Broker in scandal spotlight quits firm

Broker Steele Stephens, from whom the state treasurer’s office purchased $1.69 billion in bonds during the past several years, resigned Tuesday night from his job with St. Bernard Financial Services, the firm’s chief said Wednesday.

Stephens didn’t cite a reason for his resignation, said Robert Keenan, the chief executive officer for Russellville-based St. Bernard Financial Services.

The same day Stephens’ resignation was announced, the chief deputy in the state treasurer’s office signaled that it has started severing ties with Keenan’s company.

Chief Deputy Debbie Rogers said Wednesday afternoon that the treasurer’s office “will not be doing additional business with that firm, and we will close that account.”

Stephens’ resignation came the same day that state Treasurer Martha Shoffner stepped down. The 68-year-old Democrat from Newport submitted her resignation Tuesday, effective at 5 p.m., amid bipartisan calls for her resignation or ouster.

Awaiting a possible federal grand-jury indictment, with two nights in jail behind her and a trial likely ahead, Shoffner wrote in her resignation letter that she “could no longer perform the duties and responsibilities owed the public.”

A criminal complaint was filed Monday alleging that since 2009 she has accepted cash payments of at least $36,000 as well as $6,700 in cash campaign contributions from an unnamed bond broker in return for directing the lion’s share of state bond business to him. The complaint also said an FBI informant secretly recorded her taking $6,000 in cash hidden in a pie box.

Shoffner plans to plead innocent to any charges, according to her attorney, Chuck Banks of Little Rock.

Shoffner told lawmakers in December that she hadn’t received any compensation from the St. Bernard Financial Services or any other broker, after legislative auditors said they found eight bond transactions involving St. Bernard that resulted in the state earning $783,835 less than it would have made if it hadn’t sold the bonds early. Keenan has disputed the auditors’ figures.

Keenan said Tuesday that he believes he knows who the FBI informant is, and he said Stephens had previously denied giving any money to Shoffner other than a $2,000 campaign contribution.

Steele Stephens, who is not connected to the investment house Stephens Inc., could not be reached for comment.

He became a licensed broker in Arkansas in 1985 when he started working with Boykin Sparks & Associates of Little Rock, according to his history on file with the Financial Industry Regulatory Authority, a private corporation that is a regulatory organization of the securities industry.

He has had no customer complaints filed against him in the 28 years he has been an investment dealer.

The state treasurer’s office purchased $1.69 billion in bonds from Stephens from May 2008-May 2009 - when he worked at Apple Tree Investments - and since June 2009 while he worked for St. Bernard Financial Services, the Legislative Audit Division reported in December. That amount is almost double what what the office has purchased from any other broker.

St. Bernard has been paid at least $2.3 million in commissions on bond transactions involving the state treasurer’s office over the past few years, a state auditor has estimated.

The office’s decision to cut ties with Steele Stephens’ old firm came late Wednesday afternoon, according to Rogers, the office’s chief deputy.

Rogers initially said in an e-mail Wednesday afternoon that the treasurer’s office was considering suspending new business with St. Bernard Financial Services given the allegations in the criminal complaint, after the Arkansas Democrat-Gazette questioned whether the business relationship would continue.

When asked when the office would make a decision on whether to suspend doing further business with St. Bernard Financial Services, Rogers replied in an e-mail, “We will suspend immediately.”

She later explained in an interview that suspending such business with the firm hadn’t been “a topic of discussion” between her and the office’s chief investment officer, Autumn Sanson, until the paper asked.

Then, Rogers said, she consulted Sanson and they agreed on suspending additional business with the firm.

“It’s a permanent decision,” she said.

Asked for his reaction regarding this suspension, Keenan replied in an e-mail, “No response at this time.”

But he didn’t object to Shoffner’s departure.

Earlier Wednesday, Keenan said that Shoffner’s resignation “was 24 hours too late.”

Through a spokesman, Gov. Mike Beebe declined to comment about the treasurer’s office suspending further business with St. Bernard Financial Services.

The treasurer’s office purchased $310 million of its $1.899 billion in existing bond investments through St. Bernard Financial Services, according to treasurer’s office records.

In contrast, the office had purchased $518 million of its $1.68 billion in bond investments through St. Bernard Financial Services as of late October 2011, according to the office’s records. At that time, Shoffner maintained she was unaware that so much state business had been given to the Russellville firm.

Rogers said the treasurer’s office has decreased the amount of the bonds purchased through St. Bernard as a result of the Legislative Audit Division’s and the Joint Legislative Auditing Committee’s “concern about the amount of activity given to St. Bernard’s.

“We also changed the way we requested offers from brokers at that point and more carefully evaluated and documented the offers and how the purchases took place,” Rogers said. “Because of taking the inventory of St. Bernard’s down, that increased the amount of business that we were able to put with other brokers, thus explaining the fluctuation of the activity among the brokers. An increase or decrease of around $70 million is not uncommon activity for any one broker.”

For example, the treasurer’s office has purchased $252 million in existing bond investments through Stephens Inc, compared with $115 million in bond investments purchased through the firm as of late October 2011, according the office’s records.

Meanwhile, Beebe said Wednesday that he expects to appoint a state treasurer during the next several days to complete Shoffner’s term. Arkansas voters will elect a new treasurer in November 2014, who will assume office in January 2015.

Beebe said he’s considering several candidates, but declined to say who he’s considering or whether any candidates for the job have turned it down.

Beebe said he wants a good manager who is honest and “relatively apolitical” and has a good understanding of money and the duties of the treasurer. The treasurer manages more than $3 billion in investments for the state and serves on the board of trustees for the Arkansas Public Employees Retirement System and the Arkansas Public Employees Retirement System.

A former state bank commissioner, Robert “Bunny” Adcock of Conway, whom Beebe appointed to the University of Central Arkansas board of trustees last year, said he informed the governor’s office on Wednesday that he’s willing to serve.

“If the governor calls me and asks me to do it, I’ll do it period,” said Adcock, who is vice chairman of Centennial Bank. He served as the state bank commissioner under former Republican Gov. Mike Huckabee.

Eddie Jones of Pocahontas, a former executive director of the Arkansas Association of Counties who served 26 years as treasurer and controller in Randolph County, said he would consider it an honor to be appointed by Beebe as the state’s treasurer and that others have contacted Beebe about his interest in the post.