pricing and location."
Henry did not rule out considering Mechanics and Farmers Bank for use in some capacity. At the meeting, however, she said that banks accepting government business have to more heavily collateralize deposits from the government agency – almost dollar for dollar, she said.
In other words, the banks have to have enough income from other deposits that they can afford to basically keep the government money locked in a vault, instead of investing it.
Likewise, in her email, Henry wrote, "While a financial institution with one or even a few locations would not be able to meet the needs of the district as a central depository, we will continue to review investment options available to GCS and appreciate your request to include Mechanics and Farmers Bank in that consideration."
Don't call us, we'll call you.
On Wednesday, August 15, Quick said, "I did allow my name to be attached to that letter, right."
Quick said the push to hire Mechanics and Farmers Bank was driven by Alexander, not him.
"It's not so much – if you remember, my remarks weren't for a particular bank," Quick said. "Dr. Alexander named Mechanics and Farmers Bank. My concern was that we have some small banks in our area and we're not utilizing them as we should. If the answer is no, the answer is no, but is there a way we can make some deposits in the smaller banks to support what they do?"
Quick said however that he supports the letter.
"I'm not distancing myself from that letter," he said. "I did knowingly allow my name to be included on that. If Mechanics and Farmers Bank is able to get a deposit, that's good as well. However, there are other small banks."
There are many small banks in Guilford County. The letter asked Guilford County Schools to put money in just one.
Quick said he brought the issue up with other school board members and was asked if he wanted to discuss the matter in closed session. He said he declined because he wanted a public debate on the issue. He would not identify who offered to consider the matter in closed session. There is no provision in the North Carolina open meetings law that would allow such a discussion to be held in closed session.
Alexander said the bank didn't approach her.
"They did not," she said. "A member of the African-American community, a leader in the African-American community had approached me and had approached other African-American members prior to my being on the board."
Alexander would not identify the person who approached her trying to get the bank business, and later said several people had done so. She said she was not a depositor. She said, "I'm in no way associated with it."
Alexander said she didn't consider board members lobbying for a particular business odd.
"I think it's the first time it's been put in writing and signed by all the African-American board members," she said. "It is not an unusual request in that it is in sync or alignment with the statement that the school system has on the website, which says that it will patronize MWBE [minority and women-business enterprises] businesses in construction, architecture and other services."
There have been specific legal cases that have set precedents for setting goals for minority participation in construction and architecture. The legality of doing so in other areas is uncertain. In any case, the school board, when picking banks, goes through the RFP process to make sure banks are competent and secure enough to be used for deposits.
Told that, Alexander said, "Then we would have no problem with them issuing an RFP, if it's necessary."
According to the Federal Deposit Insurance Corporation (FDIC), as of March 31, 2012, Wells Fargo had assets totaling more than $1.2 trillion, and Mechanics and Farmers Bank had assets totaling $295 million.
According to the rating service Standard & Poors, Wells Fargo & Co. has an A+ rating for short-term local debt. S&P does not rate Mechanics and Farmers Bank.
Wells Fargo & Co. is the largest bank in the United States by market capitalization. Its shares trade on the New York Stock Exchange under the ticker WFC. Mechanics and Farmers Bank is an over-the-counter or "pink sheet" stock, meaning it is sold by dealers but does not qualify for the stock exchanges.