Washington D.C., Sept. 9, 2016 —The Securities and Exchange Commission today announced that a subsidiary of Oklahoma-based BOK Financial Corporation has agreed to pay more than $1.6 million to settle charges that it concealed numerous problems and red flags from investors in municipal bond offerings to purchase and renovate senior living facilities.
The agency also filed a complaint in federal court against a former senior vice president at the bank, Marrien Neilson, who allegedly was chiefly responsible for the failures of the bank’s corporate trust department while overseeing what turned out to be fraudulent bond offerings managed by Christopher F. Brogdon, an Atlanta-based businessman. Brogdon has since beencharged with fraud and ordered by the court to repay $85 million to investors.
According to the SEC’s order, BOKF NA failed in its gatekeeper role as indenture trustee and dissemination agent for Brogdon’s bond offerings. BOKF and Neilson became aware that Brogdon was withdrawing money from reserve funds for the bond offerings and failing to replenish them, and he had failed to file annual financial statements for the offerings. BOKF and Neilson also knew that the nursing home facilities serving as collateral for one of the bond offerings had been closed for years. But Neilson allegedly warned others that disclosing these and other problems could impair future business and fees from Brogdon, upset bondholders, and cause regulatory issues for bond underwriters. Therefore, they decided not to inform bondholders as required.
“BOKF was in a crucial gatekeeper position to stand up for bondholders and notify them about material problems with the bonds, but instead turned a blind eye and chose to protect Brogdon and the fees it collected from his deals,” said Lara Shalov Mehraban, Associate Regional Director of the SEC’s New York Regional Office.
Without admitting or denying the SEC’s findings, BOKF agreed to pay disgorgement of $984,200.73 of the fees the bank collected from its work with Brogdon. The bank also agreed to pay interest totaling $83,520.63 and a penalty of $600,000. BOKF promptly terminated Neilson following an internal investigation and reported its misconduct to the SEC.
The SEC’s litigation against Neilson will take place in federal court in Newark, N.J.
The SEC’s continuing investigation is being conducted by Lee A. Greenwood, David H. Tutor, and Sandeep Satwalekar of the New York office with assistance from Joseph Chimienti and Mark R. Zehner from the Public Finance Abuse Unit. The case is being supervised by Ms. Mehraban. The litigation will be handled by Mr. Greenwood, Mr. Tutor, Neal Jacobson, and Alexander Vasilescu. The SEC appreciates the assistance of the Office of the Comptroller of the Currency and the Oklahoma Department of Securities.