Flying High

Before heading off to Washington for confirmation as Secretary of the Air Force, State Sen. Daryl Jones got involved in one last bond deal. The money was very good, but the backwash could be very bad.

It was considered the deal of the year. In order to finance the ongoing expansion of Miami International Airport, county commissioners needed to issue $200 million in bonds and were looking for an underwriting firm to oversee the transaction. The lucky winner could expect to earn hundreds of thousands of dollars in fees.

County officials turned to their list of underwriters to see which firm was next in line according to a rotation system. In 1995 the county established this system in an effort to take politics out of the selection process, which in previous years had been scandalized by allegations of influence peddling. But when financial experts reviewed the rotation schedule, they discovered that the next firm due to manage a bond deal was Douglas James Securities, a small Miami Beach-based company that had never handled such a large sale. Up to that point, the average size of Douglas James's deals had been just $13 million; the largest it had ever handled was $45 million.

The county was worried about Douglas James's limited experience and its ability to consummate the bond sale according to requirements. Among their specific concerns was the fact that Douglas James had a sales force of only four people. In addition, the county believed that the company did not have enough capital. As the senior manager of the deal, Douglas James would be required to provide a guarantee: If the firm was unable to sell the bonds to third parties, it would buy the bonds itself. Based on the company's financial records, it seemed clear such a guarantee would be impossible.

In July of last year the Manager's Finance Committee met to discuss its options. The MFC is composed of senior county staff and outside financial advisers who regularly counsel the county manager. Based on their apprehensions about Douglas James Securities, committee members voted unanimously to recommend taking control of the deal away from Douglas James and awarding it instead to the next company in the rotation -- the much larger and more established Wall Street firm of Bear Stearns.

That recommendation was forwarded to the county commission. To Craig James -- founder of Douglas James Securities -- the prospect of being pushed aside was simply unacceptable. His firm was qualified, he would argue. Executives from Bear Stearns, he charged, had planted doubts in the minds of MFC members about his ability to manage a major bond deal. "This was just Wall Street hardball," James recalled in an interview last week. "Bear Stearns knew that if they knocked us out they would get the deal, they would be next in line. I can't fault them for that. That's the way the business is."

For the 36-year-old Ohio native, the bond business is also about fighting back -- which is what he vowed to do. So before the finance committee's recommendation came to the full county commission for a vote, James turned to his friend Daryl Jones, the popular state senator from South Dade, whom President Clinton has nominated to be Secretary of the U.S. Air Force.

From April 1994 through August 1996 the Democratic senator was an employee of Douglas James Securities. In fact, Jones was the person who had persuaded Craig James to move his firm from Tampa to Miami. And it was Jones's lobbying of county commissioners in 1995 that landed Douglas James a coveted spot on Dade's rotating list of bond underwriters. "I worked hard on that," Jones says with pride, "and superior skills and techniques prevailed." The next year, 1996, Jones left the firm in order to devote more time to his duties as a state senator.

But when Craig James found himself in need of assistance and called him back to active duty last summer, Jones didn't hesitate. "He just needed a little more help," Jones recalls. "And certainly I'm an asset when it comes to landing deals."

Today James explains the situation this way: "When all this shit started happening, with everybody saying, 'These guys aren't qualified, they can't do it,' we put together our best team and said this was not fair."

Daryl Jones describes in a single word the role he played. "Lobbying," he says flatly. "They don't just give you these deals. You have to talk to everybody -- to staff, to the Manager's Finance Committee, to commissioners."

He adds that he was not involved in other activities normally associated with a municipal bond deal -- drafting documents, computing prices, lining up potential buyers. His role was simply to lobby. "Securing the deal," he repeats, "is the toughest thing to do." James continues: "When we had the opportunity to present our facts and all these objective people [county commissioners] looked at it, they said, 'This is their turn. They're covered. Give them their chance.' That's what happened."

This past July 22 county commissioners -- ignoring the advice of Dade's own experts -- voted unanimously to select Douglas James Securities to oversee what would be one of the biggest county bond deals of 1997. Several commissioners expressed the sentiment that smaller firms needed to be given opportunities to perform bigger jobs, otherwise those companies would never be able to grow and compete with Wall Street giants.

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