A general manager of the New Jersey Sports and Exposition Authority was a paid consultant to Lazard Freres & Co., a New York-based investment banking firm that landed the bookrunner post on a $224 million authority bond issue last year, a spokeswoman for the firm said on Friday.
The consultant, Richard W. Van Wagner, also had ties to officials at Tri-State Capital Markets Group, a Cranford, N.J., firm that the sports authority selected as a co-manager on three of its issues in 1992.
Van Wagner was appointed to the $92,500-a-year authority post by Gov. Jim Florio in July 1991 after retiring from the state Legislature in the early spring of that year. In May of that same year, he also left a securities firm, now closed, that employed a number of the current employees at Tri-State. But he does not have business ties to Tri-State, a firm founded in January 1992.
Van Wagner, a former Democratic state senator from Monmouth and now general manager for governmental and regulatory affairs for the authority, was paid by Lazard Freres for his consulting services, Katherine McDonough of McDonough & Associates, Lazard's public relations firm, said last week.
Lazard, through McDonough, did not specify what the consulting work entailed, when and for how long Van Wagner provided the services, or how much he was paid. When asked again on Monday, McDonough said, "I have no one who is available to comment on those questions."
But municipal market sources familiar with his hiring say Van Wagner was brought to Lazard to help the firm win bond business in New Jersey.
Van Wagner, who does not sit on the authority's board of commissioners, did not return phone calls.
John Samerlan, a spokesman for the sports authority, said on Monday that since joining the authority Van Wagner has had no business ties to firms.
Samerjan said he was not aware of any previous relationship Van Wagner had with Lazard Freres. He also said that Van Wagner did not participate in the selection of firms for bond underwriting.
Van Wagner's responsibilities focus on construction, engineering, and governmental and regulatory affairs. Samerjan said.
The sports authority has a code of ethics that includes a provision that prohibits its officials from promoting companies to the authority that the officials have a stake in or an opportunity to make gains.
Lazard is one of a number of firms that federal officials are investigating to determine whether the firms abused relationships with well-connected New Jersey officials to win bond business in the state, in particular on a series of large refunding issues in 1991 and 1992 by the state's turnpike authority.
Van Wagner's ties to the municipal industry go back at least to the 1980s, when he worked at the Hoboken-based firm of Jersey Capital Markets Group Inc., which was founded in 1983.
He was listed as a vice president in the firm's public finance department. The firm ceased operations in March 1992.
A number of former Jersey Capital employees, including president John Twomey Booth, now work at Tri-State. The firm is a new division of Westfalia Investments Inc., a New York City-based securities firm.
Booth is listed as executive vice president and manager of Tri-State. Booth did not return phone calls.
Tri-State originates and structures new municipal revenue bond issues and sells municipal bonds in the primary, and secondary markets, Timothy E. Longworth, the compliance, officer for Westfalia, said in a written response to written questions submitted by The Bond Buyer.
Longworth said that "Van Wagner has never had any association or business relationship with Tri-State or Westfalia."
Van Wagner was "disassociated with Jersey Capital" in May 1991, Longworth said in the response. "We have no direct knowledge of the former ownership of Jersey Capital. Nonetheless, we have been advised that [Van Wagner] was never anything but an employee at Jersey Capital."
Longworth said Van Wagner does not have an ownership or investment stake in either Tri-State or Westfalia. And Van Wagner has not been retained for consulting or lobbying work by Tri-State or Westfalia. Longworth said in the response.
The New Jersey sports authority manages the Meadowlands Sports Complex in East Rutherford and Monmouth Raceway, and also financed the $52 million Camden Aquarium. The authority is also working on developing the Atlantic City Convention Center.
The $224 million bond sale in February 1992 for which Lazard Freres was the senior manager was one of four issues totaling $418 million sold by the sports authority that year. Other senior managers included Merrill Lynch & Co., Donaldson Lufkin Jenrette Securities Corp., and PaineWebber Inc. All four firms have raised money for Florio or have investment bankers active in New Jersey Democratic fund-raising activities.
Jersey Capital was never involved as an underwriter of sport's authority bond deals.
Tri-State, in addition to working on the sports authority's $224 million deal, worked on a $168 million authority offering, senior managed by Donaldson Lufkin Jenrette, and a $209 million authority offering, senior managed by PaineWebber Inc. Also in 1992, Tri-State served as a co-manager for New Jersey's $1.8 billion general obligation refunding bond sale.
The state treasurer's office sent out requests for proposals seeking underwriters for the 1992 series of bond deals after the Legislature approved the issues. The state treasurer, Samuel Crane, is also a commissioner of the sports authority.
The 11-member sports authority board, most of whom were appointed by Florio in the last few years, voted 10 to 1 to appoint Lazard senior manager of the $224 million bond deal.
Samerjan, the authority spokesman, said that on the other three 1992 bond issues, the votes by the commissioners' on the appointment of bond firms were unanimous.
Members of the board include Joseph Panepinto, a former Hudson County Democratic chairman; Jerome Goodman, president and chief executive officer of First Peoples Financial Corp., who was named vice chairman; and Cardell Cooper, mayor of East Orange. All were appointed by Florio.
The nay vote on the $224 million bond issue was cast by Peter L. Levine, a Democratic fund-raiser in the state who was then chairman of the board and also a member of the authority's executive committee. Levine later left the executive committee, but remains a member of the board.
Levine, who works at Levcom Shopping Centers in New Jersey, could not be reached for comment. Levine was replaced as chairman by Goodman, who was named by Florio.
Van Wagner, who served in the state Legislature for 18 years, was first elected to the Assembly in 1973 and won four terms before running for the Senate. He was reelected to the Senate in 1987.
Florio's appointment of Van Wagner to the sports authority was criticized in February by Republican gubernatorial candidate Christine Todd Whitman, who said Wagner's appointment, as well as a number of other appointments by Florio to high-paying state authority jobs, "is a form of political patronage taken to new extremes." Authority officials and state officials condemned Whitman's attack, denying there was political patronage.
Lazard Freres and one of its senior public finance bankers, Richard Poirier, were the subject of a story in The Wall Street Journal last Friday that outlined how the firm landed bond work in various states, including New Jersey.
The article reported on the sports authority's bond deal and how Lazard Freres was appointed. The Journal reported that Levine voted against the selection of Lazard Freres because he felt political influences favoring Lazard Freres had a role in the selection process.
It is common practice and not illegal under most circumstances for investment banking firms to hire consultants or lobbyists, especially in states where the firm is not domiciled, to promote the reputation and skills of in investment banking firm seeking state and local government bond and financial advisory clients.
In New Jersey, state lawmakers are regulated by the state's Conflicts of Interest Code and the Legislative Code of Ethics. There are restrictions on lawmakers doing business with the state. For example, a member of the Legislature could not do bond counsel work for the state. In addition, there are restrictions on receiving anything, including employment, that would influence a lawmaker in any way.
