Wednesday, January 24, 2018

SEC suspends underwriter on Rolling Fork bonds

The Securities & Exchange Commission suspended Tony Stovall from working in the securities industry for six months.  The SEC said he gave "improper gifts" to Rolling Fork's municipal financial advisor, Porter Bingham of Malachi Financial Products,  in exchange for his recommendation that the city hire him to underwrite its bonds in a 2015 offering.  Mr. Stovall received $130,000 in fees from the transaction.  The SEC sued  Mr. Bingham, and Malachi Financial Products  earlier this month for fraud in the Rolling Fork bond sale.

JJ reported earlier this month:

Rolling Fork was just another small town in Mississippi that made the mistake of running into some bond pimps who promised golden showers but instead gave the town a golden fleece. That mistake cost the town of two thousand people several hundred thousand dollars. That's quite a pretty penny for a city with a budget of less than $2 million.

 Rolling Fork was interested in financing infrastructure improvements with bonds.  The city hired Malachi Financial Products of Roswell, Georgia  to be its financial advisor.  Malachi is owned by Porter Bingham.  Mr. Bingham recommended that the city sell bonds to raise $2 million.  However, the bond sale was lowered to $1.1 million due to Rolling Fork's limited borrowing capacity. 

Most aldermen and councilmen lack the financial expertise to understand bond deals and are thus ripe targets for some good ole fashioned plucking. Rolling Fork was no exception as the bond pimps proceeded to loot the bond sale.

Check out the fees* on this bond deal:

Malachi Financial Products: $55,000
Bonwick Capital Partners ( Tony Stovall, Underwriter): $130,000
Chambers & Gaylor (Bond counsel): $25,000
Mississippi Development Bank: $2,500
Balch & Bingham: (MDB Counsel): $5,000
Allen Woodard (Issuer's Counsel): $10,000
Trustmark (Bond Trustee): $2,500
Jackson Advocate: $150
Spence Flatguard (State bond attorney): $1,000
Munideals, Inc: $1,200
Total: $232,349. 
Percentage of Bond issue: 21%

 Rolling Fork sued Malachi, Bondwick, and Chambers & Gaylor in May 2016 to recover the fees in Sharkey County Circuit Court.   The contract states that the fees  were "not to exceed 2% of the debt issuance" for Malachi's services.  The city was supposed to pay Bonwick a fee that was 1.5% of the actual bond sale. Bonwick's fee should have been $16,500 but it charged the city $130,000.   The city was going to hire Lord Snow as bond counsel but it instead hired the law firm of Chambers & Gaylor after Mr. Bingham recommended that it do so.... Earlier post.
The SEC spelled out how the scheme worked:

These proceedings arise out of certain improper gifts provided by Stovall to the president and owner of a registered municipal advisor in May 2015.  Shortly after Stovall provided the improper gifts, the municipal advisor recommended that its municipal issuer client (the “City”) hire a municipal securities dealer employing Stovall (“Underwriter”) to underwrite the City’s anticipated bond offering.  Underwriter was hired by the City and underwrote the bonds, but Stovall did not disclose to the City that he had provided the improper gifts to the owner of the municipal advisor.  The improper gifts, and Stovall’s failure to disclose the gifts to the City, violated Municipal Securities Rulemaking Board Rules
 Mr. Stovall agreed to the suspension and also to pay a $20,000 fine.  The order provides a schedule of payments of the fine.  He is a 51 year old resident of West Orange, New Jersey.

Earlier posts about Malachi Financial Products
The rape of Rolling Fork
SEC sues Malachi for Rolling Fork fraud 
No invoices for JPS bond deal.
Malachi gouges Jackson and Canton public school districts on bond deals.
Malachi and Blackmon gouging Rolling Fork?
Malachi wants $500,000 to draft JPS budget
Pay me now or pay me later.
$182,000 on Siemens deal.
Jackson will pay an extra $8 million to refinance bonds


JJ Wartime Correspondent said...

There has to be a better way to make a living than this! Porter Bingham was also wrapped up with a guy who had applied for city work with the COJ and fraudulently presented himself as having a law degree and a masters degree from made up degree programs. He called to offer his support of this guy.

Honest hard work will save you from years of jail time and unwanted male attention.

Anonymous said...

I believe Duncan Williams was co-manager on the deal. I’m curious as to why they haven’t been mentioned in anything. Also would be interesting to see how much they made on the deal.

Kingfish said...

I wasn't aware DW bribed someone or said it was a muni financial advisor when it wasn't.

Anonymous said...

