BRADENTON, Fla. The former financial advisor for bankrupt Jefferson County, Ala., appears to have revealed “privileged and confidential information” in his consulting work for sewer system ratepayers objecting to the county’s plan of adjustment, bankruptcy attorneys for the county claim.
In his consulting work for a group known as the Wilson Ratepayers, James White, chairman of the municipal advisory firm Porter, White Capital Advisors Inc., disclosed “internal deliberations and legal analysis” that he learned as a former fiduciary consultant for Jefferson County, attorneys for the county said.
Those revelations alone give the court power “to disqualify an expert who seeks to offer testimony against a party with whom the expert formerly had a confidential relationship and from whom the expert received confidential information,” the county’s attorneys said in a late Wednesday court filing in response to the Wilson objection.
The ratepayers’ objection included White’s allegation that Citi violated Municipal Securities Rulemaking Board Rule G-23.
Disqualification could “reach beyond the expert to the lawyer and thus to the entire objection,” said a footnote in the county’s document.
In addition to revealing confidential details in violation of his fiduciary obligations to the county, White also flip-flopped his position on whether Jefferson County’s outstanding, defaulted sewer debt should be paid or not paid by the county while consulting with a number of clients, and in speaking engagements, attorneys said.
“Because White has switched sides multiple times and because his opinions have varied wildly according to who was paying his bills, White’s credibility is fatally compromised, and this court should disregard his latest opinions,” the filing said. “The Wilson Ratepayers’ heavy reliance on White’s non-credible opinions provides yet another basis for overruling their objection.”
In October, Wilson attorneys filed an amended objection to the plan of adjustment based on the personal knowledge of White.
The objection also alleged Citi violated Rule G-23, which prohibits a dealer that acts as an issuer’s financial advisor from being the underwriter for that issuer on the same transaction.
The alleged violation occurred when Jefferson County hired Citi as the lead investment bank to sell $1.7 billion of sewer warrants as part of the county’s exit plan from bankruptcy, the Wilson group said. Citi also consulted with the county before and after the county filed for bankruptcy in November 2011, the objection said, adding that the violation was a basis for rejecting the county’s plan of adjustment.
Citi was never a financial advisor for the county, Jefferson County’s attorneys countered in Wednesday’s filing.
“In fact, the record shows that throughout the relevant time periods that are the subject of the Wilson objection the county was represented by one or more financial advisors under contract to the county, including Public Resources Advisory Group, Public Finance Management, and White’s own firm,” they said.
Since there has been no violation of Rule G-23 in connection with Citi underwriting the new sewer warrants, the Wilson Ratepayers’ arguments “provide no basis to deny confirmation of the plan.”
Even if there had been a violation, G-23 would not be a basis in law for rejection of the plan, according to the attorneys.
Jefferson County also said that the bankruptcy exit plan is lawful, proper, reasonable, and allows debt to be sold as a part of the Chapter 9 process.
The document also methodically rebuts all objections filed by the Wilson group, as well as those filed by a group known as the Bennett Ratepayers that attempted to discredit the county’s issuance of the sewer debt with arguments that it was fatally tainted by corruption and violated Alabama’s constitution.
U.S. Bankruptcy Judge Thomas Bennett will hear objectors, and the county’s defenses at a hearing Wednesday in Birmingham. The county is asking Bennett to confirm the plan.
By the time the hearing is held, the county will have attempted to price $1.7 billion in new sewer warrants to pay creditors holding $3.1 billion of outstanding sewer debt. The offering is integral to the confirmation plan. Pre-market sales of the warrants reportedly got under way Thursday with retail orders to begin on Friday.