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KABUL, Afghanistan — Theirname conjures up the most cele-brated moment of America’s post-Sept. 11 military campaigns. Now the Navy SEALs belong to a grim-mer chapter in history: the mostdeadly incident for U.S. forces in the 10-year Afghanistan war.

Three months after they killedal-Qaida leader Osama bin Laden in neighboring Pakistan and ce-

mented their place in military leg-end,the SEALssuffered a devastat-ing loss when nearly two dozen were among 30 Americans whodied when their helicopter wasshot down early Saturday.

It was the largest number of American troops killed in a single

day in the war. U.S. officials saidthe helicopter appeared to havebeen felled by enemy fire, and theTaliban quickly claimed responsi-bility. Eight Afghan commandosalso were killed, Afghan PresidentHamid Karzai said.

President Barack Obama saidthe deaths are a reminder of the“extraordinary” price the U.S.mili-tary is paying in the war.

Obama, who learned of the in-cident at Camp David, issued a 

statement saying his thoughts andprayers go out to the families of 

those who perished.“Their deathsare a reminderof 

the extraordinary sacrifices madebythe menandwomenof ourmili-tary and their families, includingall who have served in Afghani-stan,” the president said. “We willdraw inspiration from their lives,and continue the work of securingour country and standing up forthe values that they embodied.”

See AFGHAN, A8, col. 1

By Laura King, Ken Dilanianand David S. Cloud

Los Angeles Times

SOURCE: ESRI AP

        I        R        A        N

AFGHANISTAN

TAJIK.

TURKMEN.

UZB.

KabulWardak

province

100 km

0 1 00 mi

0

Fatal helicopter crash

PAKISTAN

U.S. SUFFERS RECORD TOLLThe deaths are “areminder of the

extraordinarysacrifices made bythe men andwomen of ourmilitary,” PresidentObama said.

30 American deaths in Afghanistan include SEAL unit tied to bin Laden raid

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INDEX

Louisville’s government agen-cies and utilities are paying legalrates for its public bonds that aresix to nine times higher than themore competitive rates paid bythe state, costing taxpayers andcustomers hundreds of thou-sands of dollars, according to a Courier-Journal analysis.

Instead of using competitivebidding, Louisville metro gov-ernment, the Louisville WaterCo. and the Metropolitan SewerDistrict reliedon their financeorlegal staff to select and negotiatewitha law firm orfirms todo thework for bond issues that coverlong-term debts, according to

documents The Courier-Journalobtained through Kentucky’sopen-records law.

The bonds have been sold tofinance capital projects such assewer and water system im-provements, road and building

construction, and park develop-ment.Specifically, the newspaper

found:Kentucky paid its bond at-

torneys just 0.02 percent of the$3.7 billion it borrowed since2009 on 25 bond issues, totaling$594,218 in legal fees.By comparison, metro gov-

ernment paidbond attorneys 0.19percent of the $355 million it hasborrowed since 2006 on 11 bondissues, totaling $679,452 in legalfees. That rate is 9.5 times higherthan the state’s rate.MSD paid 0.15 percent of 

the $1.1billion it has borrowed

 No-bid approachon bond feescosts LouisvilleState pays lowerrate to attorneysBy James Bruggers [email protected]

The Courier-Journal

See BONDS, A10, col. 1

WASHINGTON — The realdanger from the downgrade of U.S. government debt by Stan-dard & Poor’s isn’t higher inter-estrates.It’s thehit tothe nation’sfragile economic psyche and rat-tled financial markets.

S&P’s decision to strip theU.S. of itssterlingAAA creditrating for the first timeand move it down one notch, to

AA+, deals a blow to the confi-dence of consumers and busi-nessesat a dangerous time, econ-omists say.

The agency is “striking at theheart of what makes the globaleconomy tick,” said Chris Rup-key, chieff inancial economistfor

the Bank of Tokyo-MitsubishiUFJ. “It isn’t just dollars andcents.”

One economist, Paul Dales of Capital Economics, worried Sat-urday that the downgrade couldtrigger another financial crisis

Obama: We ‘mustdo better’ on debtBy Paul WisemanAssociated Press

See DEBT, A10, col. 5

FANCY FARM, Ky. — Republicans and an inde-pendent bashed Gov. Steve Beshear at the131st FancyFarm Picnic in Graves County on Saturday, and theDemocratic governor, fresh off an overseas trip to visit Kentuckysoldiers, didn’t fight back.

Instead, he talked about histrip to Afghanistan and Iraq andabout the Kentucky NationalGuard troops he visited.

