Posted 7/16/2012 12:00 am
Updated 2 years ago
Whispers almost hates to step into this one, but when the gubmint gets involved, what choice do we have?
Heath Abshure, the commissioner of the Arkansas Securities Department, filed a motion earlier this month in Pulaski County Circuit Court to intervene in the long-running case of First Security Bank v. Bamco Gas LLC.
Bamco, which was incorporated in Little Rock in 2006 and was operated by Ernest Bartlett, raised $10 million through a private bond offering in 2005 and another $7 million through a similar bond issue in 2008. The bonds were sold by Crews & Associates of Little Rock to investors in Arkansas and elsewhere, and the money was used to buy an interest in a natural gas pipeline and some wells in Texas.
Well, you know what happened to natural gas prices. Bamco ended up defaulting on both bond issues, and the bond trustee First Security Bank - which, like Crews, is owned by First Security Bancorp of Searcy - sued to have a receiver appointed and Bamco's assets distributed to bondholders.
That was in May 2009.
The first receiver appointed was Steven E. Looper of Llano Consolidates Resources LLC of Amarillo, Texas. But Looper was removed a year later at the request of both First Security Bank and First State Bank of Lonoke, which had extended a $3 million line of credit to Bamco secured by receivables. In Looper's place, Pulaski County Circuit Judge Jay Moody appointed Alan Barksdale.
Now, Barksdale used to work for Crews & Associates. And he is married to Bamco President Ernest Bartlett's stepdaughter. Those associations were disclosed to the court in an affidavit Barksdale filed a few days after he was appointed receiver in May 2010.
Now for the New News
Crews & Associates then offered to buy back all the Bamco bonds, those it sold and those sold by any other broker. Virtually all the bondholders accepted the offer. Crews paid the full face value of senior notes and paid 50 percent to holders of subordinate notes. And any additional assets that the receiver can scare up will be paid first to the subordinate bondholders until they too are made whole.
"We are working hard to protect the interest of our customers and all other investors involved in this transaction," Crews CEO Rush Harding told Whispers. "And we continue to cooperate in every way with our regulators as this issue moves toward resolution."
And resolution was in sight: Barksdale filed a motion last month to sell Bamco's assets and distribute the proceeds.
It was that motion that sent state securities regulators to court. Barksdale's motion asked the court to release everyone involved - Bamco, the receiver, Crews & Associates and First Security Bank - from any further claims or liability, including claims by "a government or political subdivision thereof."
Commissioner Abshure, it seems, just couldn't get down with that.
"The Commissioner ... respectfully requests the Court to withhold this language from any and all Orders entered in response to the Successor Receiver's Motion or in furtherance of this matter."
That's because Abshure's agency has been investigating the sale of the Bamco bonds since August 2010 and isn't finished.
The Securities Department is specifically investigating possible violations of the portion of the Arkansas Securities Act that prohibits schemes to defraud, untrue statements or omissions of material fact that could have deceived investors.