Securities Department Goes After Firm That Did Business With Martha Shoffner's Office

by Gwen Moritz  on Tuesday, Mar. 11, 2014 9:06 am  

Instead, Keenan filed his ethics complaint against Abshure (PDF) on Jan. 27. In it, Keenan alleges that Abshure contacted St. Bernard customers in December and attempted to get them to file complaints. In wording reminiscent of an ethics complaint filed against Abshure in November by Stephens Inc. of Little Rock, Keenan suggested that Abshure was trying to generate fines to benefit himself and the ASD. (Steele Stephens is not associated with Stephens Inc.)

Asked Monday afternoon if there was any basis for Keenan's charge, Abshure replied, "Zero. None."

Abshure said he never personally called any St. Bernard customers, and any customer contacts by the ASD were a "routine" part of an ongoing investigation of St. Bernard.

"A lot of times you have to talk to customers to see if there was a violation or not," Abshure said, particularly citing the question of whether a transaction was recommended by the broker or requested by the client.

According to Freydl's complaint, St. Bernard charged the state treasurer's office more than $3.23 million in commission for 85 securities trades executed by Steele Stephens, who left St. Bernard after participating in an FBI sting last year against then-Treasurer Martha Shoffner between July 2009 and December 2012.

"This amount resulted from the markups and markdowns St. Bernard charged the Arkansas treasurer's office that were much higher than the median markups and markdowns charged on similar trades in the same bonds during the same time period," Freydl wrote in the complaint against Keenan and St. Bernard.

In testimony on Monday, Stephens estimated his commissions at $2.5 million. Keenan told Arkansas Business that Stephens kept 85 percent of the commissions he generated, suggesting that Stephens' share of the total was closer to $2.75 million.

Keenan, as CEO, was supposed to conduct daily and monthly account reviews to determine the suitability of securities trading, but he failed to enforce St. Bernard's own written compliance policies, according to Freydl's findings. Also, Freydl wrote, Keenan failed to intervene when Steele Stephens sent material about proposed bond trades from which "the down side or negative aspects" of the trades had been deleted.

"Several of these bond trades involved bonds being sold prior to maturity or the call date," Freydl wrote in the complaint against Keenan and St. Bernard. "These bond trades were unsuitable because the Arkansas treasurer's office actually received no real profit or benefit from these trades. In many instances, the bond trades offered by [Steele] Stephens caused significant losses for the Arkansas treasurer's office while greatly benefiting Stephens and St. Bernard."

Abshure downplayed Keenan's suggestions of impropriety in his and the ASD's actions.

"I'm amazed, really, that Keenan decided that this was the tactic he would use when his agent is over there testifying in the Shoffner trial right now — to allege that I would seek to create complaints when there's a trial going on over there," Abshure said.

"That I'm not justified in looking into that, to me, is a little bit ridiculous," he said. "To allege that I have no reason to investigate St. Bernard — and that I'm only doing it to enhance my reputation or to generate fines — is crazy."

 

 

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