ST. PETERSBURG — The city has hired a private law firm to investigate whether it can sue an investment company over $130-million it suspects was mismanaged.
St. Petersburg attorney John Kiefner will analyze all investments purchased on the city's behalf by Wachovia Securities of St. Louis over the last six years.
The city directed Wachovia Securities to invest its money on a short-term basis, said Jeff Spies, the city's finance director.
But in March, he said, the city discovered the firm had purchased investments with terms longer than 12 months with many companies ensnared in the ongoing economic crisis, including Lehman Bros., Bear Stearns, Fannie Mae and CitiBank.
Mayor Rick Baker then told Spies to cut ties with Wachovia Securities and cease all securities investments, Spies said. The early withdrawals cost the city $800,000, Spies said.
But much more money is at stake.
Spies said two long-term investments totaling $30-million have yet to be resolved and the outlook is bleak. The companies involved? CitiBank and Lehman Bros.
Although the city's contract with Wachovia Securities did not specifically define a maximum investment period, Spies said investments longer than one year are clearly not short-term.
This is the first time the city has retained an outside counsel to help with its investments, said city attorney John Wolfe.
Wolfe said he hired Kiefner, who represents both investors and brokers in securities cases, based on personal recommendations. Wolfe can retain private legal assistance at a cost of up to $5,000 without the City Council's approval. Kiefner will charge the city $325 an hour.
"If he determines that there is a cause for action against someone, we would naturally file a lawsuit," Wolfe said.
Cristina Silva can be reached at [email protected] or (727) 893-8846.