BRADENTON, Fla. - Two former JPMorgan bankers want to revise their statements in the pay-to-play case against them involving the sale of Jefferson County, Ala.'s sewer debt and swaps, now that a key player has been deposed.
Charles LeCroy and Douglas MacFaddin invoked their Fifth Amendment rights against self-incrimination in 2011 when asked to give their own depositions in the Securities and Exchange Case charging that they made secret payments to secure work for JPMorgan on the sewer deals.
Those deals helped push Alabama's largest county into bankruptcy in November 2011.
In a court filing this week, the ex-bankers say they now want to give more details about what they know.
In their original depositions, they claimed that they could not prepare an adequate defense because of an ongoing Department of Justice investigation into bid-rigging of municipal bond products that prevented them from deposing former CDR Financial Products Inc. senior vice president Douglas Goldberg.
CDR Financial was Jefferson County's swap advisor as the county built a portfolio of derivatives during the issuance of $3.2 billion in auction- and variable-rate sewer warrants sold in 2002 and 2003 to rebuild the county's aging sewer system under a federal consent decree.
The long-running SEC case, charging the ex-bankers with securities law violations was filed in 2009. The case has been stalled while Goldberg assisted in the DOJ investigation.
Goldberg pleaded guilty in 2010 to conspiracy and wire fraud charges, but MacFaddin and LeCroy were not permitted to question him until after his sentencing.
In May, despite his plea, Goldberg was not fined or sentenced to jail or probation after U.S. attorneys sought leniency for the "substantial assistance" he provided in the government's bid-rigging investigation.
LeCroy and MacFaddin deposed Goldberg in July, said the former bankers court in this week's filing.
The filing also said that "there is every indication that the DOJ investigation is now over and that additional prosecutions are unlikely" because the ability to file charges may now be barred by the statute of limitations.
MacFaddin and LeCroy also have motions pending before the court seeking to dismiss their case claiming that recent court rulings provide the basis for determining that the SEC's fraud charges are outside the five-year statute of limitations.
By opening their depositions, the men said that they are now "uniquely situated to describe their actions and to explain their knowledge and state of mind during the relevant events."
The court filing also said that the SEC opposes their request, but that MacFaddin and LeCroy should be allowed to give more detailed statements about a "substantial amount of evidence" they have collected.
They gave no hint as to what that evidence might be, but said it might obviate the need for certain motions later in the case. The judge has not set a trial date.
The SEC suit claims that LeCroy and MacFaddin made more than $8 million in undisclosed payments to friends of certain Jefferson County commissioners and broker-dealers to ensure that JPMorgan would be selected as managing underwriter on most of the county's 2002 and 2003 sewer refunding deals, and that the bank would be chosen as the main swap counterparty.
At the same time the SEC brought suit against MacFaddin and LeCroy, it settled securities fraud charges with JPMorgan.
Without admitting or denying guilt, the investment bank agreed to pay $75 million in penalties and to forfeit more than $647 million of swap termination fees it claimed Jefferson County owed. The SEC awarded the $75 million to the county.
Jefferson County filed for Chapter 9 bankruptcy in November 2011 with $4.1 billion in debt. Of that amount, $3.14 billion was in sewer warrants. The county exited bankruptcy Dec. 3, 2013 after selling $1.8 billion of sewer refunding warrants in order to write down the remaining sewer debt.
An appeal of the bankruptcy case is pending.
