Chris Papst and the Crimes of The Harrisburg Bankruptcy

In 2011, Harrisburg, Pennsylvania became the first and only capital city in America to file for bankruptcy.

From 2010 to 2014, Chris Papst reported on the bankruptcy story for the CBS affiliate in Harrisburg.


In the spring of 2015, Papst published a book about the bankruptcy — Capital Murder: An Investigative Reporter’s Hunt for Answers in a Collapsing City.

In the book, he made the argument that the seven term mayor — Stephen Reed — and those on Wall Street and elsewhere who helped drive the city into bankruptcy, must be held accountable.

A few months after publication of the book, Reed was indicted on 500 counts of corruption.

Papst is currently an investigative reporter for ABC7 and NewsChannel 8 in Washington, D.C.

Capital Murder is based on reporting Papst did while he was in Harrisburg.

The book focuses on Stephen Reed, who was Mayor of Harrisburg from 1982 to 2010.

Papst portrays Reed as the mayor who turned the city from a dilapidated run down city to being a city with hotels, a baseball team, a civil war museum.

“And that’s how he kept getting elected to mayor seven straight times,” Papst told Corporate Crime Reporter in an interview last week. “And many of those times, nobody even bothered to run against him.”

“Reed revived Harrisburg. He brought all of these institutions into a dilapidated rust belt city that everybody thought was dead. But nobody wanted to see how he was doing it. The only thing that people cared about was that on Friday nights, I can go to a AA baseball game — the Harrisburg Senators — I can go to downtown Harrisburg and go to a beautiful restaurant. I can stay at the Harrisburg Hilton. My kid can go to Harrisburg University. All of this was created by Stephen Reed. But as he was doing it, he was bankrupting the city.”

How did he bankrupt the city?

“He was issuing bonds with help from his friends on Wall Street in a way that could never be paid back. When he left office, the city had a $50 million budget. On just one project, the incinerator, he had accumulated nearly $400 million in debt — eight times the city’s budget on one project. How does that happen?”

“One way was the city was misstating its finances. And the Securities and Exchange Commission called the city on that — for lying about its financial status. Also, they were finding ways to get the bonds passed when they never should have been passed in the first place. Reed was working with his financial advisors. He was working with the banks on Wall Street to be able to find ways to loan this money when the money never should have been loaned. He was taking the money and not necessarily spending it on the projects the money was intended for. That’s why he ended up being charged after my book came out. That’s what he is accused of doing.”

“The mayor was charged criminally with 500 counts of corruption.”

What was the result of that case?

“He has pled not guilty and the case is ongoing.”

“But it’s not just him. It’s the people who advised him. It’s the people who drafted the documents. He didn’t do this alone. Now, he’s facing 500 charges of corruption. He has pled not guilty to all of them. A trial date has not been set, but this is going to trial. The people who helped him — none of them have been held accountable. He didn’t do this by himself. He didn’t draft those documents alone. He didn’t write this stuff up alone. He had lawyers, accountants — they were all in on this.”

“The Attorney General of Pennsylvania has said that they are also being investigated. There is a grand jury investigating right now. They are looking into this to see what charges they can bring against the professionals who helped him. Also, the Governor of Pennsylvania has hired a law firm from Washington DC to go after the firms and the professionals civilly to try and claw back some of the money that Harrisburg lost in these loans that shouldn’t have been issued.”

“I titled my book Capital Murder because Harrisburg was killed,” Papst said. “But apparently nobody murdered it. When my book was published, there had been no charges. No charges, no restitution — no one had been held accountable. Three months after the book came out, the mayor was charged with 500 counts of corruption. He didn’t do it alone. And now the Attorney General of Pennsylvania and the Governor are looking at the other players criminally and civilly to try and hold them accountable. But the people of Harrisburg have suffered remarkably over this. And that is why I wrote the book.”

“Over the four years that I was in Harrisburg covering this nearly every day, I spoke to the people in the city who were suffering, the people who had houses collapse next to theirs, because the city didn’t have enough money to remove blighted structures. I spoke with people who in the middle of January were getting their utilities cut off because there were sinkholes forming throughout the city and the government didn’t have the money to either prevent them or repair them. There were people who were suffering under a spike of crime. In 2012, Harrisburg became the 20th most dangerous city in America per capita because the city could no longer operate a functional police force. Nearly every tax in Harrisburg was increased — the income tax, the property tax, wage taxes, service taxes. The people of Harrisburg have suffered because of the bankruptcy.”

“In 2010, Harrisburg became the first and only capital city in America to file for bankruptcy. This type of thing is not supposed to happen in a capital city. Capital cities are supposed to be recession proof. This is where billions of dollars in state taxes go every year. Thirty thousand workers every day go into Harrisburg — state workers. They are paying for food and gas.”

“The people who did this to the city should be held accountable. The people of Harrisburg have suffered because of it. The mayor has been held accountable. But others need to be held accountable too.”

You are talking about the Wall Street bankers who helped the mayor. What makes you think the Attorney General in Pennsylvania will be able to bring to justice those on Wall Street? The Attorney General of the United States wasn’t able to do it for the 2008 frauds that triggered the recession.

“There is evidence in this case about the incinerator. Part of the loans should not have been approved. In Pennsylvania, local municipalities have a debt limit. There is an amount of debt they are not allowed to exceed. Harrisburg had already reached that limit. The mayor of 28 years wanted to take out hundreds of millions of dollars to repair this incinerator. The only way he could do that would be if he could get the guaranteed debt to be self liquidating — meaning that it would pay for itself. That means — if you put the money into this incinerator, the incinerator is going to make enough money to pay off that loan. There was never any financial data to suggest that that was possible. Yet, the self-liquidating aspects of those loans was approved.”

