July 27, 2010
The State Ethics Commission and Stephen Lisauskas enter into this Disposition Agreement pursuant to Section 5 of the Commission's Enforcement Procedures. This Agreement constitutes a consented-to final order enforceable in the Superior Court, pursuant to G.L. c. 268B, § 4(j).
On May 15, 2009, the Commission initiated, pursuant to G.L. c. 268B, § 4(a), a preliminary inquiry into possible violations of the conflict of interest law, G.L. c. 268A, by Lisauskas. The Commission has concluded its inquiry and, on November 20, 2009, found reasonable cause to believe that Lisauskas violated G.L. c. 268A, § 23.
The Commission and Lisauskas now agree to the following findings of fact and conclusions of law.
Findings of Fact
- The Springfield Finance Control Board ("SFCB") was a state agency created by an act of the Massachusetts Legislature in 2004. The mission of the SFCB was to resolve the financial emergency in the city and to restore financial stability to the city.
- The SFCB, with the approval of the Secretary of Administration and Finance, appoints all SFCB employees.
- Lisauskas was appointed the SFCB deputy director in June 2006 and became executive director in July 2007. Previously, Lisauskas was the Town of Natick deputy town administrator.
- In September 2006, Lisauskas organized a committee (the "Committee"), of which he was a member, to find a new brokerage firm to manage the City of Springfield's (the "City") approximately $100 million in cash investments. The Committee, with Lisauskas participating, invited three firms to interview. One of those invited was the Albany, New York office of Merrill Lynch ("Merrill Lynch Albany").
- Lisauskas had a friendship with Carl Kipper, a Merrill Lynch Albany broker/vice president. Lisauskas and Kipper had socialized regularly when Lisauskas lived in the Albany area, and they kept in contact by phone and email thereafter.
- Lisauskas orally disclosed a relationship with Kipper to the Executive Director of the SFCB and members of the Committee. The Committee members were not aware that Lisauskas and Kipper had a friendship. Lisauskas filed no written disclosures with the Committee or with his appointing authority about his relationship with Kipper.
- Lisauskas informed the Committee members that he had worked with Kipper, an investment specialist from Merrill Lynch Albany, planning various investments for the Town of Natick while Lisauskas was Natick's deputy town administrator.
- Kipper had made a proposal to the Town of Natick that had not been approved. Kipper had no public investment experience in Massachusetts. Neither Kipper nor Merrill Lynch Albany had ever managed any money for the Town of Natick.
- Lisauskas typed up the questions to be asked of each brokerage firm during the Committee interviews. The questions had been decided upon by consensus of the Committee. Lisauskas provided Kipper with information about the questions to prepare him for the interview. This information was not provided by Lisauskas to the other brokerage firms interviewing for the City's business.
- The interviews of the three brokerage firms took place in November 2006. Lisauskas participated extensively in the interview process.
- Immediately following the interviews, the Committee, with Lisauskas participating, decided to give to Merrill Lynch Albany to invest on behalf of the City approximately 60% of the City's investment cash and to split the rest between the other two competing firms. Later that day, Lisauskas called Kipper to give him the news. The City began transferring funds to Merrill Lynch Albany shortly thereafter.
- Massachusetts law places restrictions on the types of investments in which public monies can be invested. In the late summer of 2007, the City learned that Merrill Lynch Albany had invested approximately $13 million of the City's investment cash in risky, mortgage-backed securities that were not on the so-called "legal list" of investments, and that those securities had lost nearly all of their value.
- The Office of the Attorney General of Massachusetts announced in late January 2008 that Merrill Lynch Albany had agreed to reimburse the City $13.7 million to cover the City's investment losses as well as its legal fees.
Conclusions of Law
14. As the SFCB deputy director, Lisauskas was at all times relevant to this matter a "state employee" as defined in G.L. c. 268A, § 1.
15. Section 23(b)(2) of G.L. c. 268A prohibits a state employee from, knowingly, or with reason to know, using or attempting to use his official position to secure for himself or others unwarranted privileges or exemptions which are of substantial value and which are not properly available to similarly situated individuals. 
