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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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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For your reading displeasure

It 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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Larry Langford by the numbers

Income 2007

Jefferson 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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Langford’s Documentation

A chronological list of SEC exhibits in the Jefferson County investigation

May 9, 2003: Email from investment banker Bill Blount to then-Commission President Larry Langford says in part, “Need to know loan request from Colonial.”

May 28, 2003: An entry from Langford’s calendar records a meeting with Blount.

May 28, 2003: Blount writes a check for $50,000 to lobbyist Al LaPierre.

May 30, 2003: LaPierre writes a check to Colonial bank for $20,000.

June 4, 2003: Blount writes an email to the Colonial bank manager over Langford’s loan. The email reads in part, “Langford note will be paid by LaPierre today and then Milton will call REL to report that it has been paid. I think we will be okay by then.”

June 4, 2003: Blount writes a check to LaPierre for $30,000.

June 5, 2003: Al LaPierre writes a check to Colonial bank for $31,644.18.

June 27, 2003: Blount writes the same Colonial bank manager. The email says, in part: “I’m taking commissioners Langford and White to Atlanta tomorrow (flying) to get them out of town (their request as of yesterday afternoon). When you have your third billion-dollar deal in the span of three months, bankers absolutely drive them crazy.”

July 21, 2003: LaPierre’s firm faxes a $100,000 invoice to Blount Parrish Holdings “for services rendered regarding Jefferson County.”

July 2003: Blount writes an email to bond swap advisor Charles LeCroy. The email reads in part, “Langford sent LaPierre home. Said he wanted to meet with White by himself.”

Aug. 6, 2003: Blount writes and email to LeCroy. It reads in part, “I hope you will have some info to give them an idea of what it is we’re doing today. Larry called and wanted LaPierre there at 3:15 to discuss some political stuff. Also, he is hitting us up for something for his ministry. LaP says it isn’t much. I will be headed in that direction about noon. Call me on cell if you can.”

Aug. 28, 2003: Blount writes in an email to LeCroy, “Visited with LL yesterday, and he told me that he was setting up committee to effect the swaps without Commission approval.” The email continues: “He also said he instructed Norm [Davis] to move forward with the swap and for me to call him.”

Sept. 4, 2003: Blount writes in an email to LeCroy, “LaP. met with LL yesterday and put the whip to him. He said that what Compass and UBS are doing will not affect out moving forward with entire swap. They were unable to complete entire conversation, because LL had to leave. LaP felt he was flopping. Anything else from your end, call me on cell today.”

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Larry Langford: In his own words

“I don’t’ fly, unless — I wouldn’t be down here unless you weren’t the SEC. I don’t get on planes.”

— On fear of flying.

Q: “Is that all one word?”

Langford: “Yeah, pretty much.”

Q: “One word or two words?”

Langford: “Two words.”

— On his home business, GlobalLink/Global Link.

“I’m a kind of a clothes person. I like clothes.”

— On his $70,000 credit card debt and store credit, spent mostly on clothes.

“I have a mortgage, a couple of car notes, maybe three.”

— On his other debts besides clothes.

Q: “Did you discuss your financial situation with anybody at the time?”

Langford: “Just my wife.”

Q: “Besides your wife — that you needed to pay off these loans — did you discuss that situation with anybody else besides your immediate family?”

Langford: “Just Al.”

— On taking loans from lobbyist Al LaPierre.

“I broke some stuff in my face.”

— On dental bills.

“You can go to Oxford and Oxford will want $3,000 for a suit. You can go to Century 21, you can get it for $400.”

— On shopping in New York’s Garment District.

Langford: “I didn’t know America had that many investment bankers, but they were lined up everywhere.”

Q: “And lined up outside your door?”

Langford: “Out the door, down the hall, out to the street, calling for appointments every day.”

— On bond solicitors.

Q: “Did you ever consider it?”

Langford: “Well, no. I mean, obviously not.”

— On bidding out county bond work.

“I know I’ve given him more than he’s ever given me.”

— On exchanging gifts with Bill Blount.

More to come …

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