“I know the great tradition of 

Fancy Farm. I know that thereshould be great, fiery, partisanpo-litical rhetoric here … and quite honestly, I was pre-pared to give just oneof those speeches,” he told thecrowd, which didn’t quite know how to react as helaunched into an eight-minute salute to the troopsand veterans.

“I’ll tell you something, myheartandmindarenotwith partisan politics,” he said.

FANCY FARM PICNIC

Beshear hails troopsas Williams jabs him

By Jim Roshan, Special to The Courier-Journal

Members of the lively crowd at the Fancy Farm Picnic show their support for Republican candidates Saturday.The candidates who spoke took on each other as well as hecklers.

By Joseph Gerth [email protected] Courier-Journal

See PICNIC, A8, col. 1

SUNDAY  PRINT EXCLUSIVE

98 PAGES

$220LOOKING GOODCardinals’ Victor Anderson

shows his old razzle-dazzle

“ 

 I was on the ground withthese troops,and I knowwhat they are going through.” 

STEVE BESHEAR

ON THE WEBGo to www.couri-er-journal.com tosee a gallery of photos of theactivities at the

Fancy Farm Picnic.

Galbraith, others assail governor’s speech

“ 

You did thewrong thing when youwouldn’t leavethe Oaks to goto FortCampbell.” 

DAVID WILLIAMS

Credit downgraderattles fiscal faith

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since 2006, totaling$1.6 million in legal fees on seven bondissues. Thatrateis 7.5 times as much as thestate’s rate.Louisville Water paid

0.12 percent of the$287 million it has bor-rowed since 2006 on twobond issues, totaling$351,396 in legal fees. Thatrate is six times as much asthe state’s rate.

Louisville Metro Coun-cilman Jerry Miller, R-19th District,has beencalling formore competitive bidding,andhe said thenewspaper’sfindings illustrate whythat’s so important.

“It’s just notbeingfiscal-ly responsible not to bid,”Miller said.

MSD, whose legal feesand executive leadershiphave comeunder the scruti-

ny of the Kentucky stateauditor, defended its prac-tice for handpicking attor-neys, including two Louis-ville firms that do all of itsbond work: The Zielke Law Firm and Wyatt, Tarrant &Combs. Each firm has col-lected $1.09 million for thework since 2006.

“The MSD boardchooses … to maintain a long-term relationship with our co-bond counsel andour f inancial adviser, whohave years of working to-gether as a team toproduceexcellent financial resultsfor our customers,” MSDsenior engineer Brian Bing-

ham said in a statement.“The same results wouldnot have been possible if MSD replaced its bondcounsel each time anotherlaw firm submitted an arti-ficially low bid to do thework, butthen neededyearsto learn what the existingbond team already knowsabout MSD.”

Process debatedBingham agreed that

competitive bidding “mightindeed result in lower feesmeasuredas a percentage of the principal amount of each bond issue,” but hesaid that would not “assureimmediate and continuousaccess to the bond counselexperience and expertiseMSDneeds tomanage itsfi-nancial planning before,during, and after everybond issue.”

He speculated that itwouldresult in higher over-all costs to the community.

MSD’s board chairman,Arnold Celentano, said theboard relied on the agency’srecently retired finance di-rector, Marion Gee, to de-cide howto hire bond attor-neys. Gee has moved andcouldn’t be reached forcomment.

Celentano said he wasrelieved to hear that MSD— which has accumulated a bond debt of $2.7 billion in-cluding interest payments— was “pretty much in linewith the water (company)and (Louisville) metro,” in terms of the lawyer fees.

But Celentano said theboard might make somechanges, pending the out-come of the review by StateAuditor Crit Luallen, whohaspromiseda close look athowMSD contracts its pro-fessional services.

“Whatwearegoingtodois follow the recommenda-tions of Luallen,” said Ce-lentano, a retired engineerwho has been on the MSDboard since 2007, becamechairman inMarchafter an-other controversy prompt-ed theformer chairman andtwo other board membersto resign.

Kentucky law allowsgovernment agencies toavoid competitive biddingfor certain professionalservices, such as law work.

But in general, competi-tive bidding is a good prac-tice, said James Chen, thedean of theBrandeisSchool

of Law at the University of Louisville.

“It strikes me that whatyou have is a situation where the agencies are act-ing within the law, though one could argue … thattheyshould consider competi-tive bidding as a way of keeping rates low,” Chen said.

