A New York city councilwoman on Friday called for an "immediate investigation" into a delay of the city's bond underwriting process and whether that delay encouraged Wall Street firms to contribute to the re-election campaign of Mayor David N. Dinkins.
City Councilwoman Kathryn E. Freed, D-Manhattan, said during a news conference on Friday that she has asked the city's Department of Investigation to launch the probe following newspaper articles suggesting a link between the mayor's fund-raising activities and the city's preparations to select a new bond underwriting group.
Last week, the Dinkins campaign managers said they had raised $1.4 million from a Nov. 30 fund-raiser, which was attended by many Wall Street professionals, including members of the city's current bond underwriting syndicate.
Peter Benjaminson, a spokesman for the Department of Investigation, said the department received a letter written by Freed to Susan E. Shepard, the agency's commissioner, calling for the inquiry.
"All I can say is that we received the letter and that we will be reviewing the letter," Benjaminson said.
On Nov. 6, The Bond Buyer reported that the city had delayed a mailing of request for proposal documents to Wall Street investment banks, originally scheduled to take place directly after the city's Oct. 20 general obligation bond sale underwritten by a syndicate led by Lehman Brothers Inc.
City and Wall Street sources said at the time that the city had planned to mail the RFPs shortly after the closing of the bond deal, during the first week of November, but city officials held off to include more questions about complex municipal financings, such as the use of derivatives products, and to meet other financing needs. The requests for proposals are used by city officials to determine which firms can best serve the city as senior and co-managers in its bond syndicate.
Officials are currently working on the RFP that will be used to choose the new underwriting team. The city's next general obligation deal is scheduled for February or March.
In a news release, Freed said, "There should be an immediate investigation into whether the administration delayed its selection process for bond underwriters to encourage Wall Street firms, who hope to receive a contract to sell city bonds, to contribute to the mayor's campaign."
During his fund-raising dinner at the New York Sheraton Hotel & Tower, the mayor raised more than twice as much as his campaign staff had expected, thanks to strong support from the Wall Street investment community, campaign aides said.
In addition to Dinkins, city Comptroller Elizabeth Holtzman is asking the municipal bond community for help, but in her case to erase a debt of $300,000 that resulted from her failed U.S. Senate campaign.
Officials in the Dinkins and Holtzman administrations moved quickly on Friday to reject Freed's comments. Officials in both camps also denied that the city had delayed the RFP mailing.
In a joint statement, Dinkins and Holtzman called Freed's allegations "simply and demonstrably untrue."
"Simply put, the timing of the city's selection and use of underwriters is driven solely by market forces and capital cash-flow needs and not by politics or press releases," the statement says.
Jennifer Sullivan, a spokeswoman for Barry Sullivan, deputy mayor for finance and economic development, said the selection of city bond underwriters "has nothing to do with politics." Kimball also criticized Freed's request in her letter to the Department of Investigations that the city postpone its selection of underwriters until after the investigation.
"That would cost the city millions of dollars," Kimball said. In the joint statement, Dinkins and Holtzman said a new RFP" will be made widely available to underwriters within the next few weeks," and that the city will likely receive responses in January.