Wall Street Whistle-Blower 'Nets' Still More Controversy


Michael R. Lissack, the Wall Street whistle-blower who encouraged Orange County not to repay $800 million in bonds and later offered his services as county executive, has landed in another controversy--this time in cyberspace.

The 37-year-old former municipal finance banker, an outspoken critic of industry practices that contributed to the Orange County bankruptcy, has become embroiled in a 1st Amendment battle on the Internet with his former employer, Smith Barney, one of the nation's major brokerage firms.

Last October, Lissack created what he calls the Municipal Bond Scandals site on the World Wide Web and began posting news accounts of public finance fiascoes, such as the Orange County bankruptcy. Lissack has been on a crusade to rid the $1.3-trillion municipal finance industry of what he sees as widespread corruption ever since he accused his former employer in February 1995 of cheating a Florida county.

In creating his Web site, he used the corporate logos of Smith Barney and its parent company, the Travelers Group, to decorate what he called "the Smith Barney Page."

That triggered a fight with his former employer, and he has since renamed his electronic publication "the Not Smith Barney Page."

Lissack has widely decried the company's threatened legal assault on his fledgling Web site as an exercise in censorship. Smith Barney dismisses the flap as merely the latest act of a "disgruntled . . . nuisance."

The idea behind the Web site is to educate readers "about a broad set of problems in a very corrupt industry," Lissack said.

Greeting computer visitors to Lissack's Web site is a satirical image of a thief picking a man's pocket. "Smith Barney making money the 'old-fashioned way,' " reads a nearby caption.

The site also contains news accounts of various municipal bond scandals, including every recent incident allegedly involving Smith Barney.

Clearly unamused by the twist on a company motto made famous in TV commercials--"We make money the old-fashioned way; we earn it"--Smith Barney's lawyers threatened legal action last month.

They demanded that Lissack, a former managing director of the company who received nearly $600,000 in pay and bonuses in 1993, immediately "cease and desist" using the trademarks of the two companies, including the ubiquitous umbrella symbol of the Travelers Group.

The firm's lawyers "started throwing temper tantrums," said Lissack, who made headlines here last year when he offered to replace William J. Popejoy as Orange County chief executive.

Smith Barney spokesman Bob Connor said there was no intention to censor Lissack.

"All we've done is, through our attorneys, ask him to stop using our trademarks," Connor said, adding, "I'm just a little upset about the press being manipulated like this."

Connor was referring to a message that Lissack sent to subscribers of the investigative reporters and editors online discussion group, saying that Smith Barney's "game plan is to drive my site off the 'Net' because they don't like what I have to say."

Lissack claims that 150,000 people have viewed his Web site since October. And after the flap developed, the number of people viewing the site rose from 1,500 a week to about 5,000.

After the warning letter from Smith Barney's attorneys, Lissack dropped the company logos and changed the typeface "in an effort to resolve this," he said.

At the bottom of his Web page, Lissack added this footnote: "This page represents independent opinion and, as you have no doubt surmised, is not authorized by Smith Barney or Travelers Group in any way. Its purpose is to provide insight into unethical and potentially illegal activities by both Smith Barney and Travelers."

To date, Smith Barney has not sued, and Lissack's site remains accessible at www.lissack.com.

The Internet battle is just the latest round in a highly public fight between Lissack and his former employer. It started in February 1995 when he publicly accused the firm of trying to cheat Dade County, Fla.

Lissack filed a $75-million wrongful termination claim, and Smith Barney countered with a $15-million claim for disseminating "derogatory documents and misinformation." The matter is pending in what promises to be a lengthy arbitration proceeding before the New York Stock Exchange.

Lissack went on to criticize Smith Barney's dealings in Orange County, Massachusetts and New Jersey.

He has claimed that Smith Barney failed to disclose to investors, as required by federal securities law, that Orange County's investment pool was in trouble. Smith Barney denies that and calls the claim "out and out defamation."

Last August, Lissack filed a whistle-blower's lawsuit against Lazard Freres & Co. for allegedly overcharging the Los Angeles County Metropolitan Transportation Authority several million dollars on U. S. Treasury securities. Lazard has denied the allegations.

If successful, Lissack would pocket a third of the treble damages of $14 million sought under the California False Claims Act.

Lissack, who spent 14 years at Smith Barney, was a highly regarded public finance banker who helped raise $35 billion for municipal projects during his career.

Joe Mysak, editor of Grant's Municipal Bond Advisor, calls Lissack one of the most credible whistle-blowers to break ranks and reveal industry secrets.

"When he left banking, he brought with him a lot of material that's very damning," Mysak said. "A lot of it seems to be very, very accurate."

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