Hands On

A memo clarifies the roles of Herenton, Lee, and Morris in the TVA prepayment.

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With Mayor Willie Herenton under apparent investigation by the FBI, with a new director of Memphis Light, Gas & Water in place, and with the city hoping to turn a corner in its relationship with MLGW and the Tennessee Valley Authority, a memo has surfaced shedding light on all the above subjects.

The memo, dated last October 3rd and made available to the Flyer from a City Council member, is from former MLGW president Herman Morris to MLGW senior vice president John McCullough, the utility's chief financial officer. It clearly outlines the mayor's hands-on approach to the terms of the city's massive prepayment arrangement last year with TVA, including Herenton's insistence on which brokering agencies should handle the deal and what percentage of the action should be due each.

Further, it shows the extent to which Joseph Lee, the former city finance director who was sworn in last week as the new MLGW head, was the mayor's factotum in carrying out his wishes. And it clearly demonstrates the significant pressure placed on various parties, including Morris and the representatives of some of the big-name brokers involved in the deal, one of whom threatened to sue as a result.

Most of this was known or suspected earlier, but Morris' memo is the most explicit revelation to date of some of these aspects.

Morris begins the memo by writing, "I said that I would try to bring the matters to a conclusion by the week's end. I don't know that any of my efforts had any impact, but here is the deal." Emphasizing Herenton's "concern that there be significant local and minority participation," the then MLGW chief (later forced out by the mayor in the aftermath of the prepayment deal) notes, "The underwriters were concerned that they not be reduced in participation levels as other participants were added to the deal."

Indeed, one of these underwriters, the major Wall Street firm of J.P. Morgan, was "concerned" to the point of threatening legal action. As Morris wrote, a Morgan representative pointedly told him of the brokerage's "willingness to agree to the Mayor's original position" (i.e., prior to the add-on brokers suggested by Herenton). "I was also gratuitously told of their willingness to sue, contact the governor and senators and pull out all the stops over their perceptions of mistreatment if that did not work." (In the memo Morris characterized the Morgan firm's reaction as possible "saber rattling.")

This was the consequence of a series of communications from Herenton, beginning with a letter of August 18th and continuing through various meetings with Morris and others, in which the mayor insisted on adding specific local and area brokers and legal advisers to the prepayment deal already set in motion by Morris, a former MLGW legal counsel.

Added to the deal, with their percentages and other terms spelled out by the mayor in a memo, were such participants as First Tennessee Bank of Memphis and members of a Little Rock law firm which, critics of the mayor have noted, played host to a fund-raiser for him just after July's windstorm.

To accommodate the changes, Herenton had suggested reducing the percentage allotted to the Morgan firm and eliminating altogether another New York firm, Lehman Brothers. When both firms protested, the mayor reacted, said Morris in his memo. "He apparently saw one of them as arrogant and unresponsive to his concerns for local and minority participation he had 'suggested.' The other he saw as more responsive and willing to be sensitive to his concerns and 'suggestions.' He advised that he wanted to consider changing lead underwriters, dropping J.P. Morgan and substituting Goldman Sachs. Goldman was making a major push to take over the lead underwriter position ... by going directly to the Mayor."

Morris' use of quote marks around "suggested" and "suggestions" were possible indications of the intensity with which Herenton insisted on the changes he desired.

Apparently there was a subsequent conversation between the mayor and the Morgan firm, resulting in both parties reaching an agreement. As Morris puts it: "I spoke with the Mayor this morning and got quite a different reaction to J.P. Morgans' participation. He was more supportive of J.P. Morgan in light of their proposal of a new allocation more consistent with his first suggestions. He suggested that including Goldman Sachs at this late date might not be a good idea and should not be added to the deal. He suggested that I get with Joseph Lee, city CFO, and work out the details of the deal. We did that this afternoon."

Ultimately, the deal did indeed get done, with Lee supervising final arrangements under what would appear to be Mayor Herenton's direct oversight. In an interview with the Flyer earlier this year, Herenton acknowledged having taken command of the bond negotiations for the prepay deal.

In the last paragraph of his memo to McCullough, which summarized the situation, Morris said, "I am leaving after a very long day and going home. I am tired and have a headache."

Not long thereafter he would also have the title of ex-MLGW president.

n The picture for the 2006 U.S. Senate race in Tennessee continues to clarify -- at least on the Republican side. The announcement last week by Chattanooga mayor Bob Corker that he will not seek reelection as his city's chief executive frees him up for an expected Senate race. (That probably lets out U.S. Representative Zach Wamp, Corker's GOP-mate and fellow Chattanoogan.)

A surprise announcement of availability came from Nashville state Representative Beth Harwell, who is state Republican chairman. If she makes the race, the auguries are not the best. The last major-party state chair to hope for such a springboard was former Democratic chair Houston Gordon of Covington, who lost badly in 1996 to then Republican Senate incumbent Fred Thompson.

The other major Republican candidate meditating on a race is former congressman and newly elected GOP national committeeman Van Hilleary, now of Nashville.

Democrats considered likely candidates are Memphis congressman Harold Ford Jr. and Nashville mayor Bill Purcell.

All these calculations will be brushed aside if incumbent Republican Bill Frist, the current Senate majority leader, chooses to run for reelection rather than opting out, as expected, to focus on a presidential race in 2008.

n Although summer is full upon us, fur is flying already in some of the countywide races on the August 5th general election ballot. In a three-for-all (which threatened to become a free-for-all) forum sponsored by the League of Women Voters at the main Memphis Public Library, candidates for assessor, General Sessions clerk, and Chancery Court judge duked it out.

Technically, those adjectives don't apply to the latter contest, between incumbent Chancellor Arnold Goldin, who was appointed to fill a vacancy last year, and challenger Karen Tyler. Theirs is both a bipartisan and a judicial race, with built-in canon-of-ethics constraints on the rhetoric that can be employed.

Even so, Goldin was able to emphasize his experience and the fact that he was nominated by a nonpartisan lawyers' panel on merit before his appointment. And Tyler, an African-American female, made an issue of "diversity" on the bench and stressed the importance of popular elections in achieving such ends.

But that was nothing compared to the gloves-off rhetoric in the two other contests. Challenger Harold Sterling, a Republican and former assessor, wasted no time in accusing incumbent assessor Rita Clark, a Democrat, of "inexcusable" delays in putting a new aerial-photography property-mapping system online and of excessive expenditures on "social amenities" and travel.

Clark responded with a defense of her record and with two charges of her own -- that a successful diversity suit against Sterling's administration had cost taxpayers a tidy sum, and that he had improperly employed out-of-county residents and wasted public money on a "personal trainer." These were recaps of charges made in her successful campaign against then-incumbent Sterling in 1996.

Surprisingly, even the race for General Sessions clerk, which in theory ought to be a placid one, got heated when challenger Roscoe Dixon, a Democratic state senator, accused incumbent Republican Chris Turner, who defeated Dixon four years ago, of creating a "prisoner-of-war" mentality among his employees. This turned out to be a reference to surveillance cameras in the office, and, though Turner took no note of the charge during his formal appearance, he later seemed content to have the procedure known. "They're up everywhere money is handled," he said.

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