LANSING – In the rush to get the 21st Century Jobs Program running, Republican lawmakers on Thursday during a joint legislative oversight committee found fault in the process as they questioned Treasurer Jay Rising to find out why members of the Tobacco Settlement Finance Authority did not receive written information when they voted to hire a financial advisor and bond counsel.

The authority met on Wednesday, as did the Strategic Fund Board, which are two of the three panels overseeing the investment of $396 million in tobacco settlement monies to invest in promising technology companies that will create high paying jobs.

The turmoil over the authority meeting centered around member Stephen Cassin, executive director of the Macomb County Department of Planning and Economic Development, who argued that the panel was rubber stamping the verbal recommendations made by the Treasury’s Bureau of Bond Finance.

Rising, who chairs the authority but was not in attendance at the meeting because of a prior commitment, said the panel did receive verbal recommendations from staff members who had interviewed the financial adviser and bond counsel proposals.

Prior to that, the department had created a list of all the firms in those two fields and contacted them to see if they were interested in sending in a proposal, said Rising, adding that the state works with many of these companies already through programs such as the Michigan State Housing Development Authority (more than $5 billion in financing was conducted by the state last year).

Three of the 50 financial adviser firms responded, with two of the three teaming up on a proposal. The contract, however, was awarded to Public Financial Management, which works with dozens of government agencies across the nation, according to its web site. For bonding counsel, staff referred to the Michigan Red Book, which has more than 20 firms listed. Nine applied and, after initial review, four were interviewed and two, Dixon Wright and Lewis & Monday, were recommended and selected by the authority.

Staff examined items such as the firm’s experience in dealing with this type of program, its fees, potential conflicts of interest and any investigations into the firm by the Securities and Exchange Commission and the Internal Revenue Service. Those questions, but not the responses were provided in writing to the panel prior to the 90-minute meeting.

Co-chairs Rep. Bill Huizenga (R-Zeeland) and Sen. Valde Garcia (R-Howell) questioned whether a sufficient amount of information and time were provided to vote on the hirings. The co-chairs said they were not arguing that the staff did a poor job, but that members should have been provided with all the proper documentation in writing.

“If I was a member of that board and walked in for 90 minutes…I would feel very much excluded from the process. Why even have a board?” said Rep. Jack Brandenburg (R-Harrison Twp.). “I think it was your responsibility to get the information out to these members.”

Rising said that Cassin had indicated he did not want information beforehand and that if the panel had felt uncomfortable with voting, when staff from his department had finished the last interview the day before, then they could have requested to vote at a later meeting. Its members and not the state dictate activity on the panel, he added. “I think it was as informed as the board wanted it to be.”

Besides Rising and Cassin, the other members of the panel are Department of Labor and Economic Growth acting-Director Robert Swanson, Consumers Energy President John Russell and Kalamazoo County Administrator Donald Gilmer.

Garcia said that even if Cassin had not wanted written information beforehand, when he requested it at the meeting it should have been made available.

Rising said he understood the concerns of how the process was hurried, but said that the panel chose to move quickly and that both the legislature and administration have dictated that the process move fast so that the bonding money can be available by early- to mid-March. “We have embarked on a very aggressive program.”

Rising himself will be leaving Treasurer at the end of the month to become chief financial officer of the Detroit Medical Center.

The financial adviser selection primarily came down to hiring two bond counsels based on costs and the firms’ unique experience in the field, he said. Huizenga and Garcia asked whether staff interviewed organizations the firms had dealt with in the past. Rising said that the state did not keep a running score on these companies, but that the state works frequently with these firms and knows them well. The state also did a thorough review during the interview process.

Huizenga also said he had concerns that the financial adviser was supposed to be hired before the bonds counsel so that it could provide consultation to the panel, a process stipulated under the statute. However, Rising said that the bond counsel is not considered a consultant and therefore having the two selected on the same day did not matter. The authority will take up proposals for underwriters to the program next week, Rising said.

Rep. Andy Dillon (D-Redford) argued that the qualm over the process was minimal since no policy was being adopted and that the pool of professionals in the field is limited. While Sen. Michael Switalski (D-Roseville) said that the state is losing money by delaying the implementation of the program and not investing the funds and gaining earnings on them.

To which Huizenga said, “In the rush to get this economy kick started, I’d rather measure twice and cut once.”

Huizenga said the committee has requested the written proposals for financial advisers and bond counsel, something that was at first turned down, but has since received approval from Rising and Michigan Economic Development Corporation CEO Jim Epolito.

MEDC has received 791 letters of intent for the 21st Century Jobs Program, which Governor Jennifer Granholm said in a statement is “Clear evidence that the next wave of exciting high-tech discoveries can happen right here, creating new high-paying jobs for Michigan families.”

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