BOSTON -- One of the biggest bond-issuing agencies in Massachusetts is having trouble holding on +to some of its veteran executives, according to highly placed officials at the authority.
Since its founding in 1978, the Massachusetts Industrial Finance Agency has been at the forefront of economic development for the commonwealth, utilizing its bonding powers and novel financing programs to spur sorely needed job growth.
But, according to numerous interviews with high-ranking officials at the agency, that mission has suffered dramatically in recent months, with at least six top officials having left or preparing to resign for jobs elsewhere, and morale among the rest of the agency's staff at an all-time low.
Several of MIFA's disgruntled executives say the trouble began in February, when Gov. William Weld replaced a popular executive director, Daniel O'Connell, with Burton M. Harris, a hard-driving local attorney.
Harris says you can always expect complaints when a new regime comes in. But as the executives tell it, their new leader not only lacks experience in municipal finance but also seems to see the field and its players as a threat.
"I've never worked for someone like him," one MIFA employee said. "There is no trust, for the other people at the agency and there is suspicion about everything involving the municipal market."
Early in his tenure, agency officials say, Harris issued a directive that no staff member can meet with a member of the agency's board of directors.
"He has ended the cooperative and collegial atmosphere that has existed at the agency, and he is suspicious of the motives of the board of directors," said a former MIFA executive.
Other new requirements Harris instituted, covering everything from lunch dates to business meetings, are viewed as obsessive micromanagement. One of the worst irritations, several executives said, is that Harris makes them ask permission before holding a business lunch. Many times Harris turns down the request without giving a reason, they said.
Harris has also taken the staff out of the budget process. Every previous executive director consulted the finance committee before presenting the yearly budget to the board of directors. Harris did not.
By far the most serious charge, one voiced inside and outside the agency, is that Harris has led the agency into transactions that are out of a public authority's depth.
Aggressive exploration of new financing methods is typical of economic development authorities, since their mission is to spur growth and generate jobs. But several sources said Harris has gone too far with a series of complex private placement pricings.
MIFA sold bonds through private placements, with the proceeds going to a leasing corporation for purchases of equipment and buildings for small local businesses. The bonds were paid back through the leasing arrangements.
Critics say the agency is not qualified to price private placements. A counterpart of Harris' at the New Jersey Economic Development Authority said his agency would be be hesitant to engage in similar deals.
"The market has too many uncertainties to be placing bonds," the source said. "What happens if the small company goes under? Who would be responsible for securing the loan?"
He said that performing due diligence in issuing the debt would also be greatly complicated by the direct-placement feature.
In New Jersey, the state authority has sold a number of composite bond issues in which several small projects are funded through one sale. For the most part, though, the source said they are sold competitively and involve a letter of credit from a double-A rated bank.
MIFA officials "have taken it upon themselves to make sure that they are getting a fair price on these financings," a former MIFA official said. "As the deals get more and more complicated, though, they will not be able to continue this practice. I'm not sure they know this."
The deals at issue include one that will allow Uno Foods, a pizza manufacturing company, to expand, and another that will allow Taunton-based Kopin Corp. to increase its liquid crystal display business.
Harris disputes that the agency is not qualified to price such transactions, and said that MIFA is simply trying to broaden its impact on businesses in the state. He said he is confident that the people within the agency know the market well enough to handle the transactions.
"We think that a direct-placement program is possible for the agency," Harris said. "I feel, and the board agrees, that a shortage of working capital in the marketplace now makes our role in the state more important."
Under previous executive directors, MIFA did complete a number of private placements using certain mutual funds. That ended in the early 1990s because senior management at the time said the agency did not have proper market intelligence.
None of the MIFA employees interviewed for this report agreed to be named, and Harris attributed their grumbling to the normal adjustment process associated with a change in leadership. In fact, some sources said MIFA was in need of a shakeup and Harris' appointment has been productive.
Robert Beal, chairman of the agency's board of directors, said that "after six months it appears that everyone is comfortable with Burr."
And Harris said he finds it "somewhat surprising to me that there have been these complaints. We are continuing to move in a straightforward manner and are planning to further expand what we are doing for the state."
Harris, 55, was a partner at the Boston law firm of Bingham, Dana & Gould, where he focused on banking law with the Bank of Boston as his largest client. He retired before Weld chose him to run MIFA.
Some state sources speculated that Harris got the job because he supported Weld during the governor's 1990 campaign, but others said there was nothing political about the decision.
"This was simply a case of the administration needing someone relatively quickly to fill the hole," said a former member of the MIFA staff. "They did not pay attention to this choice and the people that work there are suffering because of it."
Harris' inexperience in municipal finance also led to some unusual assignments, several sources said.
For example, Harris recently ordered staff members to investigate whether legal opinions were really needed for all of the agency's financings.
The agency's legal team has been another source of controversy.
For the past several years, MIFA has used the Boston law firm of Gadsby & Hannah for many of its larger financings. But since Harris was named executive director, all of MIFA's law work has gone to the firms Palmer & Dodge and Ropes & Gray.
Harris' daughter, Marjorie Harris Loeb, is an associate in her third year at Ropes & Gray. Harris said her position "had no bearing on my decision at all."
"These two firms had more depth than any of the others we looked at," he said. The change in law firms was also approved by the authority's board of directors, which Harris said was aware of his daughter's association with Ropes & Gray.
Sources familiar with the decision to name Harris to the MIFA post confirmed that Harris was not the first choice for the executive director's slot. But, according to one source, Harris had an interview with Weld and Lieut. Gov. A. Paul Cellucci in which Harris' knowledge of banking law impressed the governor. In that interview, Harris' plan to make MIFA a more international player struck the right chords with Weld and Cellucci. Since taking office, Weld has shown interest in investing state funds overseas.
One source familiar with the agency said that Weld, in the midst of a re-election campaign, cannot afford the negative publicity that would occur if Harris was removed.
"If they pull Harris out of there, Weld admits that he made a mistake, and that is something he cannot afford right now," the source said.
If he does anything, Weld will wait until after the November election, the source said, adding, "But the problem is, that by that time, a large portion of the staff will be gone."