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Fasano's firm eyed state job

The House Republican leader says he knew nothing of Morgan Stanley Dean Witter's plans to bid on a state retirement contract.


© St. Petersburg Times, published May 2, 2001

The House Republican leader says he knew nothing of Morgan Stanley Dean Witter's plans to bid on a state retirement contract.

TALLAHASSEE -- For months now, House Republican Leader Mike Fasano has been a main player in Florida's multibillion-dollar plan to overhaul its retirement system.

Fasano, R-New Port Richey, has served as a key adviser and sponsored legislation to ensure certain private companies can offer investment options to thousands of state employees.

All the while, he has said his own employer, Morgan Stanley Dean Witter, would not benefit from his actions.

But while Fasano was pushing his legislation through the state House this spring, Morgan Stanley was laying the groundwork to bid on a lucrative contract in connection with the retirement overhaul, state records show.

Now, Fasano is scrambling to ward off the appearance of a conflict of interest.

"I'm not sure of the propriety of that," Gov. Jeb Bush said Tuesday when asked about Fasano's pursuit of the legislation while his own company had expressed interest in the bidding.

But Fasano said he was shocked to learn this week that Morgan Stanley in New York had expressed interest in bidding to be a "bundled provider" in the new retirement plan.

Such a company would be able to provide a wide range of investment options and customer services to thousands of state employees and retirees.

"I knew nothing about it, I'm dead serious," Fasano said Tuesday.

He told the Times he would resign from his job as an associate vice president for investments at Morgan Stanley Dean Witter in Pasco if his company didn't back off from pursuing the bid.

Fasano also fired off a letter to Tom Herndon, executive director of the state Board of Administration that is overseeing the retirement overhaul.

"I have made every effort to avoid any impropriety in my dealings with this issue and I truly hope that Morgan Stanley will not be considered as a bundled provider in the plan," Fasano wrote.

Bret Gallaway, a spokesman for Morgan Stanley in New York, said Tuesday the investment firm has no intention of pursuing the contract.

"We expressed interest, we recognized the potential conflict, and we decided not to go forward," Gallaway said.

Fasano's legislation, which has already been approved by the state House, would require the state to allow at least one bundled provider to participate in the new retirement plan.

The issue is an important one to a host of private companies who want a piece of the action when the state begins allowing employees to switch their retirement accounts from the state's traditional plan to a 401(k)-style account.

Between $8-billion and $33-billion is expected to move from the state's traditional plan into individual investment accounts beginning June 1, 2002, with $13-billion the most likely figure.

The state Board of Administration has been cautious about using the bundled providers, preferring an "unbundled" approach in which state employees can choose from a range of investment products, but receive education and other services from separate companies.

Fasano said he filed his legislation to ensure the state would not shut out bundled providers and offer fewer choices to state employees.

He said he checked with his local branch manager, as well as a governmental relations official at Morgan Stanley in New York, and was assured that the company would not bid on the bundled provider contract.

Gallaway, the Morgan Stanley spokesman, said the official who made inquiries about the project was unaware of the assurances Fasano had received.

Tim Barron, a principal at Morgan Stanley in New York, relayed his interest in the contract in early April to consultants working on the retirement project, said Herndon, of the state Board of Administration.

Herndon said he did not believe Fasano was aware of Barron's actions. In any case, Morgan Stanley missed the April deadline to notify the state that it was interested in bidding, Herndon said.

Barron wrote a letter to Herndon last Thursday, indicating Morgan Stanley had met the deadline through a letter April 3, but the consultants say they had not received it. Morgan Stanley was then excluded from the list of respondents.

"We would greatly appreciate your intervention to correct this unfortunate exclusion," Barron wrote.

Herndon wrote back Monday, saying Morgan Stanley had missed the deadline and could not participate in the bid process. The company could possibly challenge that decision, Herndon said.

But by late Tuesday afternoon, Morgan Stanley had made it clear that it would not pursue the contract.

House Speaker Tom Feeney defended Fasano, saying he was appointed to an advisory group on the retirement overhaul because he is "one of the most sophisticated people we have on investments."

Feeney also defended Fasano's legislation on bundled providers. "There certainly is no legal conflict. This is not a bill that was passed to help Morgan Stanley."

- Times political editor Tim Nickens contributed to this report.

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