The FBI has served a subpoena on...
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The FBI has served a subpoena on the Metropolitan Transportation Authority for records of financial agreements between the now-defunct Los Angeles County Transportation Commission and two major investment firms.
MTA officials say they are cooperating with investigators and believe the request is part of a larger national investigation of the two firms, Merrill Lynch and Lazard Freres & Co.
“We’re supplying the information that we’ve been asked for,” said Alan Pegg, executive officer for administration with the MTA. “This may be more of a securities industry than an MTA issue. There is no sense that this is our issue.”
Sources familiar with the Boston-based FBI investigation said that the Los Angeles transit agency is one of at least two West Coast clients of Lazard Freres to receive such a subpoena to date.
Officials with Merrill Lynch were unavailable for comment.
A Lazard Freres spokesman said that the firm is cooperating fully with the probe--and does not know why the FBI is seeking the information in Los Angeles.
“We are not aware of any reason for this client (the Metropolitan Transportation Authority) to receive this subpoena, other than that they have been a financial advisory client of Lazard Freres,” said the spokesman.
In Boston, where the FBI’s office issued the subpoena, agency spokesman William J. McMullin declined to comment. In Los Angeles, FBI officials declined to return phone calls.
The U.S. attorney’s office in Boston has been investigating allegations of improprieties and conflict of interest involving Lazard Freres’ contractual relationship as a consultant to Merrill Lynch, according to a Dec. 22 memo from Lazard Freres issued to all MTA board members. The consulting centered on interest rate swaps for municipal bond issuers, according to the memo.
Officials are also investigating allegations that Merrill Lynch was improperly given information about its competitors’ proposals during an underwriting bidding war over the issuance of Massachusetts’ state water agency bonds, according to a report released last week by the Massachusetts inspector general.
The agreement between the two investment firms was set up by Mark Ferber, the former head of Lazard’s Boston office and the former adviser to the Massachusetts Water Resources Authority. The water agency has planned to issue more than $6 billion in bonds.
Ferber was fired from the water agency in July.
But according to the Lazard Freres memo addressed to MTA board members, Ferber “was never assigned to the Los Angeles County Transportation Commission account and did not provide assistance in any way” to the agency.
The FBI opened an investigation of the LACTC more than a year ago to examine alleged irregularities in contract awards and other billings. Officials say they believe this latest round of inquiry by the FBI is unrelated.
Times staff writer David Willman contributed to this story.
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