O.C. FINANCIAL CRISIS : Broker Has Reputation as Risk-Friendly : Advice: Some officials say man who handled Citron bond business takes too aggressive a stance.
A key adviser for Orange County’s multibillion-dollar investment portfolio is a veteran San Francisco-based broker with a reputation as an aggressive trader--sometimes too aggressive for his municipal clients.
Broker Michael Stamenson of Merrill Lynch & Co. has repeatedly declined requests for an interview after Orange County announced last Thursday that its bond portfolio had dropped $1.5 billion in value, to $18.5 billion.
But Stamenson has handled some of the most complex trades for the pool, the derivatives and structured securities blamed for the loss. Merrill Lynch has extended Orange County $2.5 billion in credit to purchase securities.
Stamenson, 54, is generally described as an energetic salesman, but one who sometimes shows a comfort with risk that is ill-matched to the needs of a conservative public agency.
John deRussy, finance director for San Mateo, said his city has declined to do business with Stamenson because of his aggressive trading practices.
“We chose not to do business with him because there was an inability to communicate between the two of us,” deRussy said of an earlier overture by the broker. “Our investment goals were more conservative” than Stamenson would have pursued, deRussy said.
Stamenson has worked for Merrill Lynch since April, 1970, said Richard Silverman, a company spokesman, but he declined to discuss any details about Stamenson’s work for Orange County.
Records kept by the state and securities market overseers show no disciplinary action, lawsuits or complaints against Stamenson.
He lives on an oak-lined street--called Merrill Circle North--in a gated community in the affluent town of Moraga, east of Oakland, and owns a 1993 Mercedes-Benz and a 1993 Jeep. His 13-room house--with 5,200 square feet, three bedrooms, four baths and a swimming pool--is assessed at $723,000.
Leopold Korens, chairman and chief executive of the Pacific Stock Exchange, declined to discuss Stamenson directly. But, he said, “One of the basic tenets of the brokerage business is to know your client, know what their capabilities are.”
Daniel Patrick Daly, chief investment officer of San Francisco, said Monday that he has not done business with Stamenson or Merrill Lynch for 12 years because of an earlier dispute. Daly said Stamenson proposed a short-term transaction in which the city would have realized a $17,000 profit; two days later, however, the city received only $12,000.
Daly said that when called Stamenson to ask about the discrepancy, Stamenson told him it was a simple miscalculation.
Daly said that Merrill Lynch should make up the difference or forget doing business with the city of San Francisco.
“He never repaid the extra money, and I never did business with him again,” Daly said.
In the bond market, one’s word is a contract, he said. “When we say something, we mean it.”
