A senior executive at a firm seeking a financial services contract at LIPA previously worked with Tom Falcone, LIPA's chief financial officer, and had recommended Falcone for his current job, the authority confirmed.
Falcone, a former Morgan Stanley investment banker who joined the Long Island Power Authority in January, sat on a three-member committee that reviewed nine responses to LIPA's request for proposals for the financial services contract. LIPA trustees are expected to vote on the contract Thursday.
LIPA chief executive John McMahon, in written responses to Newsday questions, acknowledged that Falcone "has worked with or had financial dealings" with six of the nine firms that responded to its request for proposals.
One of those firms, Public Financial Management of Charlotte, North Carolina, provided an "oral reference" for Falcone to get his LIPA job, McMahon said. PFM currently serves as a financial adviser to LIPA.
Eugene Devlin, a senior director at PFM, was head of Morgan Stanley's Public Power Group and its public finance department before retiring from the firm in 2007. Falcone spent 13 years at Morgan Stanley as an investment banker and a strategic adviser in municipal and utility finance. He had not previously worked for an electric utility before joining LIPA.
McMahon asserted that "the receipt of a job recommendation or reference does not amount to a conflict."
Devlin didn't respond to requests for comment.
Of the 32 firms to which LIPA sent the financial services proposal request, Falcone worked with or had prior business dealings with 28, McMahon said.
LIPA said it makes "extensive conflicts checks" and has "significant experience with managing apparent conflicts and the appearance of apparent conflicts." The authority is also subject to state conflict rules and "adheres closely to these rules," along with its own internal guidelines.
Generally, LIPA said, conflicts exist when a staff member has financial interest in a bidder or has a close relative working for a bidder. Falcone has neither.
Even though LIPA understood that Falcone "has worked with or done deals with almost every firm that submitted proposals," McMahon said LIPA views Falcone's "industry experience and familiarity as an asset and a reason for bringing Mr. Falcone to the Authority."
McMahon noted that PFM had been LIPA's financial adviser "for a number of years prior to Mr. Falcone's arrival," and that LIPA staff is "very familiar with PFM and its staff."
LIPA records show PFM was paid $735,231.86 in 2013 for a $4.18 million contract that began in 2009 and expires at the end of June.
LIPA trustees will be advised of Falcone's prior business dealings prior to a board vote on the contract todayThursday, LIPA said. The contract is subject to review by the state Aattorney Ggeneral and the state comptroller's office before it becomes effective.
LIPAsaid Morgan Stanley didn't submit a proposal for the advisory work, but if it had, Falcone would not have participated in the selection process. LIPA said Morgan Stanley hasn't worked for the authority in nearly a decade.