Mark S. Ferber, the subject of several state and federal investigations, once remarked that a successful investment banker needed both political connections and technical expertise.

Without both, Ferber said, you were "either a geek or a hack."

Ferber, who may have been the highest-paid financial adviser in the country, practiced what he preached. His political network stretched across the country, and his loyal coterie of clients said he knew how to structure a winner of a deal. Even as an investigative storm surges around him, Ferber's clients and colleagues in the industry maintain that he was one of the hardest working bankers in the business.

He was also one of the most connected. It is not unusual in public finance for a banker to maintain a roster of contacts, but Ferber's circle seems unusually tight - as one banker put it, "the same names come up again and again."

In his 11 years in the municipal finance industry, Ferber established an amazing list of deals and an impressive portfolio of clients. During those years, he worked at four firms: Kidder, Peabody & Co.; CS First Boston; Lazard Freres & Co.; and First Albany Corp. Each time he moved, he kept one of the most loyal client bases in New England.

In a 1989 interview with The Bond Buyer, Ferber described client loyalty in terms of a doctor-patient relationship: "As far as why my clients come with me when I leave one firm for another, look at it this way: If a doctor you had grown to respect and trust left one hospital to go to another, would you stick with the hospital or would you follow the doctor?"

Ferber had an exceptionally nice practice. While an average banker might consider participation in 10 deals a successful year, Ferber typically did twice that. It paid well. At First Albany, he reportedly earned between $3 million and $5 million in salary.

Ferber said his role was to provide solutions to governmental inefficiencies. Bureaucracy, not his business practices, was the largest problem he saw facing taxpayers.

But earlier this year, Ferber's business practices became the focus of a withering examination by the Massachusetts inspector general. In an official report released earlier this month and addressed to all three branches of the Massachusetts government, inspector general Robert A. Cerasoli said that Ferber, while financial adviser for the Massachusetts Water Resources Authority, violated his fiduciary responsibilities to the authority and provided Merrill Lynch & Co. with an unfair advantage during that agency's syndicate selections.

For this information, Cerasoli said, Ferber received favorable allocations from unrelated Merrill Lynch-managed bond sales and was paid $1 million per year for three years by Merrill Lynch in a separate retainer agreement. Ferber was being paid by the authority for his financial advice and then, allegedly, paid again by Merrill Lynch for stacking the syndicate selection deck in their favor.

The state inspector general is now the least of Ferber's concerns. He is reportedly being investigated by the state attorney general, the U.S. attorney's office, and the Federal Bureau of Investigation.

Proving anything against Ferber will be extremely difficult, observers say, but they agree that his relationship with Merrill Lynch calls into question the ethical practices of the municipal market.

And the matter reaches beyond the market, the inspector general says, because the political favors needed to win bond allocations and syndicate slots cost Massachusetts taxpayers between $3 million and $11 million. When bankers pay to play, so do taxpayers.

Ferber received his earliest education at the knee of one of New England's savviest and most powerful politicians: William F. Bulger, president of the Massachusetts Senate.

Ferber joined his staff in 1978, the year Bulger became Senate president, and within three years became the Democrat's chief budget analyst.

From his job at the top of Beacon Hill, Ferber collected allies who still play prominent roles in the Massachusetts municipal finance spectrum.

One of them is Gloria B. Vokanas, director of administration and finance for the Massachusetts Port Authority. She worked for Bulger at the same time Ferber did.

When the time came for the authority to choose a new director, Ferber, now a banker, gave Vokanas the highest recommendation. In 1992, Ferber was named financial adviser to Massport, a $150,000 per year appointment.

While in state government, Ferber also met Robert A. Ciolek. Both were Democrats, and both would travel from public service to the more lucrative field of public finance.

Their friendship began in 1980 and continued as Ciolek, a former member of the state auditor's office, worked as Boston Mayor Raymond Flynn's chief fiscal and administrative services department head. Ciolek went on to become the executive director of the Boston Water and Sewer Commission and a member of the board of directors of the MWRA. He was also a member of the authority's underwriting and financial advisory selection committee.

The authority was charged by a federal judge in the mid- 1980s to finance the cleanup of the Boston Harbor and the construction of the Deer Island sewage treatment plant. It also provides water and sewer services for 43 communities in Massachusetts.

As financial adviser for two of the biggest projects in the United States, Ferber decided how and when to sell authority debt, vetted potential syndicate members, and later controlled bond allocations.

