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The broker - Carl J. Kipper, based in Albany, N.Y. - knew Stephen Lisauskas, executive director of the Springfield Control Board for years; Lisauskas had worked with Kipper's wife in the New York state comptroller's office in the late 1990s, the New York comptroller's office confirmed.
City Council Vice President James J. Ferrera said he was concerned when he learned of the connection, which was also confirmed to the Globe by a source who had been briefed on the relationship. Ferrera said he has asked the secretary of state and attorney general's office to investigate further.
"Why would [the finance control board] be channeling business to Albany, N.Y.?" he said, noting that Merrill Lynch has an office in Springfield and another in nearby Hartford. "It's . . . important to find out the truth behind this connection."
Securities investigators for Secretary of State William F. Galvin opened a probe of Merrill Lynch & Co.'s dealings with Springfield earlier this month after the city lost nearly $13 million it invested with Merrill Lynch and Kipper in 2007.
Springfield officials have blamed Merrill Lynch, saying the Delaware-based financial company improperly invested city funds in securities that were riskier than allowed by state law. The investments, backed by home loans, plummeted in value amid the ongoing subprime mortgage disaster. Worth nearly $14 million last year, Springfield's investment is now worth just $1.2 million.
The city has hired the law firm of Goulston & Storrs. The attorney general's office is also investigating.
Galvin's office subpoenaed Merrill Lynch on Jan. 3 in an effort to learn the identity of the broker who advised the city to make the investments and learn what kind of advice was offered. Galvin's office said earlier this week that Kipper of Albany and Manuel Choy of Clifton Park, N.Y., had been the city's brokers in the deal.
Financial crisis is not new in Springfield. In 2004, the state created a control board to oversee the city's finances because the city's credit rating had plummeted and it was having trouble borrowing money. The board's mission was to secure the financial stability of the city.
Springfield Finance Committee chairman Chris Gabrieli, a former venture capitalist and Democratic candidate for governor who joined the board in June, would not respond to questions about the relationship between Kipper and Lisauskas.
"If over time facts come out that disturb us, the attorney general's office has an obligation, we have an obligation, to address that, and we're doing that," he said.
Lisauskas also said he would not elaborate on his relationship with Kipper, citing the pending investigation, and saying he did not "feel comfortable answering the question."
"The city councilor's speculation could impact the city's ability to get the $14 million back," he said. "I have a job to make sure they recoup that money."
Neither Kipper nor Choy returned phone calls yesterday. Michael Herr, a spokesman for Merrill Lynch, said the firm does not make agents available for comment during an investigation.
He also said Kipper and Choy won the investment work for the city of Springfield "as part of a competitive process."
A committee of city officials that included Springfield's chief financial officer, city treasurer, auditor, and Lisauskas, then the deputy executive director of the control board, met to interview potential investors.
The committee interviewed three firms last year, including two it already had investments with: UBS and
Ferrera said he also called Natick officials when he learned that Lisauskas was a former deputy town administrator in that community in recent years. He said Natick town treasurer Robert Palmer told him in a phone conversation that Lisauskas had encouraged that community to invest with Kipper. Palmer opened an account with Kipper but never put any money in it because the town's past investments with Merrill Lynch in Boston weren't getting a good return, Ferrera said.
Palmer did not return phone calls yesterday.
Officials at the New York State Comptroller's Office confirmed yesterday that Maureen Kipper has worked at the state agency since 1985 and is currently a special investments officer there. Lisauskas was an executive assistant in the comptroller's office from 1996 to 1999.
Officials at the secretary of state's office have asked Kipper and Choy to testify at later this month in Boston.
Officials will use the testimony to determine whether to file a civil complaint against Merrill Lynch, Galvin's spokesman, Brian McNiff, said.
Megan Woolhouse can be reached at mwoolhouse@globe.com.
