BRADENTON, Fla. - The Securities and Exchange Commission has settled its almost six-year-old pay-to-pay case against two ex-JPMorgan bankers involved in soured sewer deals that thrust Jefferson County, Ala., into bankruptcy.
The SEC, according to a notice filed in federal court Monday, said it reached a deal with Charles LeCroy and Douglas MacFaddin through mediation on Sept. 29 that resolves securities fraud charges against the pair.
Terms of the settlement were not disclosed because it must be presented to the full commission for approval, the SEC told U.S. District Judge Abdul K. Kallon in Birmingham.
"If approved, the commission will file proposed final judgments with the court that will end the litigation in this case," SEC regional trial attorney Robert K. Levenson said in Monday's notice.
The SEC asked Kallon for a 60-day stay of court proceedings, which includes delaying a trial now set for Jan. 25.
Lisa A. Mathewson, who represents LeCroy, said she would decline to comment on Monday's development until the commission approves the settlement and the terms are disclosed.
MacFaddin's attorney did not immediately respond to a request for comment.
In November 2009, the SEC filed a civil suit alleging that LeCroy and MacFaddin improperly arranged payments to local broker-dealers in Alabama to assure that certain Jefferson County commissioners would award $5 billion in county sewer bond and swap deals to JPMorgan.
The SEC suit said that the two men "privately agreed with certain county commissioners to pay more than $8.2 million in 2002 and 2003 to close friends of the commissioners who either owned or worked at local broker-dealers."
The lawsuit sought declaratory and permanent injunctions against LeCroy and MacFaddin for securities law violations, as well as disgorgement of all profits they received as a result of the violations, plus interest.
The SEC brought the suit at the same time it settled securities fraud charges with the investment bank.
Without admitting or denying the SEC's charges, JPMorgan agreed to pay $75 million in penalties eventually turned over to Jefferson County, and to forfeit more than $647 million of claimed swap termination fees.
LeCroy was an investment banker who left JPMorgan in 2004, and MacFaddin was a managing director and head of the firm's municipal derivatives department from 2001 until March 2008.
In January, the SEC sought summary judgment in the case. By June, Kallon said that the five-year-old case was appropriate for mediation.
In addition to the ex-bankers' case, nearly two dozen local elected officials, contractors, and county employees involved in the county's sewer bond deals or construction of the sewer system were jailed for bribery and fraud.
In November 2011, cash-strapped Jefferson County filed for Chapter 9 bankruptcy after failing to restructure $3.2 billion of sewer warrants and associated swaps.
The county exited bankruptcy in December 2013 after issuing $1.8 billion in sewer refunding warrants to write down $1.4 billion in related sewer debt, though the case has been under appeal ever since.
