WASHINGTON— The Securities and Exchange Commission’s legal dispute over testimony it is seeking from the mayor of Birmingham and an Alabama-based broker-dealer moves a step forward tomorrow when a U.S. judge in Miami hears arguments on a motion to transfer the case to a federal court in Birmingham, a move the SEC opposes.
Miami-based Judge Paul C. Huck will hold a hearing tomorrow on the motion filed by Larry P. Langford, the Birmingham mayor, and William Blount of Blount Parrish & Co., who argue federal Judge William B. Acker in Birmingham is the best person to resolve the dispute because he has previous involvement in it.
The dispute stems from an SEC investigation of possible securities fraud in connection with $5 billion of municipal bonds and interest rate swap agreements issued or entered into by Jefferson County. Langford is the former head of the county commission and helped select participants for county transactions, while Blount served as lead underwriter, co-underwriter, and remarketing agent for many of the county’s bond offerings and participated in its swap agreements.
The SEC stated in court filings that it has obtained evidence showing Langford received at least $125,000 in questionable payments from a registered political lobbyist and longtime friend of his and Blount. The SEC has not identified the lobbyist, but says he served as a consultant to Blount’s firm and received fees from the firm in connection with county bond and swap transactions.
The SEC is asking the Miami court to require that Blount and Langford testify in its investigation or cite a specific legal reason not to. In December, both individuals appeared at the commission’s Miami office in response to subpoenas, but refused to answer any questions, citing general constitutional protections. They also were upset that the SEC would not tell them if there is a simultaneous criminal investigation underway by the Justice Department
In court documents, the pair has also argued that the SEC lacks the authority to investigate interest rate swaps because they are tied to the London Interbank Offered Rate, which would make then non-securities instruments. But the SEC denies that.
In late October, Blount attempted to quash the SEC’s subpoena, but Acker, the Birmingham judge, ruled in that he did not have the authority to throw out a commission subpoena.
