by Gwen Moritz
Posted 1/13/2014 12:00 am
Updated 8 months ago
Arkansas Securities Commissioner Heath Abshure took heat from legislators for more than an hour last week, but threatening weather forced the Joint Performance Review Committee to recess before any other witnesses could be heard.
One person prepared to testify was Jim Jones, president of Crews & Associates, the Little Rock bond brokerage that made a $150,000 donation to the North American Securities Administrators Association as part of a consent agreement reached with Abshure last summer.
That donation, and Abshure’s subsequent suggestion that Stephens Inc. could avoid a fine by making a similar donation, led Stephens’ General Counsel David Knight to file an ethics complaint against Abshure. While the state Ethics Commission conducts its investigations in secret, the Joint Performance Review Committee held an open hearing into Abshure’s actions as described in the Stephens complaint.
Abshure told the committee that, in negotiating a settlement over the problem-plagued Bamco Gas LLC bonds, Crews had asked for a way to avoid paying a fine. Because Crews had already repaid all investors and otherwise cooperated with his department’s investigation, Abshure said he told Crews he would accept a donation to the NASAA — of which he was then president — in lieu of a fine.
NASAA trains securities examiners for Arkansas and its other state members and helps coordinate multi-state settlements with securities firms.
While Crews agreed to the contribution, no one from the company has either confirmed or denied Abshure’s description of the negotiation process. When Arkansas Business broke the story of Stephens’ ethics complaint late last year, Crews CEO Rush Harding declined to comment. Last week, Jones said he would only answer the legislative committee, which is tentatively scheduled to resume the hearing on Jan. 22.
If Jones disputes Abshure’s version, it won’t be the only disagreement as to the facts.
Rep. Mark Lowery, R-Maumelle, asked Abshure why the cost of the settlement with Stephens increased from a $20,000 donation to a $25,000 fine after Stephens declined to make the donation, Abshure said there had never been an agreement on the $20,000 in the first place.
Lowery then pointed out that a Stephens executive — Associate General Counsel Kim Fowler, although he didn’t name her — had made a sworn statement to that effect.
“My sworn statement is that’s not what happened,” Abshure responded.
Stephens ultimately agreed to and paid the $25,000 fine for failing to supervise agents who sold certain exchange-traded funds in 2008-09. But in his complaint filed with the Ethics Commission, Knight accused Abshure of illegally steering the $150,000 Crews settlement and two smaller settlements to the NASAA and of retaliating by increasing the fine when Stephens refused to make such a donation.
Whose Money Is It?
Members of the committee, starting with Rep. Bruce Westerman, R-Hot Springs, seemed to reject the idea that Abshure, a political appointee, could decide that penalties could be paid to an outside organization rather than being collected into the state treasury. And Stephens’ complaint points out that state securities law says that “all fines … or moneys collected in lieu of a fine … shall be deposited as special revenues into the State Treasury” and credited to a special fund for investor education.
But Abshure said the donations to the NASAA were never collected by the state.
“A donation is just like ordering restitution,” Abshure said. “It was never the state’s money.”
The Securities Act, he said, gives him broad latitude to craft settlements, authority he used in reaching the settlements with Crews and Stephens.
Westerman asked Abshure whether it was a conflict of interest for him to order contributions to the NASAA.
“No,” Abshure said.
“You’d have to agree that there’s a perceived conflict of interest,” Rep. Bob Ballinger, R-Hindsville, said. Abshure did not directly respond.
But he did respond when Sen. Larry Teague, D-Nashville, told him that he wasn’t comfortable with the fact that Crews & Associates’ $150,000 didn’t flow to the benefit of the taxpayers of Arkansas. Teague then instructed Abshure to “stop it until some of us get comfortable with it.”
“I think we can do that,” Abshure answered.
In answer to a question, Abshure confirmed that he had discussed the Stephens complaint with Gov. Mike Beebe. Beebe’s response, Abshure testified, was, “Heath, I know you didn’t personally profit from this, and I know you didn’t do anything wrong, but they’re going to make you look bad.”