You may know that the Arkansas Securities Department is after W. David Crain, a CPA who worked for St. Bernard Financial Services Inc., the Russellville firm under fire for employing Steele Stephens, a broker who bribed former state treasurer Martha Shoffner.
The department requested some documents from Crain following the Shoffner trial.
You may have also heard that Crain was surprised when — after refusing the department’s requests, claiming tax season was too hectic a time for an investigation — inspectors from the department knocked on his door with a subpoena.
Crain then turned in his licenses and, at about the same time, the department suspended them.
“I was getting out of the business anyway,” Crain told Whispers. “I said I was going to resign, but they said, ‘No, we’re still going to do this.’”
Crain claims that the regulators are going after the wrong target, that he “can’t give them what I don’t have.”
The ASD has requested that the Pulaski County Circuit Court order Crain to respond to the subpoena, and a summons has been issued.
Regulation Litigation
But why is the ASD going after Crain?
Scott Freydl, a staff attorney, said it’s not usual for the department to investigate firms following incidents of misbehavior to be sure that the situation was isolated to a single employee.
“Quite often we do end up looking at the firm and other employees of the firm,” he said.
But for Crain in particular, it all goes back to regulations — regulations that Freydl believes Crain dishonored.
“From our perspective, any member that’s registered with us is in a regulated industry, so when you’re registered, you agree to comply with the laws and to provide us with documents as provided by the Securities Act,” Freydl told Whispers.
“Whether Crain is hiding something or not, from our perspective, he was a member of the industry we regulate, and we can’t allow someone we regulated to tell us ‘no.’ Then it looks like we, as regulators, can’t do our job. We can’t allow that.”
Freydl said that Crain’s claims of the busy tax season and having to care for a dying mother didn’t excuse his refusal of the regulators’ requests.
“In my five years here, I’ve never seen anybody just flat refuse to provide stuff for us,” Freydl said.
Crain had 30 days as of April 10 to respond to the subpoena. He said he has hired a lawyer to do so.
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