In a blow to Birmingham Mayor Larry P. Langford and Alabama broker-dealer William B. Blount, a federal judge in Miami denied their motion to switch venues and have a judge in Alabama decide whether the Securities and Exchange Commission can force them to testify in a probe of Jefferson County, Ala., swaps and derivatives.
Judge Paul C. Huck denied their motion without comment at the end of a hearing Monday, ordering that the pair participate in a deposition by telephone, according to minutes of the hearing released by the court.
The SEC has asked the Miami court to require that Langford and Blount either testify or cite a specific legal reason not to. In December, both 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 the SEC would not tell them if a simultaneous criminal investigation is underway by the Justice Department.
The dispute over testimony 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, former head of the county commission, helped select participants for county transactions, while Blount, of Blount Parrish & Co., served as lead underwriter, co-underwriter, and remarketing agent for many of the county's bond offerings and participated in its swap agreements.
In court filings, the SEC said it has obtained evidence showing Langford received at least $125,000 in questionable payments from a registered lobbyist and longtime friend of his and Blount. The SEC did not identify the lobbyist, but said he served as a consultant to Blount's firm and received fees from the firm in connection with county bond and swap transactions.
Responding to the SEC's claims, the pair has argued that the commission lacks authority to investigate the interest rate swaps because they were tied to the London Interbank Offered Rate, which would make them non-securities instruments. But the SEC denies that.
In late October, Blount attempted to quash the SEC's subpoena, but federal judge William B. Acker in Birmingham ruled that he did not have the authority to throw out a commission subpoena. In the pair's motion to change venues, they argued that Acker was better suited to review the SEC's demands that they testify because he had ruled on Blount's earlier subpoena. q
