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.

The next day, Millard sent Lazio's private e-mail account a bio, résumé, and several news clips about himself. On December 17, Millard sent the same package to an aide to David Knowlton, the managing partner of a boutique corporate finance firm tied to Lazio. Knowlton actually appeared on Lazio's seating list for the Conservative Party dinner in 2007 that he'd tried to get Millard to attend. "Rick Lazio and David have discussed me," Millard informed the aide, "and David expressed a willingness to spend a little time helping me think about what I do next."

Even as Millard and Lazio were actively pursuing Millard's next job, PBGC's press secretary was trying to work out the details of a press release with Morgan announcing the new contract. They were waiting on a quote from Dimon, which the press assistant e-mailed to Millard on December 19. Having just met with the job-hunting head of PBGC, Dimon said how pleased Morgan was "to have been chosen to partner" with the agency.

"Are you ok with the quote from Jamie?" Lazio e-mailed. "I tried to beef it up."

Courtesy Michael Jagendorf

But a couple of hours later, Lazio e-mailed again: "Politically, probably would be better if Jes Staley gave the quotes. What do you think?"

Millard: "Jes wd be good."

Batts, in her investigation, focused on the 29 e-mails between a senior Goldman official and Millard in the same period "assisting him in his search for employment," including e-mailing the package of bio and clips he sent to Lazio. She "concluded that the receipt of employment assistance from a winning bidder raises serious ethical concerns," noting that the whistleblower who spurred the IG probe contended that Millard "contacted certain executives" during the pre-bid and bid process "in order to enhance his future employment prospects."

Millard characterized that suggestion as "ridiculous," contending in his written statement that he "already had numerous contacts at such financial firms." On January 26, 2009, in his departing interview with Pensions & Investments, a trade journal, Millard said he had "yet to accept a position," though he believed he would "wind up with a job in the asset management or insurance industries." In fact, when Millard wrote the statement to the IG in April, he'd already been out of work for three months. He later created his own Cardinal Advisors, LLC, a firm without a website or a phone number. It lists its address as 370 Park Avenue, the five-story Racquet & Tennis Club not known to house offices. The club says Millard has a mailbox there.

"I fully understood that under the ethics rules," Millard wrote, "I would not be able to work at any of the firms we selected," a temporary bar that explains why Lazio and Goldman were trying to make immediate connections for him elsewhere. Millard's attorney tells the Voice that his client "abided by all procurement rules."

Rebecca Batts, who reports to the PBGC board and not its executive director, started an audit of the Strategic Partnership contracting process in October 2008, while Millard was still weighing the 16 bids. When a whistleblower who has never been identified went to Batts with evidence that the selection was tainted by collusive contacts, she turned the heat up, slowing the transfer of PBGC assets to the three firms.

Batts's focus was Millard, not the winning bidders. She didn't interview Lazio and won't comment about whether she tried. But when the Voice asked her about Lazio, she did say, "We were certainly troubled with the JPMorgan executives as well as others."

The IG finished her 23-page report in May 2009, finding that Millard had "inappropriately communicated with bidders," including 95 pre-award calls with Morgan, and "violated" federal procurement policies. Senator Herb Kohl, the new chairman of the aging committee, called a hearing about the findings for May 20. On May 5, Kohl wrote Jamie Dimon a letter requesting detailed information "related to your firm's contract award" from PBGC by May 12. Kohl got nothing from Dimon before the hearing. When news about the report and the possible cancellation of the contracts began breaking on May 14, an internal Morgan e-mail warned other executives: "We may need to brace for press inquiries. No mention of us yet." Within hours, the Times posted a story with a picture of Lazio, but the focus was more on the other two bidders.

Millard appeared at the hearing and took the fifth on every question. His interim successor, Vincent Snowbarger, a former Republican congressman from Kansas who was deputy director under him, indicated at the hearing that Millard's new investment policy and the three deals would likely be scrapped. Senator Claire McCaskill pointed out during Batts testimony that it wasn't just Millard who had "broken" the rules. "I assume," she said, "that the people who were on the other end of these conversations were breaking rules also, correct?" She added: "We're shareholders, the American people, in some of them," a reference to the TARP money that had gone to Morgan and Goldman.

Shortly before the hearing, two Democratic and two Republican senators had written to Batts, requesting a probe of the winning bidders and Millard. In response to McCaskill, Batts testified that "we take the concerns" of the senators about the corporate conduct "very seriously" and "we've had discussions with the Department of Justice on the matter." She said their investigation would focus on "post-award contacts" between Millard and the executives regarding "placement assistance" for the departing PBGC director. Batts tells the Voice that her answers to McCaskill were sparse because she had to "parse her words when there was an open criminal investigation."

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