Arkansas Business reports that the state Securities Department is seeking up to $150,000 in fines and to end the registration of Steele Stephens, the broker who paid cash bribes to Martha Shoffner for state bond business when she was treasurer.
Stephens, who was wired by the FBI when he delivered a $6,000 payment in a pie box to Shoffner at her home in Newport, was given inmmunity from prosecution in the investigation that led to Shoffner’s indictment and conviction. He also wasn’t required to pay back commissions he’d received on millions in bond transactions with the state.
But the Securities Department mounted a civil administration action in early November, Arkansas Business reports. It could lead to the fines and loss of his registration, though Stephens currently is unable to work because he is not associated with a licensed firm.
The ASD complaint filed on Nov. 5 outlines six cash payments to Shoffner of $6,000 each, at least six unsuitable trades and multiple occasions in which he provided incorrect and misleading information to the treasurer’s office.
“In fact, in many instances, the bond trades offered by Stephens caused significant losses for the Arkansas treasurer’s office while greatly benefiting Stephens with excessive commissions,” the complaint says.
Shoffner still awaits trial on charges that she spent campaign money on personal expenses. Steele Stephens helped Shoffner raise money for that campaign, but that’s not a factor in this case. The Securities Department delayed moving against Stephens so as not to create complications for the federal bribery case, at the request of federal authorities.
Stephens, no relation to the Stephens Inc., investment house, had worked for St. Bernard Financial, but quit the firm after the Shoffner matter broke into the news. The Securities Department is still in the middle of an administrative proceeding on a complaint that St. Bernard failed to properly supervise Stephens. In that case — and in the failure to reach a settlement of the case against Stephens — both Stephens and St. Bernard continue to argue that their trading made profits for the state, contrary to a state audit finding that the state lost the opportunity to profit from interest on bonds sold before maturity.
UPDATE: Robert Keenan with St. Bernard wrote to further elaborate on the point. He also said investigators from the Securities and Exchange Commission and FINRA, the regulator for brokerage firms, had reviewed state transactions with St. Bernard and found nothing amiss. He offered, too, the buy/sell tickets on a $25 million in bonds purchased by the state through Apple Tree Investments, for whom Stephens worked before St. Bernard, and then sold through St. Bernard. Keenan said the transactions show a net profit of $1.667 million on the deal, not a loss. Securities regulators say profit — or, for that matter, loss — on a specific transaction is not the only measure of whether a salesman has made a wise investment for a client. The state audit, too, has argued that the profit/loss picture is complicated by lost future interest payments.