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Former St. Petersburg Mayor Rick Baker takes stand in Wells Fargo trial

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Published Mar. 31, 2012

TAMPA — Rick Baker was known as a hands-on mayor of St. Petersburg, a former corporate lawyer turned CEO of the city who didn't hesitate to get involved in minute administrative details.

But during testimony Friday in U.S. District Court in Tampa, Baker described a different management style, one that was decidedly more detached in the oversight of the city's $400 million investment portfolio when he was mayor from 2001 to 2010. Even after he learned some investments were in peril and could cost the city millions, he left the responsibility for follow-up to staff and the city's financial adviser, Wachovia Global Securities, Baker said.

What Baker knew and when he knew it may not matter to jurors in a trial in which the city is trying to recover $11 million it lost when Wall Street firm Lehman Brothers went bankrupt in September 2008. But Baker's testimony further illustrated the disconnect between the city's investments and the officials who oversaw them.

Baker spoke for about 15 minutes, then the city rested its case against Wells Fargo, the financial services giant that bought Wachovia. The city has hired attorneys from Charlotte, N.C., who are trying to show that Wachovia failed to properly alert the city of the declining financial health of Lehman Brothers in the summer of 2008 and should pay for losses the city suffered when the once-vaunted Wall Street firm went bankrupt weeks later.

Wells Fargo argues that Wachovia fully complied with the investment guidelines of the contract, and that the city should therefore be held responsible for the losses. After Baker spoke, Wells Fargo attorneys began their rebuttal, which included the testimony of former Wachovia employees.

Minutes before Friday's proceedings began, council members met at City Hall to reject a settlement offer made Thursday by Wells Fargo.

Baker's testimony reinforced what the city has established as one of its main premises: Officials barely followed, or understood, the city's investments.

Dressed in a dark blue pin-stripe suit, Baker recounted for jurors taking office in 2001. He soon signed a contract he said he could barely recall that allowed the city to make riskier investments called securities lending.

He said his staff explained the details of the contract.

"I asked what it was, if it was safe," said Baker, who is now director of innovation partnerships with the University of South Florida.

Baker said he didn't know the specifics of how the investments were made. He said he left that up to Wachovia; the city's financial adviser at the time, Jeff Spies; and two top administrators, Mike Connors and Tish Elston. Spies has testified he didn't review reports and updates that Wachovia gave him.

Alarmed by the turmoil in the market in early 2008, Baker instructed Elston to get more involved in the management of investments and shift the city's money into safer accounts.

But as Lehman Brothers withered that summer, a decline depicted through the financial press and grim reports by ratings agencies, Baker said he doesn't remember specific follow-up conversations with Elston on the subject.

Elston spoke for an hour Friday explaining that after Baker told her to get more involved, she still hadn't looked at the agreement with Wachovia or the investment guidelines of the contract. But she said it wasn't the city's responsibility to monitor the health of specific investments.

Wells Fargo attorneys have seized on the city's admission that it didn't closely monitor the Wachovia contract as an example of how it is to blame for the losses. But on Friday, it also showed videotape from a June 2008 City Council meeting that suggested another line of attack. In a bid to redevelop Tropicana Field that later failed, city officials were recommending a subsidiary of Lehman Brothers for the project.

In the video, council member Wengay Newton asked if the troubles with Lehman Brothers could affect the project. Economic development director Dave Goodwin assured him that the city would look more closely at the situation in the negotiation process. City attorneys objected to the video because they said the project was unrelated to the case.

But Wells Fargo attorney Mary Hackett argued to play it.

"It shows (the city) knew these issues," Hackett said. "They should have been on heightened alert themselves."

U.S. Magistrate Judge Thomas McCoun allowed it. The trial is expected to last until the middle of next week.

Michael Van Sickler can be reached at (727) 893-8037 or