Where Did They Drop It

Who else got some?

Stipanovich, who earned $180,214 in 2006 as executive director of the State Board of Administration, was in New York in confidential meetings with Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds. Lehman was proposing ways to help the state manage the risk of its debt investments, according to a letter the bank sent to Stipanovich after the meeting.

What Stipanovich, 58, hadn't told his boss, Florida Chief Financial Officer Alex Sink, was that Lehman Brothers was the same firm that had sold the state fund $842 million of mortgage- backed debt in July and August. Those securities defaulted within four months, and totaled more failing debt than any other bank sold the state, Florida records show. ``At the time, I never knew it was Lehman Brothers that actually sold us these investments,'' Sink says.

Sink also was unaware that former Florida Governor Jeb Bush, who incorporated Jeb Bush & Associates in February 2007, a month after completing his second term, had been hired as a consultant to Lehman Brothers in June. Bush is the brother of President George W. Bush.


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``Lehman and the other big players in the market decided they didn't like this stuff in their own accounts,'' Sink says. ``Where did they drop it and who did they dump it to? It looks questionable to me.''

Joseph Mason, a former U.S. Treasury official and now a finance professor at Drexel University in Philadelphia, says Wall Street had few takers for its subprime-tainted debt. ``When they couldn't sell it to more-sophisticated investors, they found less-sophisticated investors like local government investment pools,'' he says.