Bettye L. Smith, the District woman who spent the Thanksgiving holiday weekend in the Bahamas with Mayor Marion Barry, left her job yesterday as a consultant to the city's financial adviser in the wake of controversy over her relationship with the mayor.
Smith and Wardell Lazard, founder of W R Lazard Co., which has received $2.8 million in fees since 1985 as financial adviser for the city's bond program, issued a statement saying they had "mutually agreed" to suspend Smith's consulting relationship with the firm.
"We are both concerned that recent developments may impact the firm's relationship with present and future clients," Smith and Lazard said. "Consequently, we believe it is best to end the consulting relationship at this time until the entire matter can be reviewed and resolved."
The Washington Post reported Dec. 6 that Smith, a former aide to the mayor, and Barry occupied adjacent rooms at a resort near Nassau where they spent time together at poolside and in the hotel, apart from the mayor's 7-year-old son, security guards and others who accompanied Barry. The mayor's wife Effi was in London, representing the city at a convention.
Several administration officials said privately that the close relationship of Barry and Smith gave the appearance of a conflict of interest and raised questions about Barry's independent judgment in making financial decisions for the city -- particularly in deciding whether to renew a contract with W R Lazard that expires next year.
According to investment bankers knowledgeable about the firm, W R Lazard officials began considering ending the firm's relationship with Smith early this month, after learning of The Post investigation of the Bahamas trip. W R Lazard officials were concerned that Smith's relationship with Barry might damage their reputation and make their firm appear more political than professional, the bankers said.
In yesterday's statement, Lazard noted that his relationship with the District goes back many years and that his firm had advised the city on three financial deals before the firm retained Smith as a consultant in 1986 to run W R Lazard's Washington office. Smith, reached at the firm's Washington office yesterday, declined to comment further. Barry could not be reached for comment.
Previously, the mayor described Smith as a "family associate" who has socialized with him, Effi Barry and their son Christopher, and said he saw no conflict in Smith's position with the city's financial adviser.
The city's bond business is the subject of an ongoing federal grand jury probe. Lazard and officials from other investment banking firms have been interviewed by FBI agents in connection with the investigation. Smith also was interviewed, but it was unclear whether it was in connection with the probe. There is no indication that Smith or Lazard is a subject of the investigation.
Barry's close relationship with Smith was evident to associates during the period of 1984 through 1986 when Smith worked as an assistant secretary of the District and in Barry's Office of Policy and Program Analysis. But some administration officials said Barry's relationship with Smith, who was generally regarded as a competent employe, did not become an issue until after she joined W R Lazard in June 1986.