District Judge Denies Request for Temporary Injunction On County Bond Refinancing Efforts
Washita County District Judge Jill Weedon denied a temporary injunction against the Washita County Public Facilities Authority and dismissed a lawsuit contesting the validity of the sales tax election held earlier this year in Washita County.
The suit, filed by attorney J. Brent Clark on behalf of Mary Basore, requested Judge Weedon enjoin the public facilities board from moving forward with the hiring of bond counsel and other public finance professional and to void the contract enacted last week between the board and Greg Nieto of The Baker Group to act as financial advisor for the board.
The Public Facilities Board executed a contract with The Baker Group on Aug. 6, 2019, at their regular meeting. While ostensibly in regard to the possible refinance of the Washita County Justice Center, the contract has no specified term or purpose, and agrees to compensate The Baker Group at a rate of one percent of any debt incurred by the board during the term The Baker Group’s contract with the county.
“As full compensation for its services as Municipal Advisor in connection with said indebtedness, the Issuer agrees to pay the Municipal Advisor an amount equal to one percent of the principal amount of said indebtedness incurred by the Issuer.”
Board chairman and county commissioner Leo Goeringer and Washita County Clerk Kristen Dowell, who also serves as Secretary/Treasurer for the public facilities board, confirmed in conversations with The Beacon that no other solicitations had been requested for the position and no other proposals had been received or considered. Goeringer said the board had done no research into or due diligence on The Baker Group, but elected to contract with them as they had been part of the original bond issue for the Washita County Justice Center.
In his filing, Clark alleged the several potential improprieties, including the relationship between The Baker Group and bond underwriters Wells Nelson LLC and bond attorney Jacob Bachelor. He also alleged the board “rushed to judgment” in hiring The Baker Group and then in scheduling a special meeting for Tuesday, Aug. 13, 2019, the notice of which was posted Friday, Aug. 9, 2019.
Assistant District Attorney Ricky McPhearson defended the board, arguing that Clark had presented no evidence of wrongdoing on the part of either the board or its contracted advisor, and suggested that Clark was acting out of personal interest, as he was the original bond counsel when the bonds were issued in 2009 and was afraid he might be replaced in the refinance discussion.
The judge ruled first on the issue of the tax election. Clark argued the 2019 election violated Oklahoma’s statue against log-rolling by allowing multiple issues to be considered on the same ballot.
McPhearson argued, and the judge agreed, that there was only one issue on the ballot - a countywide 1.25 percent sales tax. The split of those tax proceeds, while covering different county departments, does not constitute different subjects, merely different projects under the scope of county government.
In his final remarks, Clark suggested there was nothing to lose by slowing down the process to allow more transparency into the process, as no closing can occur prior to October 1, 2019, due to the provisions included in the initial bond issue. He referenced a 2015 settlement between The Baker Group and the Securities and Exchange Commission in which the Baker Group agreed to a $250,000 civil penalty for violations of the antifraud provision of federal securities law.
“This matter involves violations of an antifraud provision of the federal securities laws in connection with the Respondent’s underwriting of certain municipal securities offerings,” the settlement document read. “Respondent, a registered broker-dealer, conducted inadequate due diligence in certain offerings and as a result, failed to form a reasonable basis for believing the truthfulness of certain material representations in official statements in connection with those offerings. This resulted in Respondent offering and selling municipal securities on the basis of materially misleading disclosure documents.”
Judge Weedon went point-by-point through Clark’s brief, and determined that no evidence was presented that would legally justify a restraining order to stop the process of refinancing the county’s bond. She denied the request for an injunction and dismissed the suit.
The judge cautioned the facilities board and county officials to exercise caution while proceeding with any bond refinancing, especially in light of the information presented about The Baker Group, who was just contracted by the board. She also agreed that Clark was acting from some level of self-interest as a candidate being considered as bond counsel, but that self-interest did not make him wrong, especially given the red flags raised by the process to date.
The public facilities board met later that day with just one item on the agenda - to discuss and/ or possibly take action on the hiring of bond counsel. Jacob Bachelor of Centennial Law Firm made his pitch to the board, and offered his services for 0.8 percent of the debt incurred in the transaction.
After discussion about the morning’s hearing and the potential for a taxpayer challenge to the bond refinance, the board decided to table the decision about bond counsel until a future meeting.
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