HomeMy WebLinkAbout1985-03-06 - City Commission Special Meeting MinutesS
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P.O. BOX 25010
TAMARAC. FLORIDA 33320
5811 NORTHWEST 88TH AVENUE TAMARAC, FLORIDA 33321
TELEPHONE (305) 722-5900
NOTICE OF SPECIAL MEETING
ilIarc:i 5, 1985
PLEASE BE ADVISED THAT Mayor Kravitz has called a Special
Meeting of the City Council to be held on Wednesday,
March 6, 1985 at 9:00 A.M. in the West Conference Room
of City Hall, 5811 N.W. 88th Avenue
The purpose of this meeting is:
1) Discussion and possible action on the effects of the
Securities and Exchange Commission's injunction on
ESM GROUP, INC. with which the City has repurchase
agreements for investment of funds.
2) Discussion and possible action regarding engaging
the services of special counsel.
L
Marilyn ertholf, CMC
City Clerk
AN EQUAL OPPORTUNITY EMPLOYER
POLICY OF NONDISCRIMINATION ON THE BASIS OF HANDICAPPED STATUS
CITY OF TAMARAC, FLORIDA
SPECIAL CITY COUNCIL MEETING
March 6, 1985
Tape 1 CALL TO QMER: Mayor Philip B. Kravitz called the meeting to order
on Wednesday, March 6, 1985 at 9:00 A.M. in the West Conference Room
of City Hall.
RQIL- CALL: kU_,SENT:
Mayor Philip B. Kravitz
Vice Mayor Sydney M. Stein
Councilman Jack Stelzer
Councilman Raymond J. Munitz
Councilman Allan C. Bernstein
EN
Elly F. Johnson, City Manager
Jon M. Henning, City Attorney
Steve Wood, Finance Director
Marilyn Bertholf, City Clerk
Carol E. Barbuto, Assistant City Clerk
Patricia Marcurio, Secretary
Mayor Kravitz read the Notice of the Special Meeting into the record
noting the purpose of the meeting as:
1. Discussion and possible action on the effects of the Securities
and Exchange Commission's injunction on ESM Group, Inc., with
which the City has repurchase agreements for investment of funds.
2. Discussion and possible action regarding engaging the services of
special counsel.
SYNOPSIS OF ACT -ION:
1. The City Attorney gave a
report to Council.
2. The City Manager and
City Attorney were authorized
to negotiate with a law firm
to represent the City for an
amount not to exceed $10,000.
The City Attorney will report
the results to Council at the
3/13/85 Council meeting.
City Attorney Henning said ESM Group, Inc. is an investment company
operating in Broward County that is a recognized firm with legal
investments according to the Florida Statutes. He said this company
is regulated by the S.E.C. as well as the State Comptroller's Office
and was mentioned at Investment Advisory Committee meetings as well.
He said these particular types of investments, which are short-term
repurchase agreements for premium interest rates, have been
practiced for well over a year by Tamarac and other cities. He said
there was a problem revealed by a special audit and the Securities
and Exchange Commission has issued an injunction which has seized
the assets of the investment company.
Mr. Henning said the City has received specific receipts of collat-
eral guaranteeing the investments. He said there are six contracts
totalling 7 million dollars with interest coming due to the City at
various times. He said an area of concern is whether this has any
impact on the City's rating for the bonds and presently, the City is
planning on moving forward with the bond sale at the 3/13/85 Council
meeting. He said the problem has two areas of law; first, the
securities specialty and, second, bankruptcy specialty. He said the
City has been in contact with bond counsel as well as Holland and
Knight, which is a recognized bankruptcy expert.
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3/6/85
/pm
Mr. Henning said Mr. Norman of Holland and Knight was City Attorney
of Tamarac in the 70's and he is checking to determine if they have
any conflicting clients. Steve Wood, Finance Director, said the
City relied on recommendations made by Alexander Grant & Co.
and, in their financial statements on ESM, dated December, 1984,
with an opinion date of January, 1985, which stated, "We have
examined the statements of financial condition of ESM Government
Securities, Inc., a Florida corporation, wholly -owned subsidiary of
ESM Group, Inc., as of 12/31/84. Our examination was made in
accordance with generally accepted auditing standards and,
accordingly, included such test of the accounting records and other
such auditing procedures as we consider necessary in the
circumstance. In our opinion, the statements referred to above
present fairly the financial condition of ESM Government Securities,
Inc. at 12/31/84 in conformity with generally accepted accounting
principles applied on a basis consistent without a preceding year."
