Merrill Sachs is an accountant with the treasurer’s ofﬁce of a midsize city. The city is about to issue $50 million in general obligation bonds to construct a new ofﬁce complex.
The treasurer has recommended that the city negotiate the sale of the bonds with a single investment banking ﬁrm rather than opening the offering for bids. He cites several advantages to the negotiated sale, all of which have been validated to some extent by reputable experts. Sachs has evidence that for an offering of the size contemplated by the city and by a government with the characteristics of the city, an auctioned sale would be preferable. More signiﬁcantly, she is convinced (although she cannot prove) that the treasurer selected the investment banking ﬁrm under pressure from the mayor and city council members. This ﬁrm was by far the largest contributor to their election campaigns.