BRADENTON, Fla. - The Securities and Exchange Commission and two former JPMorgan bankers argued in filings late Friday that their respective experts should not be disqualified from a federal pay-to-play suit stemming from Jefferson County, Ala.'s sewer deals.
Former municipal banker and derivatives market specialist Robin Kole "is not a professional witness like [the SEC's expert] Robert W. Doty," but she is uniquely qualified to testify, argued Charles LeCroy and Douglas MacFaddin, who are charged in the lawsuit involving Jefferson County, Ala.'s 2002 and 2003 sewer deals and related swaps.
The former bankers said Kole is qualified to give her opinions "given her experience in municipal bond offerings before her substantial experience in the municipal swap market," and her experience with financial structures such as Jefferson County's swap and warrant transactions.
Doty, who has more than 40 years of experience in the municipal securities industry as an underwriter, lawyer, and financial advisor is "eminently qualified to opine on industry customs, practices, and standards," the SEC said in its filing. Doty is president and owner at municipal bond consulting firm AGFS in Annapolis, Md.
Since the suit is a bench trial, where a jury is not present, case law suggests that the judge should hear Doty's testimony and determine whether to disregard it or how much weight to give it, the SEC argued.
The SEC and former bankers each filed motions in late January asking the judge overseeing the case to exclude the other side's witnesses Kole and Doty, each citing numerous reasons why their expertise and opinions are not relevant to the case.
LeCroy and MacFaddin filed a motion to exclude Doty saying, in part, that he is not qualified as an expert in the municipal derivatives industry.
The SEC's motion asked the court to exclude Kole's testimony because, in part, she lacked the "requisite training, background, and experience" to render many of her opinions.
The motions are part of each side's discovery as the case, originally filed in November 2009, finally moves closer to trial in Birmingham, Ala., district court.
The two men are charged by the SEC with arranging $8.2 million in payments to friends of certain Jefferson County commissioners and local broker-dealers who had no official role when the county issued more than $3.2 billion of sewer refunding warrants and entered related swap transactions.
The alleged payments were made to ensure that JPMorgan would win bond underwriting and swap business from the county, the SEC said in its complaint.
The case has been delayed because the bankers have been unable to depose CDR Financial Products Inc. senior vice president Douglas Goldberg, who was Jefferson County's swap advisor.
Goldberg pleaded guilty to a conspiracy to rig bids for municipal bond investment contracts, and U.S. District Judge Abdul Kallon has refused to allow him to be deposed until after his sentencing, which has been revised several times.
On Feb. 28, attorneys for LeCroy and MacFaddin notified the court that Goldberg's sentencing had been delayed once again to April 10 from April 1, and Kallon subsequently issued an order delaying his deposition.
The sewer debt was a key factor in the financial troubles that led Jefferson County to file for bankruptcy in November 2011.
The county emerged from Chapter 9 bankruptcy after closing on $1.8 billion of new sewer refunding warrants Dec. 3 to write down the $3.14 billion of debt.
The case is being appealed.
