Joseph C. Salema
Encyclopedia
Joseph C. Salema is the former Chief of Staff
to New Jersey
Governor
James Florio
, a position he held from 1990 to 1993. Salema resigned in the Spring of 1993 amid intensifying media scrutiny during an investigation of illegal misconduct while serving the State of New Jersey.
He currently lives in Wenonah, New Jersey
and is the married father of two children.
with Armacon Securities, in what was later speculated to be an attempt to conceal a personal interest.
investment bank took part in an illegal pay to play
scheme in the sale of $2.9 billion dollars in New Jersey Turnpike bonds. In the sale of such bonds, it is considered advantageous for an investment bank to attain the lead manager mandate, as these banks customarily keep 50% of all underwriting fees.
It is during the prospective sale of these bonds (in February 1990) that Armacon Securities' cash holdings increased from $4,600 to $412,000; Armacon's assets skyrocketed from $10,100 to $665,577 and their net capital increased in similar fashion from $8,100 to $395,710. Armacon Securities prospered greatly while performing extremely little underwriting
during this period. In 1991, the following year, Armacon took in $727,800 in underwriting fees, while its total operating expenses were less than $50,000. The firm operated without any staff to sell the bonds, no clients to buy the bonds and very little capital with which to finance an inventory.
In the three years that Joseph Salema served as the Governor's Chief of Staff, Armacon Securities received over one million dollars in underwriting fees while lacking the necessities a firm would require to operate as an underwriter.
In 1993, Armacon Securities became a familiar name in the daily news media. Journalists became increasingly aware that a chief aide to the Governor of New Jersey was a partner in a firm that was managing to post robust returns while remaining virtually inactive. By May 1993, Joseph Salema willingly resigned amid growing public sentiment that he had inappropriately made use of his position to funnel cash and assets into his firm. Salema and his legal representation denied being the subject of the federal inquiry, claiming the resignation was a measure to spare Governor James Florio further political embarrassment.
Salema pleaded guilty to the federal charge of sharing in more than $200,000 in kickbacks. In August 1995, he was sentenced to six months in a halfway house and six months of home confinement. Salema was also fined $10,000 and required to serve 1,400 hours of community service. (His Armacon Securities partner, Nicholas Rudi, was later acquitted of all federal charges after going to trial in June 1996).
In a subsequent civil suit filed by the U.S. Securities and Exchange Commission, Joseph Salema reached a settlement, paying $324,764.55 without admitting or denying liability.
Chief of Staff
The title, chief of staff, identifies the leader of a complex organization, institution, or body of persons and it also may identify a Principal Staff Officer , who is the coordinator of the supporting staff or a primary aide to an important individual, such as a president.In general, a chief of...
to New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
Governor
Governor
A governor is a governing official, usually the executive of a non-sovereign level of government, ranking under the head of state...
James Florio
James Florio
James Joseph "Jim" Florio is a Democratic politician who served as the 49th Governor of New Jersey from 1990 to 1994, the first Italian American to hold the position...
, a position he held from 1990 to 1993. Salema resigned in the Spring of 1993 amid intensifying media scrutiny during an investigation of illegal misconduct while serving the State of New Jersey.
He currently lives in Wenonah, New Jersey
Wenonah, New Jersey
Wenonah is a Borough in Gloucester County, New Jersey, United States. As of the 2000 United States Census, the borough population was 2,317. It is located approximately 10 miles south of Philadelphia, Pennsylvania....
and is the married father of two children.
Armacon Securities Scandal
Prior to becoming the Governor's Chief of Staff in 1990, Salema joined in a partnership with longtime friend and associate, Nicholas Rudi, within the Armacon Securities firm. Seven months after being named Governor James Florio's Chief of Staff, Salema engaged in a blind trustBlind trust
A blind trust is a trust in which the fiduciaries, namely the trustees or those who have been given power of attorney, have full discretion over the assets, and the trust beneficiaries have no knowledge of the holdings of the trust and no right to intervene in their handling...
with Armacon Securities, in what was later speculated to be an attempt to conceal a personal interest.
Investigation
In 1990, Mark Fitterman, the Associate Director of the U.S. Securities and Exchange Commission's Market Regulation division, led the investigation into whether the Merrill LynchMerrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
investment bank took part in an illegal pay to play
Pay to Play
Pay to play, sometimes pay for play, is a phrase used for a variety of situations in which money is exchanged for services or the privilege to engage in certain activities...
scheme in the sale of $2.9 billion dollars in New Jersey Turnpike bonds. In the sale of such bonds, it is considered advantageous for an investment bank to attain the lead manager mandate, as these banks customarily keep 50% of all underwriting fees.
It is during the prospective sale of these bonds (in February 1990) that Armacon Securities' cash holdings increased from $4,600 to $412,000; Armacon's assets skyrocketed from $10,100 to $665,577 and their net capital increased in similar fashion from $8,100 to $395,710. Armacon Securities prospered greatly while performing extremely little underwriting
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
during this period. In 1991, the following year, Armacon took in $727,800 in underwriting fees, while its total operating expenses were less than $50,000. The firm operated without any staff to sell the bonds, no clients to buy the bonds and very little capital with which to finance an inventory.
In the three years that Joseph Salema served as the Governor's Chief of Staff, Armacon Securities received over one million dollars in underwriting fees while lacking the necessities a firm would require to operate as an underwriter.
In 1993, Armacon Securities became a familiar name in the daily news media. Journalists became increasingly aware that a chief aide to the Governor of New Jersey was a partner in a firm that was managing to post robust returns while remaining virtually inactive. By May 1993, Joseph Salema willingly resigned amid growing public sentiment that he had inappropriately made use of his position to funnel cash and assets into his firm. Salema and his legal representation denied being the subject of the federal inquiry, claiming the resignation was a measure to spare Governor James Florio further political embarrassment.
Guilty Plea and Sentencing
At the conclusion of the federal investigation, Joseph Salema was formally indicted in February 1995 for the acceptance of kickbacks in exchange for influencing New Jersey state bond deals.Salema pleaded guilty to the federal charge of sharing in more than $200,000 in kickbacks. In August 1995, he was sentenced to six months in a halfway house and six months of home confinement. Salema was also fined $10,000 and required to serve 1,400 hours of community service. (His Armacon Securities partner, Nicholas Rudi, was later acquitted of all federal charges after going to trial in June 1996).
In a subsequent civil suit filed by the U.S. Securities and Exchange Commission, Joseph Salema reached a settlement, paying $324,764.55 without admitting or denying liability.