A powerful New Jersey lawmaker this week blasted state Treasurer Samuel Crane for not releasing details of the fees earned by Lazard, Freres & Co. on a $1.8 billion state refunding issue last December.
Assemblyman Rodney Frelinghuysen, R-Morris, said he found Crane's lack of response to repeated requests for the information "appalling," and said as a result he will call legislative hearings to review state bonding practices.
"It's a sad commentary that Gov. Florio's treasurer appears to be withholding information from the Legislature," Frelinghuysen, who is chairman of the Assembly Appropriations Committee, wrote in a letter to Crane Monday.
"The public can only conclude that ongoing federal investigations are rightly focused on this administration's past bond sales and related events," Frelinghuysen said, referring to a federal probe of various state turnpike authority bond deals.
If necessary, Frelinghuysen said he will ask the full Assembly for subpoena powers to force Crane or "any public or private individuals or companies involved in bond issuance matters" to testify at his proposed hearings.
A spokeswoman for Gov. Jim Florio, a Democrat, called the Republican's attacks on the administration politically motivated. Florio is up for re-election in November.
The spokeswoman, Audrey Kelly, said that within the next two weeks Florio and Crane plan to release the information in a formal report on every bond deal the state has sold since Florio took office in 1990. She said the report would, among other things, detail fees earned by all the firms involved in the various transactions.
Recent press reports, including an article in May in The Wall Street Journal, said Lazard earned $10 million in fees and profits on the $1.8 billion refunding. But Robert Lurie, director of public finance for the state, said yesterday that the entire spread on the deal was about $12 million to $13 million, and Lazard did not take $10 million of that sum.
Lurie also said there is no way to know how much Lazard privately earned on its contract to reinvest proceeds on the state's behalf, but he said it was unlikely that the amount could have brought the company's total haul near the $10 million figure.
The state's public finance chief also rejected criticism of the decision to award the reinvestment contract to Lazard without requiring competitive bids. Some state officials, including Roland M. Machold, director of the division of investment, have characterized that decision as a break with past policy. But Lurie said New Jersey has no formal policy about competitive bidding on such contracts, especially since the use of reinvestment contracts is a relatively new phenomenon associated with negative arbitrage.
A spokeswoman for Lazard declined to comment.
Administration officials and other sources have said Lazard turned over fee information to state officials several months ago. But Kelly said the delay in preparing the report came when Florio's chief of staff, Richard L. Wright, expanded the scope of the review to include every bond deal New Jersey has sold under Florio's reign, rather than just Lazard's $1.8 billion refunding.
Other administration sources say that it is in the best interests of the governor, who is in the middle of a close race for re-election, to get the information out as quickly as possible. That way, any controversy that results would be allowed to run its course well ahead of the election, they say.
The hottest election issue currently involves accusations that Florio's Republican opponent, Christine Todd Whitman, is using family farms as a tax shelter. Kelly, Florio's spokeswoman, suggested Frelinghuysen's attack is an attempt to deflect public attention from that issue.
"If [Frelinghuysen] were truly concerned with improving the bond process here in New Jersey, he would be urging his colleagues in the Legislature to pass the bills Gov. Florio supports that put competitive bidding requirements on local and county governments and would ban political contributions from bond houses," Kelly said. "Instead, he's borrowing a page from Ms. Whitman's campaign playbook, which amounts to criticizing policy but offering no solutions."
Kelly said that comparisons between Florio's bond issues and those of his predecessor, Republican Tom Kean, show the state is now spreading its business among a wider range of firms and spending less on fees.