WASHINGTON – Marrien Neilson, the former BOK Financial employee the Securities and Exchange Commission said was responsible for concealing Christopher Brogdon's securities fraud, has agreed to a ban from acting as an indenture trustee or dissemination agent for municipal bonds in the future as well as a $55,000 payment to settle the charges.
Neilson consented to the settlement, which would includes the first ban of an indenture trustee or dissemination agent for munis, without admitting or denying the SEC's findings. Judge Kevin McNulty, who sits on the U.S. District Court for the District of New Jersey, approved the settlement on Tuesday.
The $55,000 is a combination of disgorgement of $29,624 in ill-gotten gains plus $4,208 of prejudgment interest and a $21,167 fine. Neilson's ban on serving as an indenture trustee or dissemination agent for munis also means she could not be employed by another party that serves as an indenture trustee or dissemination agent for munis. Additionally, she is permanently enjoined from violating securities fraud laws contained in the Securities Act of 1933 and the Securities and Exchange Act of 1934 as well as aiding and abetting any such violations.
Neilson, who worked at BOKF in Oklahoma from September 1996 until she was fired on July 9, 2015, became a senior vice president in 2007 and served as the national sales manager for the Tulsa Corporate Trust (TCT), a business unit within BOKF, from January 2013 to July 2015.
The SEC's September complaint against Neilson involved charges related to Brogdon, an Atlanta-based businessman with more than 25 years in the retirement community business.
The SEC found that Brogdon committed fraud through at least 43 entities he owned or controlled by falsely claiming in offering documents that investors would receive interest from the revenues generated by the projects in which they thought they were investing. Instead, he commingled investor funds and used the money for personal expenses and other business ventures.
BOKF served as indenture trustee and dissemination agent for the majority of Brogdon's bond offerings since 2000 and Neilson was the employee responsible for activities related to the Brogdon bond offerings, including supervision of other responsible BOKF employees, according to the SEC.
BOKF served as indenture trustee for 39 of Brogdon's offerings since 2000. The Brogdon offerings typically mandated the creation of a debt service reserve fund (DSRF) that could only be used to pay principal and interest on the bonds if no other funds were available to make the required payment. If the DSRF was drawn down, the trust indentures usually required that the Brogdon-controlled borrower replenish the amount drawn down within 12 months.
If the borrower failed to replenish the DSRF, that was considered an "event of default" and BOKF was required to act in the best interest of the bondholders. The bondholders, if polled by BOKF could also require BOKF to accelerate the maturity date for payment to declare all principal due immediately, the SEC said in its complaint.
Neilson and the other members of the TCT, which was the exclusive provider of the trustee network, interpreted the indentures to require disclosure and notification to bondholders if BOKF failed to replenish, as opposed to a draw on, the DSRF.
BOKF also served as dissemination agent for at least 33 Brogdon offerings. The continuing disclosure agreements (CDAs) for the offerings required BOKF to file certain documents on the Municipal Securities Rulemaking Board's EMMA system if the borrower did not do so itself. Additionally, if the borrower did not provide BOKF with notice that the required documents were not being filed, BOKF was required to file a notice on EMMA stating that.
The SEC found that Neilson concealed the problems and red flags related to the bond offerings, including that Brogdon drew down on DSRFs and failed to replenish them in the manner laid out by the trust indentures.
She also ignored Brogdon's failure to provide or file annual financial statements on EMMA. The SEC found that despite BOKF's duties as dissemination agent, the practice within TCT was to avoid filing EMMA notices stating that the Brogdon-controlled borrowers had failed to file annual financial statements, a practice that diverged from other accounts.
