CHICAGO -- Issuers in Illinois and other states say they may follow Illinois' lead and require bond firms to certify that they have written policies against sexual harassment.

The illinois law, which was passed by the General Assembly last year and took effect on July 1, requires all parties involved with, or bidding on, a state contract to have written policies against sexual harassment.

James Montana, Gov. Jim Edgar's chief legal counsel, said last month that the law applies to both underwriters and bond counsel. He said the senior managers for two upcoming state bond issues, as well as firms selected as bond counsel, will be asked to certify that they have anti-harassment policies. The state will probably also ask bidders on its competitive issues to file the same certification, Montana said.

Sexual harassment became the talk of the Illinois bond underwriting community last month, when state officials cut Rodman & Renshaw Inc. from the syndicate list for an upcoming bond sale because the firm had three outstanding sexual harassment complaints.

At the time, Montana said the law did not require dropping Rodman & Renshaw, but that the state preferred to have the complaints resolved before including the firm in any transaction.

Rodman officials have denied the allegations of sexual harassment by three former female employees.

Officials with Lehman Brothers,

First Chicago Capital Markets, and Prudential Securities, senior underwriters for two upcoming state issues, as well as officials at the bond counsel firms of Chapman & Cutler, and Mayer, Brown & Platt said they will be able to certify that they have written policies against sexual harassment.

The new law says the policies developed by the firms must include the state's definition of sexual harassment, the fact that the practice is illegal, information about the complaint process and the penalties established by the firm, and the legal recourse that harassment victims have through state agencies.

Officials at some state and quasi-state bonding authorities, including the Illinois Housing Development Authority, Illinois Development Finance Authority, and Metropolitan Water Reclamation District, and the State Toll Highway Authority said their agencies will comply with the law if they conclude that it applies to their activities.

"We will certainly comply with the statute in Illinois if it applies to us," said Bob Kugel, chief financial officer at the Illinois Housing Development Authority. The authority hopes to select underwriters within the next two weeks for bond issues over the next two years.

Marquita Russel, director of marketing services at the Illinois Development Finance Authority, said the agency's executive committee will take up the new law at its meeting this week.

Tim Bobinsky, executive director. of the Illinois Rural Bond Bank, said he believes the agency will ask its sole underwriter, Smith Barney Shearson Inc., and its bond counsel, Chapman & Cutler, about their policies.

Even local bond issuers in Illinois may take a look at the law.

Woods Bowman, chief financial officer for Cook County, said the law "is a good idea" for the county, which is in the process of completing a multiyear GO bonding program of at least $750 million for capital improvements.

"I think it's well worth looking into," Bowman said. "And, the state [law] certainly gives us an example."

State Sen. Penny Severns, D-Decatur, a sponsor of the sexual harassment bill, said the measure grew out of an advisory committee set up in the Senate to study the issue. It did not come about as a result of any specific instance of harassment, she said.

"Our strong sense is that anyone in the state government or doing business with the state ought to abide by the basic policy that sexual harassment should not be tolerated," Severns said.

Severns said she is not aware of any other state that requires its contractors to certify that they have written policies against sexual harassment.

Illinois is apparently taking the lead nationwide on the sexual harassment issue. None of the major underwriters polled informally last week said they had seen any requests for information on sexual harassment policies.

But bond industry sources said that complying with such requests would not be a problem, since most firms maintain formal written policies against sexual harassment.

Some state government officials outside of Illinois say they routinely ask bond firms about their policies in areas such as equal opportunity hiring and South Africa, but they say they have not yet quizzed companies on sexual harassment policies.

Greg Diamond, deputy treasurer of Colorado. said the state "will definitely look into" the Illinois law.

"We're in the process of putting together a manual for dealing with bond counsel and underwriters and I think as part of it we'll ask that question," Diamond said.

David Walsh, a deputy attorney general in Washington State, called the Illinois law "an interesting idea" and said he "suspects" that the state will give the problem of sexual harassment "increased attention in the future."

Officials in California said that a state law passed last year requires all California-based firms to have and distribute a policy on sexual harassment. However, the law does not make such a policy a requirement for doing business with the state.

"This is one instance where California is lagging behind someone else, and Illinois is leading the charge," said Stan Wolcott, president of the California Association of Bond Lawyers.

Michael Geffrard, New York City's director of public finance, said the city does not specifically ask bond firms about their sexual harassment policies, but reports of problems at any firm could trigger a face-to-face meeting with city officials to "explain what's going on."

"If there was a pattern of abuse that came to our attention, we would want to talk to the firm involved," Geffrard said.

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