DALLAS -- The U.S. attorney's office has subpoenaed the Oklahoma Turnpike Authority's records on several bond issues for a federal grand jury scheduled to convene Oct. 4 in Oklahoma City, a state official said this week.
In addition, the U.S. attorney's office and the Federal Bureau of Investigation have requested information on bond deals from the Oklahoma bond adviser and have contacted investment bankers involved in Turnpike Authority debt issues, sources said.
The requests are among the latest developments in federal investigations that began last year into bond deals for the Turnpike Authority from 1989 to 1992 and Oklahoma school cash management programs from 1990 to 1992. Three separate federal agencies, the Securities and Exchange Commission, the Internal Revenue Service, and the FBI, are looking into some or all of the bond deals.
Oklahoma Turnpike Authority spokeswoman Mary Kay Audd said the agency received a subpoena Aug. 24 from the U.S. attorney's office in Oklahoma City, requesting all information related to three bond sales. They are: a $350 million bond sale in 1989 to finance four turnpikes; a $50 million bond issue in 1991 for toll equipment; and a $608 million deal in 1992 to refinance debt.
In addition, FBI agents looked through records on those deals at the turnpike offices in Oklahoma City on Sept. 6.
"We don't know what the focus of the investigation is," Audd said. "We have been led to believe that we are not the focus of the investigation, but that it is someone outside the Turnpike Authority."
Industry sources said the main target of the FBI investigation appears to be Stifel, Nicolaus & Co., the St. Louis-based firm that is the dominant bond underwriter in Oklahoma. Two top executives have left the firm's Oklahoma City office in the past few weeks.
Stifel was a co-senior manager with Merrill Lynch & Co. on the 1992 refinancing deal for the authority, the senior manager on the 1991 issue, and one of three co-managers on the 1989 deal. In addition, the firm is the common thread in the SEC investigation. where officials are looking into several cash-management bond deals for which Stifel was the lead underwriter.
Industry sources said the federal agencies were looking into underwriter compensation and selection in all deals. In the turnpike deals, the FBI is reportedly checking into the reinvestment of bond proceeds, forward purchase agreements, and guaranteed investment contracts, investment sources said.
Oklahoma state Sen. David Herbert, D-Midwest City, said he had a similar impression. "It is a guess," he said, but "I think they are looking at some questionable investments and undisclosed profits by underwriters and financial advisers."
A financial industry source said the advance purchase agreements and the guaranteed investment contracts were the subject of "intense scrutiny."
One investment banker involved in the 1992 turnpike refinancing said he was not provided a typical verification report that charts rates, yields, escrow security, takedown, concessions, and underwriting fees from the deal.
Meanwhile, the FBI, the U.S. attorney's office, and the SEC have asked the Oklahoma bond adviser's office for information. State bond adviser Jim Joseph said his office received a request for information on bond issues in July from Robert McCampbell, assistant U.S. attorney in Oklahoma City.
Last November, the Oklahoma bond adviser's office was asked by the SEC to provide information on school cash management programs from 1990 to 1992 and the 1992 Turnpike Authority refinancing.
The FBI also has made several requests for information, with the last telephone contact about three weeks ago, Joseph said. He said he had been asked not to say what information had been requested.
For months, federal officials have been asking questions in Oklahoma. In December, Oklahoma Turnpike Authority director Terry Young confirmed that FBI agents had talked with some agency employees. In addition, Turnpike Authority board members were asked in May to give depositions in the SEC investigation of the three agency bond issues from 1989 to 1992.
Despite the investigations, Audd said the Turnpike Authority plans to sell $475 million in bonds later this year to expand its toll road system and to improve its two oldest highways. The issue must first be approved by the state's Legislative and Executive Bond Oversight Commissions.
"Our financial advisers don't seem to think [the investigations] will harm us ... as far as our bond proposal," Audd said.
Joseph said the oversight commissions are scheduled to discuss the bond issue on Oct. 3 and the competitive bond sale could be held in November if the commissions approve it.
However, be said the investigations could cast a cloud over the sale. "I am sure it will be something they will want to address if they come to market before there is resolution," Joseph said.
Joseph said the authority and its bond counsel will probably need to determine whether the investigations should be part of their disclosure in the preliminary official statement for the bond sale.
Meanwhile, the IRS is continuing its investigations into the bond sales held as part of the Oklahoma school cash management programs from 1990 to 1992. It already has charged several school districts arbitrage rebate because they appeared to have sold bonds based on overstated budget deficits.
Patrick L. Fitzgibbons also contributed to this article.
