Lisauskas fine is still point of controversy in city
Date: 8/4/2010
Aug. 4, 2010By G. Michael Dobbs
Managing Editor
SPRINGFIELD -- While the state Ethics Commission and former Springfield Finance Control Board (SFCB) Executive Director Stephen Lisauskas have come to terms over his involvement in the investments with Merrill Lynch that initially lost the city millions of dollars in 2007, two city councilors have different takes on how and who responsible.
What both councilors agreed upon was a need for greater transparency in city government.
Lisauskas agreed to the findings in a disposition agreement with the state dated July 27 and will pay $3,000 in fines.
In a statement released by his attorney, Lisauskas said, "I am comfortable that I did everything right and in the best interests of the city and its taxpayers. My decision to settle this is purely economic, balancing a $3,000 settlement against attorney's fees and a fight that could last a year or more. This lets me and my family move on with our lives, avoiding cost and a great deal of aggravation."
City Councilor James Ferrera believes that former City Treasurer Salvatore Calvanese, who left his job because of the controversy, should be reinstated.
"Poor Sal had to vacate his position," Ferrera told Reminder Publications. "When do we bring Sal Calvanese back?"
Ferrera called the $3,000 fine "peanuts" and questioned why Lisauskas agreed to the arrangement.
"If he thought he could win I guarantee you he would have fought it," he said.
City Councilor Timothy Rooke said, "I think Steve Lisauskas got screwed. He got used as a political pawn to try to blame this financial debacle by Merrill Lynch."
Rooke said Lisauskas was part of the management team that "turned a $45 million deficit into a $45 million surplus and made sure proper financial processes were put in place."
Rooke sees the $3,000 fine as "excessive."
He charged that Calvanese "was in over his head."
In a story dated Oct. 26, 2009, on www.bloomberg.com, it was reported "Salvatore Calvanese, the treasurer of Springfield, Massachusetts, for four years, had a ready defense for why he risked $14 million of taxpayer money on collateralized-debt obligations (CDO) laden with subprime mortgages in 2007.
"He didn't know what he was buying, he says, and trusted the financial professionals who sold them and told him they were safe.
"'I thought they were money markets that were just paying more,' Calvanese said in an interview. 'Nobody ever used the term 'CDO,' and I am not sure I would have known what that was anyway.'"
Rooke said, "They didn't want to blame the local guy [Calvanese] and Stephen Lisauskas was thrown into the fire."
*** According to the disposition agreement, "In the late summer of 2007, the city learned that Merrill Lynch Albany had invested approximately $13 million of the city's investment cash in risky, mortgage-backed securities that were not on the so-called "legal list" of investments, and that those securities had lost nearly all of their value.
"The Office of the Attorney General of Massachusetts announced in late January 2008 that Merrill Lynch Albany had agreed to reimburse the city $13.7 million to cover the city's investment losses as well as its legal fees."
The question city and state officials faced is how the decision to go with Merrill Lynch was made and by whom.
According to the Ethnic Commission report, "Lisauskas had a friendship with Carl Kipper, a Merrill Lynch Albany broker/vice president. Lisauskas and Kipper had socialized regularly when Lisauskas lived in the Albany area, and they kept in contact by phone and email thereafter.
"Lisauskas orally disclosed a relationship with Kipper to the executive director of the SFCB and members of the [investment] committee. The committee members were not aware that Lisauskas and Kipper had a friendship. Lisauskas filed no written disclosures with the committee or with his appointing authority about his relationship with Kipper.
"Lisauskas informed the committee members that he had worked with Kipper, an investment specialist from Merrill Lynch Albany, planning various investments for the Town of Natick while Lisauskas was Natick's deputy town administrator.
"Kipper had made a proposal to the Town of Natick that had not been approved. Kipper had no public investment experience in Massachusetts. Neither Kipper nor Merrill Lynch Albany had ever managed any money for the Town of Natick."
*** In a written statement, Mayor Domenic Sarno said of the findings of the Ethics Commission, "The events involving the Merrill Lynch investment, which led to the filing of a complaint with the State Ethics Commission occurred prior to my administration.
"When I became mayor of the city of Springfield my immediate concern was getting the money back and ensuring that something like this did not happen again. The city of Springfield was successful in getting the money back and the city has put safeguards in place, including a new Ethics Ordinance and new financial policies, to prevent this from occurring again in the future.
"We must all remain vigilant and continue to insist on the highest ethical standards within city government."
Ferrera is going to ask the law department to draft an ordinance that would require any investment decision to go through a public Request for Proposal process.
Rooke agreed that such an ordinance would be "a step in the right direction."
