WASHINGTON -- The District of Columbia's investigation of its ties to financial adviser Lazard Freres & Co. has so far yielded no evidence of improprieties, the city's chief financial officer said yesterday.
Ellen M. O'Connor, the district's deputy mayor for finance, said she entered the inquiry under the assumption that Lazard had not acted improperly in connection with two interest rate swaps.
"To date, both orally and through the written materials we've reviewed, the premise and position the District of Columbia has taken -- that there wasn't anything improper -- has been vindicated," O'Connor said.
A similar inquiry elsewhere sparked the city's review of its relations with Lazard. In Massachusetts, the state took action after a previously undisclosed fee-splitting arrangement between Lazard and Merrill Lynch & Co. came to light.
The Massachusetts revelations also prompted officials in Wisconsin and Louisiana to take a closer look at transactions involving Lazard. Wisconsin officials recently reported that they found no evidence of improprieties in their dealings with the firm.
O'Connor has said that district officials going into the swaps transactions were aware that Lazard and Merrill had a fee arrangement. But when Lazard outlined how fees had been structured in other municipalities, the district explicitly rejected the idea of paying Lazard a separate fee. Instead, the district stuck by the terms of its contract, under which the firm receives a flat annual fee of $500,000.
O'Connor has said that the review was intended primarily to ensure that the district's understanding of the transaction was what, indeed, actually occurred.
A long-awaited report on the district's investigation is currently in the draft stage and is expected to be sent to Mayor Sharon Pratt Kelly by the end of next week, O'Connor said yesterday.
She said the report probably will be released shortly thereafter.
O'Connor said the city's report will be based on interviews conducted with Lazard and Merrill employees, and on written documentation provided by the firms. In addition, city officials have discussed the matter with their counterparts in Massachusetts.
A rumor circulating on Wall Street suggested that the district was about ready to sever its relationship with Lazard. But when asked about the rumors yesterday, O'Connor said, "I'm unaware of any rumors and I am unaware of any action by the District of Columbia to disassociate itself with Lazard Freres, and I would know if there was."
