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News: Analysis & Commentary: FINANCE
MIAMI HEAT ON A MUNI-BOND FIRM
The feds probe Grigsby Brandford's dealings with Dade County
Calvin B. Grigsby powered his way through the municipal-bond world. A well-connected lawyer, he pioneered the issuing of public bonds that didn't need voter approval, turning the firm he founded in 1981, Grigsby Brandford & Co., into one of the leading minority-owned municipal-bond houses. This year alone, it has been senior underwriter in $1.1 billion worth of issues.
But federal investigations into public corruption and the muni-bond business in Miami threaten to bring down Grigsby Brandford--and could implicate others. Grigsby resigned as chief executive on Sept. 17, then dropped from public view. On Oct. 1, the firm's chairman, Napoleon Brandford III, and its new CEO, Suzanne Shank, announced they would join rival Muriel Siebert & Co. Although the firm still is operating, other defections are likely.
While Grigsby cited personal reasons for his resignation, his departure and his firm's rapid descent parallel an ongoing federal grand jury probe into municipal-bond dealings in Miami. On Sept. 18, the grand jury subpoenaed records from Dade County and testimony from three county administrators regarding the role of Grigsby Brandford in at least four separate municipal-bond issues.
Federal investigators are focusing on the connection, first reported in The Miami Herald, between Calvin Grigsby, Dade County Commissioner James Burke, and another municipal-bond firm owner, Howard V. Gary, and on possible improprieties in a deal involving the three men. Celebrity defense attorney Johnnie L. Cochran, retained by Grigsby on Sept. 24, issued a statement that Grigsby has not been charged and "is not only presumed innocent but strongly maintains his innocence." Brandford, Shank, and other Grigsby Brandford employees have not been implicated.
Grigsby Brandford's travails reflect grim times for minority-owned municipal-bond firms. Amid severe industry competition, several have suffered from notoriety surrounding government investigations. Some also say they have been hurt by a 1994 Securities & Exchange Commission decision to restrict muni-bond firms' political contributions and by attacks on affirmative-action programs.
The Miami investigation appears to focus specifically on a $183 million industrial-development-bond refinancing on Aug. 29 by Montenay Power Corp., the operator of a county-owned resource-recovery plant. Federal authorities have a videotape of a dinner meeting on Aug. 25 at the Mark Hopkins Hotel in San Francisco between Grigsby, Burke, and Gary. At that meeting, the Herald reported, Grigsby and Burke allegedly discussed a $300,000 payment to Burke. No one at Montenay has been implicated.
Burke denies that kickbacks were discussed. "The interpretation of the tapes [is] misleading," Burke said in an interview with BUSINESS WEEK. "This is basically Howard Gary's conversation, Howard Gary's orchestra." Gary, says the Herald, agreed to cooperate with authorities after being implicated in a separate corruption case. Gary refused to comment or to provide the name of his attorney. Two days after the dinner meeting, though, Grigsby discussed with Dade County's finance department his request for a $600,000 "structuring fee" for extra work done by his firm, in addition to the $943,206 that Grigsby Brandford would earn on the bond sale.
Burke, who participated in the call, says Grigsby's request is reasonable. But Dade County Finance Director Edward Marquez calls it "unusual." Typically, such fees, if paid at all, are negotiated earlier. The fee has not been paid.
Federal investigators also have requested records of "any underwriting firm" for which Burke lobbied for inclusion or for a higher level of participation in county deals. Burke denies any improprieties. "There have been no payoffs," Burke said in an interview. "I didn't do anything illegal." He concedes, though, that he has hired a criminal defense attorney and is not taking the investigation lightly. Neither, apparently, is Calvin Grigsby.By Gail DeGeorge in Miami, with Andy Reinhardt in San Francisco and Leah Nathans Spiro in New YorkReturn to top