Bill Collins found guilty of extortion, tax evasion.

ATLANTA -- Jurors in the federal extortion trial of Bill Collins yesterday found the husband of former Kentucky governor Martha Layne Collins guilty of extorting two securities firms in exchange for state bond contracts.

The jury in the eight-week-long trial held in Frankfort, Ky., also found the Versailles, Ky., dentist guilty of a related tax-evasion charge.

Sentencing was set for Dec. 22 before Joseph Hood of the U.S. District Court of the Eastern District of Kentucky, according to Deputy Clerk Shirley Middleton.

The extortion charge carries a maximum penalty of 20 years in prison and a $250,000 fine; the tax code violation carries a five-year prison sentence and $250,000 fine. "We got a bum rap, there is no question about it," said Bill Collins' lawyer Frank Haddad, in an Associated Press report filed yesterday from Frankfort. "[The jury] just didn't understand the evidence and apply it to the law."

Haddad said he would appeal the decision on grounds of "insufficiency of evidence."

Assistant U.S. Attorney Jane Graham, however, characterized the jury as "extraordinarily attentive," and said its verdict "was well warranted on the basis of the evidence," according to the Associated Press.

"We came up with our verdict after weighing the evidence on each side very carefully and finding it matched the [prosecution's] charges," one juror, Betty K. Fulgham, said yesterday in a telephone interview.

"I can tell you we worked hard the whole time," Fulgham said. The jury, composed of nine women and three men, had been deliberating since Wednesday morning.

Bill Collins, the sole defendant in the case, was accused of using the prospect of bond underwriting contracts to force Donaldson, Lufkin & Jenrette Securities Corp. and Cranston Securities Co. to make political contributions and invest in his horse partnership business. Donaldson Lufkin also had to pay for a $35,000 custom-built piano presented to Martha Layne Collins in December 1984, the government charged.

During that period, Donaldson, whose executives invested $1.2 million in the horse partnerships, became bookrunner on bond deals totaling $500 million. Cranston, whose bankers put up $450,000 for the partnerships, was named to head deals totaling $1.2 billion.

Martha Layne Collins served as governor from 1983 to 1987.

Reaction to the verdict came swiftly yesterday both in New York City and Kentucky.

In New York, Christopher Taylor, executive director of the Municipal Securities Rulemaking Board, said, "The verdict confirms the concern that the board has had that such activities impugn the integrity of the municipal bond market. It will be a further spur to our efforts."

The MSRB is preparing its final rule governing political contributions. The board issued a proposed rule in August that calls for a ban on campaign contributions made for the purpose of obtaining municipal bond business.

In a statement issued yesterday, Donaldson Lufkin said, "The outcome of the trial surprises us. While the government made many accusations against Dr. Collins, alleging improprieties in his soliciting political contributions from numerous sources and in influencing various engineering, architectural, and bond underwriting contracts, this general verdict does not specify the conclusion reached by the jury regarding each individual allegation." "As employees of Donaldson Lufkin and many other witnesses testified, they were neither coerced nor extorted in any manner," according to the statement.

In Kentucky, Pat Molloy, secretary of finance and administration to Gov. Brereton Jones, said that he had accepted the resignation of Lynn Luallen, executive director of the Kentucky Housing Corp.

Neither Molloy nor Luallen were available for further comment. A spokesman for the governor said that Jones did not have a comment yesterday afternoon on the verdict.

During the trial, Luallen testified that at the direction of Bill Collins, he served as a liaison to investment banking firms during the 1983 gubernatorial campaign of Martha Layne Collins, asking the firms to contribute $25,000 apiece to be guaranteed "a level playing field."

Also yesterday, a key Kentucky legislator, State Rep. Marshall Long, D-Shelbyville, said that he may push for a state law banning prospective bond underwriters from making campaign contributions to state candidates. "The verdict is an indication of the mess we have had here in Kentucky with contracts for engineers, architects, and bond work -- which have tended to insiders deals," said Long, who is chairman of the House appropriations and revenue committee. "Now the problem is how to straighten up the mess."

Long said the verdict will make it "virtually certain" that a bill will be passed in the 1994 session to make into law recently imposed administrative guidelines governing the selection process for bond underwriting syndicates and bond counsel.

Those guidelines, most recently revised in May, require the state's finance secretary to approve a selection committee prior to mailing of requests for proposals for state negotiated financings. Responses to the proposals are then graded on a strict numerical basis.

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