Inside Rick Lazio's Biggest Wall Street Deal—The Chummy E-Mails

Diverting nearly a billion in retiree benefits into subprime risk? Oh, just watch him work the e-mail.

Millard reached out to his assistant on October 24, just a week before the selection, seeking Lazio. It was a Friday night, and Millard sent a "Can I reac[h]" e-mail to Lazio at 9:27 p.m. That Saturday, Lazio e-mailed back with a schedule of where he'd be and a series of numbers for Millard to use. He did the same again on Sunday. Their exchanges got so frantic that by October 28, Millard was asking if they could talk "right now." On October 29, Lazio was calling from a Florida hotel room. Though Millard at one point e-mailed that these contacts were "not business," the subject line on two actually read "Strat partnerships." One referred to O'Shea.

Finally, at 7:08 a.m., on October 31, Millard e-mailed Lazio: "U guys got 900m. 600 real estate. 300 private equity." It was less than the billion discussed in June, but it was weighted toward Lazio's real estate division. The three contracts, including Goldman and Blackrock, combined to re-allocate $2.5 billion in assets, with a potential payout of $100 million in fees. Lazio replied immediately: "Fantastic. Thank you so much. Let me know when you would like to discuss."

Batts, the Inspector General, determined that despite Millard's denials, there was a "strong indication" that the late-October conversations between Lazio and Millard, which explicitly broke blackout period rules, were about the partnerships. Her report said that Millard's multiple explanations for these contacts "evolved" during the probe, with the ex-director initially claiming that the two were discussing New York politics. In an April 28, 2009, written explanation to the IG, while Lazio prepared to launch his gubernatorial committee, Millard claimed that he and his "friend since the mid-90s" were talking about Lazio possibly joining the McCain administration in a cabinet-level office. Millard said he was "working at that time on the McCain presidential team's potential transition," and Batts did, in fact, find that Lazio was listed on a McCain document titled "Top Tier Presidential Appointment Process Overview."

Courtesy Michael Jagendorf

But the McCain transition leader told the IG that "candidates were not called as part of the process," and that any calls about candidates "were made from the legal offices" of the GOP transition in Washington. Batts then discovered that Lazio was the only one on Millard's transition list of potential candidates that Millard actually called, a fact he later conceded. Batts tells the Voice that her auditors were "very frustrated" by Millard's changing excuses for the contacts with Lazio. "We went to corroborate" these claims, she said, "and couldn't."

Millard and Lazio did talk about McCain during this period, but it had nothing to do with a Lazio appointment. "Just heard dour news on Indiana from an inside player," Lazio wrote in late October, saying John McCain was down by 10 points. Millard sensed he was weeks away from unemployment during the worst recession since the 1930s. Way back in June, O'Shea noted in the memo that followed Millard's meeting at Morgan, that "Time is an obstacle," observing that "a change of an administration will cap" Millard's tenure. "CM said that even in the case of a McCain victory," he wrote, "he is not likely to remain in the post long," an early indication that Millard expected to do these deals and get out, potentially using them as a golden parachute.

On November 3, the day before the election, Millard sent a 9:58 a.m. e-mail to his two personal assistants asking them to "arrange a time for me to speak today" with 16 people, almost all of whom were with the three winning bidders. Lazio was the first name on the list. Millard worked his way through the list that day and on election day.

The two met on November 11. Their communications were suddenly turning more clandestine, with Lazio asking that they get together at 815 Second Avenue, the offices of the Ad Council, where Lazio was a board member. On November 12, Millard: "Great to see you and thanks for all." On November 13 at 6:39 in the morning, Lazio: "Have another idea with some paper. Where would you like me to send it?" And in the same early exchange that morning, Lazio: "I'll be setting up the meeting with Jamie," a reference to Dimon. Lazio also asked if Millard had connected "with Jes Staley yesterday," the asset unit head. Millard: "Jes and I traded calls. Probably get him on fri. Let me know re Jamie."

On December 2, Millard e-mailed himself a list of six names ostensibly connected to his job search. Lazio was on it, as were Larry Fink from Blackrock and John Weinberg from Goldman. On December 12, a Friday, Millard's assistant e-mailed Millard that Lazio's office called. "Ric sent you an email to your personal"—where much of this dialogue appears to have been diverted—"and said to please look over the weekend prior to your meeting with Jamie Dimon on Monday," referring to documents Lazio had apparently sent him. "Also, Rick would like to meet you in the lobby at 270 Park Avenue at 10:50am and bring you to Jamie Dimon's office." That Sunday, Millard and Lazio exchanged e-mails about spending 10 or 15 minutes together before or after the December 15 meeting.

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