Ack-Ack Over Washington

The county commission eventually sided with Jones and selected Douglas James. The bonds were sold in October, and Douglas James earned nearly $300,000 in commissions, from which Jones was paid $90,000. The incident raised questions regarding the possibility that Jones traded on his name and political office for personal financial benefit.

Sitting at his computer, Lissack read that several senators had also questioned whether Jones and his firm violated SEC rules governing bond transactions. Under those rules, companies that hire consultants and lobbyists are required to disclose that fact. Douglas James never listed Jones on any of the required documents as a lobbyist or consultant. Recalls Lissack: "My reaction was, 'Good questions, wrong jurisdiction.'"

Few people understand the arcane laws and regulations governing the world of municipal finance as well as Lissack, who worked as a senior banker in Smith Barney's public finance department for thirteen years. Outspoken and brash, Lissack now bills himself as a professional whistle blower in the bond industry.

He is also highly controversial. Several years ago, while working at Smith Barney in New York, he was accused of misleading Dade County about how much money it would save on a particular bond transaction. As a result, Smith Barney was forced to refund to the county nearly six million dollars; Lissack was slapped with a $30,000 fine by the SEC and barred from working in the finance industry for five years.

Lissack may be out of the business, but it is never very far from his mind. After reading the stories about Jones, he called several high-ranking staff members on the Senate Armed Services Committee, including Peter Levine, Democratic counsel for the committee, and Les Brownlee, Republican staff director. Rather than dwelling on SEC rules, which are administrative, Lissack suggested that they look at Florida law, specifically statute 218.386, which makes it a third-degree felony for a bond firm to pay someone who is not a "regular employee" for helping drum up municipal bond business. (Joe Centorino, head of the Miami-Dade State Attorney's public corruption unit, says he is aware of the allegations against Douglas James Securities. "We are reviewing the information that's available," he notes without elaborating.)

If the firm violated this statute, Lissack contends, then Jones could be accused of violating federal money laundering laws because he received the proceeds of a felonious act. Lissack says the staff members he talked to were taken aback by this prospect and claimed it hadn't been covered in the original FBI background report. "I was reassured that the info would be referred to the FBI and that committee members would take this into account when they questioned Jones in executive session," Lissack says, adding that he could even imagine a scenario in which a federal independent counsel would need to be appointed to investigate Jones if he is confirmed.

Sources on the committee acknowledge that Lissack spoke at length to Levine and Brownlee and that his information is being reviewed. They caution, however, that senators are unlikely to give much attention to the possibility that Jones could be guilty of money laundering. Two former federal prosecutors also thought it highly unlikely that Jones could be prosecuted for receiving his $90,000 fee.

Lissack, though, remains undaunted. On Monday he launched a Website in opposition to Jones's nomination: www.rtheycrooks.com.

Rule G-37
JONES: I was actually trying to be too honest.
WARNER: I beg your pardon?

JONES: I was actually trying to be too honest. What I was trying to do was create a distinction.

During his confirmation hearing, Jones told senators that he made a mistake when he told New Times he was a lobbyist and a consultant for Douglas James Securities, not an employee of the firm. "What I had done in speaking to a reporter was use a common-sense word," Jones said. "Instead of that word [employee], I used the word consultant. I apologize for not using the right term."

Jones now contends he was an "employee" of the firm, and therefore the firm did nothing wrong in hiring him and not disclosing his fees. As he tried to explain to Warner, he was attempting to distinguish between his most recent stint with Douglas James in 1997 (when he was hired to secure the $200 million county bond deal) and his original tenure with the firm, when he worked there from 1994 to 1996. "When I was with the firm the first time, I was certainly an employee," he told the committee. "I received a regular paycheck, taxes and SSI were taken out." He said he received a W-2 tax form each year.

But when he came back for the bond deal, things were different. "I wasn't present at the firm on a regular basis," he told the senators. He also did not have taxes or SSI withheld from his check. And instead of a W-2, he received a Form 1099, which is used for people who work on a contract basis.

Jones told the committee he is still uncomfortable calling himself an employee of the firm but claims that under SEC rules, he was an employee.

Assuming that Jones is correct -- and the SEC has yet to make that determination -- his testimony before the Armed Services Committee could spell additional trouble for him and for Douglas James Securities.