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Langford legal woes: First shoe drops


SEC sues Langford, Blount and LaPierre

As expected, the SEC has filed a lawsuit in federal court here against Mayor Larry Langford, Montgomery investment banker Bill Blount and lobbyist Al LaPierre. The SEC’s complaint is a civil lawsuit, so nobody is getting arrested or going to jail. That’s the Justice Department’s end of things and they’re still working at it.

In the meantime, the SEC wants Blount, LaPierre and Langford to repay money they received in various bond deals from Langford’s tenure at the Jefferson County Commission. According to the lawsuit, Blount paid off more than $150,000 of Langford’s personal debts, while Langford directed more than $6.7 million in fees to Blount’s investment firm, Blount Parrish.

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SEC sues Langford, Blount, LaPierre


More as it comes. Here’s the SEC press release.

Here’s the Complaint

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20545 / April 30, 2008
Securities and Exchange Commission v. Larry P. Langford, William B. Blount, Blount Parrish & Co., Inc., and Albert W. LaPierre, Case No. Case No. cv-08-B-0761-S (N.D. Ala., filed April 30, 2008)

The Securities and Exchange Commission filed a civil action today in the U.S. District Court for the Northern District of Alabama against Birmingham Mayor Larry Langford, William Blount, and Albert LaPierre. The SEC’s complaint alleges that while Langford served as president of the County Commission of Jefferson County, Alabama (County Commission), he accepted more than $156,000 in undisclosed cash and benefits over the course of two years from Blount, the chairman of Blount Parrish & Co, Inc. Blount Parrish is a broker-dealer based in Montgomery, Alabama.

According to the SEC’s complaint, Langford selected Blount Parrish to participate in every Jefferson County municipal bond offering and security-based swap agreement transaction during 2003 and 2004, earning Blount Parrish over $6.7 million in fees. Moreover, the SEC alleges, Langford and Blount concealed the payment scheme by using their long-time friend, LaPierre, an Alabama registered political lobbyist, as a conduit. The case is the SEC’s first enforcement action involving security-based swap agreements.

The SEC’s complaint alleges that prior to Langford’s election to the County Commission, Blount Parrish had not received any municipal bond business from Jefferson County for years. After Langford won the primary election in 2002 for the County Commission, however, Blount began making payments and conferring other benefits to Langford, funneling funds through LaPierre. The SEC alleges Blount’s efforts were rewarded because Langford, who served as president of the County Commission from November 2002 to November 2007, selected Blount Parrish to participate in $6.4 billion of Jefferson County bond offerings and swap agreement transactions from March 2003 to December 2004. Blount Parrish’s fees for these transactions comprised over 70% of the firm’s annual revenue during the relevant period, according to the SEC’s complaint.

The SEC alleges that of the five municipal bond offerings at issue, Blount Parrish participated as lead or co-underwriter on three municipal bond offerings, and as a remarketing agent on a fourth bond offering. In connection with all five bond offerings, Langford signed the official statements, which were intended to disclose material information to investors, on behalf of Jefferson County. In its role as underwriter or remarketing agent as to four of the bond offerings, Blount Parrish reviewed the official statements and distributed those materials to investors in connection with its sale of these securities. The official statements did not disclose Blount’s payments to Langford.

The SEC further alleges that Langford directed that Blount Parrish be included in four security-based swap transactions, including a $1.5 billion transaction which was the largest swap transaction in Jefferson County’s history. Langford signed letter agreements with the counterparties to the swap transactions representing that Jefferson County had requested and approved fee payments to Blount’s firm for services to Jefferson County in connection with the swap transactions. Other than the swap counterparties, the fees Blount Parrish received on these swap transactions were substantially larger than those received by other professionals on the deals. However, according to the SEC’s complaint, neither Langford nor Blount disclosed to Jefferson County Blount’s payments to Langford.

The complaint charges Langford, Blount and Blount Parrish with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; Blount and Blount Parrish for violations of Section 15B(c)(1) of the Exchange Act and Municipal Securities Rulemaking Board Rules G-17 and G-20; and LaPierre with aiding and abetting Blount and Blount Parrish’s violations. The complaint seeks judgments against each defendant providing for permanent injunctions, disgorgement with prejudgment interest and a civil money penalty.
The SEC previously prevailed in subpoena enforcement actions filed against Langford and Blount, both of whom had refused to either testify or assert a valid privilege when questioned about these payments during the SEC’s investigation. [Securities and Exchange Commission v. Larry P. Langford and William B. Blount, Case No. 07-23271-MC-Huck-Simonton (S.D. Fla., filed December 17, 2007)] [Litigation Release No. 20400/ December 17, 2007]

The SEC’s investigation is continuing.

