Federal authorities have subpoenaed several municipal bond firms seeking information about their business ties to Essex County, N.J., according to sources familiar with the investigation.
The request is apparently part of a widening federal probe of Essex County government officials, including county executive Thomas D'Alessio and a prominent New Jersey bond consultant, John M. Alati. Alati is a former county official and currently a consultant for A.G. Edwards & Sons Inc., which is one of the firms that has been subpoenaed in the case.
According to sources familiar with the investigation, other firms that have been subpoenaed include Chapman Co., Chemical Securities, W.R. Lazard, and R.D. White Glaves & Co. A spokesman for First Fidelity Bank Corp. said First Fidelity has also been asked to provide information in the investigation.
The firms have been requested to "appear and testify" before the U.S. District Court in Newark, N.J., today. The firms also have been told to provide:
* All correspondence and memoranda to or from Essex County government.
* All documents, records, correspondence, and memoranda pertaining to bond financing in Essex County or any Essex County government authorities, including the Essex County Improvement Authority and the Essex County Utilities Authority.
* All correspondence and memoranda to, from, or about John M. Alati.
* All records of payment or contributions, including canceled checks, made to Essex County government officials or John M. Alati.
* All records of payment, including canceled checks, to consultants for procuring bond underwriting work in Essex County.
The requests, cover the period from Jan. 1, 1989, to the present, according to a copy of a subpoena obtained by The Bond Buyer.
The district attorney's office declined to comment on the subpoenas.
"I cannot confirm or deny whether there's an investigation," said James B. Nobile, assistant U.S. attorney for the district of New Jersey, whose name appears on the subpoenas. He declined to comment further.
Alati was chief of staff to former Essex County executive Nicholas Amato. Alati also has close ties to county executive D'Alessio, market sources said.
A secretary with A.G. Edwards' office in Newark referred calls for Alati to John Alati & Associates in Montclair, N.J. Alati, who is president of the firm, could not be reached for comment.
"A.G. Edwards has been subpoenaed," said Lynn Greenwood, a spokeswoman. "But we have been assured that we are not a target of the investigation."
Typically, no one is named a target of investigations this early in the process, say sources familiar with the U.S. Attorney's Office.
Paul Levine, a spokesman for First Fidelity, said in a prepared statement, "There is an investigation into this matter and we have been contacted in connection with the investigation. We are cooperating fully."
Howard Glaves, chairman and chief executive officer of R.D. White Glaves & Co., confirmed his firm was subpoenaed. He said the firm has not done any work in Essex County but responded to a request for proposals issued by the county earlier this year.
An official with Chapman in Baltimore also confirmed that that firm had received a subpoena.
A spokeswoman for Merrill Lynch & Co., which participated in a 1988 general improvement financing for Essex County, said the firm does not comment regarding subpoenas or other requests for information from federal authorities. Officials at Roosevelt & Cross Inc., which also participated in the 1988 financing, said the firm has not been subpoenaed.
A.G. Edwards ranked as the top senior manager of short-term municipal note underwritings in New Jersey for the period from Jan. 1, 1993, through Sept. 13, according to Securities Data Co. The firm worked as lead manager on six note issues this year, totaling $156.1 million. The firm handled all 16 note deals totaling $424 million that Essex County sold during the period specified in the subpoena.
In 1989, Ehrlich-Bober & Co. was the top underwriter of New Jersey note issues. A.G. Edwards did not do any senior management work on note deals in the state that year.
A.G. Edwards ranked third for the same period for long-term New Jersey securities, working as senator manager on 41 issues totaling $538 million. The firm did not serve as senior manager of any long-term bond deals in New Jersey, in 1989.
Over all. A.G. Edwards ranks 12th among senior managers of municipal underwritings through Sept. 15, 1993, according to Securities Data Co. In a senior managers role. A.G. Edwards worked on 207 issues totaling $2.89 billion. The firm also ranked 20th among co-managers of tax-exempt offerings.
Municipal underwriters that have done work for Essex County since 1989 include A.G. Edwards, M.R. Beal & Co., Bear Stearns, Chapman, Chase Securities, First Boston Corp., First Fidelity Securities, Kidder Peabody, Lazard Freres, PaineWebber, Powell Capital Markets, Ryan Beck & Co., and W.R. Lazard & Co.
At a county freeholders' meeting earlier in this month, Essex County adopted a new form of selling bonds similar to Gov. Jim Florio's executive order No. 92, which bans negotiated underwriting by the state and its authorities for most deals, said a county official who asked not to be quoted by name.
The official said "a day or two" after the meeting, the county executive got subpoenas from the U.S. Attorney's Office demanding information on county bond deals covering the "past number of years."
Michael Critchley, D'Alessio's personal lawyer, said the new subpoenas are part of a two-year "campaign of harassment" launched by the U.S. Attorney's Office, which is investigating the county executive.
D'Alessio is reportedly awaiting trail on federal charges of campaign fund abuse, extortion, and money laundering. He will appear in court on Nov. 7, Critchley said. "[D'Alessio] is a trophy," Critchley said. "These subpoenas are becoming random."
