PHOENIX – The trustee firm in many of the troubled bond deals assembled by accused fraudster Christopher Brogdon is taking a harder line against the former employee it says was responsible for those deals.
In its latest quarterly financial filing, Bank of Oklahoma Financial confidently predicts that the lawsuit from the fired employee will come to nothing.
Marrien Neilson was fired from her job as an executive at the Tulsa, Okla.–based firm last year following a bank investigation into her work with Brogdon, who was subsequently charged with fraud by the Securities and Exchange Commission for his role in financing a string of failed and defaulted properties in Florida, Illinois, and elsewhere.
Neilson, who was trustee agent on those deals, and her New York-based attorney Robert Kraus have denied any wrongdoing on her part and have brought a defamation suit against BOKF in federal court in Texas.
The SEC alleged that Brogdon since 1992 has raised more than $190 million for his nursing home and retirement community projects through 54 conduit municipal bond transactions and private placements.
In total, the SEC alleged Brogdon committed fraud through at least 43 entities he owns or controls.
The SEC also charged Brogdon's wife Connie and son Tygh.
Some sources told The Bond Buyer they believed Brogdon's conduct stretched back even further, into the 1980s.
Brogdon was censured and expelled from the National Association of Securities Dealers in 1986, according to a BrokerCheck report from the Financial Industry Regulatory Authority, the NASD's successor.
Brogdon and BOKF worked together on more than 10 deals stretching back more than a decade.
Bondholders complained about having apparently lost their money when the properties defaulted and more than $2 million seemed to have disappeared from debt service reserve funds.
BOKF vigorously denies that it erred in terminating Neilson, and its recent quarterly filings reinforce the bank's opposition to her suit.
While the bank's October filing said that Neilson had "violated company policies and procedures" and that BOKF was trying to determine its liability to bondholders, language in its latest filings, after Neilson filed suit in January, is much more forceful.
"The Bank has been advised by its counsel that there is no basis for the employee's action and that any recovery by the employee is remote," the filing said.
Kraus noted that the bank has shifted its tone from previously asserting something more akin to criminal wrongdoing. The bank filed a motion to dismiss the lawsuit, and Neilson has filed a response.
"BOKF knew or should have known that its investigation was completely inadequate and that it had no basis to state that Neilson had colluded in misusing revenues," her attorneys wrote in their May 10 motion.
Neilson is also seeking compensation for benefits she believes are due to her that were withheld because of what she believes to be her wrongful termination. BOKF has filed not only a motion to dismiss, which is still active, but also a motion to transfer the case from the Southern District of Texas to the Northern District of Oklahoma for convenience reasons. Kraus said that the litigants are scheduled for a courtroom conference May 17.
Brogdon has been ordered to repay investors and remains embroiled in lawsuits with both the SEC and with BOKF.
Brogdon has denied wrongdoing in the BOKF lawsuit.
In April, a federal judge in Georgia overseeing the BOKF case against Brogdon ruled that the proceeding should be halted pending either the resolution of the SEC case or the resolution of Brogdon's effort to put one of his companies through the bankruptcy process. That court has ordered the parties to provide updates every 60 days so that the court can keep track of those matters.
A confederation of some 40 bondholders has also actively been pushing for authorities to uncover what happened with the Brogdon deals, and previously alluded to the possibility of pursuing its own legal action separate from that of BOKF's actions as trustee.