“Clearly, the incinerator wasn’t self-liquidating. What did the people who worked the loan do to get that self liquidating aspect approved? Clearly, it wasn’t self-liquidating. The incinerator didn’t come close to paying the city back.”

“It’s inconceivable that financial professionals were that far off. That’s what the Governor and Attorney General are looking into.”

There was strong evidence of fraud on Wall Street and yet there was no criminal prosecution of the banks for that fraud. Some argue the reason is because of a compromised system of justice. Do you anticipate something different at the state level?

“I don’t think that I do see anything different. I am not confident that charges will come out of this. Part of the reason is that it has been too long. These bonds that bankrupted the city — they were issued between 2003 and 2007. The statutes of limitations can be circumvented if there is an ongoing conspiracy. There is a possibility. But I have noticed in my 13 years of journalism that prosecutors are really good at prosecuting someone who holds up a liquor store or steals a candy bar. But they are not nearly as good at bringing to justice those who cause widespread disaster.”

Do you see Stephen Reed as a scapegoat?

“I don’t. He was the figurehead. He was the easiest target. He was the mayor for life. He won seven straight terms. In 2006, he was named the third greatest mayor in the world and the greatest mayor in America.”

Why was he then an easy target?

“Everybody knew who he was. And the Attorney General of Pennsylvania doesn’t have a law license right now. It was stripped from her. She needed to do something to get positive press. She was accused of leaking information from a grand jury to retaliate against political foes. That snowballed into a whole bunch of other issues. Her law license was stripped. It’s been an ongoing disaster over the past two or three years.”

Why did you write this book?

“I felt that the people of Harrisburg deserved justice. I wanted other people around the country to see what Harrisburg did so that their cities don’t go through the same thing. I watched the people in the city suffer. And it broke my heart. They didn’t deserve it. The people of Harrisburg did not deserve what happened to them.”

“Yes, they did elect this same guy seven times in a row. I understand that. But there should have been more accountability. And also, the firms that loaned this money, once they loaned the money and the city went bankrupt, they just washed their hands of it and walked away as if they had no involvement at all.”

“Wall Street was not 100 percent responsible for what happened. But they were partially responsible for what happened. The rest of the country can learn a story from Harrisburg and look at the warning signs within the city. There are many cities in the country going down the same path. They are accumulating too much debt and they are making the same mistakes Harrisburg did. Jefferson County, Alabama has filed for bankruptcy. Stockton, California has filed for bankruptcy. But Harrisburg holds the distinction of being the only capital city to file for bankruptcy. If this can happen in a capital city, it can happen anywhere.”

There is big crime and there is small crime. This book deals with big crime, big money crime. Generally, you don’t see investigative reporters tackle big money crime. Why is that?

“There are resource issues. And there is a lot of pressure on investigative reporters to turn content. When you are doing long form investigations, like Capital Murder, people do say to you — we need you to turn more content. Short term investigations are a lot easier. You can get on air a lot more. They are simpler. I had to have attorneys look over my research to make sure that everything was legally sound. That takes a lot of resources. And it’s just simply a lot more difficult to do this type of reporting and this type of story. A lot of companies don’t want to put the time and resources in to do it.”

“And the other thing is — we don’t get a lot of play on these corporate corruption stories. I’m doing a story right now about a park and ride. There is a park and ride in Maryland that people have turned into a used car lot. This story is going to do really well for us. We have a great headline. Instead of a park and ride, it’s a park and sell. Car dealers are taking their vehicles there and selling them on a piece of land paid for by tax dollars. That is a sexy cute little story that people are going to be interested in and that people are going to read. Stories about corporate corruption — you don’t get a lot of return on those. People generally are not real fascinated with corporate corruption — and I’m talking about clicks on web sites, watching the television shows. Often, people just gloss over it and they don’t see it as something that is worthy of their attention. That is one of the bigger problems. If the public were more interested in them, we would do more of those stories. But unfortunately, media is interested in these gimmicky little stories. This park and ride story — it’s tax dollars being misused. But does it rise to the level of a capital city going bankrupt?”

Do you come from a family of reporters?

“No, my father is a retired school teacher. And my mother worked in a real estate office.”

What made you want to be a reporter?

“I wanted to find a way that I could make a difference and do something that was meaningful. In 2004 or so, the newspaper industry became a little shaky. And I thought that television was a bit more secure if I’m looking at a 30 to 40 year career. But I wanted to do hard hitting journalism that often is associated with newspapers. “

“There is that saying that people get the government they deserve. In the case of Harrisburg, they got the government they deserved — they kept electing Reed for seven straight years. He became a dictator. He did whatever he wanted to. Nobody was watching what he was doing with the money. And the people suffered as a result. If I can do more journalism, write more books to alert people about what happened, I feel I’m doing this job.”

“I got into journalism to try to help people. And I hope that in someway this book can help people.”

What is your next book?

“It’s called Devolution. It’s a novel. It deals with the fragility of society. It is dealing with a fictional super power struggling financially. In the book, America has already collapsed and the next super power to take America’s place is going through the same issues that led to the collapse of America. The book offers an alternate Constitution with the idea that there has been a couple thousand years of human civilization. We have a pretty good idea of what works and what doesn’t work. The main character in the book wrote a Constitution that focuses on what works.”


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