DALLAS -- The Securities and Exchange Commission is investigating at least seven Oklahoma bond issues totaling $1.7 billion for potential violation of federal securities law, according to a letter and document request from the agency's enforcement division.
In the request sent to the Oklahoma Executive Bond Oversight Commission. SEC staff attorney J. Allen Overby said his division wants documents for a $608 million refinancing of Oklahoma Turnpike Authority bonds in 1992 and several bond issues for Oklahoma school cash management programs from 1990-1992.
Overby asked for information concerning the underwriter compensation for the bond issues and information related to evaluation of potential underwriters for all state municipal security issues from January 1990 to present.
He also requested documents that concerned compliance of the issues with Internal Revenue Service regulations and Oklahoma state law.
"The files and information may be used for the purpose of our formal investigation and any resulting proceedings," Overby wrote in the letter dated Nov. 5. "They may also be transferred to criminal law enforcement authorities."
The SEC also sent a separate letter to the Oklahoma Turnpike Authority requesting information on the selection of underwriters for the refinancing issue in 1992, two authority board members confirmed.
"They wanted to know about the process and the choosing of investment bankers," said Mick LaFevers, the turnpike authority's vice chairman.
Merrill Lynch & Co. and Stifel Nicolaus & Co. were the lead underwriters on the 1992 tumpike refinancing, and St. Louis-based Stifel was the senior manager on the other six bond issues being investigated by the SEC.
"The bond industry is under great scrutiny right now, and the SEC and other regulatory bodies are appropriately being very aggressive," Stifel said in a prepared statement issued late Monday afternoon. "Fortunately, Oklahoma has one of the strongest bond oversight laws in the nation. That's why the Oklahoma tumpike request for proposals process was such a textbook. example of the right way to do a bond deal, and that's why we're happy to have the SEC take a close look at the tumpike deal along' with all our other financings."
The SEC investigation comes at a time when a nationwide debate has emerged over campaign. contributions and the awarding of negotiated bond sales to influence peddlers in the industry. It also comes as both Merrill Lynch and Stifel are at the center of separate controversies.
Merrill Lynch was the lead underwriter on a large New Jersey Tumpike Authority bond offering. The sale and the firm's roll in the syndicate are under investigation by federal authorities.
Stifel was the underwriter on several controversial cash management programs that are drawing IRS claims for arbitrage profits, penalties, and rebates and that are included in the SEC investigation.
The IRS maintains that some of the more than 200 Oklahoma public schools exaggerated their budget deficits to sell tax-exempt tax anticipation and revenue notes, and as a result violated federal regulations.
The precise focus of the current SEC investigation is not known.
Overby at the SEC said that as a matter of policy he could not make statements to the press. A Merrill Lynch spokeswoman said the firm was not prepared to make a comment at this time.
Oklahoma Bond Adviser Jim Joseph said: "I can't tell what the focus from the request; it's so broad."
Joseph said he asked the SEC to narrow the request because he would have to supply an "enormous volume of paper," and officials have said they would provide a more limited request later.
Under current SEC request are documents including reports, correspondence, telephone bills, messages, and date books. A total of 13 requests were made, including documents concerning:
* A $608 million refinancing in 1992 for the 1992 Oklahoma Turnpike Authority bond refinancing.
An issue of $182.21 million in the 1992 Oklahoma school district cash management trust;
* An issue of $88.08 million by the Tulsa County Governmental Operations Financial Authority in 1992;
* An issue of $183.92 million in 1991 by the Oklahoma school district cash management trust;
* An issue of $116.31 million in 1991 by the Oklahoma political subdivision cash management trust;
* An issue of $395.85 million in 1990 for the Oklahoma school district cash management trust;
* An issue of $128.51 million in 1990 by the Oklahoma school district cash management trust;
* Compliance of the issues with Olkahoma state law and IRS regulations;
* Criteria that would apply to evaluation of potential underwriters and compensation of underwriters for the seven specific issues being investigated.
Two Oklahoma Tumpike Authority board member said they presumed the investigation was prompted by concerns in New Jersey.
Still other sources said the investigation could be linked to the campaign contributions made by Stifel to Oklahoma Gov. David Walters, who has been indicted add could face possible impeachment for violating the state's campaign finance laws.
At least 33 lobbyists, lawyers, company' officials, members of families, associates, and employees of the state's two most prominent bond firms -- Stifel and Leo Oppenheim & Co. -- contributed a total of $61,335 to Walter's gubernatorial campaign, according to the McCarville/Hill Report, an Oklahoma political newsletter.
"I don't think it has anything to do with the contributions," Joseph said.
In recent weeks, the Oklahoma Tumpike Authority has said it intends to do a competitive sale for its upcoming bond issue because of the problems surrounding the New Jersey controversy.
However, the sale has been delayed, partially because of the investigation.
"It would not be timely to sell an issue under these circumstances," LaFevers said.
Mean time several groups in Oklahoma have been pushing for investigations into the tumpike project and the cash management programs.
