WASHINGTON — James T. Kelly, a Securities and Exchange Commission administrative law judge who presided over several municipal bond enforcement cases, plans to retire later this month after 42 years of public service, with more than 11 spent at the SEC, the commission announced Tuesday.
Kelly’s rulings in muni-related administrative proceedings were a mixed bag for the SEC.
In May 2007, he dealt the SEC a major blow, ruling that two former JPMorgan bankers did not violate the Municipal Securities Rulemaking Board’s Rule G-38 on political contributions when they worked with the late lawyer Ronald White — a politically connected bond counsel in Philadelphia — in order to get their firm hired for muni deals, but failed to hire White as a municipal securities consultant. Kelly found that White had “no understanding” that a $50,000 payment from JPMorgan was “in exchange” for obtaining muni business for it.
The SEC did not appeal the ruling because the former bankers, Charles LeCroy and Anthony Snell, had been barred from the financial markets by a federal court after each pleaded guilty to two criminal counts of wire fraud in a related criminal case that centered on alleged corruption by Philadelphia officials.
Kelly also made some troubling off-the-cuff remarks about the SEC’s jurisdiction over swap transactions in that ruling that have come back to haunt SEC enforcement lawyers in other cases.
Kelly stated: “I agree with [LeCroy and Snell] that, while an issuer might enter into a swap transaction or swaption at the same time as it enters a bond offering, the contemporaneous nature of the two transactions does not make them a single financial instrument with a bond component.”
In 2008, lawyers representing Larry Langford, former head of the Jefferson County Commission, Alabama bond dealer William Blount, his firm, Blount Parrish & Co., and local lobbyist Al LaPierre against SEC securities fraud charges used Kelly’s words to claim the SEC did not have jurisdiction over Jefferson County swaps.
The SEC had sued them in April of that year, claiming Langford selected Blount Parrish to participate in every Jefferson County muni bond offering and security-based swap agreement transaction during 2003 and 2004 in return for payments made to Langford via LaPierre, a long-time friend.
In a helpful ruling for the SEC, Kelly in February 2005 found the now-defunct underwriter Dolphin & Bradbury and its principal, Robert Bradbury, were reckless and violated the securities fraud laws because they failed to ensure the offering documents for bonds issued to finance the acquisition of a building disclosed to investors that the main tenant was moving out of the building. His decision was upheld by SEC commissioners after Bradbury’s lawyer appealed part of it.
Kelly also help finalize an agreement the SEC reached with lawyers for the North Orange County Community College District in 1999, under which the SEC dropped charges for alleged faulty disclosures in connection with two note issues. Under the agreement, the SEC would have been able to get the charges reinstated if it won an appeal of a ruling by a federal judge that dropped similar charges against former Dain Rauscher Inc. banker Kenneth Ough. But Ough later settled charges with the SEC, without having to pay any monetary penalty.
Kelly received his bachelor’s degree in economics from Georgetown University in 1969 and his law degree from the University of Pennsylvania in 1975. He served as an officer in the U.S. Navy from 1969 to 1972.