CHICAGO -- Standard & Poor's Corp. last week affirmed the general obligation bond ratings of 16 local governments it identified as having invested money with a California investment advisory firm accused of fraud by the Securities and Exchange Commission.

Six of the issuers whose ratings were affirmed were from Iowa, the state where local governments were "hardest hit" by the alleged fraud of Institutional Treaury Management, the rating agency wrote in last Monday's issue of Credit Week Municipal.

The ratings on the outstanding bonds of 10 other local government issuers from six other states also were affirmed.

Standard & Poor's began reviewing the ratings of governments that invested with Institutional Treasury Management after the SEC charged on Dec. 11 that at least $75 million of the $1.5 billion of assets under management by the firm was missing.

Iowa officials later determined that of the $75 million that was missing, $65 million was from Iowa Trust, a pooled-investment fund in which 108 local governments in the state had invested a total of $100 million.

The other $10 million was missing from a separate account held by Marshalltown, Iowa.

In affirming the outstanding GO ratings of the six Iowa governments, Standard & Poor's wrote that the lack of access to the missing money would have only a "limited liquidity impact on financial operations."

The rating agency affirmed the insured debt ratings of Altoona, Black Hawk County, and Decorah County School District at AAA. The AA ratings of Muscatine, Polk, and Story counties also were affirmed.

Last Friday, U.S. District Court Judge Richard Gadbois released $750 million of Institutional Treasury Management's $1.5 billion of assets.

The judge earlier this month froze the assets and placed the firm in receivership after the SEC complaint was filed.

Iowa Treasurer Michael Fitzgerald said a court-appointed receiver is in possession of the $35 million that was remaining out of the $100 million that was supposed to be in the Iowa Trust account and will soon begin distributing it on a prorated basis to the governments that had invested in the fund.

Mr. Fitzgerald added that it is unclear when or if the governments would recover the $65 million that was missing from the Iowa Trust.

He said that Institutional Treasury Management apparently shuffled money among various accounts it managed and that the courts probably would make the final decision as to how much each investor was owed from the firm's remaining assets.

Standard & Poor's also affirmed the GO ratings of 10 other issuers it had identified as having money invested with Institutional Treasury Management.

Those issuers and their ratings are: Galveston County, Texas, A-plus; Levelland, Texas, A-minus; Memphis, Tenn., Light, Gas and Water Division, AA; North Carolina Eastern Municipal Power Agency, A-minus; North Carolina Municipal Power Agency Number 1, A; Roanoke, Va., AA; Rockwall, Texas, BBB-plus; Torrance, Calif., A provisional; Travis County, Texas, AA-plus; Utah Municipal Finance Cooperative, AA-minus.

Standard & Poor's wrote that it is still attempting to determine whether other governments that it assigns ratings to had funds invested with Institutional Treasury Management.

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