WASHINGTON -- The National Association of Bond Lawyers has decided not to get involved for now in a case in which the Securities and Exchange Commission filed fraud charges against municipal bond market participants over alleged tax law violations.

The association's directors made the decision at a board meeting in Woodstock, Vt. late last week, a knowledgeable source said.

But NABL's president, Andrew Kintzinger, said yesterday that the board is continuing to review the case and could decide to participate in it in the future.

""The board's view is that this is a very significant matter which it is continuing to review. We don't plan to take any specific action at this time, but we may take action in the future," Kintzinger said.

Lawyers with King & Spalding in Atlanta had asked the association to file an amicus, or friend-of-the-court, brief in the case, which is pending before Brenda Murray, the SEC's chief administrative law judge.

King & Spalding is representing Thorn, Alvis, Welch Inc., an underwriting firm in Jackson, Miss., and its president, John E. Thorn Jr.

The SEC filed the securities fraud charges against the Thorn firm, Thorn, and bond counsel Derryl W. Peden last June in connection with $20 million of multifamily housing bonds that were sold in 1992 and 1993 by Warren and Hinds counties in Mississippi.

The SEC alleges that in the bond transactions more than $1 million in bond proceeds was used to pay the developer, which then used the money to pay some of the bond issuance costs.

The SEC claims that the bond offering documents improperly characterize the developer's payments as "contributions" to help finance low-income housing projects.

The SEC also claims that the use of bond proceeds to pay issuance costs violated tax law requirements for private-activity bonds under which no more than 2% of bond proceeds can be used for issuance costs and at least 95% of the proceeds must be used for the exempt purpose of the bond issue.

The offering documents, the SEC contends, omit key information by failing to disclose that the bonds might be taxable because of the alleged tax law violations.

But the Thorn firm, Thorn, and Peden dispute the charges and say the bond transactions did not violate any securities or tax laws.

The SEC charges are improper and premature, they say, because there has been no finding by the Internal Revenue Service that tax law violations occurred. Tax law issues are the jurisdiction of the IRS, not the SEC, Thorn and Peden say.

King & Spalding asked NABL to file a brief in the case because they believe it raises some far-reaching issues, several bond lawyers said.

"Obviously it lends credibility if you have a national organization file an amicus brief in the proceeding," the NABL source said.

Michael Russ, a lawyer with King & Spalding, said in an interview yesterday that if the association does decide to participate in the case, it probably would not do so while the case was pending in an SEC administrative proceeding.

"It would be very unusual to file an amicus brief at this stage," he said.

Russ defended Thorn and the Thorn firm and said he will continue to fight the SEC charges before the SEC commissioners if Murray rules against his clients in the administrative proceeding. He said he will appeal the case to a federal appeals court if the SEC commissioners rule against the Thorn firm and ThOrn.

"This is a little broker-dealer that's put together some very excellent housing for low-income people, which is the very purpose for which these tax advantages were created. These are real life projects with real life people in them," Russ said.

The Thorn firm "relied On the opinion of bond counsel" in the seven bond transactions, he added.

Russ claims the Thorn firm "has been caught up in the web of an enforcement initiative by the Securities and Exchange Commission, which is going after what it considers to be abuses in the municipal bond area."

"My clients are caught up in the swirl of this initiative and it's a completely unfair situation from their standpoint," he said.

SEC officials recently defended their charges against the underwriter and bond counsel in an interview. They said they have a long and successful track record of bringing securities law charges that revolve around tax issues.

Some members of the bond community are concerned about the case and the trend that it may represent, several lawyers said this week.

"You have the SEC going after an underwriter and a bond lawyer, something the IRS can't do. It can only go after the bondholders and maybe the issuer," said one lawyer who did not want to he identified.

Other bond market participants, however, while not referring to this specific case, said they generally support stepped-up bond enforcement activities by the SEC and the IRS.

Russ said in the interview yesterday that he objects to press reports that he said suggest his clients were involved in "kickbacks," a criminal activity. The reports said SEC officials were charging that the developer was paid more than $I million in bond proceeds that was then "kicked back" tO pay issuance costs. But the case does not involve any criminal kickback charges.

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