Ferber said that, in helping to choose syndicate members, he simply asked firms technical questions about their ability to structure sales. The inspector general's report says he added a second role: coaching Merrill Lynch on how to answer the questions.

In a telephone interview, Ciolek said that since a federal and state investigation is ongoing, it would not be prudent to comment on the matter.

Ferber's Democratic connection also helped land him his job at Lazard Freres.

During the mid- and late-1980s, Lazard's gentlemanly world of municipal finance was shaken up when the firm hired Michael DelGiudice to head the department. Lazard had long been considered one of the best financial advisory firms in the industry, but when DelGiudice took over the municipal group, the firm made a commitment to bring in some of the most powerful rainmakers in the industry.

DelGiudice, a longtime political player, was a delegate for Massachusetts Gov. Michael S. Dukakis at the 1988 Democratic Convention and served as the chief of staff and adviser to New York Gov. Mario M. Cuomo.

DelGiudice hired Ferber as a partner in 1988 to manage the firm's new Boston office. Ferber was given complete control of the office and was responsible for all of the business generated through the office.

Another of DelGiudice's hires was Richard Poirier, now under fire for his role in a New Jersey Turnpike Authority sale involving a politically connected firm, Armacon Securities. Armacon was owned in part by the chief of staff for New Jersey Gov. Jim Florio.

Once Ferber had his Boston office established, he began assembling his own team of rainmakers.

One of the best-connected was Raymond S. Dooley, former chief adviser to Mayor Raymond F. Flynn of Boston. Ferber had known Dooley since Ferber chaired a review board in 1984 to evaluate the city's fiscal shape. In a subsequent report to the mayor, Ferber's committee recommended that the city issue $50 million in bonds for various projects.

Flynn accepted Ferber's recommendation to issue the bonds and named Ferber's firm at that time - Kidder Peabody - senior manager on the deal.

Although Ferber's New England clients made up the bulk of his base, he was also able to turn several national contacts and relationships into profitable clients for his firms.

One of those relationships appears to exist in Washington, D.C., where Ferber has served as the financial adviser of the district since 1991.

In 1992 alone, Ferber earned almost $365,000 from the district in advisory fees.

Over the years Ferber has maintained a close association with Boston attorney Fletcher H. Wiley, a partner at Goldstein & Manello.

Ferber played an important role in securing a special counseling post at the MWRA for Wiley's former firm, Fitch, Wiley, Richlin & Tourse. As special counsel, the firm did a good portion of the work on the authority's preliminary official statements.

D.C. Mayors Sister

Although Wiley's practice is varied, he has kept a hand in local Boston politics. Currently, he is the president of the Boston Chamber of Commerce and has also served - at Mayor Raymond Flynn's behest - on the Economic Development and Industrial Corp. in Boston. Like Ferber, he served in state government in the late 1970s and early 1980s as head of the state Alcoholic Beverages Control Commission.

Wiley is married to Benaree P. Wiley, a member of the board of directors of First Albany Corp. and the sister of Washington Mayor Sharon Pratt Kelly. Wiley and Ferber began their tenure at First Albany at about the same time.

Last week Kelly rebuked two district councilmen who have called for an investigation into Ferber's contract with Merrill Lynch. The mayor said she was satisfied with an internal review of the agreement that was done by senior members of her administration. She had no further comment on the matter.

One of the members of that investigation was Ellen M. O'Connor.

O'Connor, deputy mayor for finance, is a transplanted Massachusetts resident who served for two years as chief budget director for former Gov. Michael S. Dukakis.

In her report to the mayor, O'Connor said that both Lazard and Merrill Lynch were exonerated of any wrongdoing because of an assurance from Lazard partner DelGiudice that, "none of the compensation Lazard received from Merrill Lynch pursuant to the contractual relationship was related in any way to services provided to the District of Columbia."

Councilmen John Ray and William Lightfoot have called for an end to the district's relationship with Merrill Lynch and Lazard Freres, and also told The Bond Buyer that they want O'Connor to resign.

Ferber's network extended beyond the eastern seaboard, as well. The Indianapolis Bond Bank, the States of Michigan and Wisconsin, the Michigan Department of Transportation, the Oklahoma Development Finance Authority, the U.S. Postal Service, were all clients of Ferber's firms at one time or another.

