Grigsby, after beating Illinois allegations, wants state to pay legal fees

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CHICAGO — Longtime municipal finance banker and lawyer Calvin Grigsby will continue to fight to recoup legal expenses from Illinois after successfully fighting a state agency's allegations of securities violations.

Secretary of State Jesse White’s securities department accused Grigsby and his firm Grigsby & Associates Inc. in connection with advice offered to the Illinois Student Assistance Commission on a $12.8 million investment made in 2008 in Chicago’s ShoreBank Corp. Federal authorities seized the bank in 2010, rendering the investment worthless.

Grigsby was accused of failing to supervise the Chicago-based lead banker working with ISAC, breaching the firm's fiduciary duties, misrepresenting and omitting material information, failure to conduct due diligence, and failure to disclose information on subcontractors.

Grigsby refused to settle and instead engaged in a years-long fight against charges he called “meritless.” He scored his first victory in 2016 when a hearing officer found no evidence to support the violations and recommended the case be dismissed.

Grigsby filed a complaint seeking an administrative review in an effort to conclude the case based on the hearing's officers recommendations and a state court judge last year agreed they should be dismissed.

"Shore Bank failed. The whole world failed. Are you kidding me?" Cook County Circuit Court Judge Thomas Allen said during a hearing, according to a transcript provided by Grigsby, referring to the 2008 financial crisis and its aftermath. The department had accused the firm of providing misleading information on the number of failed banks.

"I don't see a smoking gun...I don't see that he did anything wrong,” Allen said.

The judge noted that it was the head of ISAC that expressed interest in the bank investment which "begs the question how does Mr. Grigsby get charged with selling something" to ISAC.

"There is no evidence," Allen said. "I agree with the hearing officer."

Hearing officer Jon K. Ellis concluded in 2016: "The record in this matter does not support a finding that any alleged act or failure to act, failure to disclose, practice, course of business, statement, opinion, representation, or omission of the respondents constitutes, or caused, a violation” state and federal securities rules.

The allegations were laid out in a 2012 hearing notice and the subject of multiple hearings during 2014 and 2015 as part of the state's ongoing investigation that began with the lead banker/advisor on the investment.

Grigsby said he feels vindicated by both the hearing officer and judge’s findings but remains dismayed over the havoc the allegations caused to his business.

“The entire set of charges were made by the Department of Securities of the Secretary of State’s Office falsely in bad faith,” Grigsby said.

“Regrettably, all of this has harmed my business, my personal reputation and caused me to incur very significant legal fees and costs. The SOS effectively put a large chunk of my career on hold for years without a single act or proof of any wrongdoing on my part,” Grigsby added.

The deadline for the office to appeal the court’s findings has passed, according to Grigsby’s attorney, Stephen Scallan.

White’s office declined to comment on the case, citing the ongoing litigation over fees.

“The circuit court judge denied the motion and stated that the department did nothing wrong in bringing its administrative case against Grigsby. The case is still in litigation because Grigsby filed an appeal of the judge’s order,” said SOS spokeswoman Elizabeth Kaufman.

The state began pursing Grigsby shortly after entering a consent order imposing various penalties, including a $15,000 fine, against Alvin Boutte Jr., who was a public finance banker at Grigsby's firm.

The office had previously temporarily suspended Boutte's license, accusing him of providing misleading advice that led to ISAC's investment for its pre-paid college tuition.

The Boutte consent order concluded that Boutte and the firm breached their fiduciary duty to ISAC. The order attributed the finding to Boutte and the firm's failure "to prepare a complete and accurate offering analysis and prudence opinion that fairly and objectively evaluated the prudence" of the investment based on ISAC's goals.

State regulators charged that Boutte had not properly documented or kept records of due diligence he had said was conducted, including interviews with key bank personnel and bank branch visits. The audit also faulted the company for not keeping records on its contract with a subcontractor who was paid $50,000 and not keeping proper records of sporting event tickets provided to ISAC officials. The Chicago office was also accused of not keeping proper documentation of office emails and communications. ISAC paid the firm a contingent fee of $256,000.

The pursuit of Boutte and Grigsby came after the public airing of ISAC's fiscal woes and news that the prepaid tuition program's ongoing losses were the subject of several regulatory and legislative probes that prompted then-Gov. Pat Quinn to overhaul the agency.

In written closing arguments, Grigsby's lawyer highlights that key investors in ShoreBank included top national banks and insurance companies.

Law firm Dykema Gossett and ISAC reviewed all documents and signed off on them and ISAC's former head testified during hearings that he did not believe any malfeasance occurred in the investment.

Grigsby & Associates remains a registered independent municipal advisor. The firm withdrew its broker-dealer license in 2010.

Grigsby said he continues to offer advice to municipalities on financial zoning, economic development, housing, mixed use projects, and other areas.

Grigsby also continues to represent a group of taxpayers in Jefferson County, Alabama, challenging the county's Chapter 9 bankruptcy in 2011. In July 2014, Grigsby filed a federal discrimination lawsuit against the Shreveport, Louisiana, City Council in a long-running flap over the council's claim that Grigsby overcharged for financial advisory fees. Grigsby said last month that he and the city entered an “amicable” agreement to end all litigation.

Shelly Sigo contributed to this article

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Securities law Enforcement actions Illinois Student Assistance Commission Illinois