BRADENTON, Fla. - In what is the first case of its kind involving Jefferson County, Ala.'s troubled sewer system, a former county commissioner has agreed to plead guilty to one count of obstructing justice in connection with her involvement in the sewer bond deals.
Mary Buckelew, who was a county commissioner from 1990 until 2006, admitted she lied to a federal grand jury in August when she denied receiving gifts from an investment banker involved in many of the county's sewer bond transactions,
Buckelew participated in authorizing much, if not all, of the $3.2 billion of sewer debt and more than $5 billion of related swaps that now threaten to force Jefferson County into the largest municipal bankruptcy in U.S. history. Most of the debt is in variable- and auction-rate securities, which have seen interest rise to penalty rates and repayments accelerated.
"For approximately $4,000, [Buckelew] entered the spider web of corruption that surrounds the financing of Jefferson County's sewer project and the bond swaps," U. S. attorney Alice Martin said in a statement. "As a result of these corrupt transactions, Jefferson County is now in a financial crisis of unprecedented proportions. This investigation is active and ongoing and additional charges will be forthcoming."
The Federal Bureau of Investigation and the Internal Revenue Service are investigating Jefferson County's bond and swap deals, along with the U.S. attorney and a federal grand jury. Buckelew, who has agreed to assist in the ongoing investigation, could receive up to 20 years in a federal prison and a fine of up to $250,000.
There have been a number of convictions related to rehabilitation of the county's sewer system, but to date those have been not been related to the debt program. The massive sewer rehabilitation project has been underway for years and is related to a federal consent decree signed by Jefferson County.
The Securities and Exchange Commission is pursuing an alleged pay-to-play scheme against Birmingham Mayor Larry Langford, who formerly headed the Jefferson County Commission, as well as Montgomery bond dealer William Blount and his firm Blount Parrish & Co., and Albert LaPierre, a lobbyist and friend of Blount and Langford. The SEC has been investigating the county's sewer bonds and swaps for several years.
In related news yesterday, Jefferson County commissioners authorized attorneys to file a "counterclaim" against the two bond insurers that last week sued seeking to have a receiver appointed to oversee the sewer system. The counterclaim seeks up to $100 million in interest and $56 million in premiums the county paid for bond insurance.
The counterclaim is in response to a lawsuit filed last week by insurers of most of the troubled sewer debt, Financial Guaranty Insurance Co. and Syncora Guarantee Inc., and the trustee of the debt, Bank of New York Mellon. The lawsuit also claims the county has failed to abide by rate covenants and take other actions to stabilize the system.
"We feel like we have to protect ourselves against this lawsuit," said Jefferson County commissioner Shelia Smoot, who noted that she abstained from voting on the resolution to pursue the counterclaim because she said she did not have enough information about it.
