BRADENTON, Fla. — An Alabama judge has set Sept. 7 for trial to begin in the Bank of New York Mellon's quest to obtain a receiver to take over control of Jefferson County's sewer system, which is saddled with close to $3.2 billion of troubled variable- and auction-rate debt.
An order setting the trial date in Birmingham was issued by Russell County Judge Albert Johnson, who is presiding over the case because judges in Jefferson County recused themselves, according to the Birmingham News.
BNY spokesman Kevin Heine on Friday said the bank, which is trustee for the sewer debt, had no comment about the trial going forward.
The county did not respond by press time to a request for comment.
BNY-Mellon filed a civil suit in Alabama state court on Aug. 3 seeking a receiver for the sewer system as well as a court order requiring county commissioners to raise sewer rates and impose additional charges and fees to pay bondholders.
The over-leveraged sewer system has defaulted on some debt payments. Credit ratings for the debt have been at junk level for some time.
Jefferson County is involved in numerous suits over the sewer system that it was required to improve because of violations of the federal Clean Water Act.
The program has been marred by numerous corruption convictions of county commissioners, contractors, and local members of the finance team that helped the county refinance fixed-rate debt into variable- and auction-rate mode with swaps to avoid large increases in sewer bills.
Assured Guaranty Corp. on June 16 filed a civil suit in New York alleging that JPMorgan, along with Jefferson County, "fraudulently induced" it to provide more than $378 million in insurance coverage for the sewer warrants.
In its complaint, Assured said it would not have insured the warrants if it had known about bribes that JPMorgan paid to Jefferson County commissioners to become lead underwriter for the sale of the warrants and counterparty to "lucrative swap agreements."
The county is not a defendant in the case.
Much of the wording in Assured's complaint first appeared in a suit filed April 29 in New York by Syncora Guarantee Inc., the county's largest bond insurer, alleging that Jefferson County and JPMorgan fraudulently induced it to provide more than $1 billion in insurance coverage for the sewer warrants.
Syncora, which sued the county and JPMorgan, said it would not have insured the warrants had it known about bribes the investment bank paid to county commissioners.
Jefferson County last November filed a lawsuit alleging fraud and conspiracy against JPMorgan, Blount Parrish & Co., Charles LeCroy, Douglas MacFaddin, Larry Langford, William Blount, and Albert LaPierre for their roles in the soured sewer deals. The county is demanding a jury trial.
The county is also named in a number of civil complaints filed in local court by sewer system ratepayers.
In another recent development, Jefferson County late this month for the first time in its history posted the commission meeting agenda and minutes online.
The postings, along with other information, were ordered by the Alabama Legislature last year in a bid to bring greater transparency of the county's finances to the public.
The information can be found at jeffconline.jccal.org.