So this guy nets $110,000 from the deal and has to take a 6 month vacay... Good work if you can find/keep it! Why doesn't he forfeit all of his fees?


Anonymous said...

I'm not the 10:15am commentor but

See page six of the Duncan-Williams,Inc. Fourth Quarter G-37:

1,100,000 MS

Anonymous said...

12:35 - DW was a co-manager. Not in dispute. But the problems with this deal revolved around the FA, Porter Bingham. If DW paid Porter Bingham for a seat at the table, they will be nailed as well; but evidently the SEC hasn't found any such connection. If you have any such suggestion I would suggest you bring it on - otherwise, what the hell difference does it make that they were a party. Several other folks involved that got paid, but all were doing their jobs as required - and got a normal fee. Unlike the self-annointed FA, Porter Bingham, and his buddy Stovall.

My guess is that they needed someone at the table that actually would do the work required while the others were eating dessert.

Burke said...

Where is Delbert Hosemann on this? The Sec'y of State must be aware of the history of Malachi and friends going back years. Now that the SEC has fired down, the SOS should put Malachi and friends in the bad actors book.

I smell Bennie.

Anonymous said...

>>>My guess is that they needed someone at the table that actually would do the work required while the others were eating dessert.<<<

So when it was all done everyone else at the table was shocked to find out that Rolling Fork had been sold a ticket to Pound Town?


I suppose the detail of Rolling Fork incurring the extra costs* of issuing the bonds through MDA rather than direct sale to a bank...who would notice a detail like that?

*A bond sale for this amount is considered to be a very small issue. Malachi had a fiduciary duty to advise Rolling Fork that it did not need a financial advisor for such a small sale. Malachi recommended the city use the Mississippi Development Bank, which incurred a whole set of unnecessary professional service fees. Using the Mississippi Development Bank meant the city has to pay an extra $150,000 in capitalized interest and ten years of extra payments. The bonds have a thirty-year maturity instead of a twenty-five year maturity, thus costing

The city could have simply sold the bonds to a bank as a qualified investment. Only the services of a bond counsel and city attorney. Going through the development bank meant an underwriter, state bond counsel, issuer's counself, and other services and thus fees were required.

Anonymous said...

Somebody needs to put a stop to these bond pimps running trains on all these towns in Mississippi...I hope everyone in this latest town got tetanus shots...

Kingfish said...

SOS has a securities division. However, often when feds move on someone, state or local will defer. Having written that, the division could investigate.

Anonymous said...

Just because SEC has moved on this one deal is not a reason for SOS to sit on its arse. Truth is, Dilbert doesn't want to open this particular can of s**t, (where the worms live) because he still thinks he attracks black votes to his charming personality.

"Thinks" is the operative word in that theory.

Anonymous said...

The fact that DW, or any other issuer, is brought in as a co-runner on a deal does not taint them by the deal - it was already set that they were going through Development Bank (thanks to being led to that trough by their "Financial Advisor"). Whether DW suggested that there was a better way or not is unknown, and also as to the crooked activities at this deal, is irrelevant. Not that I give a damn about DW, but I do give a damn about the blame being appropriately dished out to the ongoing crooked enterprise of PB and his cronies.

Anonymous said...

Delbert is the slowest to act against monied interests. His years long "investigation" and then tiny penalty to the Morgan Stanley -Ridgeland office fiasco several years ago is proof positive.

Anonymous said...

Delbert is only about Delbert. Anyone expecting him to act against anyone is thinking that a cute tv ad brings with it a competent officeholder.

All Delbert is wanting to accomplish is a movement to a higher office - one that in his holy opinion, he is entitled to because he is after all the smartest one available.

Anonymous said...

Rollingfolk is only the start of a much bigger investigation. Wait until they get to Canton School Districts $32m Bond issue. Heads will roll. You know ho you are. Now is the time to worry!

Anonymous said...

These bond pimps are a bunch of imposters and should be hauled into the Superior Player's Court and go before the Honorable Mack Minister Bishop Don Magic Juan to face 4 counts of:

1) Pimping Under the Influence
2) Reckless Pimping
3) Voluntary Pimp-slaughter
4) First Degree Pimp-ocide

Revoke these imposters Player's Card...

Anonymous said...

“who promised golden showers but instead gave the town a golden fleece. “

Something seems amiss with these metaphors...but oh well.

Anonymous said...

Golden Fleece =

Golden Shower = oh, NVM

Anonymous said...

The Blackmon’s are in the mix of this somewhere. When will we see the real truth?

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