Chicago - Mayor Stephen Goldsmith of Indianapolis said this week that most of the members of the city's bond bank board will probably not be reappointed.

The mayor also said that the consultant contract the Indianapolis Local Public Improvement Bond Bank has with its creator Fred Armstrong may not be renewed next year.

Goldsmith, who was speaking Tuesday at a conference in Chicago on privatization, said in an interview afterwards that the upcoming changes have "a little bit" to do with controversy over Armstrong's failure to disclose his business relationship with Mark Ferber, a former Lazard Freres & Co. partner. Ferber's dealings in Massachusetts are the subject of a grand jury probe in that state.

"I thought it was inappropriate. It wasn't criminal," Goldsmith said, referring to Armstrong's relationship with Ferber. "I think it was improper not to disclose it to the bond bank board."

Last December, Indianapolis began an investigation after learning that Armstrong received $15,000 from Lazard in January 1993 for consulting work. The work was done in 1992 when Armstrong was employed as a consultant to the bond bank and Lazard was an underwriter on bond bank debt issues.

The probe concluded that there was no apparent violation of state or local laws, but raised the possibility that Armstrong failed to disclose to the board a potential conflict of interest. In February, the bond bank board exonerated Armstrong and the following month he signed a new consulting contract that expires Dec. 31.

Armstrong, who created the Indianapolis bond bank in 1985 and served as its executive director until the end of 1991, has denied any conflict of interest in his dealings with Ferber. He has characterized the Lazard payment as reimbursement for expenses he incurred while working on deals not related to city government. Armstrong has been a consultant to the bond bank since 1992.

Goldsmith said that Armstrong "may not have a contract next year."

In addition to his displeasure with the lack of disclosure on Armstrong's part, Goldsmith said that Armstrong's current role with the bond bank may be diminished in the future.

The mayor said that the city has completed most of its major financings for the foreseeable future, including a $226 million general obligation bond issue for infrastructure improvements in 1993 and a $290 million bond refunding for the Circle Centre retail mall project in 1992. Armstrong's current responsibility at the bond bank is to monitor spending of money for capital projects.

Goldsmith said that only one o the five current bond bank board members may remain on the board when he makes his appointments known. The announcement will probably come next week.

The terms of four of the five bond bank board members, including chairman Larry Barrett, expired last month. All four members were appointed by former Mayor William Hudnut. The fifth, Bob Salyers, was appointed this year by Goldsmith.

Goldsmith, who took office in January 1992, said that the four members have served on the board "for a long time" and that he wants an opportunity to make his own appointments.

Armstrong and Barrett did not return phone calls.

Goldsmith said that even with new members, he envisions no "difference in the style" of the bond bank.

"I've made a lot of changes in the way we manage city government," Goldsmith said. "But I don't want substantial changes in the way we conduct public finance. I want continuity in that area."

The mayor said that he doesn't believe that the bond bank will have potential conflict of interest problems in the future like the one that occurred with Armstrong.

In February, Indianapolis' corporation counsel was instructed to draft a disclosure form for all the the bond bank's consultants. Jim Snyder, the bond bank's executive director and a special counsel to the mayor, said he will review the disclosure form with the new board once it is in place.

Indianapolis is one of several governments that received subpoenas for documents from the Securities and Exchange Commission and the U.S. Attorney in Boston in conjunction with ongoing investigations into Ferber's business dealings with several municipal bond issuers.

The investigation was sparked by revelations that Ferber maintained undisclosed fee-splitting contracts with Merrill Lynch & Co. while simultaneously acting as an independent consultant to the Massachusetts Water Resources Authority, which used Merrill as a swap counterparty.

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