Erie County Comptroller Nancy A. Naples and her aides carted boxes upon boxes of paperwork to a panel of legislators Wednesday to convey the volume of work involved each time the government borrows money.
Then she began a patient discourse on how she selects bond underwriters, delaying questions about why 80 percent of the business since 1994 has landed with one politically connected manager.
"Mr. Chairman," she said to Legislature Chairman George A. Holt Jr. when the Buffalo Democrat said it was time for questions, "is it my understanding you don't want me to explain the process?"
Holt struck a compromise. Naples and one of her key aides could continue explaining the complexities of borrowing money -- assessing proposals from underwriters, negotiating the terms and the timing, selling bonds as IOUs to investors -- if she would return Friday morning for questions.
She agreed to arrive at 10:30, indicating that she'll correct any implication that she's failed to strike the best deals for taxpayers, and that she will not sit by if the Legislature removes her authority to negotiate with underwriters in the future.
The County Legislature extends to Naples the power to negotiate the best deal rather than simply taking the lowest bid. In this busy year for borrowing, she's asking that her authority be extended. In March, she borrowed $80 million to provide short-term cash and will need to borrow another $170 million for government operations in coming months.
Holt said Erie County faces a new day, when it may no longer need to negotiate its bond deals with a select group of underwriters if it can simply select the best bid.
He said he had just read a report in the January issue of Bloomberg Markets magazine, which concluded taxpayers nationwide have been the losers as their governments stray from competitive bidding to negotiate bond sales, which allows fees to slide up or down as conditions change. A state audit in Missouri, the magazine said, found taxpayers there could have saved $83.2 million if all the loans examined had been secured competitively.
Erie County rarely uses competitive bids. When Naples and her staff borrow money for government needs, they solicit offers from seven to nine underwriting firms, they explained, then negotiate the best terms.
She said that gives Erie County more flexibility to borrow money as the market changes, and it creates a partnership between the county and the underwriters who connect the government with the always-changing bond market.
When the Legislature's Finance and Management Committee recessed Wednesday, Naples told The Buffalo News she hasn't always taken the least-expensive deal because there are other factors. "I took the best deal for the county," she said.
In roughly three of every five bond deals since taking office in 1994, Naples selected investment firms employing Paul Atanasio of New York City, who donates generously to Republican causes and is active in the Conservative Party, which gave George E. Pataki the lift he needed to defeat Mario Cuomo for governor in 1994.
Atanasio was one of just four municipal finance officials named to Pataki's transition team, and when he left Chemical Securities for Bear Stearns in 1996, the state's business, as well as Erie County's under Naples, continued to gravitate to Bear Stearns. It didn't hurt, as the Village Voice newspaper reported in July 1996, that Bear Stearns was employing a son of Pataki ally Alfonse M. D'Amato, a U.S. senator at the time.
While the firm was barred from donating on a large scale to Pataki, 29 of its employees donated $26,000 to D'Amato in 1995, the newspaper reported. It said that while Bear Stearns was selected as senior manager on only one offering in the final three months of the Cuomo administration, it was selected six times in a three-month period the following year, under Pataki.
Meanwhile, in Erie County, Naples would select Bear Stearns for seven of her next 11 deals, and the county's business followed Atanasio when he moved to UBS Financial Services in 2003.
Since 1994, when Naples took office, she has selected firms employing Atanasio as lead underwriter on 14 of 24 loans and 80 percent of all money borrowed. Eight other firms shared the remaining 10 issues.
For their services, underwriters charge a fee for each $1,000 bond sold, and their profit can run into the tens or hundreds of thousands of dollars, depending on the size of the transaction. To make sure they're noticed, underwriting firms donate often to partisan causes, Republican and Democrat, though Atanasio leans toward Republican and Conservative party efforts.
Naples calls Atanasio "extremely well qualified and respected in his field."
He maintains a close friendship with New York's powerful Conservative Party chairman, Michael R. Long of Brooklyn.
Long told The Buffalo News that he and Atanasio have been friends since 1980, when Atanasio ran for Congress in a metropolitan New York City district and, with Republican, Conservative and Right-to-Life backing, almost unseated an incumbent Democrat.