Charlie Crist, Alex Sink and Bill McCollum are all running for higher office on platforms of transparency and openness. And all three have said it's a new day of just such openness at the State Board of Administration.
They should know. As the three trustees of the agency, they are responsible for its oversight.
Yet when the SBA filed a $682 million claim in the Lehman Brothers bankruptcy case in January, the agency did not furnish any of them with copies. Nor did any of them ask for it.
And nobody told the public.
"Obviously, it should have been made public,'' Gov. Crist said in an interview. "It is the people's money we're trying to recover.''
It's business as usual at the SBA, the less-than-transparent agency that manages more than $124 billion of public money.
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The agency invests money on behalf of nearly 1 million Floridians in the state's public pension fund, as well as for some 1,000 local governments and state agencies. It handles investments for everything from the hurricane catastrophe fund to the prepaid college tuition program to the Division of Blind Services.
Two summers ago, during the subprime mortgage meltdown, the SBA bought risky securities through now-defunct Lehman Brothers and two other big Wall Street firms. The funds were supposed to be ultrasafe, to provide participants with a secure place to stash spare cash.
The investments plummeted in value. After news broke that the state was holding tainted securities, hundreds of counties, cities and school districts yanked $13 billion from an SBA account.
In December 2007, after the revelations about the soured deals, the SBA's trustees complained that they had been kept in the dark.
They hired lawyers and auditors and demanded investigations. The agency's executive director, Coleman Stipanovich, resigned under pressure.
Crist and Chief Financial Officer Sink said they suspected that Lehman and the two other firms, JPMorgan Chase and Credit Suisse, dumped the risky securities, originally worth $2.3 billion, on the state. They urged the SBA to aggressively pursue lawsuits against the brokers.
The trustees also backed a bill by Rep. Carl Domino, R-Jupiter, calling for a "potent mix of protections'' for local governments that keep their money in SBA accounts, including "affirmative disclosure … transparency in disclosure … comprehensive, frequent reporting … and full accountability for disclosure.''
Given that the trustees backed his transparency bill, what did Domino think about them not getting copies of the state's $682 million claim against Lehman?
Said Domino: "I'm shocked.''
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The trustees — Crist, Sink, Attorney General McCollum — have been the epitome of a hands-off board. In their oversight role, they meet twice a month for about 15 minutes. (Their aides also meet.)
They rubber-stamp SBA motions with little or no discussion. They rarely ask questions about opaque, unregulated investments. They let SBA managers keep secret information about transactions that touch millions of Floridians.
The bad investment decisions in the Lehman case have cut into pension fund assets and the budgets of hundreds of towns, counties, school districts and state organizations.
Losses from the local government debacle and the bankruptcy of Lehman Brothers could cost Florida and its citizens more than $1 billion. The outlook is bleak in bankruptcy court. In years to come, the state will be lucky to collect pennies on the dollar.
The SBA said it informed local governments about possible lawsuits and the Lehman bankruptcy claim in monthly reports.
But those reports omitted key facts — including the amount of the claim.
Three members of a local government advisory board that monitors SBA investments said they either could not recall or were unaware of the Lehman claim until contacted by the St. Petersburg Times.
"$682 million?'' said Karen Nicolai, who is in charge of finances for Hernando County. "Wow. Be nice if we could get a copy of it ... I don't remember them bringing it up.''
A fourth advisory board member did recall a discussion but said they were not told the amount of the claim. She was assured the locals would get an update at this month's meeting.
The SBA didn't tell the public about the filing of the claim.
Asked why not, SBA spokesman Dennis MacKee offered two answers. One, the agency generally doesn't provide detailed comment on "imminent legal issues so as to not compromise the legal rights and interests of our participants.''
Two, he said "the basis of our claim'' against Lehman "has been addressed publicly and at trustee meetings.''
In fact, the basis of a claim was discussed at a single trustees meeting — about four months before Lehman declared bankruptcy, and eight months before the $682 million claim was filed.
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The trustees meeting where the possibility of a claim was discussed came in May 2008. Bob Milligan, then the SBA's acting executive director, said he was ready to sue Lehman and the other two brokers if they didn't negotiate a settlement.
The agency ended up signing "tolling agreements,'' extending the deadline for going to court.
In the next four months, as Lehman Brothers slid toward bankruptcy, Crist said he and his staff were "pushing and pushing'' to file a claim against the firm.
"It struck me at the time it was moving too slowly,'' Crist said in an interview. "And I was frustrated by the slowness.''
In September 2008, aides to the trustees were briefed at least twice by SBA staff about possible legal claims against Lehman and the other two firms.
One briefing was Sept. 15, the day Lehman filed for bankruptcy.
On Jan. 29, 2009, as a deadline approached, the SBA brought the $682 million claim in bankruptcy court in Manhattan.
The SBA has posted press releases about positive returns and managers who are "rising stars of corporate governance.'' But the agency issued no press release on the $682 million claim.
The SBA did not provide copies to any of the trustees, and none of them asked to see it.
On April 7, the Times requested copies of the Lehman legal papers. The SBA asked for clarification, then did not respond to the request. On April 23, after renewing the request and as the newspaper prepared another story about disclosure problems at the SBA, the agency released a copy of the Lehman claim.
Ash Williams, who took over as executive director last October, also said openness is the new watchword at the SBA. He said he continually briefed the trustees and their aides about possible litigation and the Lehman bankruptcy filing. He said he had no written communications, e-mails or calendar entries on the topic. He did not provide details of his discussions with trustees or their aides, including whom he briefed and when.
The Times asked to interview each of the trustees about the $682 million claim.
Crist said his legal counsel briefed him regularly about possible legal action against Lehman and the other two Wall Street brokers. He said he did not know the amount of the claim until aides briefed him before his interview with the newspaper.
Sink would not be interviewed. An aide said she was briefed about the Lehman matter. But the state's chief financial officer did not ask for a copy of the bankruptcy claim until more than three months after it was filed — after the newspaper asked her office about it.
McCollum would not be interviewed. An aide said he was "routinely updated'' on possible claims against Lehman and the other firms. But the state's top legal officer saw no need to review the claim or the attached exhibits because he had been briefed on it, including the big price tag.
Who should have told the public?
According to Jack Kiefner, a St. Petersburg securities lawyer formerly with the Securities and Exchange Commission, the trustees had a "fiduciary duty'' to review the claim and decide if it was material information that should be fully disclosed. But, Kiefner said, "The board could not make any decision if it were kept in the dark. In this case, the amount of the claim seems to speak for itself.''
Crist was asked if he and the other trustees have enough time to oversee $124 billion in public assets. Or are they too busy and spread too thin?
"All of us rely to a great extent on our general counsels ... and that allows us to multitask,'' Crist said.
"Having said that, at our last (SBA) meeting, we have mapped out procedures to be able to be more engaged ... You will see an evolving transparency ... at the SBA in very rapid fashion.''
Times computer assisted reporting specialist Connie Humburg, news researcher Shirl Kennedy and editorial assistant Barbara Moch contributed to this story.