According to testimony this week at his federal racketeering trial, Bridgeport, Conn.,Mayor Joseph P. Ganim allegedly manipulated the bidding for the reinvestment of proceedsfrom the sale more than two years ago of $350 million in pension obligation bonds.
In testimony at the trial, Frank Sullivan said that in exchange for the city steeringbusiness to him at Salomon Smith Barney Inc., he kicked back part of his commissions toGanim through the mayor's associate, Paul Pinto. Sullivan has already pleaded guilty tohis role in the kickback scheme and is cooperating with federal prosecutors.
The testimony was backed up with Federal Bureau of Investigation wiretaps ofconversations between Sullivan and Pinto regarding the arrangement.
The $350 million in taxable bonds were sold in August 2000 in order to finance anoutstanding obligation to the pension funds of Bridgeport's police and firefighters.Chicago-based William Blair & Co. negotiated the sale, which was insured by triple-Arated Financial Guaranty Insurance Co.
Mike Lupkas, Bridgeport's acting finance director, said the scandal has had "no materialeffect on the city's financial statements." He added: "In both our OS's and financialstatements there is a discussion concerning any pending litigation and federalinvestigation. The biggest thing is that the mayor has pled innocent to all charges."
The bond counsel, Bridgeport-based Pullman & Comley LLC., could not be reached forcomment by press time. In a report released at the time it rated the pension bonds,Standard & Poor's said the city was making an "aggressive investment return assumptionof 9.32%, which is higher than other pension bond issues."
By selling pension bonds and reinvesting the proceeds, the city said it would save moneyby paying debt service of around $31 million a year, compared to paying up to $41million a year to fund the pensions directly. According to sale results, the $350million deal was made up mostly of a $264.8 million, 30-year term bond and also includedserial bonds.
Lupkas said the city is standing by the investment assumptions.
When reached yesterday, Standard & Poor's would not comment further on the pension bondsale. It rated the credit underlying the insured deal BBB-plus, which is the same as therating on the city's general obligation bond credit. Analysts at Fitch Ratings andMoody's Investors Service could not be reached for comment.
