making local government more ethical

Municipal Bid Rigging Nationwide and Ethics Day in Chicago

A Municipal Bid Rigging Scheme Comes to Light
According to an article in the New York Times this week, Banc of America Securities (which recently merged with Merrill Lynch) agreed to pay the SEC and others $137 million to settle charges related to a municipal bond bid-rigging scheme. For those who think competitive bidding rules are enough, this case should make you think otherwise.

According to the article, "bidding agents, who helped municipalities with their efforts to raise money, steered business to their favored companies by giving them inside information on competing bids or by getting others to submit fake bids to make it appear as if there were an actual market. In return ... Banc of America Securities steered business to the bidding agents, sometimes paying them kickbacks and at other times submitting purposefully nonwinning bids upon request." As many as twelve other banks were involved in these schemes, and more indictments are expected.

Only $36 million of this settlement will go to the municipalities and other organizations that issued bonds affected by the scheme.

Were all the municipal officials ignorant of what was going on, or were some of them in on it? Stay tuned.

Ethics Day in Chicago
According to an article in the Chicago Tribune, last week two of the principal candidates for mayor of Chicago focused on local government ethics, at least for a day. Gery Chico called for consolidation of the board of ethics, the compliance office, and the two inspectors general, with the IG to be appointed by an independent commission. According to a Sun-Times blog, he would also bid out legal and financial advisory contracts, have stronger revolving door provisions, and require much more transparency in government and with respect to campaign contributions.

Rahm Emanuel focused on revolving door provisions and the city's ethics environment. But according to a Sun-Times blog post, he also wants to strengthen the board of ethics and the ethics code, and get the IG and board to work together more closely. He also says he would bring more transparency to bidding, zoning, business licensing, and other areas where there is abuse behind the scenes.

It all sounds interesting on paper. Check back with these pronouncements in a couple of years if one of these favorites is elected.

Robert Wechsler
Director of Research, City Ethics