Winslow’s move to Commerce Bank raises questions

(Published on Monday, April 28, 2003 in the Courier-Post)


Winslow’s government switched all its banking to Commerce Bank several months after the bank contributed thousands of dollars to township Democrats.

Winslow officials put every township account — more than $9 million — in one bank for the first time in at least 20 years. They neither sought nor accepted proposals from its previous banks, First Union and PNC. It ends a Winslow tradition of using branches in Winslow, where Commerce has none.

Commerce is known for its powerful political connections across New Jersey, both Democratic and Republican. Its government deposits of $2.1 billion represent nearly 14 percent of its $15.3 billion in total core deposits, a higher percentage than any other bank in New Jersey.

Winslow’s decision to switch to Commerce has raised questions of whether the move was best for Winslow taxpayers or an example of New Jersey’s system of “pay to play,” in which political donations go hand in hand with government contracts.

Commerce’s political action committee gave Winslow Democrats two campaign contributions totaling $6,500 in May and August in 2002. The second check came a week before the township committee approved a $4.8 million bond refinancing with Commerce. By February, the township was doing all its banking with Commerce.

Republican Mayor Sue Ann Metzner said she didn’t learn about the switch until after it was made — and then only from a First Union representative. She said she believes politics played a role.

Township Administrator Andrew Mair made a change with direction from a subcommittee that included Deputy Mayor Barbara Holcomb, a Democrat now running for mayor. Holcomb is a former Camden County employee and part of the leadership of the county Democratic organization led by George E. Norcross II, a Commerce vice president who heads the insurance division.

Mair said Commerce was chosen because it offered more services and showed it could save Winslow nearly $30,000 the first year, and because of service problems the township had experienced with PNC and First Union.

Deal defended

Commerce said the political contributions were unrelated to its ability to win the account.

“We wouldn’t be getting the business if we didn’t have a good product and good services,” said David Flaherty, a Commerce spokesman.

Holcomb also denied the change in banks was influenced by last year’s political contributions to the local Democratic committee, which was chaired by her husband, Larry.

“There is never a giveback,” she said.

But Metzner said the way the accounts were shifted to Commerce speaks for itself.

“I have no issue with Commerce. I have a problem with how it was done through the back door,” the mayor said. “I don’t think this is a good way to do business.”

First Union, PNC and Winslow Republicans question how the township can be assured it got the best deal when it did not consider competing proposals. A leader of a statewide group of finance officers agreed with them.

“It’s possible the bank offered them the best deal, but how would they know if they didn’t put out (a request for proposals)?” said Terry Delp, president of the Government Finance Officers Association of New Jersey and chief financial officer of Bridgeton, Cumberland County.

Mair said banking decisions in the township have always been made administratively rather than by the township committee.

“I am not a political person,” said Mair, appointed last year by the township committee. “Nobody ever called me on the phone and told me, ‘Let’s do business with Commerce Bank.’”

Pitches and donations

Here’s how the contributions and decision to switch banks unfolded:

Commerce’s PAC donated $3,000 on May 17 to the local Democratic committee.

On June 25, Mair, Holcomb and then-Committeewoman Cynthia Pratt, the lone Republican, formed a subcommittee on banking. Winslow administrators had historically chosen banks without input from committee members; Mair wanted that input.

Mair said he first spoke to Commerce representatives early in 2002, not long after he was hired. Mair had previously worked with Commerce as Atlantic City’s business administrator and said he liked their service.

On July 16, township committee members heard a pitch from Commerce representative Randy Primas, now Camden’s chief operating officer, to refinance $4.8 million in bonds with Commerce.

On Aug. 20, Commerce’s PAC wrote Winslow Democrats a $3,500 check, according to campaign finance records.

On Aug. 27, the township committee approved Commerce’s plan for the bond refinancing.

In October, Commerce sent Mair a proposal seeking every township account, and the subcommittee met later that month, shortly after Pratt resigned from the township committee to move to Pennsylvania. By this time, Terry Whelan, then Winslow’s chief financial officer, had put together a report on problems the township said it had experienced with PNC and First Union.

Banking problems

The township had some mundane service-related problems with its banks, Mair said.

The problems with First Union, which administered a $7 million landfill closure account, were more extensive, he said. Township audits in 1997 and 1998 found the bank invested in bonds and treasury notes with maturities longer than state law allowed. The bank took three years to correct the situation, the audit said.

“I simply cannot imagine that we were notified of that and we ignored it or that their calls went unanswered,” said First Union representative Fran Durst, who said Friday she didn’t have immediate access to account details.

In December, Winslow’s banking subcommittee met with a Commerce representative to close the deal. Its members didn’t invite Al Cooper, a Republican who had just been appointed as Pratt’s replacement.

“As for consolidating the accounts, I think that’s just good business,” Mair said. “I don’t think we would’ve gotten this kind of business (deal) if we didn’t.”

Among the benefits offered by going with Commerce, Mair said, is that the bank begins paying interest immediately upon deposit while other banks wait until the checks clear. He said Winslow would gain nearly $30,000 as a result of this policy.

Mair said Commerce also offered other advantages: a 90-day account history; all banking can be done online; automatic account reconciliation; and an automated bank teller machine in the municipal building. He said Winslow couldn’t get all those services from the other banks.

Durst said the bank could match all those services, and PNC spokesman Matt Cabrey said his bank could offer most of them.

PNC and First Union would not provide details on their interest rates, making it impossible to determine how they might have compared with Commerce. Commerce’s October’s sales pitch put its interest rate at 1.54 percent, subject to market changes.

Mair said the decision to go with Commerce was made at a time of turnover in the finance department. He said other banks will be able to compete for Winslow’s accounts next year.

First Union account representative Joe Jackson said he learned Winslow had decided to switch banks in February when he called to arrange a meeting with Winslow’s interim chief finance officer.

“He said, ‘Don’t bother. We’re moving to Commerce,’” Jackson said. “That’s when I said, ‘Do we have a chance to bid for this money?’ And he said, ‘No.’ And that’s when I called the mayor.”

Commerce Bancorp

Sources of core deposits

Consumer: $7.9 billion (52%)

Commercial: $5.3 billion (34%)

Government: $2.1 billion (14%)

Total: $15.3 billion

Source: 2003 first-quarter report; numbers are rounded