On Thursday, in conjunction with his appointment of Paul T. Williams to the position of executive director of the Dormitory Authority of the State of New York, Gov. David Paterson signed an executive order to increase utilization of Minority and Women-owned Business Enterprise underwriters for state debt offerings. His actions demonstrate his unwavering commitment to minority- and women-owned businesses.
“There is a new sheriff in town,” Gov. Paterson declared at a news conference, while black senators cheered. Indeed, according to Paterson, the time for someone to lay down the law was long overdue.
Although article 15A of New York law, which charged state agencies with establishing employment and business participation goals for minorities and women in 1988, was extended in 2003 and reexamined in 2007 by Gov. Eliot Spitzer, the financial sector was not covered by this law, explains Michael Jones-Bey, executive director of the New York State Division of Minority & Women Business Development. From 1995 to 2006, the division’s staff was cut from 35 to 11 by previous administrations. “Black firms received 0.66% of business, but were 10% of the prequalified companies,” says Jones-Bey.
Before Paterson signed the executive order, article 15A did not include banking, insurance, or sales of securities and bonds. “We are issuing an executive order that will establish guidelines for what we are hoping will aim to increase minority underwriters in the areas of state debt offerings,” Paterson stated. “In addition, we are going to set up transparent business models that will govern the underwriting of the state’s bond transactions.”
“We know that in Gov. Patterson we have someone who has had a long-term commitment to creating opportunity that would extend to minority- and women-owned businesses,” says Sen. Andrea Stewart-Cousins (Downstate Co-Chair for the New York State Senate Democratic Minority M/WBE Task Force).
Paterson reported that Minority and Women’s Business Enterprises qualified for 35% of contracts but received only5%; a mere 1/7 of the total. “Since 2004, New York State has issued $22.3 billion of debt. The minority firms participated in only 3% of that,” Paterson pointed out. “When you factor in their participation based on the value of the debt, it is less than 1%.”
“Frankly, New York has been behind other major states’ governmental bond issuers in giving business to African American firms; particularly those based in New York,” says J. Donald Rice Jr., CEO of Rice Financial Products Co (No. 6 on the BE INVESTMENT BANKS list with $30 billion in
managed issues). “New York is certainly the home of Wall Street. One would expect that if African American firms were going to grow you would see them grow in the Wall Street area. For the last 20 years we have been the only African American firm specializing in municipal bonds to develop in the New York market. In 2007 we did no bond business in New York State. Now we hope that will change.”In his address, Paterson challenged state agencies to measure compliance and compare New York State’s performance to other states. “New York is way behind other states. The executive order is designed to create fairness and inclusion,” he said, confounded that even Mississippi and Alabama, states once known for unjust race relations, outperformed New York in awarding M/WBEs in the financial sector. “Fairness is that the companies that have already met the threshold get the opportunity that they earned.”
Like USB Securities, which has shut down its municipal finance operations, many of the large Wall Street-based firms have suffered significant losses and are laying people off. “Smaller and minority firms are absorbing some of those employees,” says David Womack, managing director at Rice Financial Products Co. “If the governor’s actions can help encourage these firms to grow their business, it can in some manner blunt or mitigate the impact of what is going on in the broader financial marketplace.”
As executive director of the Dormitory Authority, Williams will serve as the chief administrative and operating officer of one of the leading public finance and construction management agencies in the nation. The Authority annually ranks among the top five issuers of tax-exempt bonds in the nation. In 2007, it sold $4.6 billion in bonds (third in the nation) and had a portfolio of $35 billion in outstanding bonds. M/WBE underwriters served as senior managers in only about 5% of those transactions.
Williams’ experiences as an attorney — he helped Williams & Harris L.L.P. become the first minority-owned law firm recognized as a bond counselor by the state of NY — has helped to prepare him for this new post. More recently he was a principal in a boutique investment banking company. “I understand the benefits and potential of increasing diversity to the bond issuance process,” he said.
The task force will implement the recommended new practices for selecting MWBE underwriters by October 15, 2008, and also issue a preliminary report on April 15, 2009 and a final report on January 31, 2010.
“The task force timeline is very aggressive. We want to get to the bottom of the questions and issues that the governor raised and get a systematic way to expand opportunities for firms that are already prequalified,” says Williams, who also wants newer firms to join that prequalified list.
“We will look at how to streamline reporting so that we are getting critical data points to determine whether or not a firm is getting access to business. There has to be follow-up in a systematic way and on a statewide basis,” explains Williams, a member of the Earl G. Graves Board of Directors and a former president of 100 Black Men Inc. in New York.
“As you can see the record of the state has been quite abysmal in terms of inclusion of women and minorities,” says Stewart-Cousins. “When Paterson was the Lt. Gov., he was able to keep focus on that particular issue and see that uppermost in his agenda is making good the promise that NY holds for Minority and Women owned businesses. This is quite a historic time and one that will bear much fruit for [WMBE] who have waited to see their dreams realized.”