He said this was signed Alexander Grant & Co. and was dated 1/30/85.
Mr. Wood said the purpose of financial statements is to inform
investors on making investment decisions and the City relied on the
financial statements in making these investments. He said they
believe that the Comptroller, Gerald Lewis, should have regulated
this industry and he urged all the residents of Tamarac and Broward
County to contact their legislators and the Governor requesting an
investigation of this problem. He said some of the people involved
in this are the largest Savings and Loan Associations in the State
of Florida, school boards, Ohio State University, Bank of the South,
Cities of Tempe, Arizona, Birmingham, Michigan, Tulsa, Oklahoma and
Toledo, Ohio. He said he has a listing of all of the creditors that
they obtained from Judge Ortez's office in the Exhibits filed
regarding this case.
C/M Bernstein asked what the dates and amounts of the City's invest-
ments were and Dan Saale, Deputy Finance Director, said on 11/30/84
the City entered into a one million dollar contract with ESM for
four months and the settlement date on that was 3/29/85 and the rest
of the investments were subsequent to that. V/M Stein asked
Mr. Wood if there is any idea of what assets are available and
Mr. Wood said they do not know. He said the balance sheet for this
subsidiary showed that they had three billion dollars in assets as
of 12/84. He said the primary was securities purchased under agree-
ment to resell and that is disclosed under A & D of the Financial
Statements. He said Exhibit A looks like the document that may
have been.done after this occurred showing that the financial
statements of the preceding years may have misled the investors.
Mr. Wood said "Exhibit A" is a P & L Statement and shows the group
consolidated and the financial group as a whole, which shows that
they really had losses. Mr. wood read a quote from this morning's
Wall Street Journal made by General Counsel for Alexander Grant,
"It is not clear why the financial problems were not detected during
audits by Alexander Grant & Co., which has been ESM's independent
auditor at least since 1977. We frankly do not know a whole lot,
said James F. Strother, General Counsel for Alexander Grant. We are
unaware or without knowledge of what might have led to such
problems."
Mr. Henning said he spoke with Jim Norman on the telephone and there
is a conflicting client with Holland and Knight. He said the City
Manager and he would like authorization to negotiate with a
prominent law firm. He said the fees discussed with Holland and
Knight were on the average of $140.00 per hour with an expert's
salary of $275.00 per hour. He said this should be on the next
Council agenda for a report; however, in the meantime, an amount of
$10,000.00 could be used as a cap for this service.
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3/5/85
/pm
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Mayor Kravitz suggested Council make a MOTION that the City Manager
be authorized to spend up to $10,000.00 to proceed with negotiations
with a report to Council at the 3/13/85 Council meeting.
C/M Bernstein so MOVED, SECONDED by V/M Stein.
V/M Stein asked if ESM was in bankruptcy and Mr. Henning said there
was an injunction by the Securities and Exchange Commission and the
nature of the claim is the same type of law as bankruptcy.
VOTE: ,ALL VOTED AXE
C/M Bernstein asked the City Attorney what Alexander Grant's liabil-
ity in this case would be and Mr. Henning said he cannot answer
that. C/M Bernstein asked if a City makes an investment relying on
the accuracy of a Clean Opinion Audit, does history of such matters
indicate that the accounting firm may be held accountable?
Mr. Henning said he cannot state what their liability is; however,
the Finance Department does rely on the audit to make investments.
C/M Bernstein asked what the liability of Bradford Trust would be
and Mr. Henning said one of the City's first concerns is to protect
the interest in the collateral.
City Manager Johnson said this is not the time to discuss possible
liability on their part. He said staff will investigate this and
report back to Council. Mayor Kravitz noted that this report from
the City Attorney should be put on the 3/13/85 Council meeting
agenda. City Manager Johnson said the City also relies on the State
of Florida and the S.E.C. as far as the banks being regulated and
licensed.
Mr. Henning noted that the bond sale should be on the 3/13/85 Coun-
cil agenda with the bid opening at 11:00 A.M. and the sale at 1:30
P.M.
Mayor Kravitz adjourned the meeting at 9:40 A.M.
MAYOR
ATTEST: -
ASSISTANT CITY CLERK
This public document was promulgated at a cost of $90.00 or $2.47
per copy to inform the general public and public officers and
employees about recent opinions and considerations by the Council of
the City of Tamarac.
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3/6/85
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CITY OF TAMAPAC
APPROVED AT ME9-5NG OF /o