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Ma Bell phones pwned


The first thought after realizing the phones weren’t working: Isn’t this exactly how Independence Day began? Just when we thought Friday was as strange as it could get, was E.T. coming to kick some ass?

Alas, no. It seems that Ma Bell has screwed something up. AL.com is reporting that the repairs have been made.

“Overnight, we had a technical equipment problem in Birmingham, and it’s disrupting the ability for customers to call from landline to mobile phone,” an AT&T spokeswoman told the Birmingham News.

If that’s true, then the solution seems to be worse than the problem. At the Weekly, we haven’t been able to reach anyone on AT&T’s system, neither landlines nor mobile phones.

On the other hand, there was a moment of 1990s nostalgia when we heard actual busy signals again.

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Students live like refugees, for refugees


Students camp out on BSC\'s quad

Earlier this week, a group of students at Birmingham-Southern College set out from their dorms with tents, sleeping bags, musical instruments and whatever else they could carry. They gathered together on the academic quad, set up a camp and began asking passing students, professors and administrators for food.

“We’re depending on other people for everything other than what we brought in one trip. That doesn’t seem like a big deal, but it takes away your dignity,” said Marc Parker, a junior philosophy major from Thorsby, Ala.

Parker and 15 other BSC students are participating in an event called “Refugee Live for Free,” organized by a campus cultural awareness organization called the Middle Eastern/Central Asian Alliance. The students are living on the quad for a week to raise awareness of the plight of refugees around the world. They hope that relying on other students for food and other supplies will raise awareness on campus of what refugees around the world must endure.

Refugees are people fleeing persecution based on religion, ethnicity or other traits. The United Nations estimates that at the end of 2006, there were 9.9 million refugees and 12.8 million internally displaced persons (refugees who haven’t left their home country). The students participating in Refugee Live for Free represent refugees from many different countries, including Burma, Tibet, Sudan, and Iraq.

“On the first day I told everybody that this is really what everyone makes it to be. Everyone has their own concerns. Mine are for Palestinian refugees,” said Parker, who founded MECAA in 2007.

To add to the realism of their event, the BSC students vowed not to use motor vehicles, money or electricity for a week. Cell phones are allowed, but they can’t be recharged.

Despite these restrictions, things weren’t all bad in BSC’s refugee camp. In between classes, students entertained themselves and each other with guitars, harmonicas and even a didgeridoo.

Kirk Hooten, a senior from Vestavia Hills, said that so far they had received plenty of food. “Dr. Trench even brought us some candy,” said Hooten, referring to psychology professor Lynne Trench. Nevertheless, some students were bracing for any future decline in food supplies - one had constructed a questionable squirrel trap from a small charcoal grill, and another had painted a sign that said “Will sing a song of your choice for food.”

“We cannot actually simulate what refugees actually go through,” Parker admitted. “We’re going back to normal middle class life after this, and this isn’t that far from normal middle-class life anyway. We have really nice tents and we’re eating Pop-tarts.

“We’re doing what we can. There aren’t really a lot of options as far as being able to do something,” Parker said. “But at least we can build a community of compassion, of thoughtfulness. Hopefully people that aren’t sleeping outside with us will have concern for people that are out of sight and usually out of mind.”

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JeffCo to pledge new funds


Bettye Fine Collins F

If the commission approves, Jefferson County will pledge surplus sales taxes to help meet debt service on its sewer bonds, Commission President Bettye Fine Collins said in a press conference Wednesday. Currently the county has only pledged net sewer revenues — money from ratepayers minus operating costs — to pay down the $3.24 billion in sewer debt. In recent years, the net sewer revenues have average about $130 million per year. After recent market events and Jefferson County’s technical defaults, annual debt service on the sewer bonds could rise to $250 million or more, Collins said.

In 2004, the county enacted a one-cent sales tax hike for school construction. Then-Commission President Larry Langford championed the tax increase. Today, the sales tax produces more revenue than needed to pay the school bonds, Collins said.

However, it will take an act of the Alabama Legislature to redirect the surplus revenue.

Read the full text of Collins statement here.

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JeffCo assuages employee fears


The financial crisis over Jefferson County’s sewer debt will not cause layoffs or otherwise effect employee benefits, Commission President Bettye Fine Collins said Thursday morning.

Bettye Fine CollinsDuring the commission’s weekly work session, Collins read from a memo to county employees assuring them that their jobs and benefits are not at risk.

By the contracts with bond holders, the sewer system debt is payable only from the net revenues of the sewer system, Collins said. That means other county services will not be effected. What’s more, the debt service comes after other sewer operating expenses, such as payroll.

