St. Petersburg considers terminating securities lending program
ST. PETERSBURG-- Nearly a year after city officials learned a securities lending program had drained roughly $15.8-million from the city's coffers, city officials discussed terminating its securities lending program today.
Finance director Jeff Spies recommended that the City Council approve a resolution to terminate its securities lending agreement with Wachovia Global Securities. He presented the idea to the council's budget committee. The council will vote on the resolution at a future council meeting.
The city has hired two outside law firms to determine whether the city has cause to sue Wachovia. They say Wachovia violated city investment policies and gambled taxpayer dollars in high-risk transactions — without the consent of anyone in City Hall.
Terminating the contract could give city officials a better understanding of their total loss, Spies said.
A recent St. Petersburg Times investigation found that long before the market's downward spiral, when profits were still rolling in, city officials routinely ignored oversight procedures in place to protect taxpayers' investments. As a result, Wachovia invested public dollars in highly complex deals that went unchecked.
For years, Mayor Rick Baker's staff neglected to provide the City Council with regular written financial reports as required by the city's investment policy.
Last year, the City Council and the city's Investment Oversight Committee, groups designed to check and balance City Hall's authority, were left in the dark about some financial transactions until after decisions were made.
And Spies rarely mentioned anything about the securities lending account in his required quarterly financial reports — despite the fact that the program's annual returns fell below the expected $160,000. From 2002 to 2008, the city earned a total of $993,056 from securities lending.
But even as city officials consider terminating its securities lending contract, officials have been reluctant to criticize the program.
"Over the last decade we made money every year," said council member Karl Nurse. "It is ridiculous to look item by item and say, 'well, I want to bust your chops for losing money on this and this and by the way I am not going to mention the part where you made money.'"
Council member Jamie Bennett, who oversaw the city's investment committee in 2008 when city officials learned Wachovia had violated city investment policies, praised how city officials handled the crisis.
"It appears to me that the safeguards we put in place worked," he said.
Cristina Silva, Times staff writer