An embattled Joseph C. Salema resigned as chief of staff to New Jersey Gov. Jim Florio yesterday, giving up a post he has held since October 1990, the governor's office confirmed.

Salema's resignation comes in the wake of the widening federal probe of municipal bond underwriting activity in New Jersey.

"Governor Florio has accepted the resignation with deep regret," Jon Shure, communications director for Gov. Florio, said yesterday. "Joe Salema felt that if he stayed on, it would allow our opponents in the upcoming election to take attention away from the issues that really affect the citizens of New Jersey, and the governor respects Joe's feelings." Florio, a Democrat, is running for re-election this year.

Salema is a long-time political ally of Florio, having worked for him for over 20 years. Most recently, Florio brought him back into politics after the governor began to plummet in the polls in the wake of the passage of his $2.8 billion tax package.

Florio's spokesman said no successor has been named.

The Star-Ledger of Newark, N.J.. reported that Richard Wright, associate state treasurer, is expected to replace Salema.

Other candidates reported to be possible successors include Scott Weiner, the state's environmental commissioner; Thomas Downs, transportation commissioner; and David Applebaum, Gov. Florio's policy director.

Salema was one of the first figures subpoenaed in connection with the federal investigation.

The U.S. Attorney's office for the Southern District of New York, the Securities and Exchange Commission, and the National Association of Securities Dealers are all investigating Armacon Securities, the small securities firm jointly owned by Salema and Nicholas A. Rudi, president of Consolidated Financial Management, a financial advisory firm.

At the same time, federal officials are looking into whether several Wall Street firms abused relationships with well-connected New Jersey officials to win bond business in the state, in particular on a series of large refunding issued in 1991 and 1992 by the state's turnpike authority.

The New Jersey Bureau of Securities is also reviewing Armacon.

The issuance of a subpoena does not indicate wrongdoing, and Salema has not been charged with committing any crime.

Sometimes an investigation never leads to charges. The Securities and Exchange Commission investigated First Boston Corp. in connection with alleged insider trading of New York City bonds last year, but no charges were filed in the case and the investigation ended.

Salema's attorney, Randy Levine, has said Salema is not a target of the investigation. Levine has also said Salema had no connection with the selection of underwriters on the turnpike refunding. Levine decided to comment yesterday.

In connection with its investigation, the U.S. Attorney's office recently issued a subpoena to Douglas Berman, the New Jersey state treasurer, during the turnpike refundings, sources familiar with the agency said.

Sources familiar with the investigation said they expect Berman to testify before a federal grand jury in New York City this week.

Berman could not be reached for comment.

Salema first worked for Florio as a driver on then-state Assemblyman Florio's 1972 campaign for Congress. When Florio lost the race, Salema joined his Assembly staff.

He later managed Florio's successful 1974 campaign for Congress and stayed with Florio until 1984.

In 1984, Salema went to work with Rudi at Consolidated Financial Management. The two started Armacon in 1990.

When Salema rejoined Florio's staff, he immediately sold his stake in Consolidated. Eight months later, he placed his stake in Armacon in a blind trust.

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.