The U.S. Securities and Exchange Commission said that BOK Financial Corporation subsidiary BOKF NA will pay over $1.6M to resolve charges accusing the Oklahoma-based bank of ignoring signs that businessman Christopher F. Brogdon was engaged in suspect activates related to his management of municipal bond offerings for investors. Brogdon was charged by the regulator with fraud last year and he must pay back investors $85M.
The federal government accused him of collecting almost $190M through private placement offerings and muni bond offerings. Investors thought they would earn interest from money made by assisted living facilities, nursing homes, or another retirement community project. Instead, Brogdon commingled accounts and redirected investor funds to other ventures and his own expenses.
According to the regulator, BOKF and ex-senior VP Marrien Neilson found out that Brogdon was taking money out from reserve funds for the muni bond offerings and not replacing the money. They also became aware that he had neglected to file annual financial statements for the bond offerings.
Neilson is accused of cautioning that disclosing these issues and others could hinder the opportunity to obtain more fees and business from Brogdon, lead to regulatory issues for bond underwriters, and distress bondholders. As a result, said the SEC, the bank and Neilson did not tell bondholders even though this was their duty.
The Commission said that BOFK failed as an indenture trustee and disseminator of the bond offers to properly act as gatekeeper. The SEC said that the subsidiary should have protected bondholder interests by letting them know about the “material problems” had arisen with the bonds.
To settle, BOKF will pay over $980K in disgorgement and a $600K penalty. Neilson has been let go by the bank and she is now the subject of an SEC federal compliant.