While that’s good news for county employees, the commission and its advisors are still struggling over how to keep the county out of bankruptcy. On Wednesday, the county announced that it would not post collateral or insurance to stop terminations of 13 interest rate swaps. Thursday, Collins seemed more upbeat, indicating that the county might be able to work with its creditors to avoid bankruptcy.
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JeffCo to stiff swap partners


Jefferson County has until Friday to post $184 million in collateral or insurance to prevent the costly terminations of its interest rate swaps, but in two more material event notices Wednesday night, the county says it will meet neither requirement.

PDFs of Jefferson County’s latest event notices can be found here and here.

“The County has notified the counterparties to the Swap Agreements that it does not
presently intend to post collateral or provide insurance to the counterparties for its obligations under the Swap Agreements,” the county said in the notice.

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JeffCo debt: bad to worse


Thursday night Jefferson County released the second “material event notice” in as many weeks regarding its sewer debt crisis. The news isn’t good.

According to this release, recent downgrades by ratings agencies could soon cause the county’s interest rate swaps to terminate, an event that could cost the county hundreds of millions of dollars. The only way to avoid such terminations is for the county to produce $184 million in insurance or collateral by March 7. According to the notice, the county does not have the revenue or cash on hand to provide such collateral.

The county writes in the notice:

“As of the date of this notice, the County can offer no assurances that it can obtain the required insurance or post the necessary eligible collateral to avoid an Additional Termination Event under the Swap Agreements. If an Additional Termination Event occurs, the respective counterparties will have the right to terminate the respective swap transactions upon notice to the County, in which event the County would be obligated to pay the resulting termination payment in accordance with the provisions of the Swap Agreements. The aggregate amount of the termination payments that would be due is approximately $184 million as of February 27, 2008.”

What’s more, interest rates on variable rate warrants continue to rise and auction rate warrants continue to come due. As the auction rate warrants mature, and the county still cannot pay or find buyers for new bond debt to refinance the old.

“The County has experienced a total of eight failed auctions as of February 27, 2008 with respect to $869,450,000 aggregate principal amount of Auction Rate Warrants,” the county said in the event notice.
The county says that, while it continues to look for solutions to the problems, it can promise none.

More to come as we translate from the original Greek.

Or you can find the whole document here.

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Langford SEC Transcript


For your reading displeasure

Larry LangfordIt is common knowledge in Birmingham that the Securities and Exchange Commission has been investigating a series of conspicuous bond deals that took place during Langford’s tenure as president of the Jefferson County Commission.

Also, it has been widely reported that, in his second interview with the SEC, Langford refused to answer investigators’ questions, citing an ambiguous Constitutional right.

What has not been reported is what Langford said to those same investigators in his first SEC interview on June 21, 2007.

Birmingham Weekly has obtained a copy of a transcript from that interview. What it reveals about the mayor is disconcerting: personal financial habits that are reflective of — and perhaps connected to — his management of public funds, and an attitude towards debt that makes the federal government seem frugal.

You can download it here.

And read our Cover Story about it here.

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Weekly Tease No. 3


Larry Langford by the numbers

Income 2007

Larry LangfordJefferson County: $73,000
Langford told the SEC that he made $68,000 per year for the Jefferson County Commission, in addition to a $400 per month car allowance.

Birmingham Budweiser: $80,000

For 25 years Langford has done public relations for the beer distributor, a full-time job in addition to his elected positions.

Global Link: $120,000

Langford and his wife run a telecommunications business out of their Fairfield home. However, when questioned by the SEC, Langford gets confused about the company’s name.

Purchases


Clothes: $70,000

Langford told the SEC that in 2002 he had accumulated that much debt, mostly from buying clothes. About $40,000 of that debt was to Shaia’s mens store in Homewood.

Teeth: $52,000

According to Langford, he maxed out his credit cards paying for dental bills.

More Clothes: Unknown

Langford said that he bought thousands of dollars worth of suits while on county bond trips to New York. He charged them to his credit cards, which he previously testified had been maxed out paying dental bills.

Debts


Mortgage: $300,000

Last year, The Birmingham News discovered that Langford had received a $300,000 mortgage in 2000 on his Fairfield home. The loan from The Bank — now Superior Bank — was due in three years, but probate records don’t indicate it was paid. According to Langford, he had two home equity lines, in addition to “a couple of car notes, maybe three.”

Al LaPierre: $150,000

Late last year, Langford told the SEC that he had borrowed a total $150,000 from the lobbyist. Neither Langford nor LaPierre had recorded the loans on their financial disclosures to the Alabama Ethics Commission. The $150,000 is the total from at least two loans. Langford said there is no paperwork and that their agreements were verbal.

Colonial Bank: $50,000 (paid)
Langford took out the loan in 2002 to pay off credit cars and clothing store credit. While the loan was due six months later, Langford never paid. Instead, LaPierre paid it for him with one of the loans above.

Cover story and PDFs of Langford’s testimony here at noon.

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