While MSD awaits theoutcome of Luallen’s audit,the city is already movingtoward more competitivebidding, including for legalservices associated with any new bond issues, saidthe city’s chief financial of-ficer, Steve Rowland.

Mayor Greg Fischer,who took office in January,“is committed to a competi-tiveprocess,” Rowland said.“We areinterested in payingmarket rates, and we be-lieve that through biddingand through competitivenegotiation, you can savetaxpayers dollars.”

State may have edgeState finance officials

said they maintain a list of qualified law f irms and putout a request for proposalswhen state agencies seek toborrow money by issuingbonds.

“

With national competi-tion along with local, youget a very competitiveprice,” saidF. Thomas How-ard, executive director of the Kentucky Office of Fi-nancial Management.“They are pretty aggres-sive.”

A firm is selected basedon a combination of techni-cal factors, which areweighted 75 percent, andthe dollar amount of thebid, which accounts for 25 percent of a bidder’s score.

Although Howard said

the low bidder doesn’t al-ways win, the process intro-duces an element of com-petition that often results in lower costs.

“It’sa smart thing todo,”said Pat Brennan, Omaha-based spokesman for Kutak Rock, a law firm with of-fices in 16 cities that haswon 12 of the last 25 bond-counsel contracts with thestate. “I am sure it’s broughtfees down,” Brennan said of the bidding.

He said he works on hisfirm’s business proposalsnationally and such com-petition is “very typical.”

State and local officials

acknowledge it can be diffi-cult to compare the legalfees associated with bondwork. Some types of bondscan be more complicatedthan others, they said.

And Howard said law firms like the prestige of listing state governmentsamong their clients, which may help give Kentucky an edge in securing competi-tive rates.

Often the larger value of the bond issues, like manyof those done for the state,tend to be more complexand demand more work bylawyers, Chen said. “But in many instances, it’s just asexpensive to prepare a small but complex issue asit is to work on a big bond.”

Questions remainRowland said he didn’t

workfor the citywhenit is-sued previous bonds andcouldn’t explain why itdidn’t use competitive bid-ding.

He and the mayor’sspokesman, Chris Poynter,directed questions about fi-nance policies in recentyears to the city’s formertop finance officer, JaneDriskell, who now works ascommissioner of finance

and administration for Lex-ington.Driskell said the city

maintained a list of quali-fied law firms and then spread the business around,as bonds needed to be is-sued. She said they wouldfactor in the skills of each 

law firm to match the city’sbond needs.

“It was just the system we had in place,” she said,adding that the issue hasn’tcome up for her in Lexing-ton.

The Louisville Water

Co., which the city owns,defended its practice of handpicking its bond attor-neys, but a spokesman saidit would consider competi-tive bidding the next time itissued bonds.

“There isa lot ofvaluein making sure you have a le-galteamthat isveryfamiliarwith your structure andhow you operate and whatyour culture is,” VinceGuenthner said. “If you arejustlookingat a competitivebid, whereyouarejustlook-ing at the lowest price, youmight be sacrificing on quality somewhat.”

At MSD, the mayor also

makes board appointmentsand both the MSD execu-tive director andchief engi-neer serve at the mayor’spleasure. Still, Poynter saidthe mayor leaves decisionssuchas competitive biddingto MSD officials.

Poynter noted, however,that Fischer called for themanagement audit of MSDbyLuallenafter thenewspa-per reported questionableMSD spending practicesand alleged conflicts of in-terest.

Luallen has said her au-ditwill include an examina-tion of MSD’s procurementpolicies as well as looking

into a 2008 internal auditthat questioned the largerole that MSD’s longtimeoutside attorney, LarryZielke, plays in the agency,and the billing practices of Zielke’s former law firm.

The newspaper has re-ported that Zielke and hispast and current firm havebeen paid at least$5.9 million by MSD since

  Jan. 1, 2006, including the$1.09 millionfor bondcoun-sel work.

Zielke and the Wyattfirm work together as co-bond counsels, with Zielkeand Wyattattorney Stephen Berger previously sayingthey divide the tasks.

Berger, an attorney forthe Wyatt firm, which hasalso handled some of thebond counsel work forLou-isville Metro, declined toanswer questions. He saidMSD officials told him todefer to Bingham’s state-ment.

Zielke didn’t return tele-phone calls or emails.

Bingham wrote thatMSD’s topfinanceand legalstaff members “are in fre-quent contact with our twoco-bond counsel firms toverify the reasonablenessof their fees in relation to the

value of the work they per-form for us, to manage andcoordinate the division of labor between them, and toevaluate their perform-ance.”

