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N.Y.'s Lieut. Governor Ready to Step Up

New York Lieut. Gov. David Paterson will become the state's governor on Monday, following the resignation yesterday of Gov. Eliot Spitzer, who stepped down amid a prostitution scandal that ended his political career.

"Like all New Yorkers, I am saddened by what we have learned over the past several days," Paterson said in statement. "It is now time for Albany to get back to work as the people of this state expect from us."

Paterson will assume his new post with just weeks to go before the March 31 budget deadline.

"It is now time for us and all New Yorkers to move forward," said Republican Senate Majority Leader Joseph Bruno.

The Assembly passed its versions of the budget yesterday and the Senate passed one budget bill, important steps in the budget negotiating process. The Senate's version of the budget would impose a $1.7 billion increase in fees and taxes, cut spending, and would establish a cap on spending increases in future budgets.

In January, Spitzer's fiscal 2009 budget assumed revenues of $123.11 billion, but that has been reduced by $250 million since then due to the slowing economy.

Spitzer resigned following revelations Monday that he was a client to a high-priced call-girl service. Spitzer became the focus of an investigation when banks flagged some transfers of funds to a shell corporation that were linked to Emperor's Club VIP, an escort service that was later subjected to wiretaps which resulted in four arrests. Those wiretaps recorded a client that investigators identified to several news organizations as the governor.

Paterson, 54, will be the state's first black governor, as well as its first legally blind governor. Paterson, a Democrat, comes from a political family. He is the son of Basil Paterson, a Harlem politician who served as secretary of state under Gov. Hugh Carey and as a deputy mayor under New York City Mayor Ed Koch. Paterson attended Columbia University and Hofstra Law School. He was elected to the state Senate in 1985 and became minority leader in 2002.

Paterson has pushed for increased participation of minority- and women-owned business in government contracts. Writing in the New York Amsterdam News while campaigning with Spitzer in 2006, Paterson said that they would "open doors previously closed to minority and women's business enterprises." He wrote that this was "a call for government to require that qualified MWBEs be given opportunities for contracts so they can develop the permanent capacity needed to compete on a level playing field."

Both as a senator and as lieutenant governor, he also pushed for a $1.5 billion bond issue to fund stem cell research in last year's budget. The proposal failed as a bond issue, but the state committed to spending $600 million over several years. One indication of how he might approach economic development comes from a call in 2005 for a moratorium on the use of eminent domain by governments for redevelopment projects.

Paterson, in his campaigns, has accepted donations from muni market participants in the recent past both when running for the senate and for lieutenant governor, according to state campaign finance records.

The Citigroup Inc. Political Action Committee gave Paterson's campaign $1,000 in 2004 and $1,000 in 2005. Goldman Sachs New York PAC contributed $2,500 in 2005. Robert Kaplan, a senior director at Goldman, donated $1,000.

Asked whether or not Kaplan's donation would have an impact on Goldman's ability to do negotiated bond business with the state under the Municipal Securities Rulemaking Board Rule G-37 in a Paterson administration, a Goldman spokesman read this statement: "This contribution was made in accordance with our policies."

MSRB Rule G-37 prohibits bond dealers from donating more than $250 to public officials who have the power to influence the awarding of underwriting business. If a firm was found to have violated the rule, it would be banned from doing negotiated business with the official's government for two years from the time of the donation. It does not apply to law firms or non-brokerage financial advisory firms.

H. Sidney Holmes, a bond attorney at Winston & Strawn LLP, attended law school with Paterson and said the firm supported his campaigns at his behest. "I've been a supporter of his most of his professional career as an elected official because we're friends," Holmes said. Holmes donated $500 to Paterson in 2004 and $1,000 in 2006. Winston & Strawn donated a total of $10,000 to Paterson in 2005 and 2006.

Nixon Peabody LLP donated $2,500 to Paterson in 2007.

Several law firms involved in the municipal bond business donated money to the Spitzer-Paterson ticket, according to campaign finance records. Notable among those are: Orrick, Herrington & Sutcliffe LLP, which gave $20,000 to Spitzer Paterson 2006 and $15,000 to Spitzer 2010 Inc.; Hiscock & Barclay, LLP which gave $105,658 to the 2006 ticket and $15,000 to Spitzer 2010; and Harris Beach LLP PAC, which gave $20,200 to the 2006 campaign.

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