16. Being selected as a brokerage firm to invest the City's money was a privilege.
17. Lisauskas knowingly or with reason to know used his official position to secure for Kipper and Merrill Lynch Albany, Merrill Lynch Albany's selection as a brokerage firm to manage the City's investment money by, in his capacity as SFCB deputy director, (a) informing the Committee members that he had worked with Kipper, an investment specialist from Merrill Lynch Albany, planning various investments for the Town of Natick while Lisauskas was Natick's deputy town administrator, when Kipper had only made a proposal to the Town of Natick that had not been approved, Kipper had no public investment experience in Massachusetts, and neither Kipper nor Merrill Lynch Albany had ever managed any money for the Town of Natick; (b) providing Kipper with information to prepare him for the November 2006 interview; and (c) then participating extensively in the interview process and the decision to have Merrill Lynch Albany invest on behalf of the City approximately 60% of the City's investment cash.
18. The privilege was unwarranted because it was awarded, at least in substantial part, based on inaccurate information, and through a process that gave Merrill Lynch Albany an unfair advantage.
19. This privilege was of substantial value because the fees to be earned by Kipper and Merrill Lynch Albany exceeded $50.
20. This unwarranted privilege was not properly available to similarly situated individuals (i.e., other companies vying for the ability to invest a share of the $100 million cash investment and earn fees for such investment).
21. Therefore, by, in the manner described above, using his official position as the SFCB deputy director to secure for Kipper and Merrill Lynch Albany, Merrill Lynch Albany's selection as the brokerage firm to invest the City's money, Lisauskas knowingly or with reason to know used his official position to obtain an unwarranted privilege of substantial value not properly available to other similarly situated individuals in violation of § 23(b)(2).
22. Section 23(b)(3) of G.L. c. 268A prohibits a state employee from, knowingly, or with reason to know, acting in a manner which would cause a reasonable person, having knowledge of the relevant circumstances, to conclude that any person can improperly influence or unduly enjoy his favor in the performance of his official duties, or that he is likely to act or fail to act as a result of kinship, rank, position or undue influence of any party or person. The section further provides that it shall be unreasonable to so conclude if such officer or employee has disclosed in writing to his appointing authority or, if no appointing authority exists, discloses in a manner which is public in nature, the facts which would otherwise lead to such a conclusion.
23. By participating in his capacity as SFCB deputy director in the above-described brokerage interviews and in the decision to award Merrill Lynch Albany $60 million in cash investments while his friend, Kipper, was a vice-president/broker for Merrill Lynch Albany, Lisauskas knowingly, or with reason to know, acted in a manner which would cause a reasonable person, having knowledge of all the relevant circumstances, to conclude that Kipper could unduly enjoy his favor in the performance of his official duties. Lisauskas did not file any § 23(b)(3) disclosure to dispel this appearance of impropriety. Therefore, in so acting, Lisauskas violated § 23(b)(3).
In view of the foregoing violations of G.L. c. 268A by Lisauskas, the Commission has determined that the public interest would be served by the disposition of this matter without further enforcement proceedings, based on the following terms and conditions agreed to by Lisauskas:
(1) that Lisauskas pay to the Commission the sum of $2,000 as a civil penalty for violating G.L. c. 268A, § 23(b)(2);
(2) that Lisauskas pay to the Commission the sum of $1,000 as a civil penalty for violating G.L. c. 268A, § 23(b)(3); and
(3) that Lisauskas waive all rights to contest, in this or any other administrative or judicial proceeding to which the Commission is or may be a party, the findings of fact, conclusions of law and terms and conditions contained in this Agreement.
STATE ETHICS COMMISSION
//signed// 7/6/10 _ //signed//_____________ 7/27/10___
Stephen Lisauskas Date Karen L. Nober Date
I, Stephen Lisauskas, have personally read the above Disposition Agreement. I understand that it is a public document and that by signing it, I will have agreed to all of the terms and conditions therein, including payment of $3,000 to the State Ethics Commission.
__ //signed// 7/6/10_
Stephen Lisauskas Date
 G.L. c. 268A was amended by c. 28 of the Acts of 2009. The language of § 23(b)(2) now appears in § 23(b)(2)(ii) of G.L. c. 268A, as amended.