The details on the interest rate swap used to refinance Jackson's 2002 and 2004 bonds continue to bubble up to the surface of the swamp that is Jackson's political scene. While Jackson travels down the path to disaster, Jefferson County, Ala., Houston, and other cities found out the hard way what happened when they went down the same path after listening to some smooth-talking salesmen from Wall Street.

Sterne Agee is the "bond advisor" for Jackson on this particular deal. When the deal closes, Sterne Agee will reap $476,000 for its "advice." In addition to this fee, Sterne Agee will also receive at least $50,000 per year for four years to "monitor" the swaps. Nice grub if you can get it.

Frank Melton gave us a parting gift as mayor of Jackson: a signed agreement with Sterne Agee to "monitor" our bond debt refinancing with Deutsche Bank and Rice Financial Products. On April 18, Melton signed an agreement (which was obtained in an FOIA request) with the following terms:

"The compensation for the services provided is at a cost not to exceed $10,000 annually for swap monitoring services related to the city's existing swap transaction and a 50 percent increase for any additional swaps; compensation for swap advisory fees related to policy and plan development and implementation will be provided at a cost of $300 per hour not to exceed $15,000; and compensation for assisting the staff in the evaluation of swap proposals and preparation of requests for proposals related to swap transactions and other financial advice as needed will be provided at a cost of $300 per hour not to exceed $35,000 annually. Expenses associated with services performed shall not exceed $5,000 annually."

The contract is valid for four years.

Jackson could have required Sterne Agee to include its monitoring services in that fee. However, these services are not subject to competitive bidding. Sterne Agee makes a joke out of its so-called bond advisor role as its compensation is based upon whether the deal closes and how big the deal is instead of a flat fee one would expect one to pay for objective advice.

One might be tempted to ask how Sterne Agee wound up with such a nice deal. It turns out there is a Mississippi connection at Sterne Agee and it's not their local office. Robert A. Smith Jr. is a vice president in the Public Finance Group in the New York City office of Sterne Agee. His biography on the company Web site states: "He has over 13 years of experience in trading, sales, and deal structuring. Prior to joining Sterne Agee, Mr. Smith was employed at JPMorgan Securities, Inc. He earned a B.S. from The Wharton School of the University of Pennsylvania, and holds professional license (Series 7 and 63)."

Sterling credentials. However, the 37-year-old Smith is also the son of Dr. Robert A. Smith Sr. of Jackson, (the civil rights hero who opened a clinic in West Jackson to provide medical care to blacks who were denied such services by white doctors in the 1960s) and graduated from St. Joseph Catholic School in Jackson. However, Dr. Smith was Frank Melton's personal physician. It also didn't help that Hinds County Supervisor George Smith was his uncle as well. While no one is accusing Mr. Smith of using his connections to win this deal, Mr. Smith should expect such scrutiny when there was no public bidding for the project and the fees are so high.

There are many other politically connected players who have a financial interest in this refinancing. Jim Evans' wife gets $60,000. Baker Donelson gets $120,000. Local attorney Anthony Simon gets $60,000. The firm that employs the son of Melton's physician gets $476,000 up front and at least another $200,000 in future years. All for refinancing bonds that when first issued, cost $2.5 million less in fees than they will now and requires no underwriting. Let the party begin.

James Hendrix is a Northsider.