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Mo. financial firm fined 200K over free tickets

Mo. financial firm fined 200K over free tickets

October 8th, 2013 in News

ST. LOUIS (AP) - A Chesterfield-based financial services firm has been fined $200,000 by securities regulators for giving away thousands of free sports tickets to Missouri school board members, superintendents and other government officials as an improper benefit for doing business with the company.

The St. Louis Post-Dispatch reported Tuesday that municipal bond underwriter L.J. Hart & Co. was fined by the Financial Industry Regulatory Authority, an independent industry oversight group, for violating so-called "pay for play" rules designed to keep corruption out of the municipal bond business.

The company and the independent regulator declined to identify the ticket recipients. The company's past clients include the Normandy, Lincoln County, Winfield, Warren County, Grandview, Windsor, Hillsboro and Festus school districts, according to its website.

School officials received tickets to St. Louis Cardinals, Rams and Blues games - including playoff matches - as well as professional games in Kansas City, according to the authority. The tickets were collectively valued at $183,000. Half of the freebies went to school superintendents, and one-third went to school board members, according to a disciplinary settlement from the authority. The rest went to county officials and others. The recipients worked at districts and counties that had hired Hart for bond underwriting and advisory services.

The regulatory group said the tickets were worth more than $100 on nearly 600 occasions, with some valued as high as $260. The best tickets were reserved for officials of districts that had given the most business to Hart.

Roughly one-third of the tickets were distributed to board members at the annual convention of the Missouri School Boards' Association. Superintendent Link Luttrell of the Festus R-VI School District said he and board members received tickets at the meeting as a "reward for visiting their booth."

Luttrell said the firm's founder, Larry J. Hart, also occasionally called his office offering tickets. "Mr. Hart would call and say, "I have two tickets available for a Cards or a Rams game,'" Luttrell said. Hart handled an $11.9 million general obligation bond refinancing in 2009 and a $588,000 lease certificate deal for the Festus district.

Luttrell said the board follows conflict of interest policies recommended by the Missouri School Boards' Association, which he said allow officials to accept tickets from companies doing business with the district. Association rules limit acceptable gifts to those worth less than $50.

Daphne Dorsey, spokeswoman for the Normandy School District, said Hart would "make tickets available" to school administrators, who in turn provided the tickets to district employees. The Normandy School District issued four bonds totaling $43.5 million from 2009 to 2012. The district is unaccredited, and its treasury is rapidly being drained as it pays for students to transfer to other districts.

The Municipal Securities Rulemaking Board allows bond underwriters to take clients to sports events, and pay for the tickets, if the underwriter "hosts" the event. But they're not allowed to provide tickets if the clients attend without a host from the firm.

Regulators tightened rules for underwriters beginning more than a decade ago, after it became commonplace for underwriters to make big political contributions to politicians who could influence the awarding of municipal bond deals. Underwriters arrange the deals and market the bonds. They are often paid a percentage of the bond amount.

Hart, the company founder, declined to comment but provided the newspaper a statement that the firm filed with regulators. The company said it had been giving tickets to clients since 1991 "as an expression of its appreciation to its clients" and never used the tickets to win a client or a specific deal.

The firm also said it had explained its policy and shown its ticket records to the Securities and Exchange Commission in 2007 and to the independent regulator in 2008.