By Dan Christensen, BrowardBulldog.org
As a member of the county’s Resource Recovery Board, Weston Mayor Eric Hersh was the chief negotiator and driving force behind Broward’s controversial $1.5 billion garbage deal.
But Hersh has another, less well known public position. The three-term mayor is a snitch for Florida securities regulators, according to records obtained by Broward Bulldog.
State records show that Hersh agreed to cooperate with Florida’s Office of Financial Regulation [OFR] last year as part of a settlement of agency findings that while working at Raymond James & Associates in Weston “he engaged in conduct in violation of (the state’s) Securities and Investor Protection Act.” Hersh worked there from 1997 to April 2009.
Hersh also was fined $7,500, suspended for five days and ordered to be placed on heightened supervision. He did not admit or deny the charge, but nevertheless agreed to “cease and desist” from future violations in a seven-page consent agreement he signed on July 6, 2009.
Currently, Hersh works in Plantation as a senior vice president and investment advisor for Morgan Stanley Smith Barney. Records show Morgan Stanley paid Hersh’s $7,500 fine.
The OFR agreement is sparse on details about what Hersh allegedly did wrong, but says he used “portfolio statements containing inaccurate information without obtaining the approval of a registered principal” at Raymond James. Financial Industry Regulatory Authority [FINRA] records show it involved the sale of auction rate securities – long term debt issued by municipalities, hospitals, and schools.
Until 2008, many investors bought auction rate securities on the advice of brokers who touted them as safe investments that offered higher yields. But early that year, the $300 billion auction rate securities market froze suddenly leaving thousands of investors stuck with investments they could not sell.
Neither Hersh nor his attorney responded to requests for comment.
In a statement on his FINRA record, however, Hersh said the matter “stemmed from asset allocation reports where auction rate securities were listed as a ‘cash equivalent’ and suggested he did nothing wrong.
He noted that Raymond James had emailed those reports to clients, and that the firm’s compliance department was aware of them. Later, after the market seized up, regulators determined the reports were not accurate, he wrote.
“Although compliance was responsible for reviewing all my emails, I could not provide proof that in fact they ever did review the reports,” he wrote.
As part of his cooperation, Hersh agreed to be “fully debriefed” by regulators, attend meetings regarding “his participation in and his personal knowledge of all securities transactions” under scrutiny, and to testify as needed. He also agreed to keep his mouth shut.
“Hersh agrees not to reveal his cooperation, or any information derived therefrom to any third party without prior consent of the office, and to instruct his attorneys to do the same,” says the agreement, a public document.
Hersh was represented by Joel Fass, managing partner of Fort Lauderdale’s Colodny, Fass, Talenfeld, Karlinsky & Abate.
OFR declined a public records request by Broward Bulldog for more details about the state’s case against Hersh, and its ongoing investigation.
“The remaining/supporting evidence in the Hersh matter is part of a larger ongoing examination. Until that examination is completed and ceases to be active the final order (on Hersh) is about all the information we can provide,” said OFR spokeswoman Flora N. Beal.
Florida, however, is among a number of states that are jointly examining the auction rate securities debacle.
The state apparently began to look at Hersh in early 2009 when he sought to terminate his professional registration with Raymond James, and re-register with Morgan Stanley.
In the consent agreement, regulators approved Hersh to work at Morgan Stanley, but under a number of conditions.
For example, Hersh agreed to submit to “strict supervision…from a person who is physically present in his office of employment.” He also agreed not to “exercise discretionary authority in any customer account,” split commissions, or train stock brokers in how to sell securities or give investment advice.
FINRA records show that in 2008 two customers complained that Hersh involved them in unsuitable investments. Each case involved alleged damages of about $40,000. Regulators denied one complaint; the other was withdrawn by the customer. Details were not available.
Hersh, born Eric Murray Herscovitch, moved to South Florida from Montreal in 1977. His family owned and operated the popular, but now closed Gibby’s restaurant in Oakland Park.
Hersh was first elected Weston mayor in 2001. He was re-elected a third time in 2008. He is term-limited and can’t run again in 2012.
The no-bid garbage deal Hersh helped negotiate calls for Waste Management’s Wheelabrator subsidiary to continue to dispose of garbage for 26 Broward cities for at least another 10 years. Wheelabrator, which operates Broward’s two waste-to-energy plants, has offered cities a large “signing bonus” if they approve the pact by Dec. 31. The current agreement expires in 2013.
Unhappy the deal was negotiated without competitive bidding, the county commissioner voted 5-4 last week to ask staff to get a better deal. On Tuesday, Hersh made a brief, but impassioned appearance before the commission in an effort to salvage the big trash deal that he said took three years to hammer out.
“The bottom line is if this doesn’t get done quickly what you’ll have is all the cities going their own way,” he said.
The commission put off further debate until January.