In separate bond fraud lawsuits, two groups of municipal bond holders are suing Bank of Oklahoma Financial (BOKF), also called BOK Financial Corp. They claim that the bank was not a responsible trustee to certain conduit bondholders that were harmed by fraud.
The first securities lawsuit is a class action brought by eight plaintiffs in the U.S. District Court for the Northern District of Oklahoma. They are claiming a number of causes of action, including gross negligence, aiding and abetting fraud, breach of fiduciary duty, civil conspiracy, and aiding and abetting breach of fiduciary duty.They want a jury trial and over $5M in compensatory damages.
The second case includes 20 individuals and a company. All of them invested in conduit bonds. They brought their case in Tulsa District Court in Oklahoma and are asking for exemplary damages of up to $5M, as well as yet-to-be determined actual damages.
The municipal bond fraud cases are connected to a number of SEC actions with ties to Christopher Brogdon, a Georgia businessman whom the regulator charged with fraud related to the financing of more than three-dozen nursing homes and other entities. Last year, a jury ordered Brogdon to set up a plan to pay investors whom he harmed $85M.
Another SEC case accuses another man, Dwayne Edwards, of engaging in similar wrongful acts after he bought some of Brogdon’s facilities. Edwards worked with many of the same deal participants as Brogdon, including BOK Financial, which the latter used when committing fraud.
According to both sets of plaintiffs, the bank did not disclose material facts to investors while serving as trustee for a number of offerings. Among the facts that the plaintiffs say the bank should have disclosed was that there had been draws on debt service reserve funds, which were not always replenished, and bond revenues that had been designated for certain facilities were commingled.
Last year, the BOK Financial agreed to pay $1.6M to settled with the SEC allegations that it helped hide red flags and certain other issues from holders of different conduit bonds while serving in the role of trustee. The regulator accused the bank of not exercising proper oversight over bond offerings made by Brogdon. The Commission also filed a case against ex-BOK Financial Corp. Sr. VP Marrien Neilson for not properly overseeing the bond offerings.
In another SEC muni bond fraud case also tied to Brogdon, Lawson Financial Corp. has now settled charges brought against it for offerings it underwrote that proved to fraudulent. According to the regulator, the firm did not perform reasonable due diligence when underwriting the offerings, which Brogdon managed, to renovate and buy senior living facilities and nursing homes. The Commission contends that Lawson Financial did not make sure that Brogdon and related borrowers were in compliance with their disclosure undertakings.
To settle the charges, the firm and its CEO Robert Lawson will pay almost $200K of disgorgement. Lawson Financial will pay almost $200K in penalties and Lawson will pay $80K in penalties. He also has agreed to a three-year bar from the securities and industry. However, even though they are settling, Lawson and Lawson Financial are not denying or admitting to the Commission’s findings.
BOK Financial : sued over municipal bond deals, 4-Traders, March 16, 2017