A controversial link between Fleet Financial Group Inc. and New York City Comptroller Elizabeth Holtzman has taken a new twist with the revelation that a senior bank executive raised money for the comptroller's failed U.S. Senate campaign last year.

James P. Murphy, an executive vice president at the Providence, R.I.-based holding company, was on the finance committee for the campaign, say legal and campaign officials for Ms. Holtzman.

New York City began investigating a possibly illegal link between the bank and the campaign after discovering that Fleet made a loan to Ms. Holtzman's senatorial campaign and was subsequently appointed a co-manager of a city bond issue.

Fleet Recommended

Although the selection of New York City bond underwriters is a joint decision between the comptroller's office and the mayor's office, Ms. Holtzman's office recommended Fleet's inclusion.

City conflict-of-interest rules prohibit public officials from using their office for private gain.

Sources with knowledge of the probe say the state Department of Investigation is examining what role, if any, Mr. Murphy played in the matter. A department spokesman would not comment.

Mr. Murphy was the top administrator of the New York State Bankers Association for 13 years before joining Fleet in 1989 to run its government relations area.

Mr. Murphy's duties include coordinating Fleet's lobbying efforts, with special emphasis on public and municipal finance. He did not return calls for comment.

|Judged on Its Own Merits'

Thomas L. Lavelle, a spokesman for Fleet, confirmed that Mr. Murphy supported Ms. Holtzman's failed Senate bid, but denied that the loan or its provisions were connected to his support.

"The loan was judged on its own merits," Mr. Lavelle said.

Officials close to Ms. Holtzman, who is campaigning for re-election, said Mr. Murphy's role in the campaign's fund-raising efforts was minimal.

"If you're trying to look at this guy as an active fund-raiser, you're way off," said campaign spokesman George Arzt.

According to Federal Election Commission records, Fleet's political action committee contributed $3,000 to the campaign.

Relationship Cited

Ms. Holtzman has maintained that Fleet was selected as one of 23 co-managers in a March bond sale because of its reputation as an underwriter of municipal debt. She said the decision was made by her finance staff, not by her.

Ms. Holtzman noted that her campaign has a long relationship with Fleet Bank because of its proximity to the municipal building in downtown Manhattan and because it has had no ties to the government of South Africa.

Influence Seen

For public-policy watchdog groups, however, Mr. Murphy's joint role as banker and fund-raiser adds weight to claims that politicians can be tainted by ties to powerful business interests.

"In this case, you are seeing in a very real way how a business delivers money to a politician with an eye toward influencing the politician's action," said Josh Goldstein, a policy director for the Center for Responsive Politics, which tracks campaign contributions to political candidates.

Mr. Lavelle said Ms. Holtzman's campaign officials approached Mr. Murphy when seeking the loan last year. Mr. Murphy referred the inquiry to loan processing officials at Fleet Bank.

"Mr. Murphy is not a lender, he did not do the credit analysis, the underwriting, nor did he approve the loan," Mr. Lavelle said.

"The loan met all the credit standards and legal requirements."

Fleet's Melville, N.Y.-based bank affiliate made the uncollaterized loan of $450,000 at 1% over the prime rate.

The campaign, which has had difficulty repaying the loan, still owes the bank $225,400, according to its last Federal Election Commission filing.

The Bond Buyer is a sister publication of American Banker.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.