Stephens Inc.'s Ethics Complaint Against Heath Abshure Dismissed

Stephens Inc.'s Ethics Complaint Against Heath Abshure Dismissed
Heath Abshure

Arkansas Securities Commissioner Heath Abshure has been cleared of any ethical violations alleged by Stephens Inc., which the Little Rock investment firm says is an indication that state ethics law needs to be stricter.

The Arkansas Ethics Commission on Friday voted 4-0, with one member not present, to dismiss the complaint that Stephens General Counsel David Knight filed in November. It claimed that three settlements Abshure negotiated were illegal because they allowed contributions to a nonprofit organization of securities administrators to be recognized in lieu of fines.

Abshure was president of that organization, the North American Securities Administrators Association, in 2012-13.

"While we respect the Commission's decision, we remain convinced that his actions in diverting over $170,000 of public funds to an out-of-state entity of which he was the president was unethical in the common sense meaning of that term," Knight said in a written statement. "The Commission's decision provides even more evidence that Arkansas law needs to be changed to make sure that this type of misconduct is prohibited, and we remain committed to pursuing the legislative changes we have proposed to address this problem."

The largest of the three settlements that included donations to NASAA was $150,000, paid last year by Crews & Associates of Little Rock. The two much smaller donations were part of global settlements that had been negotiated with securities firms by NASAA itself.

When negotiating a settlement with the Arkansas Securities Department last year, Stephens Inc. had rejected Abshure's suggestion that it could also make a donation to NASAA — or to Economics Arkansas, a local nonprofit on whose board Abshure also sits. Instead, Stephens paid a $25,000 fine.

While Knight referred to the settlements as misconduct on Abshure's part, the Ethics Commission disagreed.

"Simply stated, the Commission was unable to say that your suggesting and/or allowing contributions to NASAA and Economics Arkansas as an alternative to paying fines was contrary to or beyond the scope of your powers" under the Arkansas Securities Act, Ethics Commission Director Graham Sloan wrote Tuesday in a letter informing Abshure of the commission's decision (PDF). "Accordingly, the Commission did not find that you acted unfairly."

Nor did the commission agree with Knight's characterization of the donations as "public funds." Instead, it agreed with Abshure's understanding of the law: That a payment by a regulated entity doesn't become public money until it is collected by the state. The donations in lieu of fines were not paid to the state, but paid directly to NASAA.

Abshure told Arkansas Business that he never saw any gray area in the settlements that included donations to NASAA.

"Had I thought there was a gray area in what I did, or when considering these things, I wouldn't have done it. Not only do I not think there was a gray area, there was ample precedent for what I did," he said.

However, he is no longer exercising what the Ethics Commission described as the commissioner's "broad settlement powers" to recognize third-party donations in lieu of fines.

After two hearings by the legislature's Joint Performance Review Committee in January, "it was clear that some legislators were not comfortable with contributions in settled actions," Abshure said.

"The fact is, recognizing contributions was a benefit to the respondents in the case … so if the Legislature wants to take away something that I view as a benefit to respondents, well, OK. It's certainly not going to hurt the department."

Abshure remains the subject of another complaint to the Ethics Commission, one filed in January by Robert Keenan, CEO of St. Bernard Financial Services Inc. of Russellville. The Securities Department has an administrative complaint pending against Keenan and St. Bernard, the brokerage that employed Steele Stephens, the bond broker who testified that he paid bribes to former State Treasurer Martha Shoffner.

Abshure said on Wednesday that he had talked to the Ethics Commission's lawyer about that complaint but that the commission had not started its investigation.