By Ryan Yousefi
By Chuck Strouse
By Terrence McCoy
By Terrence McCoy
By Terrence McCoy
By Michael E. Miller
By Kyle Munzenrieder
By Michael E. Miller
In the world of bond underwriters, the distinction between employee and consultant is extremely important. Under state law, as well as federal rules governing financial institutions, bond firms are required to disclose -- before any bonds are sold -- the names and fees paid to consultants, lobbyists in particular. Douglas James Securities, however, never made such a disclosure regarding Daryl Jones.
In Florida, failure to report the work of a consultant in a bond deal constitutes a third-degree felony. And under federal guidelines established by the Municipal Securities Rulemaking Board (MSRB) -- the agency created by Congress to establish procedures for the industry -- failure to disclose a consultant is a violation of Rule G-38 and can carry myriad sanctions, from a written warning to the suspension of an underwriter's license.
Christopher Taylor, executive director of the MSRB, says the disclosure requirements were instituted over the past five years in an effort to restore public confidence in the bond business. "For several years now there have been concerns about the role political influence has played in the process," Taylor explains. "Too often we were seeing across the country that business was not being awarded on the proper basis of qualifications but rather based on a firm's political influence. By establishing these rules we wanted to make sure that people were aware when consultants were being hired. We wanted to bring it into the open."
Nowhere has the public's confidence been tested more severely than in Dade County. For years politicians and municipal bonds have been inextricably linked by allegations of wrongdoing -- from the FBI investigation of Commissioner Joe Gersten's stranglehold on the local bond business in the early Nineties to the indictment earlier this year of Commissioner James Burke, his chief of staff Billy Hardemon, and California investment banker Calvin Grigsby in what federal authorities say was a brazen bonds-for-kickbacks scheme.
Well aware of local history, both Daryl Jones and Craig James say they have been extremely cautious in their business dealings. "I've tried to stay on the straight and narrow," Jones reports. "I've tried to make sure that everything I did was ethically correct." Adds James: "Everything we've done in this business vis-a-vis Daryl Jones has been over the top in terms of caution to make sure there were no perceived conflicts of interest or any allegations of impropriety." For instance, Douglas James Securities has participated in several projects with the state's Housing Finance Administration, but Jones says he has not been involved in lobbying on those issues because of the potential for a conflict of interest with his role as a legislator.
In 1995 Douglas James was hired by security giant Wackenhut to be part of a team of underwriters that would issue $42 million in bonds to finance construction of a new, privately run prison near Lake Okeechobee. A year earlier in the Senate, Jones supported a measure authorizing the 1300-bed facility. Once again, though, he claimed there was no conflict because he was not involved in lobbying the state prison officials who awarded the contract to Wackenhut.
Mindful of ethical correctness, on February 17, one day after repeatedly insisting that he had worked for Douglas James Securities as a consultant, Jones contacted New Times to say he had been mistaken. "I thought I was a consultant, but I'm not a consultant," he said. "I came to the conclusion today that I am a quote-unquote employee."
Jones explained that he did not receive a weekly paycheck from Douglas James Securities last year and so had been thinking in "legal terms" when he described himself as a consultant. "I was trying to answer your questions [yesterday] when I really wasn't sure of the answers," he explained.
Pressed to clarify the terms of his employment, Jones directed further questions to Craig James. "He is going to have to explain all of those distinctions to you," he allowed. "I just don't know every SEC rule."
In a subsequent interview, James said that if Jones initially described himself as a consultant, he was wrong. Jones, he insisted, was an employee: "He was a nonsalaried, commissioned, registered representative."
If he had hired the state senator as a lobbyist, James went on, he would have disclosed that fact as required. "Our point is that we did no lobbying," James declared. "There was nothing to lobby." Jones's own contention that he was in fact hired as a lobbyist elicited this response from James: "Well, you're talking to me and I'm telling you what happened." He and Jones, in a series of private meetings with commissioners and county staff, merely presented the facts regarding his firm's qualifications. "That's not lobbying," James insisted. "We did not lobby to get this deal. This deal belonged to us and [Bear Stearns] tried to take it away." (Further contradicting James's assertion is the fact that Jones registered with the county clerk's office as a lobbyist for the bond issue, although he did not list Douglas James Securities as his principal client.)
Definitions of lobbying aside, the core question remains: Was Daryl Jones a bona fide employee of Douglas James Securities last summer? In addition to Jones's original statements describing himself as a consultant, other evidence indicates he was not a regular employee: