City Hall dispute stalls bond deal

As early as September, Councilman C.T. Martin began pushing for a larger role for San Francisco-based Grigsby & Associates, a minority-owned firm, in the giant bond deal. Martin says he has done nothing wrong and says his chief interest is making sure the city does more business with minority-owned companies.

But his visit to the office of the city’s chief investments and debt officer to press Grigsby’s case set off protests from the officer and her boss. Carmen Pigler, the chief investment and debt officer, told the AJC she told Martin he should not have come to her office for Grigsby.

“I told Mr. Martin it was inappropriate,” Pigler said. “I would think you would not want to put yourself in a position where it looks like you are lobbying for a particular firm.”

Martin’s intervention, coupled with a strange development about the same time involving anonymous information packets, has caused a tempest at City Hall. Meanwhile, the council has postponed the airport bond deal until January.

To understand the dispute, it helps to know about some of the more arcane aspects of municipal bond deals. First, the chief underwriter is called the “bookrunner.” The bookrunner handles the largest share of the deal and gets the largest share of the fees. Other firms often get lesser roles, such as senior manager or manager, and less of the business and the fees.

Traditionally, the lesser partners in such deals have been smaller minority-owned firms. Minority participation in city contracts has been a hallmark of Atlanta government since the Maynard Jackson administration in the 1970s.

The airport bond program initially was a smaller issue of several hundred million dollars, and the city had selected Bank of America/Merrill Lynch as the bookrunner. Rice Financial Products, a minority-owned firm, was a senior manager. Grigsby was among the lower-level managers.

After the deal grew to $1.4 billion, the city’s chief financial officer, Jim Glass, decided to increase minority participation.

Martin and Councilman H. Lamar Willis had both pushed for Grigsby as a co-senior manager with Rice, according to remarks they made at council meetings. But Martin says he later heard that Pigler, who works for Glass, decided not to follow through on the restructuring, so he decided to visit Pigler to find out why.

About the time he did, packets of information about the bond deal began showing up on desks at City Hall and at City Council members’ homes. The packets included a memo from the city contract compliance director endorsing the idea of having all three firms act as co-bookrunners — which Martin was advocating.

Glass said he interpreted the letter as a directive and agreed with the approach. But later, the contract compliance officer, Hubert Owens, “informed me that that was not the letter he intended to send. He showed me a different letter.”

It is not known who distributed the packets or altered Owens’ memo or why. Martin said he had nothing to do with the packets or the letters.

Glass told City Council this month that he was concerned about “the amount of pressure” by Martin on Pigler and raised questions about the alteration of Owens’ memo. The CFO, who would not comment on the matter to the AJC, also told the council that he asked the city Law Department for an investigation. Owens would not discuss the matter with the AJC.

“I did some soul searching and I thought, you know, if we’re going to do something like this, I’m uncomfortable with proceeding,” Glass said. “Did I go back on what I said? Yes, I did. ... But I was not comfortable with staying with that proposed structure based on what I saw.”

He asked the full council to pass a resolution if it wants a change in the structure of the deal.

Acquitted in Florida case

Amid the infighting, the City Council has postponed a decision until January, when a new administration and a new council take over. The council cited a need for more financial information from the airport in postponing a vote on the bond deal.

In a meeting with The Atlanta Journal-Constitution, Calvin Grigsby, head of Grigsby & Associates, said his company has handled millions of dollars in bond business for Atlanta as well as for governments around the country and was more than capable of handling a bigger share of the airport deal.

Grigsby, who started his firm in 1981, has had problems in the past. Ten years ago, he was indicted on federal bribery charges in Florida bond deals, when his firm was called Grigsby Brandford & Co. He was acquitted. A county commissioner involved in the case was convicted of bribery for taking a $350,000 payoff from an undercover agent in exchange for $400 million in bond contracts.

“It was all fabricated,” Grigsby said.

Pigler said Grigsby’s firm was approved for business with the city of Atlanta in 2005 in a request-for-qualifications process. Though he had problems in his past, because he was acquitted on federal charges, “No one thought there was a reason to exclude the firm.”

Grigsby said he barely knows Martin and doesn’t know Willis at all.

Martin said he assumed Grigsby would not have been included in the bond “if there was something illegal about their ability to practice their profession.”

Martin also pointed to controversies Merrill Lynch has faced in Congress concerning its acquisition by Bank of America. The firm also has been fined by the Securities and Exchange Commission. Merrill would not comment for this article.

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‘Problematic’ process

Councilman Willis, who also backed an upgrade for Grigsby and Rice to boost minority participation, called the process the city uses to choose bond underwriters “problematic, because it’s handled completely by one individual.”

“I think that’s a lot of power for one city employee to have,” Willis said. At least one council member supports the idea of taking more time to make sure the deal is clean.

“This is a $1.4 billion bond issue. The public is entitled to know it is on the up and up, especially given the airport’s less-than-squeaky-clean reputation,” said Howard Shook, chairman of the city council’s finance committee.

The bond financing — $800 million to complete its international terminal and more than $500 million to refinance debt — is critical for the world’s busiest airport.

“My intention is to go full-steam ahead with all processes leading to borrowing the money,” said Hartsfield-Jackson International Airport general manager Ben DeCosta.

Pending the city council’s approval next year, he said he hopes to go to market with the bonds in January or February.

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