But the issue of what constitutes a securities-based swap is subject to interpretation and has already been under dispute in another SEC case involving the Jefferson County swaps. That case against former Jefferson County Commission chairman Larry Langford, Alabama bond dealer William Blount, and lobbyist Albert LaPierre is currently on hold until a parallel criminal case is resolved.
In that case, which was filed in a federal court in Birmingham in April 2008, the SEC charged that Blount and his firm provided Langford with $156,000 in payments and benefits, through LaPierre, in exchange for Langford's efforts to ensure Blount Parrish was chosen to participate in Jefferson County bond offerings and swap agreements, so that it could reap millions of dollars of fees.
Langford and Blount sought to have the case dismissed, claiming the SEC has no jurisdiction over the swaps. The SEC disagrees, saying, among other things, that the swaps were based on a municipal securities swap index created by the Public Securities Association, which became The Bond Market Association, and then the Securities Industry and Financial Markets Association.
SIFMA, in turn, has filed a friend-of-the-court brief in the case, claiming the index is an index of interest rates, not securities.
The SEC has countered that the rates are derived from securities. The index is a compilation of rates for variable-rate demand obligations that are reset on a weekly basis. The securities are all sold at par such that the interest rates are also the yields of the VRDOs.
Blount Parrish and Pierre are accused of funneling money to the mayor whose extravagant tastes came with a high price tag.
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