Finra board member downplays scandal

A newly elected Finra board member whose firm has been connected to a bribery scandal involving the former treasurer of Arkansas said the matter should have no effect on his ability to serve on the board.

“If I felt it was a problem, I wouldn’t have run in the first place,” said Robert Keenan, chief executive at St. Bernard Financial Services Inc.

Mr. Keenan was elected to the Financial Industry Regulatory Authority Inc. board as a small-firm representative this month. St. Bernard has 53 independent-contractor representatives in 10 states.

Federal prosecutors allege that a former broker at Russellville, Ark.-based St. Bernard gave at least $36,000 to former Arkansas Treasurer Martha Shoffner in exchange for the state’s investment business.

FBI investigators reportedly taped Ms. Shoffner accepting a $6,000 payment from the broker, who on at least two occasions delivered additional $6,000 cash payments hidden inside a pie box, together with a pie.

Ms. Shoffner was indicted in June and is awaiting trial on 14 counts of extortion and bribery.

Mr. Keenan has not been accused of any wrongdoing and said he was unaware of any alleged payoffs. Prosecutors have not identified the broker who is alleged to have made the payoffs.

“Hell no, I didn’t know it was going on,” Mr. Keenan said when asked about the case.

He said that a father-son broker team he hired in 2009, Steve and Steele Stephens, were responsible for the bond sales to the state that have come under question.

“They’d known Martha [Shoffner] for years,” Mr. Keenan said.

“They were just doing a tiny bit” of bond business with the state in 2009 “and cranked it up when they got here,” he said.

‘Sounds about right’

Steve Stephens, the father, retired this year, Mr. Keenan said, and Steele Stephens voluntarily left the firm in June.

A review by the state Legislature found that Ms. Shoffner’s office purchased $1.69 billion in bonds from St. Bernard and another firm between July 2008 and March 2013, almost double the amount purchased from any other broker, according to the Associated Press.

Mr. Keenan said that that figure “sounds about right.”

Why would a state treasurer do so much business with a small, local firm?

“We had the best yields,” Mr. Keenan said. “That and the personal connection,” he said, referring to the relationship the Stephenses had with Ms. Shoffner.

Steele Stephens declined to comment on the case.

However, he said Mr. Keenan “only does business one way, and it’s the right way.”

Mr. Keenan said that the case doesn’t affect his ability to sit on the Finra board, as he has done nothing wrong, and he didn’t reconsider his candidacy even when Ms. Shoffner was indicted in June. The Shoffner matter was already “old news” that had been widely covered, Mr. Keenan said.

David Sobel, general counsel for Abel/Noser Corp., who lost to Mr. Keenan in a close three-way race, said that he was aware of the bribery scandal but didn’t seek to capitalize on it.

“It was discussed, but I decided I didn’t want to get involved in it,” he said.

Mr. Keenan said that a few small-firm representatives asked him about the case during the election, “but they voted for me” anyway.

The small-firm candidates were nominated by petitions circulated to other small firms. Finra doesn’t vet petition candidates.

“There is not currently a plan to change the [election] process,” Finra spokeswoman Nancy Condon wrote in an e-mail.

Heath Abshure, Arkansas’ securities commissioner, said that his department is investigating St. Bernard over the suitability of the bond sales, but his case has been delayed by the criminal proceedings.

Arkansas regulators, as well as Finra and the Securities and Exchange Commission, have been investigating the matter since September 2011, Mr. Keenan said.

“If I’d done something wrong, they already would have charged me with something,” Mr. Keenan said.

Ms. Shoffner resigned her position in May after initial charges were filed by the U.S. Attorney’s Office for the Eastern District of Arkansas.

A trial date for Ms. Shoffner has been set for March 2014. Her attorney, Charles Banks of the Banks Law Firm PLLC, declined to comment.

Related Topics: Financial Industry Regulatory Authority