Gault leaves First Boston for J.P. Morgan; will head new urban finance unit.

Veteran investment banker Ronald T. Gault yesterday resigned from First Boston Corp. to join the public finance department at J.P. Morgan Securities Inc.

The move to J.P. Morgan, effective in mid-July, followed weeks of speculation that Morgan was discussing employment opportunities with Gault. Both First Boston and J. P. Morgan are senior managers in the city's general obligation bond syndicate.

As a banker, Gault has developed strong relationships with urban leaders across the country. He is a close friend and tennis partner of New York City Mayor David N. Dinkins, who is running for re-election.

Gault, before his resignation, was First Boston's lead banker on city bond deals. At Morgan, he will share the New York City account with managing director Eric H. Altman, officials at the firm said.

Gault, in a telephone interview yesterday, said he will head a new urban finance unit at Morgan. He also said he will remain at First Boston until city officials finish pricing the next city bond deal, in which First Boston will serve as senior manager.

The city is planning to sell about $800 million in general obligation bonds in mid-July. Gault said that he will continue at First Boston in order to provide an orderly transition.

Morgan's new urban finance unit, to be part of the firm's public finance department, will be responsible for banking opportunities in urban areas throughout the country, gleaning support from the firm's various regional units and product groups.

The unit will also address investment banking opportunities in New York City, Morgan officials said. Gault, before coming to First Boston in April of 1985, served in the administration of former New York City Mayor Edward I. Koch.

"The decision to move was based on three factors: job satisfaction, opportunity, and compensation - and I rank the importance of each factor in that order," Gault said. "This is not a slam against First Boston, but it's an opportunity I can't pass up."

Richard A. Mahony, a vice president and spokesman for J.P. Morgan, said Gault will report to John K. McColloch, a managing director and head of the company's municipal finance group. Gault, who was a managing director at First Boston, will also be a managing director at J.P. Morgan.

"Ron is very highly regarded for his skill as an investment banker and for the relationships he's built over the years," Mahony said. "He will be a terrific asset."

"Ron was a significant presence here," said Carl M. Eifler, a managing director and head of the public finance department at First Boston Corp. "He will be hard to replace."

Market observers said Gault's presence should prove beneficial for Morgan. The firm's municipal finance group, which recently was named as one of seven senior managers in the city's lucrative general obligation bond syndicate, is known for its banking acumen.

The department will benefit from Gault's relationships with city officials nationwide, including Dinkins, observers say.

For First Boston, the effect of Gault's departure is less clear. The firm is also part of the city's seven-member senior management team, and is a major player in the municipal bond business. If Dinkins is re-elected, the firm would not have the services of a banker with a powerful friend in City Hall.

And despite Gault's friendship with the mayor, First Boston's relationship with the office of city Comptroller Elizabeth Holtzman has been stormy. Holtzman's office, along with finance officials in the Dinkins' administration, selects bond underwriters and manages the city's debt policy.

For example, finance and legal officials reporting to Holtzman recently delayed selection of the city's new bond syndicate, in part because her office conducted an inquiry into Wall Street bond firms and their ties to the white-majority government of South Africa. The inquiry, which found that no firm on the street violated the city's anti-apartheid law, convinced First Boston to sell its interest in one company and change its relationship with another.

In addition, Holtzman's office in 1992 pressed for investigation of possible insider trading at First Boston following a bond refunding. Both a city investigation and an investigation by the Securities and Exchange Commission later found no evidence of insider trading.

Gault said he informed Dinkins and officials in Holtzman office about his move yesterday. Roger Anderson, bureau chief for debt management in the comptroller's office, said the move will have "no effect" on the coming $800 million bond sale. "We hire a firm, we don't hire a person," he said.

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