In mid-March, Houston Chief Deputy City Controller Judy Johnson and Banc One executive Barry T. Smitherman were winding down a tense conversation about the technicalities of a controversial bond deal, when Smitherman asked a colleague to leave Johnson's office.
According to Johnson, Smitherman then had a few choice words of advice concerning her boss, Controller Sylvia Garcia. She is running as the Democratic nominee for Harris County's Precinct 2 commissioner.
Relations between the 44-year-old investment banker and the controller had turned icy after Councilman Mark Ellis had offered an unusual amendment at the council table. He proposed inserting Banc One into a potentially lucrative $400 million bond transaction for which the city's Financial Working Group had already approved another candidate, PaineWebber. The maneuver resulted in an indefinite delay and renegotiation of the so-called bond swap and angered Garcia to the point she re- fused to return Smitherman's calls.
Johnson says that during the meeting with Smitherman in her City Hall office, he made a blunt attempt to insert politics into the bond deal.
"Barry said, 'Well, Judy, under these circumstances, what am I to do? I've got lots of friends in Precinct 2, and when they call me and say, "Are you still supporting Sylvia, should we be supporting Sylvia for the Precinct 2 race?" what was I supposed to tell them?' "
Johnson says she broke off the conversation with "Hey, that's not my area." She later told The Insider, "I thought it was totally inappropriate on his part." Johnson says she cannot recall a similar incident during her years in the controller's office. "Investment bankers just don't do that," she notes.
About the same time, another subordinate of Garcia's, Sharon Adams, reported that unnamed "friends" of Smitherman had called her to lobby for Banc One.
"I was told that Barry's family and his wife's family are very influential in Precinct 2," Adams wrote in a memo to Garcia. "It was strongly suggested that your support of Banc One would lead to his support in your County Commissioner race. I found this 'suggestion' to be offensive and certainly counter to good public policy."
Garcia says she is "disappointed and offended" by Smitherman's alleged attempt to mix business and politics. "It's an affront to my integrity and professionalism and that of my office," comments the controller. "But it certainly says a lot more about his." Garcia admits she was disturbed when Ellis and Smitherman "blindsided" her staff with the bond swap amendment.
Last week, Banc One fired Smitherman. Company officials cited the reason as his unapproved co-authorship of an op-ed piece in the Houston Chronicle with Ellis and Councilman Michael Berry, offering a formula for elevating the city's sagging bond rating. Councilmembers Ellis, Berry and Bert Keller charged that Mayor Lee Brown had his unpaid special assistant Cindy Clifford complain to Banc One about Smitherman. They later backed down from that position in a letter to Brown, saying the mayor may not have known about Clifford's call but asking him to intervene to get Smitherman rehired by the company.
Contacted at his Chicago-area home, the now jobless Smitherman denies attempting to use the commissioner's race as leverage with Garcia.
"She and I did not talk about the commissioner's race," Smitherman says of his conversation with Johnson. "I'm not a resident of Precinct 2. I'm not registered to vote in Precinct 2. My father is supporting Johnny Isbell" -- Garcia's Republican opponent -- "and that's his own decision. I wouldn't presume to try to influence anyone about what to do in that race."
County records show that Smitherman is registered to vote in Precinct 2 at the Highlands home of his parents, former Houston port commissioner C.C. Smitherman and Billye Smitherman, a former aide to current Precinct 2 Commissioner Jim Fonteno. Smitherman says the registration "must be a mistake," since he is also registered to vote in Illinois.
A councilmember who asked to remain nameless cited Smitherman's aggressiveness and unsubtle connections to Ellis and the conservative bloc on council. The source says that made Smitherman a liability to a banking outfit trying to do business with the current administration.
"Barry Smitherman has pissed twice on the mayor's leg," says the official, referring to Smitherman's role in the Chronicle op-ed piece and the Ellis bond swap amendment. "What did they expect to happen?"
Smitherman's style is certainly higher-profile than most bond executives', who prefer to work behind closed doors in financial committee meetings. By contrast, Smitherman has chewed his way through a series of securities employers, including First Boston, Lazard Freres and J.P. Morgan, acquiring a reputation in the process as a hard-charging executive who speaks his mind. When J.P. Morgan did not get a piece of a deal with the Texas Turnpike Authority in 1995, Smitherman went public to question how the agency chose its underwriters.
Council friends Ellis and Keller say Smitherman is aggressive, imaginative and a hard worker. He's also developed a reputation for being difficult to work with, according to a recent article on his firing in the Bond Buyer. It suggested that Banc One seized on the unauthorized op-ed as a pretext to get rid of him for other reasons.
Keller says competing municipal finance firms are "just like car dealerships or grocery stores: They all have a lot of the same products." He lauds Smitherman for distinguishing himself with service and initiative. As for the banker's personality, Keller describes it as " 'I'll hug you and I'll hit you.' He's that kind of person."
Smitherman's political activities included hosting a dinner earlier this year for the incoming councilmembers. Ellis says he and Smitherman were attempting to "educate" the new officials about financial issues. One of the information packets handed out at the dinner concerned the city's bond rating, and out of that came the idea for the Chronicle op-ed piece.
Smitherman first alerted Ellis to the bond swap in January, warning that the city could lose from $5 million to $10 million over ten years, Ellis says, because only PaineWebber was proposed for that deal.
Ellis says he suggested that Smitherman get into the deal, and the banker replied, "I'm not telling you to do that, but sure, I'd love to be in." Ellis says he pushed Banc One not to get a friend some business but rather to save the city money and make Smitherman his "watchdog on the deal."
Now that the watchdog has been fired, Ellis and Keller are taking sides with Smitherman against his ex-employer.
"I don't like what Banc One did," says Ellis. "I'm taking the position I don't want Banc One in the bond swap, I don't want Banc One doing business with the City of Houston."
Keller met with Mayor Brown last week to urge him to get Banc One to rehire Smitherman. The mayor declined, saying he did not care to get involved in corporate-employee relationships.
Garcia characterizes the attack on Banc One by the councilmen as "so silly I'm not going to dignify it with a comment." Brown's finance and administration director, Phil Scheps, says, "as far as I know, Banc One is a good corporate citizen in town, and there's no particular reason to take that approach with them."
Councilmember Annise Parker says Ellis's abrupt about-face on Banc One "seems to indicate it wasn't Banc One he had ties to, but rather Mr. Smitherman. I think the professionals should deal with this on a professional level and try to take it out of politics."
As for the jobless Smitherman, he's taking stock of his options and looking to the future. With Brown vacating City Hall next year, one politico reports there's a mini-boomlet afoot to get Smitherman to return to town and run for mayor.
"I think the city would benefit from someone with knowledge in public finance and financial matters, and I would hope the next candidate would have some of those capabilities," says Smitherman coyly. "But I just lost my job a couple of days ago, and my family and I are trying to figure out what to do now."
If his critics and friends are correct, a political job might be a far better fit for Mr. Hug 'Em and Hit 'Em than the diplomatic, don't-ruffle-our-feathers world of municipal finance.
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