But the disclosure requirements and SEC-mandated ban on contributions haven't stopped bond houses from finding creative ways to influence political decision-making. The most egregious recent example was in New York state, where Dean Witter & Company and Bear Stearns Companies became the lead underwriters for a $3 billion utility bond issue after hiring lobbyists, law firms and municipal bond executives with longstanding connections to Senator Alfonse D'Amato and New York governor George Pataki.
While not directly bankrolling the politicians' campaigns, the bond firms gave money to state Republican Party "housekeeping" accounts and helped fund a campaign for a New York environmental initiative that featured advertisements portraying D'Amato as a friend of the environment.
Since the introduction of rules banning direct political contributions, Colorado securities commissioner Phil Feigin has noted local bond houses shifting the emphasis of their political activities. "Influence-peddling was driven in different directions," he says. "All of a sudden, law firms and political consultants became part of the package."
But while the East Coast is awash in outrageous examples of political payoffs, Feigin says he doesn't think Colorado has seen enough corruption in the local bond industry to justify new state regulations.
"In a smaller state where there are fewer bond issues, I'm not sure it's an issue," he says. "I hate to fix a problem we don't have."
Other states have tried to rein in their securities firms, though. Missouri, for example, passed a law in 1992 that prohibits bond houses from being involved in any way in bond elections from which they stand to make a profit.
In the absence of any local regulations, Colorado's bond firms may soon follow the lead of their East Coast colleagues. "It seems like this goes in cycles," says Paul Hendrie, spokesman for the Center for Responsive Politics in Washington, D.C. "Somebody figures out a way to get around the rules, and it spreads around the country. Then they have to change the rules to deal with that."
The irony is that hiring a political consultant may not increase the chances for a successful bond election. "Their track record is less than 50 percent," Caldwell claims. "Their success rate isn't any higher than for people who don't use them."
Still, he doesn't expect to see an end to bond-house-funded political campaigns in Colorado. In fact, the practice could be just beginning. "I don't know where it all ends," Caldwell says, adding that the bravado of the New York bond dealers in dodging SEC regulations is almost awe-inspiring.
"I thought our crowd was sophisticated," he says, then laughs. "Those boys have taken it to a higher level of science.
