The Securities and Exchange Commission (SEC) has reached a settlement in a civil fraud lawsuit that claims two bankers paid $8.2 million to friends of Jefferson County officials so that their company could obtain $5 billion in county bond business. Lawyers for the SEC have notified U.S. District Court Judge Abdul Kallon that a proposed settlement with former J.P. Morgan Securities Inc. executives Charles LeCroy and Douglas MacFaddin “on all outstanding issues” had been reached in the 2009 lawsuit. The parties had been in mediation when the settlement was reached.
It should be noted, however, that the settlement is not final. It can’t be presented to the judge until the five-member commission approves it. Once approved, the commission will then file proposed final Judgments with the court to end the case. It’s expected that the process of obtaining commission approval will take 60 days. The judge was asked to stay the case for 60 days so that the process can be completed. If the SEC declines to approve the settlement, it would mean moving the date for the trial to late March. Judge Kallon had set the trial for Jan. 25, 2016, and had ordered the case to mediation for a possible resolution. Both sides had until Oct. 31 to reach a settlement or face having the trial. At press time we had not heard from the court.
The SEC filed the lawsuit in 2009 against LeCroy and MacFaddin claiming the two men paid $8.2 million to friends of Jefferson County officials so J.P. Morgan could obtain $5 billion in Jefferson County municipal bond offerings and swap agreement transactions. A trial in the case had been postponed for several years, waiting for the deposition of a key witness, Douglas Goldberg, in the case. Goldberg, a former official with CDR Financial Products Inc. based in Beverly Hills, Calif., pleaded guilty in March 2010 to charges in a New York federal court that he conspired to rig bids for investment agreements or other municipal finance contracts. He was sentenced to probation in May 2014. Goldberg refused to give a deposition in the Jefferson County case until after he had been sentenced.
Jefferson County’s sewer financing problems began when it borrowed money to comply with a 1996 court order to stop sewage leaks from polluting area streams. Construction overruns and later bond swaps ultimately increased the cost of the sewer project to more than $3 billion. A number of persons have either served time or are currently in prison because of their involvement in the scandal.
Source: The Birmingham News
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