Former bond broker Steele Stephens testified with obvious reluctance Friday against former Arkansas Treasurer Martha Shoffner, admitting that he secretly gave her $36,000 in cash over 2½ years and was rewarded with a large share of the state’s bond business, which earned him hefty commissions.
Stephens, 52, never used the words bribery or extortion - the charges for which Shoffner is on trial in a Little Rock federal courtroom.He said he made the payments willingly, and even came up with the idea himself in mid-2010, during a conversation with Shoffner, because he “felt sorry for her.” He noted that she had recently experienced financial difficulties, the death of her mother and an onslaught of publicity about her use of a state-owned vehicle.
During the six hours he spent on the witness stand Friday, Stephens said he was working as a broker at Apple Tree Investments in Little Rock when Shoffner was first campaigning for the elected position. He said he went out of his way to meet her during a public appearance at a Maumelle bank, hoping it would help him get his foot in the door to do business with the state.
Shoffner was elected to the position in 2006 and then won another four-year term in 2010. She resigned May 21, six years into the job, after FBI agents arrested her at her Newport home in a recording operation in which Stephens, wearing a hidden microphone, delivered $6,000 cash to her in $100 bills in a box containing an apple pie.
He said it was the seventh time he had delivered cash payments of that amount to her in various places, including in her office in the state Capitol, but that this time he used money supplied by federal agents, as opposed to his own money.
Stephens testified that while he worked at Apple Tree in 2008, and after he moved to the Russellville-based St. Bernard Financial Services in 2009, he began cultivating a relationship with employees of the Investments Division in Shoffner’s office. He said he occasionally provided gifts, some of which exceeded the $100 reporting limit, to office staff members, noting that he was following the lead of other bond brokers who did business with the state.
He said it wasn’t until he became increasingly leery of talking to Shoffner’s chief financial officer, Autumn Sanson, whom he said he suspected of trying to thwart his bond trades, that he started calling Shoffner directly. From their one-on-one conversations, he said, they began a friendship that quickly grew to the point that he helped sponsor campaign events and started noticing his share of the state’s bond business increase, when compared with the other 10 or 15 brokers used by the state.
Before that, he said, “She was kind of like the Wizard of Oz, and I was led to believe you don’t contact the wizard herself - you go through Autumn.”
Stephens said the idea to give Shoffner $1,000 a month in six-month increments came about after she suggested that he buy a building in Little Rock that was being foreclosed on, so that she could continue to live there rent-free and avoid a daily commute between Newport and her Capitol office. He said he looked at the building but decided it was a “dump” that wasn’t safe for Shoffner, a single woman, and instead offered to give her money so she could afford a nicer apartment in Little Rock.
Eventually, he acknowledged, Shoffner gave him access to the state’s bond-trading portfolio, which other brokers who traded with the state weren’t allowed to see.
On Sept. 23, 2011, he testified, Shoffner was in Florida when she helped him, through a phone call, get around Sanson’s resistance to him making an unusually large bond purchase of $100 million. It was disguised as two $50 million bond purchases to avoid drawing attention by auditors, and it netted him a $110,000 commission through St. Bernard, he testified.
Stephens also acknowledged that in 2012, Shoffner helped him earn two $21,000 commissions off two $35 million bond trades, and that she helped him obtain an $85 million trade stemming from Metropolitan National Bank liquidation.
He said his boss at St. Bernard never knew he was paying Shoffner cash on the side. He also asserted that his bond transactions didn’t cause the state to lose any money, even if some early bond sales, which each resulted in him earning a commission, caused the state a loss of expected profits.
Testifying under a grant of immunity, Stephens readily answered questions from Assistant U.S. Attorney John Ray White but at times dropped his head or declined to give a detailed answer, prompting White to ask the judge for permission to treat him as a hostile witness.
In discussing two campaign events at which Stephens said he handed over $4,000 in cash to members of Shoffner’s staff, he suggested that one of the staff members took the money. On Thursday, former staff members testified against Shoffner, suggesting that she pocketed the cash donations and never reported them to the Arkansas Ethics Commission, as required.
Jurors listened Friday afternoon to an audio recording that Stephens secretly made at the behest of FBI agents when he went to visit Shoffner’s Newport home on Jan. 19, 2013, while Shoffner was under intense public scrutiny about Stephens’ unusually large share of the state’s bond business. Stephens told Shoffner he had just been contacted by the FBI, but didn’t tell her he was cooperating with them or wearing a microphone.
The two stood in Shoffner’s backyard and talked while she burned some trash. Both described Sanson and Shoffner’s former chief deputy, Karla Shepard, as “b * * * * * * ” who they said set them up to be investigated about the bond trades.
Jurors heard a 1½ -hour recording of the meeting, which began with Shoffner saying she felt “like a f * * * * * * criminal,” and worrying that her home was bugged. Stephens told her that he had steered FBI agents away from her when they interviewed him, and promised Shoffner she had “nothing to worry about.”
“Karla’s a b * * * * , she’s a devious b * * * * ,” Stephens said at one point.
Shoffner agreed that “Karla was a kiss of death” on Stephens’ ability to maintain the lion’s share of the state’s bond business. She said that when she let Stephens look at the portfolio, “that’s what started them,” referring to Shepard and Sanson.
Stephens told Shoffner that he didn’t tell the FBI about handing Shepard an envelope containing $2,000 cash from him, and $2,000 cash from his father, who was also a broker, at a 2009 re-election event. A day earlier, Shepard testified that Stephens gave her the envelope containing cash campaign contributions from him and his father, and that she later gave it to Shoffner, as he requested.
On the tape, Shoffner could be heard telling Stephens, “I never got it.”
“You never got it?” he asked. “Well, who got it?”
“I don’t know,” she replied.
“You think Karla kept it?” he asked.
“She might have,” Shoffner replied, adding, “because she’s a sneaky b * * * * .”
“You haven’t told anybody about me?” he asked.
“Uh-uh,” she replied.
“You gotta take that s * * * to your grave,” he told her, referring to the $6,000 payments he had been giving her.
“You think I won’t?” she replied. She later added, “This has gotten so trumped up by those two b * * * * .”
Stephens testified that state authorities suspended his bond-trading license as a result of the federal investigation.
His direct examination is expected to continue when the trial resumes at 9 a.m Monday before U.S. District Judge Leon Holmes, when prosecutors say they will play an audio recording of the May 18 FBI recording operation that led to Shoffner’s arrest.
Stephens isn’t associated with the Stephens Inc. investment house.
Front Section, Pages 1 on 03/08/2014