 ReporterJames Bruggers can bereached at (502) 582-4645.

BONDS | City doesn’t use competitive biddingContinued from A1 Recent bond attorney fees

00.02%0.04%0.06%0.08%0.10%0.12%0.14%0.16%0.18%0.20%

Metro MSD LouWater State

Percent of bonds issued

0.19%

0.15%0.12%

0.02%

Attorney chargefor bond work based on the dollar amount of agovernment agency bond issue. Competitivebidding has helped thestate of Kentucky reducethe rate it pays forhiring attorneys to do bondcounselwork. MSD, Louisville Metro and Louisville Water have not usedcompetitive bidding.

Sources: The agencies The Courier-Journal

KY-A10 | SUNDAY, AUGUST 7, 2011 | THE COURIER-JOURNAL FROM PAGE ONE | courier-journal.com

Commentators are splitas to whether Standard &Poor’s downgrade of U.S.debt will have major nega-tive consequences for theU.S. and world economy, orwhether it will be basicallymeaningless.Why It Might Mat-

ter: If U.S. debt is down-

graded, many other debt in-struments likely will bedowngraded as well. When Moody’sput U.S.debton re-view for downgrade duringthe debt ceiling standoff, italso put on notice 7,000otherbonds, wortha totalof $130 billion, that rely direct-ly on revenue from federalgovernment payments,such as certain kinds of munici-pal bonds.

Bonds that are indirectlydependent on the federalgovernment, such as thoseissued by hospitals that re-ceive Medicare payments,or defense firms reliant on Pentagon contracts, could

get downgraded as well. In addition, many everyday in-terest rates — such as thosefor mortgages, car loansandcredit cards — arepeggedtoU.S. Treasurys, meaning

that if a downgrade forcesup interest rates on U.S.debt(whichis likely, butwilldependon howthe marketsreact), interest rates forthose will shoot up as well.This would raise the cost of borrowing across the sys-tem, depressing the econo-my.Why It Might Not:

Ratings generally are usedas a proxy to determine thefinancial health of entitiesthatinvestors maynot know much about. But everyoneknows about the health of 

the U.S. government, andnowthat thedebt ceilingde-bate has passed, no onethinks it is going to defaultanytime soon. Thus, inves-tors who might normally beinclined to not buy or keepAA-rated debt could makean exception for U.S. Treas-urys.

Indeed, some pension and money market fundshave considered looseningtheir rules to allow higherholdings of U.S. debt in theevent of a downgrade. Fur-ther, AA is still a very high rating. AA firms have statis-tically identical perform-ance to AAA ones, accord-

ing to the Fitch rating agen-cy. Just this past January,S&P downgraded Japan’sdebt from AA- to AA, andmarkets more or less didn’tcare.

Downgrade’simpact may be

 big or small Experts are spliton bottom lineThe Washington Post

that sends Western econo-mies back into a recession.

The Obama administra-tion made its displeasureknown quickly after thedowngrade was announcedFriday. The Treasury De-partment said S&P had act-ed on an analysis that had a $2 trillion error.

On Saturday, the admin-istration appeared to soften its tone. White House presssecretary Jay Carney, with-out referring directly to thedowngrade, said PresidentBarack Obama believesWashington  “must do bet-ter” tackling the deficit.

The timing of S&P’s de-cision could hardly beworseforthe U.S. Theecon-omyadded117,000jobs in Ju-ly, more than expected. Butother economic indicators,including manufacturing,

consumer spending andoverall growth, are gettingweaker.

In normal times, in an-other country, a downgradein a sovereign debt ratingprobably would force itsgovernment to pay higherinterestratesto persuadein-vestors to keep buying itsdebt.

If that happened, itwould drive upthe rates thatconsumers pay on mortgag-es and auto loans, which often aretied to the govern-ment’s interest rate.

Butthe United States is a special case. Treasury debtis considered the safest in-

vestment in the world —even after the downgrade.Investors don’t doubt theU.S. government’s ability torepay the $9.8 trillion itowes.

“Anytime there’s a prob-lem anywhere on the planet,investors come to the safetyofthe U.S.,and they don’tgoanywhere else,” said Mark Zandi, chief economist atMoody’s Analytics.

Mark Vitner, senioreconomist at Wells FargoSecurities, agrees that theS&P downgrade is unlikelyto drive up interest ratesright away.

But he says that’s partly

because the economy is soweak that borrowers aren’tcompeting for money anddriving rates higher.