It also extended beyond the largest bond issuers and underwriters. One of his close associates is one of the wealthiest people in municipal finance, Alice L. Walton.

Walton is the president of the woman-owned, Arkansas-based municipal bond firm of Llama Co. She is also the daughter of the late founder of Wal-Mart, Sam Walton.

In 1992, Ferber took Walton on a tour of some of his clients and suggested to them that they use Llama as a woman-owned participant in their bond syndicates.

In two cases, Ferber's recommendation paid dividends for Llama.

In November 1992, Llama served as a co-manager for two deals in which Ferber was involved.

One of them was a $189 million Massachusetts Health and Educational Finance Authority revenue bond sale for Massachusetts General Hospital.

According to one source at the authority, Ferber brought Walton in to both the hospital and the authority for a visit. Although Lazard Freres was not the bookrunner on the deal. Ferber was responsible for Llama's addition to the syndicate, the source said.

Llama's appearance in the syndicate was the first time they had been part of a deal in Massachusetts.

The source said that Massachusetts General Hospital wanted Llama in the syndicate not because of the firm's proficiency at distributing bonds, but because they hoped to have Walton become a benefactor to the hospital.

Walton did not return telephone calls, and the hospital's policy is to keep their list of benefactors confidential.

But Ferber's connection to Arkansas runs deeper than just Walton.

Another of his associates in the state was Wooten Epes, a partner at the law firm of Kutak Rock, and former head of the Arkansas Development Finance Authority. Epes, who was at one time a close adviser for then-Arkansas Gov. Bill Clinton, helped Clinton establish the finance authority and was its first executive director.

Both Clinton and Epes went on to serve on the Anthony Public Finance Commission, established by then Rep. Beryl F. Anthony, D-Ark., to champion issuers' rights.

Ferber received $150,000 as the financial adviser for the authority in 1989. A spokesman for the authority said the contract between Ferber and the authority was terminated after a year because officials there did not think they were able to best utilize Ferber's skills.

Ferber also successfully shopped Walton's firm to Indianapolis officials. Jim Snyder, the city's director of strategic and financial planning. said Ferber brought Llama to the city's attention in 1992.

Snyder said Ferber introduced Walton to him and to Mayor Stephen Goldsmith. He said the city was looking for woman-owned firms to include in deals.

"We did meet with Mrs. Walton," Snyder said. "Her firm is a qualified woman-owned firm, and there are not that many out there."

He said that knowing Walton and her firm through Ferber helped in making the decision to include Llama as a co-manager in a $290 million bond refunding the city sold through the Indianapolis Local Public Improvement Bond Bank in November of 1992. Lazard was the senior manager on that deal.

Snyder said he recommended the team for the deal to the bond bank board and to Goldsmith, and that Lazard was not involved in that process. Snyder is also executive director of the bond bank.

Lazard's Fees

Lazard meanwhile, was paid $2.268 million in management fees, takedown, and underwriter's expenses for the deal, which involved the refunding of 1988 bonds backed by tax increment financing revenues that had been issued to help build Circle Centre, a retail mall development in downtown Indianapolis.

Snyder said that Lazard was selected to head that deal because it had been the senior manager on the original 1988 bond issue.

"We needed to stick with people that knew that transaction," he said.

Snyder said the fee paid to Lazard for that deal was one of the lowest per bond fees paid by the city.

Once Ferber and Kenneth Gibbs left Lazard for First Albany last January, First Albany was included the next month in a $226 million GO bond issue Indianapolis sold in February through the bond bank. While First Albany was a co-manager for the deal, along with eight other firms, it was given a 6% to 7% higher allocation of bonds than those firms.

Snyder said First Albany was given a higher percentage of bonds because of "the longstanding relationship" between the city and Ferber and Gibbs.

Snyder said the work they had done for the city "had been outstanding and we wanted to recognize that contribution."

In particular, Snyder said Ferber and Gibbs had crafted a debt plan for Indianapolis to use during the transition between the administration of long-time Mayor William Hudnut and Goldsmith, whose administration took office in January 1992.

The senior manager on the GO bond deal was Merrill Lynch.

Snyder said First Albany was selected by the city and the bond bank and not by Merrill Lynch. He said he had no knowledge about any kind of relationship that may have existed between Ferber and Merrill Lynch.

"Lazard was never directly a [financial adviser] in Indianapolis," Snyder said. "As far as looking for any side deals, there's nothing to look at in our opinion."

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