Stephens Inc. Asks Legislators to Consider Changes to Securities Law

by Gwen Moritz  on Wednesday, Jan. 22, 2014 5:10 pm  

Securities Commissioner Heath Abshure

(A correction has been made to this article. See end for details.)

Stephens Inc. of Little Rock, in pursuing its grievance against state Securities Commissioner Heath Abshure, on Wednesday suggested changes to state law that would, among other things, move all enforcement actions into the court system.

Also on Wednesday, a lawyer representing Crews & Associates of Little Rock disputed Abshure's repeated claim that he allowed the Little Rock bond house to make a $150,000 contribution to a national organization that Abshure led only after Crews asked if there was some way to avoid paying a fine.

Crews' donation to the North American Securities Administrators Association was part of a consent order — a settlement agreed to by both parties — issued last July.

Stephens Inc. filed a complaint against Abshure in November, accusing him of illegally steering donations from Crews and others to NASAA, of which Abshure was president in 2012-13. Stephens has also accused the commissioner of retaliating when Stephens refused in August to make such a donation while negotiating a settlement over its failure to properly supervise the sale of certain exchange-traded funds in 2009.

While the state Ethics Commission conducts its investigations in secret, the Legislature's Joint Performance Review Committee on Wednesday continued a hearing on the allegations that began on Jan. 8.

As he did two weeks ago, Abshure answered questions from committee members and other legislators for more than an hour. But this time, Rep. Mark Lowery asked that Abshure be put under oath, suggesting that the commissioner had been "less than forthcoming" the last time.

Under oath, Abshure again disputed the version of the settlement negotiations that Stephens representatives have included in sworn affidavits. In the Stephens version, Abshure offered to settle the case of the exchange-traded funds in exchange for a $20,000 donation to NASAA or to Economic Arkansas, another nonprofit on whose board Abshure sits. Stephens said that after it opted to pay a fine rather than make a donation, Abshure unilaterally raised the dollar amount to $25,000 and, in an email from staff attorney Scott Freydl, threatened to expand the investigation if Stephens didn't agree to the terms.

"To me, this is a threat," Sen. Bill Sample, R-Hot Springs, said of Freydl's email. "Would you not feel like there's a little bit of extortion there?"

"Not at all," Abshure responded. The department, he said, had offered a settlement that included stopping its investigation. If Stephens rejected the settlement, the process would restart.

"Making a final offer happens in every negotiation," Abshure said.

In Abshure's version, his opening offer was $30,000, which Stephens countered with $15,000 because that was the amount paid in 2012 by Morgan Keegan & Co. in another case involving exchange-traded funds. Abshure says a $20,000 donation was discussed, but, as he told Lowery, "there was no deal."



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