CHICAGO -- Look behind a Midwestern political consultant and you may find years of political experience and maybe even a family tree branching into realms of government.
Chicago politics is synonymous with the family of late Mayor Richard J. Daley. And one of his sons has been a public finance consultant for several years.
A spokesman for Smith Barney Shearson in New York confirmed using Chicago attorney Michael Daley as a consultant in public finance for county and state of Illinois deals. Another Smith Barney official said Daley has been working for the firm "some 11 to 13 years."
On the Payroll
Daley is paid $15,000 a month by Smith Barney, according to sources familiar with the relationship between Daley and the firm.
Daley, who works for the law firm of Daley & George Ltd., has impressive connections in northeastern Illinois. His brother Richard M. Daley is now mayor of Chicago. Brother John has been a Cook County commissioner since 1991. And brother Bill, a Chicago attorney, was recently tapped by President Clinton as chief salesman for the North American Free Trade Agreement.
Woods Bowman, Cook County's chief financial officer, said he has never been approached by Michael Daley.
"We've done business with Smith Barney, but Michael Daley was nowhere to be seen," Bowman said.
For Cook County, Smith Barney was the lead underwriter on two deals, totaling $430 million since 1991. John Daley, who along with other Cook County commissioners must approve underwriters for deals, did not return phone calls.
John Holden, a spokesman for Walter Knorr, Chicago's comptroller, said that Knorr "has never been personally lobbied on behalf of Smith Barney by Michael Daley."
Since Richard Daley was elected mayor in 1989, Smith Barney has been the senior manager on seven deals, totaling $792 million of city and airport debt, according to Securities Data Co.
On the state level, Smith Barney won the largest bond issue in Illinois history -- $879 million of revenue bonds last December for the Metropolitan Pier and Exposition Authority. The authority's board, which selected Smith Barney as lead manager, was appointed by Mayor Daley and Gov. Jim Edgar of Illinois.
Michael Daley did not return phone calls.
But Daley is not the only consultant in Chicago.
Alfred G. Ronan, who served for 14 years in the Illinois General Assembly as a Democratic representative from Chicago, has been a consultant for two Chicago-based public finance firms. Ronan worked for Chicago-based Rodman & Renshaw Inc. beginning in early 1990 while he was in office, according to Thomas Basehart, a senior vice president at Rodman. Ronan's role for Rodman was to get the firm "in the door" of governments, allowing Rodman's bankers to get the business based on the firm's abilities, Basehart said.
"All he did was help us with local municipalities," Basehart said. Ronan was not a lobbyist for state issues because of the conflict with his position as a lawmaker, Basehart said.
Ronan, who was paid a monthly salary by Rodman, was also connected to political contributions Rodman made. Rodman made contributions by buying tables at fund-raisers that Ronan threw for politicians, Basehart said.
No longer a legislator, Ronan now works for the Chicago Corp.
Walter Filkin, a senior vice president in public finance at the Chicago Corp., confirmed that the firm has retained Ronan as a consultant since Ronan left Rodman this summer.
Ronan's "doing some of the things our employees are doing -- helping us originate new municipal bond business," Filkin said. He declined to comment further on the firm's relationship with Ronan.
Ronan declined to comment for this article.
Last month, Ronan was at the center of a controversy over campaign contributions when local news media reported that he called Illinois lawmakers off the floor to pass out checks from his riverboat gambling clients.
Ronan's actions spurred state Rep. Clem Balanoff, D-Chicago, to introduce two bills in the Illinois General Assembly. One would prohibit the giving or accepting of campaign contributions on state property or in facilities leased by the state. The second bill would yank the privileges of former legislators, who are registered lobbyists, to gain access to the General Assembly's House and Senate floors.
Balanoff said the first bill would apply not only to the acceptance of contributions by legislators, but by all state office holders and employees, including those involved in the state's bond business.
"Under my bill, no one could go into a bathroom in the state capitol and drop the contribution on the floor, knowing someone would pick it up," Balanoff said.
In Michigan, state officials say that just about every public finance firm has a consultant.
Kimball R. Smith 3d, a Lansing, Mich.-based attorney, is one of them.
At first, Smith would say only that he works as a consultant for a number of different firms and that only the firms could disclose that he is working for them. However, Smith eventually said that one firm he works for is Prudential Securities Inc.
