Wednesday, March 4, 2015

Securities complaint arising from Shoffner case settled for $25,000 fine

Posted By on Wed, Mar 4, 2015 at 3:59 PM

CASE CLOSED: St. Bernard Financial, based in Russellville, has ended a securities investigation by agreeing to a $25,000 fine over supervisory policies related to a salesman who paid bribes to the state treasurer.
  • CASE CLOSED: St. Bernard Financial, based in Russellville, has ended a securities investigation by agreeing to a $25,000 fine over supervisory policies related to a salesman who paid bribes to the state treasurer.

Robert Keenan
, CEO of St. Bernard Financial, reports that the company has settled a complaint that the firm failed to properly supervise salesman Steele Stephens, who paid kickbacks to then-Arkansas Treasurer Martha Shoffner for millions in state bond business. Stephens cooperated in a federal investigation that led to Shoffner's  federal fraud conviction. She's awaiting sentencing.

A hearing officer ruled that St. Bernard failed to provide a "reasonably designed" written supervisory policy and ordered a $25,000 fine. Specifically, the order said the company failed to prevent conduct of business by Stephens with Shoffner by non-firm e-mail accounts or archiving of those communications between 2008 and 2012.

Here's the hearing officer's order.
The consent order dismisses Keenan and applies only to St. Bernard.

Keenan told me by e-mail that he had presented expert witnesses and refused to admit any wrongdoing. As a result, he said, the department wanted to settle. Wrote Keenan:

In order to save face and avoid a costly hearing on whether my supervision of the bond sales by Steele Stephens was inadequate, they changed the complaint to "prior to December 1, 2012, St. Bernard's written supervisory and compliance policy failed to adequately address and prevent the usage of non-St. Bernard email accounts to conduct securities business by St. Bernard's registered agents,…". The part about email retention is not quite right - the emails they wanted to look at, I was able to provide, just not until later. It was cheaper to pay a fine over that than to go to a hearing, so I agreed. I have learned over the years that no matter how strong your case, you can get a bad judge and lose. We all know that sometimes, even when it's a lot of money, it's better to just get the thing over with and done.

As I've said all along, I didn't do anything wrong in the saga of Martha Shoffner. I was just a victim of the fallout of someone else's criminal activity. The order shows I was right.

Keenan has disputed characterizations of the sales to Shoffner as bad for the state. He said the firm sold from an inventory similar to those of other dealers and sometimes at lower cost. He said he didn't know of illegal activities between Stephens, who no longer has a securities license, and Shoffner.

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