By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
By Jeff Balke
Since his first election four years ago, Mayor Lee P. Brown has continually proclaimed his administration's commitment to high ethical standards. However, that hasn't stopped him from going to bat repeatedly for one good buddy seeking city business.
When City of Houston finance officials and Controller Sylvia Garcia's staffers worked out the underwriting teams last month for upcoming city bond issues, they recommended Jackson Securities for only one small assignment. Owner Maynard Jackson is the former Atlanta mayor who appointed Brown top cop in that city in the '70s and remains his close personal friend and political adviser.
Jackson Securities wasn't certified then by the city's Minority Women and Disadvantaged Business Enterprise program, which qualifies minority firms for mandated contract roles. But hey, no sweat. When you've got a pal at the top, MWDBE barriers have a way of evaporating.
After an unusual delay in approving the underwriting teams, the final list by Brown's staff suddenly had Jackson Securities participating in two bond deals -- a $250 million water-and-sewer refunding and a $550 million airport system pact. Even more striking, the revised list slated Jackson Securities to play a senior role on the big airport issue, considerably more lucrative than the firm's previous deals as a lesser co-manager.
For example, a senior role can net a firm up to 15 percent of a $1 million commission on a $500 million transaction. Co-managing such a deal is relative peanuts, drawing about 3 percent of the commission.
Jackson got the upgrade in status despite performance problems in previous work for the city. According to Garcia, Jackson Securities didn't market all its allotted bonds and had been removed from the selection list for city brokerage work.
The episode has a certain déjà vu quality for City Hall insiders. In July 1998 Brown found himself defending his administration's recommendation of Jackson for a role in a $150 million bond sale. "He was picked because of his ability to do the job," Brown told the Houston Chronicle. "To make anything else out of it is really a big stretch."
At the time, Jackson defended his firm's reputation. He also made a strange comment that if Houston failed to uphold affirmative action, it would harm its aspirations to be a future Olympic Games host.
There are no records of any Jackson campaign contributions to Brown. But an administration insider confirms that the two are close and that Brown has gone out of his way to help Jackson, despite the source's opinion that Jackson is undeserving because he hadn't done enough for the mayor.
In a heated meeting with Garcia last month, Brown emphasized that he was determined to include Jackson in the bond work. Garcia opposed using Jackson, because of both the firm's past performance problems and its lack of minority certification with the city. At one point the mayor consulted with Al Haines, his chief administrative officer, and then assured Garcia the firm was MWDBE-certified. He took that position, even though an eligibility list by affirmative-action director John de Leonclearly showed no certification for the firm.
Brown then argued that it was a technicality that could be handled after the contracts were finalized. And presto! Within days, the city had recertified Jackson's firm.
Brown did not respond to an Insider inquiry, but de Leon says the recertification request came from a Jackson Securities employee rather than the mayor's office.
According to de Leon, the firm lost its eligibility when it did not file required annual paperwork, and it was recertified after submitting the documents. The director says his office does not monitor a firm's performance, so he has no idea whether Jackson Securities' past city work was satisfactory.
The Insider had no more luck than Garcia's staff in attempting to contact the Houston office of Jackson Securities. The phone appeared to be on perpetual "busy."
At the meeting with the mayor, Garcia had suggested that another African-American-owned firm, Chicago-based Loop Capital, should be used instead of Jackson. Unlike Jackson, Loop's performance ratings for past work have been excellent, Garcia says. The mayor refused to budge, insisting that Jackson get the work. Garcia eventually agreed to provide Jackson with one senior assignment, but she makes it obvious she's unhappy with the mayor's handling of the issue.
"I was just offended by the way they circumvented the established process," says the controller. "There are requirements pursuant to city ordinance, and there are requirements of affirmative action for certification, and I'm not sure they have been followed to the letter and spirit of the law."
Asked whether the term "cronyism" applies to Brown's pushing Jackson, Garcia replied, "I'll let your readers make that conclusion if they want to."