In fact, Smith said he began working as Prudential's consultant exactly two days after he resigned from his seat on the Michigan Municipal Bond Authority, a state agency that issues bonds for local governments.
In 1986, Smith was appointed to the authority's board as the nominee of then-Senate majority leader John Engler, a Republican who became Michigan's governor in 1991. Smith said he began doing consulting work for Prudential shortly after resigning from the board on Feb. 15, 1991.
Smith is well-versed in both government and the securities business.
He was deputy state treasurer in charge of finance for the administration of Gov. William G. Milliken for 1973 and 1974. As deputy treasurer, Smith said he was involved with the now-defunct Michigan Municipal Finance Commission and the Michigan Hospital Finance Authority.
Smith's ties to Prudential stem from John Glidden, who headed the firm's Public finance department from 1988 to February 1992, when he resigned. From 1979 to 1984 Smith said he was a consultant for PaineWebber, when John Glidden worked there. He said he was hired by Prudential after Glidden moved to the firm.
Smith said he advises various people at Prudential about upcoming bond transactions in Michigan.
Smith pointed out that he had no investment banking clients during the time he served on the board of the bond authority.
Current and former state officials said they believe Smith did not begin working for Prudential until he left the authority. Sarah Eubanks, the authority's executive director, also said that was her impression.
Smith also said that by the time he was appointed to the board in April 1986, the board had already sent out requests for proposals for underwriters and that the underwriters, including Prudential, were already in place by the time he got to the board.
"Prudential was named one of two original co-managers, but I never had any contact with them," Smith said.
Eubanks said that Prudential, along with other firms, was picked in early 1986 to work on deals on a revolving basis. The authority selected a a new team of firms that did not include Prudential last year, Eubanks said.
From 1986 to 1992 Prudential was a senior manager on six authority deals totaling $31.5 million, and was a co-manager on 39 deals totaling just over $1 billion, according to Securities Data.
Smith said he has given money to candidates in Michigan from securities firms. "I've raised money for candidates not just from firms I represent," Smith said. "Having been in the business for 20 years I know most people in the securities industry. I've hit up probably every firm in the state for political contributions."
For example, Smith pointed to the "Governor's Club" which is funded with $100 annual non-corporate, non-PAC contributions. Smith said he has solicited clients and non-clients to contribute to the club. He estimated that about 85% to 95% of the $12,000 he raises for the club per year comes from securities firms.
However, he said he has never "laundered" money for a firm, meaning that he has never signed his name to a contribution that really came from a firm.
John Truscott, a spokesman for Gov. Engler, said donations to the club are limited to personal checks and that the money is used to defray expenses in the governor's office that would otherwise be paid with taxpayers' dollars. Donations to the club total $300,000 to $400,000 a year and are disclosed to the secretary of state's office, Truscott said.
There is no link between contributions and getting business from the state of Michigan, Truscott said. Nick Khouri, the state's chief deputy treasurer who oversees much of the state's bond issuance, said that his policy is to meet "directly with bankers and not with their local lobbyists."
But the fallout over campaign contributions by bond firms has affected Engler's re-election campaign. Truscott, Engler's spokesman, said that a fund-raiser in New York City had been considered to coincide with Engler's speech before the Municipal Forum of New York on Oct. 27.
Truscott said the fund-raiser was scrapped partly because of "awareness" of the controversy surrounding contributions by securities firms. Timing and the fact that Engler has had no problem raising money within Michigan were the other reasons it was not held, Truscott said.
States like Michigan and Illinois have passed laws aimed at illuminating who is consulting or lobbying for whom.
Illinois passed a law earlier this year tightening up lobbyist disclosure beyond lobbying for legislation. Effective Jan. 1, anyone who lobbies state officials for contracts, including contracts related to bond business, will be required to register with the secretary of state's office. Lobbyists will also be required to disclose any expenditure made to acquire the state contract.
Michigan's lobbyist registration law, on the other hand, is not clear-cut when it comes to the bond business. Peter Allegrina, an analyst with the state's election bureau, said application of the law sometimes has to be determined on a case-by-case basis, depending on who is doing the lobbying and how much personal discretion the person being lobbied has in making decisions.
"It's a gray area," Allegrina said.