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PANEL TO QUIZ NAPLES ON FAVORED UNDERWRITER
SELECTION OF GOP BACKER IS FOCUS OF LEGISLATORS

A panel of Erie County lawmakers will ask County Comptroller Nancy A. Naples to explain how she selects bond underwriters and why one politically connected finance official has received the bulk of the county's work during Naples' years in office.

"Due to the legalities involved and a lot of the issues that have been pointed out, she might get a lawyer," said Finance and Management Committee Chairman Demone A. Smith, D-Buffalo. "But we would like to hear her side of it."

Smith said he will invite Naples to the panel's next meeting, probably next week, or ask if a special session should be scheduled for her.

"It's certainly the Legislature's role," said Legislator Albert DeBenedetti, D-Buffalo, the panel's former chairman, who expects to sit in to quiz Naples. "In a system of checks and balances, somebody's got to keep an eye on the so-called watchdog."

Smith also had invited Naples to appear before the committee Monday to answer questions about her handling of this year's spring borrowing, among other subjects. But she canceled minutes before the start and sent a letter instead.

County records show that since Naples took office in 1994, she has given roughly three of every five bond deals to firms employing Paul Atanasio of New York City, who donates generously to Republican causes, has served Gov. George E. Pataki on two panels and has a friendship with state Conservative Chairman Michael R. Long of Brooklyn.

Atanasio has given to a political action committee that donated $10,000 to Naples' congressional campaign last year. And his mother in Queens County gave a Naples committee $1,000 in 2001, though an industry rule bars underwriters or their conduits from giving to candidates with whom they do business but for whom they cannot vote.

Atanasio's 14 deals over the years involved $1.1 billion in borrowing, 80 percent of Erie County's $1.4 billion in business from 1994 to present. Under Naples, Erie County's business followed Atanasio as he moved through three underwriting firms over the last 11 years. "We have never had a problem with any of the offerings we have done," Naples told The Buffalo News, explaining why many of the deals she negotiated involved Atanasio. "We know we can work with his people at various firms. . . . This is not an unusual way to do business."

Naples so far has not provided documents The News sought March 10 under the state Freedom of Information Law to determine whether she consistently selected the underwriter offering the lowest cost over the last 11 years. Naples said she lacks the staff to process the request.

In one deal for which records are available -- the $246 million borrowed so the county could have its tobacco settlement money all at once -- Naples selected the firm employing Atanasio though its structuring fee totaled $500,000 more than what a comparable firm would have charged.

Naples did not return telephone messages Wednesday. But in a written statement, she repeated information contained in The News article that day: An independent adviser determined that Atanasio's firm -- Bear Stearns at the time -- was worth the higher fee. The advisory firm's two officials had averaged out Bear Stearns and Salomon Smith Barney equally, but Bear Stearns went on to take the lead position.

In her statement, Naples called Atanasio "an underwriter extremely well-qualified and respected in his field." And while he got three of every five deals, she said, "this situation is nothing like the administration's furniture fiasco."

Naples was referring to a finding published in The News in the fall of 2003 showing that County Executive Joel A. Giambra had bought $2.5 million in government furniture from a company run by his best friend and chief fund-raiser, James J. Spano.

She said the fact that two of every five bond deals went to underwriters other than Atanasio "speaks to the fairness and impartiality with which I have made these decisions."

Speaking on WBEN radio early Wednesday, Naples said she has not decided whether to seek re-election this year. However, in January she told The News, "I fully intend to run again."

And in a news conference held March 29 to apologize for the fact that she and her husband had paid their county property taxes late in five of the last seven years, she said her decision on seeking a fourth term had not changed.

Meanwhile, a spokesman for state Attorney General Eliot L. Spitzer, when asked Wednesday whether the staff will investigate how Erie County selects its underwriters, repeatedly said, "We do not confirm or deny the existence of an investigation because it hampers our ability to do them."

Giambra two weeks ago asked Spitzer to investigate Naples' handling of this year's $80 million short-term loan and whether she delayed it so the business could be given to Atanasio.

e-mail: mspina@buffnews.com