In three to five years, hesays, loan demand will behigher. When that happens,a U.S. Treasury with a dinged credit rating will bevying with private borrow-ers for loans and invest-

ments, and rates will likelyrise.

“The greater conse-quences are going to be in the intermediate and long-term,” he says. “If it didn’tmean anything, S&Pwouldn’t have downgradedus.”

Already, there weresignsthat the downgrade itself would become a volatilepo-litical issue.

Senate Majority LeaderHarry Reid, D-Nev., said theS&P decision showed thatDemocrats’ preferred solu-tion tolong-termdebt, a mixof tax increases on thewealthy and budget cuts,was the right answer.

House Speaker John Boehner, R-Ohio, said hehoped Democrats wouldlearn they can’t “tinkeraround the edges” of theU.S. debt problem. And Re-publicanpresidential candi-

dates for 2012 laid blame on Obama.S&P had called for

$4 trillion in U.S. deficit re-duction. The deal cut byCongress last week calledfor only about $2 trillion in the next decade. The ratingagencysaid it wasn’t enough to address America’s debtproblem.

It also said its decision reflected its loss of confi-dence in the U.S. politicalsystem. Republicans andDemocrats didn’t reach a deal on debt reduction untilhours before the federalgovernment’s borrowinglimit was to expire, which 

some say would havetrigged a U.S. default on itsdebt or massive, immediategovernment cuts.

Economists say thedowngrade, the first sincethe U.S. received the toprat-ing in 1917, will rattle al-ready-worried consumersand businesses.

Some fear that the Dow  Jones industrials, which fell512 points on Thursdayalonebecauseof fears aboutthe economy and European debt, will plummet Mondaywhen investors get to venttheir anxiety.

An earlysign of what’s tocome may emerge today

U.S. time, when Asian mar-kets open.America’s reputation has

already taken a hit abroad.China, the largest foreign holder of U.S. debt, on Sat-urday demanded that theUnited States tighten its beltand overcome its“addiction to debt” in the wake of theS&P downgrade.

DEBT | Recession fearsContinued from A1

POINT REYES NA-TIONALSEASHORE, Calif.— Two juvenile California sea lions paused for a mo-ment at the edge of the sea,eachraisingtheir whiskeredfaces toward the silvery wa-ter before sliding in to free-dom.

For the Marine MammalCenter crew standing be-hindthe rehabilitatedpinni-peds on Thursday, it was a significant day: rescued sea lion No. 10,000, nicknamedMilestone, and 10,001, Zo-diac Girl, had been nursed

back tohealth andsentback to the wild.“There’s always some at-

tachment. There’s alwayssome animal that capturesyour heart,” said ShelbiStoudt, the center stafferwho organizes the regularreleases. “It’s a bittersweetfeelingbecauseyou’re send-ingthemback home butyou

also don’t get to see them anymore.”

Since it openedits doors36 years ago in the Marin Headlands just north of the

Golden Gate Bridge, thenonprofit marine mammalhospital has become fa-mous for nursing sick ma-rine critters back to health — but its biggest contribu-tion perhaps has been itsrole in collecting and stor-ing thousands of tissue andother samples from the ani-mals it rescues along 600

miles of California coast.The center’s mix of labora-tory science, marine zooand educational outreach has led to dozens of pub-

lished scientific papers andhelped push understandingof effects of toxic algae, dis-ease and the effect of cli-mate change on these coas-tal denizens.

Onlyabouthalfofthean-imals the center takes in survive to be released. Still,many of the more than 17,000 marine mammals —

includingentangled whales,otters and elephant seals —the center has aided or tak-en in have contributed sam-ples that will help further

research that can aid threat-ened and endangered spe-cies around the world.

Indeed, many of the ani-mals nursed back to health arenot facing imminent ex-tinction — there are200,000 California sea lionsin the wild— but their mal-adies and their geneticmakeupare similar to otherspecies in peril.

Californiasea lionssharegenetic traits with Stellersealions, whichare a threat-ened species. The center’sresearchers say collectingand banking scientific sam-ples from many of thethou-sands of sealionsthe center

has treated contributes toeffortsto save Stellers. Samegoes for elephant seals,which share traits with theendangered Hawaiian monk seals.

Milestone and ZodiacGirl had leptospirosis, a bacterial infection that at-tacksthe kidneys andcanbefatal.

10,000th rescued sea lion releasedCalif. center also

does research

By Jason DearenAssociated Press

Jason Dearen/Associated Press

Zodiac Girl, left, and Milestone, both California sea lions, arereleased in northern California on Thursday.

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