Stillwater school officials can't explain financial adviser's six-figure payday

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Kristen and Michael Hoheisel's intertwined professions have raised the suspicions of residents before.

Like many American families, Kristen and Michael Hoheisel are a dual-income outfit.

Stillwater Schools employ Kristen. She's been the district's business director since 2015. Beginning with the spring of 2014, Michael has worked as a financial adviser for R.W. Baird & Co.

What makes the couple unique is how their careers intersect.

Kristen served as St. Anthony-New Brighton Schools business director for 11 years prior to coming to Stillwater. Michael was once employed at Springsted, a company that provides financial consulting to public entities. St. Anthony-New Brighton was among Springsted's clients back when Kristen was employed at the district office.

Michael would switch employers, taking a job at Northland Securities in 2005. Not long after, St. Anthony-New Brighton changed financial advisers as well. It hired Northland.

Northland worked on the district's $20 million-plus bond deal in 2008. With Kristen working in school headquarters and Michael as its financial consultant, the Hoheisels professional relationship raised the eyebrows of some residents. 

Some petitioned the Minnesota State Auditor, who's charged with ensuring the financial accountability of local governments. 

But since Kristen wasn't responsible for contracting with Northland, no conflict of interest existed, according to the office's 2011 findings. 

The Hoheisels rolled onward and upward. For Kristen, that meant getting hired in 2013 by Stillwater. 

When she landed at her new gig, coincidence would have it that Stillwater's financial adviser was none other than Northland.

That too would change. Michael parted ways with Northland, becoming a managing partner at R.W. Baird & Co. in March 2014. Baird would soon become Stillwater's financial adviser. 

The timing could not have been more fortuitous. Stillwater was in the process of putting together a massive modernization and renovation plan that would require tens of millions of dollars.

Baird helped lead the way. In early 2015, as the district was securing nearly $100 million in bonds, Michael was named its financial consultant in documents submitted to the state. 

On May 12, 2015, voters approved the $97.5 million referendum. According to Baird's official contract signed in July, Michael Hoheisel would serve as its “exclusive… adviser.” But no one seems able to show there was a competitive selection process for this contract.

Nor did the contract contain a specific fee structure. Instead, it stated Baird's compensation would be determined later “by mutual agreement.” 

School Board Chair Tom Lehmann signed it. So did Michael Hoheisel, Baird’s “Managing Director.”

The bond monies were disbursed to the school district in mid-August. Piper Jaffray handled the distribution of funds, which included an $115,000 “financial adviser fee” to Baird. Documents show that the district's representatives in the closing were Kristen and a lone subordinate.

Which raises questions: Who approved Baird’s fee? And when exactly was it mutually agreed upon? 

Lehmann can't say. He doesn't know where or when it was determined what Baird got paid. 

Cathy Moen, Stillwater Schools director of administrative services, does him one better. According to emails forwarded to City Pages by a Stillwater resident, Moen concedes “[t]here are no documents” that say anything about the adviser's exact compensation. In other words, Baird’s fee, which was supposed to be spelled out in forthcoming contract language, wasn't, according to Moen.

Kristen Hoheisel says that's inaccurate. "The fee was established” during the months prior to the closing, she insists. She points to two places where the fee is specified. 

The first is from January 2015. The district needed to show the Minnesota Department of Education its financial house was in order before moving forward to ask voters for funding. Kristen says Stillwater's paperwork to the department lists what the adviser would get paid.   

But there are no figures mentioned. Instead, it refers to a "separate budget." 

Kristen also says Baird's fee is spelled out in the bond sale's closings costs. Yet the documents don't appear to specify a number or fee schedule, and Kristen can't point to where it does. 

In fact, the first place the company's $115,185 fee appears is on the same day the sum was wired to Baird: August 17, 2015.   

Board chair Lehmann didn't respond to messages seeking further explanation. Messages left for Superintendent Denise Pontrelli were not returned.   

Michael Hoheisel tells City Pages "you're looking something that's not there." He contends Baird's fee was defined in various documents to different "district and school board" officials as far back as early 2015. 

But if that's true, no one at the district seems to be able to say where they are. 

School board member Mike Ptacek doesn't know what to make of it.

"Speaking strictly as an individual here, it seems to me a person ought to be able to find this document showing how much [Baird was] supposed to get paid," he says. "Since it hasn't, I think it raises the question any reasonable person would ask: Is there such a thing that even exists?"


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