ST. PETERSBURG — Rick Baker makes no bones about it: he’s a hands-on mayor.
In nearly every interview and every candidate forum over the past six months, St. Petersburg’s mayor from 2001-10 has presented himself as someone who sweats the details.
But in the final days of the city’s combustible mayoral race, Mayor Rick Kriseman’s latest attack ad questions whether Baker really kept his eye on the ball when the city lost $11 million in investments after its former Wall Street advisor was wiped out by the 2008 financial crisis.
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"That’s just sleepy, sloppy management," read a recent post on Kriseman’s Facebook page, alongside a photo of Baker with his eyes closed.
Did the city really lose millions under Baker’s watch? At first, yes.
But the story doesn’t end there.
• • •
In 2012, the city sued Wells Fargo to recover about $11 million lost when city investments overseen by Lehman Brothers that evaporated along with the firm itself during the Great Recession.
The city was hardly Lehman’s only victim, of course. The storied investment bank had $639 billion in assets but $619 billion in debt. It disappeared after making the largest bankruptcy filing in history on Sept. 15, 2008.
Wachovia Global Securities managed the city’s Lehman investment portfolio, before being acquired by Wells Fargo in 2009. So when St. Petersburg filed suit in federal court to recover its Lehman losses, it sued Wells Fargo. The trial started in federal court in Tampa in March 2012.
Trial begins in city of St. Petersburg’s lawsuit against Wachovia (March 27, 2012)
Former St. Petersburg Mayor Rick Baker takes stand in Wells Fargo trial (March 30, 2012)
City of St. Petersburg wins $10.4 million verdict against big bank (April 3, 2012)
City attorneys argued that Wachovia officials were too heavily invested in Lehman to warn the city about the firm’s impending collapse.
Wells Fargo attorneys argued that city officials weren’t reviewing Wachovia’s reports, which would have alerted them to Lehman’s problems.
A Tampa Bay Times reporter covered the trial, and Baker was called as the city’s last witness. The former mayor testified for 15 minutes. He told jurors that when he took office in 2001, he signed a contract allowing the city to invest in securities lending, a riskier form of investments.
Baker testified that he didn’t know specific details of the city’s investments. He said that he delegated to his staff the responsibility of monitoring the Lehman portfolio.
That dovetailed with the city’s argument, that officials didn’t really understand what its investment advisor was doing.
• • •
Kriseman has now seized on that episode — Baker telling the jury he wasn’t much involved in managing the city’s investments — as belying the image Baker has projected as a hands-on leader.
"He took the stand and testified that he was decidedly more detached in the management of our investment portfolio," Kriseman told the Times. "He left responsibility for follow up to staff, that certainly doesn’t quite jibe with his hands-on image."
In the end, the city won. A federal jury ordered Wells Fargo to pay $10.5 million, meaning the city recovered all but about $600,000 from its original investment.
Add about $1.2 million in legal costs and the city ended up losing about $1.8 million.
But the Kriseman campaign’s ad said Baker’s inattention "lost the city millions."
Though the city’s argument that Wachocia was responsible for the losses prevailed, afterward one juror told the Times that the city was also negligent.
Baker points to that payout and the city’s overall financial returns during his tenure, which ranged from 2.3 percent to 5.7 percent as evidence he didn’t drop the ball.
"I would say in terms of overall investment financial response to the Great Recession, I think we did a very good job in preserving city’s assets," Baker said this week. "Nothing went south. We got our money back and had a positive return on our investments."
But the city had to go to court to get most of its money back, Kriseman said.
"He put the city in a position that the only way to get the money back was to litigate it," Kriseman said. "It’s an issue of mismanagement, really. If you’re going to tell the public you’re a great manager and you have your eye on the ball all the time, this clearly shows he didn’t."
Baker dismissed the mayor’s assertions as desperate, last-minute attack to counter Kriseman’s own recent bad publicity in regards to continued fallout from the 2015-16 sewage crisis and Hillsborough County identifying a baseball stadium site for the Tampa Bay Rays.
"The mayor has had a really, really bad 10 days," Baker said Wednesday. "They are just trying to find anything they can throw up against the wall at this point."
Contact Charlie Frago at [email protected] or (727)893-8459. [email protected]
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