How Politics Trumped Finance in New York

Statehouse skills (and the desire to stick it to Eliot Spitzer) prove more important than accounting, auditing, and pension acumen in the choice of...
David KatzFebruary 9, 2007

Is this any way to pick a comptroller? Corporate senior finance executives might well have asked that question after a brief glance at the raucous spectacle that ended with the New York Legislature choosing one of its own as the state’s chief fiscal officer on Wednesday.

Packed with drama and a hefty dose of comedy, the process pitted an increasingly irate new governor, Eliot Spitzer — well known to Wall Street and the financial-services sector after years as an aggressive state attorney general — against what he has called the most “dysfunctional” legislature in the United States.

Among the supporting players were three well-known former comptrollers, two for the state and one for New York City, who had been tapped by Spitzer and the legislative leadership to choose the finalists for the finance chief slot. Apparently shunning senators and assembly members for the job, the panel picked three finalists with sterling finance and administrative resumes.

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The snub — many thought it was Spitzer who pulled the strings — seemed to enrage the Statehouse denizens. Breaking with a public agreement with the governor to vote only for the panel’s finalists, the legislators nominated Thomas DiNapoli, an assembly member for 20 years. They also nominated Martha Starks, New York City’s finance commissioner and one of the panel’s choices. DiNapoli won by a margin of 151-54. (Starks and DiNapoli did not respond to requests for comment.)

During the noisy vote, many senators and assembly members seemed downright gleeful about defying Spitzer. But there was little talk about what the post might actually ask of its occupant. Here, after all, was a job that involved overseeing a $145 billion pension fund, about 2,500 employees, thousands of audits, and the issuance of massive financial reports. What kind of experience would such an official really need? What was the proper mix of finance know-how and political savvy for the job as the top financial officer in the state?

For the selection panel, the choice was clear. Above all, the comptroller had to have the professional skills to run a huge finance department. To be sure, the ex-comptrollers had all come up through the political ranks: Harrison J. Goldin had been a state senator before he became New York City comptroller; H. Carl McCall had also been a state senator before his unsuccessful run for governor; and Ned Regan had been county executive of Erie, New York.

But their more recent careers seemed to reflect a tilt away from politics and toward finance. Goldin, for example, runs his own corporate-turnaround firm, Goldin Associates, and has worked on such prominent bankruptcies as Enron North America and Drexel Burnham Lambert. Both Regan and McCall, who runs Convent Capital, an investment firm, have served on several corporate boards. Indeed, McCall chaired the New York Stock Exchange’s compensation committee during the scandal surrounding former NYSE chairman Dick Grasso’s controversial pay package. (McCall did not return a phone call seeking comment for this story.)

In choosing three candidates from among 18 applicants for the state comptroller’s slot, the panel focused on finding “people who had experience administering a large and complicated organization and [in] other technical aspects,” including money management, accounting, and auditing, Goldin told Normally, in a general election in which the voters would choose the comptroller, political skills play a greater role in the job’s requirements, he said. After all, Goldin acknowledged, “he is a politician.”

But the panel was operating in an unusual situation: the need to pick a comptroller came about when Alan Hevesi stepped down in December after pleading guilty to a felony involving the improper use of the services of a state employee as a driver for his ill wife. By some accounts a prudent and successful manager of the city’s pensions, Hevesi had been reelected by a wide margin in November, despite the unfolding scandal. In that unsettled political climate, the panelists believed they should zero in on managerial and quantitative skills over political ones, according to Goldin.

At least on paper, the three candidates they selected seemed like solid choices for the job:

• Starks, the New York City finance chief, leads a 2,300-person agency charged with collecting $18 billion in yearly tax revenue, maintaining records for more than 1 million properties, conducting thousands of tax audits, and adjudicating more than 2 million parking tickets a year.

• Bill Mulrow, a seasoned Wall Street hand who ran against Hevesi for comptroller in 2002, is a managing director of Paladin Capital Group, a private-equity firm with a specialty in homeland security. His resume includes a stint as managing director of corporate finance at Rothschild Inc. and one as managing director of public finance banking at Donaldson Lufkin & Jenrette.

• Howard Weitzman is the comptroller of Nassau County, New York, which has a $2.5 billion budget and “a population exceeding 11 states,” he says. A CPA, he spent 20 years in public accounting, including stints at KPMG and at Haskins and Sells (a precursor of Deloitte and Touche).

Weitzman told that he underwent some fairly deep questioning by legislators at a January 24 joint session of the Assembly Ways and Means Committee and the Senate Finance Committee, where the candidates made their pitches for the job. The lawmakers asked him, for example, about diversity in the allotment of some of the state’s $300 million in advisory fees by the management of the pension fund. At least one legislator, he told, “was concerned that the money was targeted to women- and minority-owned businesses in an inappropriate manner.” Weitzman’s perspective was that while diversity is an important issue, prudent fund disbursement is paramount.

Weitzman was also asked whether he thought the state comptroller served a policy-making role. He says he answered that while it’s the governor and legislature that are the main policymakers, by determining “which agency [is] audited, the comptroller influences policy.”

Indeed, it’s the political role that marks what Weitzman considers to be the strongest difference between senior finance executives in the public and private spheres. Even though corporate CFOs are encouraged to report directly to the board, they “ultimately carry out the policies of the chief executive,” he says. Elected comptrollers, on the other hand, must oversee the finances of the governor’s office and render tough financial criticism of erring state agencies. Further, in contrast to corporate finance chiefs, the state comptroller “has to maintain high visibility, not only with the financial community, but also with voters,” says Weitzman. “That’s why you have high-profile audits.”

In the end, politics won. While the panel of ex-comptrollers spurned DiNapoli, his colleagues voiced considerable admiration for him, praising his integrity and often calling him Mr. Clean during the voting. An assembly member since 1986, DiNapoli has been noted, however, for his involvement in environmental and educational legislation, not finance. Before joining the assembly, he served as a manager for a telephone company. He holds a master’s degree in human-resources management from The New School in New York.

Given a choice, the legislators opted to promote from within. Democratic Assemblywoman Sandra Galef, returning for the vote after being out sick for a week, described what she called a difficult decision. At first, she told the packed hall, she’d decided to vote for one of the panel’s choices. But after hearing the personal accolades DiNapoli got from her colleagues, she decided to vote for him. “Why am I going to support somebody chosen [by the members of the panel], that I don’t know?” she asked.

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