Quick & Dirty

The Hidden Treasures Behind Lazio's Stock Deal

U.S. Senate candidate Rick Lazio not only personally profited from trading stock in 1997 in Quick & Reilly just before it was sold to Fleet, the Boston-area banking giant, but he raked in sizable campaign cash on a single day in the same period from Boston financiers, including the Fleet official who engineered the deal.

Lazio's profit-taking on his first venture into the world of stock options has prompted suspicion that he had inside information that the deal was about to go down, but he has denied receiving any improper tips from Q&R officials, who also were major contributors to his campaign before, during, and after the sale to Fleet. He has also refused to name his broker.

The Boston big shots, who had previously donated only a handful of coin to Lazio, shoveled more than $14,000—almost as much as he made on the stock options—into Lazio's campaign on July 1 of that year, just one week after he made a crucial purchase of Q&R shares. In October, less than a month after Fleet completed the purchase of Q&R—the nation's third largest discount brokerage—Lazio got another clump of campaign funds, much of it from officials of a Q&R subsidiary, U.S. Clearing, which makes money processing stock trades.

An analysis by the Voice of Lazio's campaign records indicates that the Boston bankers gathered on July 1 at a Lazio campaign "event." Those records show that at least part of the tab was picked up by Michael Gladstone, an official of Boston Financial Group, a powerful housing industry firm. He contributed $387 in "in-kind" money to Lazio's campaign as an "event sponsor" on July 1.

Among the other big cigars who gave Lazio dough on July 1 was H. Jay Sarles, Fleet's vice chairman, who was later credited in press reports as having "guided" the purchase of Q&R. Sarles, a heavy spender on politicians, gave Lazio $500; it was his first and only reported contribution to Lazio. Besides Sarles and Gladstone, 26 other Boston-area bankers and housing-finance muckety-mucks gave checks to Lazio's campaign that day. Most of the checks came from the lawyer-lobbyists of Peabody & Brown and employees of Boston Financial Group. Some came from Boston Capital Ventures, a real estate investment group whose chief was a major donor to Democrats. Both Boston Financial and Boston Capital did business with Fleet. If they were all gathered together with the Long Island Republican, you'd think somebody would have gossiped about whether Fleet and Q&R were wooing each other.

Lazio is the only House member to serve on both the Commerce and Banking committees, and he chairs the subcommittee that oversees HUD and other housing-finance machinery, with which the Boston bankers and developers make their money and then give morsels to politicians.

Lazio's lucrative 1997 actually began in December 1996, not with American banking matters but with a furor over Swiss banks and Nazis. The banks, accused of storing cash and gold that the Nazis looted from Holocaust victims, were trying to clean up their image so they could expand their U.S. business interests.

But lawyers for World War II survivors urged the Federal Reserve Bank to revoke the charters of the Union Bank of Switzerland and two other Swiss banks. Even Al D'Amato, still a senator at that time, blasted the Swiss banks, releasing a report detailing their purchase of looted gold. But Lazio said it would be unfair to single out the Swiss banks. He told Jewish Week, "I'd be very reluctant to scapegoat a couple of banks."

His sympathy for the foreign banks paid off. The next month, he got three campaign contributions totaling $700 from three officials of the Institute of International Bankers—his first reported money from the Long Island-based group that represents foreign banking interests in the United States. D'Amato, the leading moneymaker from institute officials until he shot his mouth off, never got another penny from them according to reported contributions. Lazio continued to rake it in, garnering $750 in 1998 and $750 in 1999. His pals at Q&R and in New England must have been happy with his gentle handling of Union Bank of Switzerland: The bank was Fleet's financial adviser in 1997 during the Q&R purchase.

Also in early January, Lazio introduced his "reform" measure, the Housing Opportunity and Responsibility Act, one section of which called for public housing tenants to perform "community service" in return for their federal subsidies or face eviction. (Critics pointed out at the time that he wasn't requiring—or even asking—heavily subsidized oilmen, peanut farmers, developers, or bankers to work for free in exchange for their subsidies.)

Then Lazio took off on January 10 for a trip with his wife to Orlando, Florida, for a speaking engagement. It was no coincidence: Bankers and developers have made millions off tax credits and housing subsidies, and the Lazios' trip was all-expenses-paid by Novogradac & Co. LLP, a San Francisco-based accounting firm specializing in housing finance. On February 10, the company's chief, Mike Novogradac, a steady contributor to Lazio over the years, sent him a $1000 check.

Lazio's campaign money from New England didn't start arriving, however, until the next day. On February 11, according to The New York Times, he made his first purchase of Q&R stock. That same day, according to a Voice review of Lazio's campaign records, he got $500 from a Boston Capital executive. Exactly a week later, he got $500 from Boston Financial chief Fred Pratt, $1000 from a second Boston Financial official, and $500 from another. On February 25, he got $1000 from Boston Capital's chief, Herb Collins.

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