SEC Rapped for Allegedly Failing to Fully Investigate Alleged Wrongdoings in the Municipal Securities Market
Congressman Spencer Bachus (R – Ala) says the Securities and Exchange Commission should have done more to probe alleged wrongdoings in the municipal securities market. Bachus issued a statement noting that the SEC knew as far back as 1997 of a potential “pay to play” scam involving water and sewer bonds in Jefferson County, Alabama, which is now facing the largest municipal bankruptcy in sewer bonds at $4 billion.
Bachus says that back then, Jefferson County Commissioner Bettye Fine Collins had sent the SEC a letter telling them about the municipal bond sales, but no follow up letter was sent to her. The congressman noted that it doesn’t appear to be an uncommon practice for the SEC to fail to use the tools to which it has access to investigation credible allegations.
Bachus said he resubmitted the original packet, along with information from 2007 to the SEC but nothing has been done to address his concerns. He also says that he provided SEC Chairman Christopher Cox with material about Jefferson County’s municipal bond indebtedness. The Commission responded by presenting a White Paper about municipal securities reform. Bacchus also noted new information has come to light indicating an “anti-trust collusion” involving investment advisers who inflated the fees that were “already outrageous.”
Jefferson County got into financial trouble when it changed from fixed rates to adjustable rates and refinanced its sewer bonds before becoming involved in complex interest rate swap agreements to hedge against higher rates. When the rates increased, Jefferson County found that it couldn’t refinance a return to fixed rates.
Last April, the SEC filed a lawsuit against Birmingham, Alabama Mayor Larry Langford, who formerly served as Jefferson County Commission president, for alleged improper payments involving the county’s bond business. While serving in the role of county president, Langford allegedly accepted over $156,000 in undisclosed benefits and cash from Blount Parris & Co. securities chairman William Blount. In exchange, Langford allegedly allowed Blount’s company to take part in all of Jefferson County’s security-based swap agreement transactions and municipal bond offerings and the firm earned over $6.7 million in fees.
Related Web Resources:
Jefferson County, Alabama
About Municipal Bonds, SIFMA
US Representative Spencer Bachus
US Securities and Exchange Commission
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