Initially, we thought the assignment would be simple. Peter Byrne, a Weekly contributing writer, had put together an astonishing story. The piece laid out documentation strongly suggesting that the Bank of America had stolen hundreds of millions -- even billions -- of dollars from California governments, and that San Francisco finance officials knew or should have known about some of the thievery as it occurred (see "The Great Bank Thievery," Dec. 31).
During his research into a lawsuit the city, state, and other governments are pursuing against BofA, Byrne came upon an interesting fact. Many BofA contracts to handle city money apparently had never been put out to competitive bid.
This situation seemed strange to us; most governments not run by Ferdinand Marcos make a special effort to bid their public banking contracts. Governments accumulate, disburse, and invest huge amounts of cash. (The city of San Francisco, for example, runs an average balance of somewhere between $30 million and $50 million in its main depository accounts.) Normally, competition forces bankers eager to handle these large deposits to give the government attractive rates on banking services.
But everyone knows San Francisco is not a normal place.
Confirming that Bank of America had an unusual, noncompetitive lock on most city banking did, in fact, prove to be a simple assignment. City fiscal types agree: BofA has long been the city's main bank, and most of the contracts it holds have not been competitively bid.
But then we did something that apparently flummoxed the city bureaucracy. We asked simple, direct questions. What contracts did BofA have with the city? How much money had the bank made from those contracts in the last 18 months? Does the law require the city to put any of those contracts out for competitive bids?
Because the Grid is a reader-friendly column, we will not trace the two weeks of scared-rabbit runaround and Clinton-esque evasion those simple questions inspired at City Hall. Instead, we'll cut to the chase: No one knew how many contracts BofA had. No one knew how much money BofA made. No one could say which contracts needed to be bid.
We absolutely kid you not.
Susan Leal, a former supervisor who took over as city treasurer just a few weeks ago, is attempting to untangle the BofA contracting mess as we write this column. Leal was refreshingly frank in discussing it.
She says that the city's unbid banking relationship with BofA apparently began in the 1930s. (That's right; the bulk of the city's banking business has been simply handed to BofA for 60 years.) She says there is a "contract" with BofA, but it doesn't describe consideration. The charges the city pays for different types of banking services are, Leal says, handled through addenda to that contract -- many, many individual fee schedules for services provided for many, many bank accounts.
Leal acknowledges that the employees in her new office were unable to quickly give her documentation completely describing the city's contractual relationship with BofA. She also acknowledges that it is passing strange for a city treasurer's office to be unable to instantly produce the contracts under which any firm does business with the city.
Leal says that her staff is gathering the scattered paperwork for all city banking contracts (the city does relatively minor business with some other banks) and compiling other base-line data on the operation of the Treasurer's Office. Only when that's done, she says, can she explain BofA's contracts with the city, and what consideration has been paid under them. "Until I get the universe laid out in front of me, it's hard to give you a subset [of that universe]," is how she put it.
We're all in favor of public officials who want to be thorough, especially when they face what appears to be decades of fiscal insanity. So we applaud Leal's thoroughness, and wait attentively for her to answer our simple questions.
While we wait, though, two other questions keep forcing themselves into our brains. The questions involve the lawsuit that Peter Byrne wrote about. The lawsuit that alleges BofA stole hundreds of millions of dollars -- or more -- from governmental bond accounts, and improperly overcharged governments for banking services. The lawsuit that the city joined last May.
Our new questions are simple and direct:
1) Why is the city just now trying to document the extent of its oddly incestuous financial relationship with this allegedly untrustworthy -- and possibly criminal -- bank?
2) Are the last eight months of business-as-usual with the allegedly untrustworthy, possibly criminal Bank of America evidence of city incompetence, or city corruption? Or are they evidence of both?
We're sorry. That's three questions, isn't it? We'll work on our math skills while we wait for some answers.