Advisors Own No Electricity Stocks

Two key energy advisors to Gov. Gray Davis who were exempted from filing conflict-of-interest statements disclosed Friday that they don’t own stock in any electricity companies.

Wall Street investment bankers Joseph Fichera and Michael Hoffman sent letters to the governor saying they do not and will not hold stock in companies engaged in the generation, transmission, marketing or distribution of electricity while they work for the state.

The letters were sent exactly a week after the Davis administration announced that it had fired five consultants who owned energy stock and were involved in buying power on the state’s behalf.

Secretary of State Bill Jones, a Republican who hopes to challenge Davis next year, has attacked the governor in recent weeks over conflicts of interest involving energy consultants. Jones also has taken aim at Fichera and Hoffman, demanding that they complete financial disclosure forms to ensure that they don’t have a conflict of interest.

But the governor’s legal affairs secretary, Barry Goode, concluded that the two men are contractors, not consultants, and do not have to file the financial disclosure documents.

To allay any concern about their personal finances, a spokeswoman for the governor said Fichera and Hoffman were asked to prepare the letter.

Fichera is chief executive officer of Saber Partners, and Hoffman is a principal in the Blackstone Group, two New York firms being paid $275,000 a month by the state.

They were hired in March to advise the governor, promote a $13-billion bond issue to cover the cost of power purchased by the state, and prepare a financial rescue plan for California’s financially crippled major utilities.

Saber Partners and the Blackstone Group could be paid an additional $14 million if the state buys the transmission lines of Pacific Gas & Electric Co., Southern California Edison and San Diego Gas & Electric.

The two advisors wrote that neither they nor any member of their immediate families have any stock holdings that could present a conflict. They specifically said this includes the parent companies of the state’s major utilities: PG&E; Corp., Edison International and Sempra Energy.

Hoffman did note that on March 6, the managers of an investment account which he owns sold options to acquire stock in Williams Companies, an international energy firm, at a loss of approximately $8,000.

Fichera and Hoffman also said they do not own stock in any brokerage firm involved in the sale and underwriting of the bonds that will be sold by the state to repay the cost of buying power. Both men have worked for prominent Wall Street investment firms during their careers.

“I will not own any of the stocks described . . . or have any direct interest in these entities throughout the term of the contract,” Fichera and Hoffman wrote.

Fichera’s three previous employers--Prudential Securities, Bear, Stearns & Co. and Smith Barney (now Solomon Smith Barney)--are among the 32 firms signed to underwrite the $13-billion electricity bond program, according to the state treasurer.

For months, the Davis administration did not require any financial disclosures by dozens of consultants, companies and advisors hired to assist the state in dealing with the energy crisis.

But as questions began to arise in recent weeks, the administration ordered some consultants to complete disclosure forms. In a number of cases, they reported owning stock in energy companies, a situation that posed a potential conflict between their state role and personal finances. The governor’s office last month ordered them to sell their holdings within hours or be terminated.

Four traders who were buying power for the state and a consultant negotiating long-term power contracts were fired even after selling their holdings.

The governor’s office drew a line when it came to contractors, such as Fichera and Hoffman, as opposed to consultants. The administration argued that contractors did not have to disclose holdings because their duties were narrowly focused and their contracts were short-term, less than a year.