Finra board member's firm caught up in bribery scandal

Former Arkansas treasurer allegedly took cash and steered business to broker

Aug 9, 2013 @ 6:51 am

By Dan Jamieson

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 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.

Mr. Keenan said 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.”

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

According to the Associated Press, 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.

Mr. Keenan said 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 added, referring to the relationship the Stephenses had with Ms. Shoffner.

Reached by InvestmentNews, Steele Stephens declined to comment on the case.

However, he said Mr. Keenan is a “good guy, a straight shooter. He only does business one way, and it’s the right way.”

Mr. Keenan said the case does not affect his ability to sit on the Finra board, since he’s done nothing wrong, and he did not reconsider his candidacy even when Ms. Shoffner was indicted in June.

“I was already well into the campaign,” he said. And the Shoffner matter was already “old news” that had been widely covered in the press.

Finra spokeswoman Michelle Ong declined to comment about Mr. Keenan's situation.

David Sobel, general counsel for Abel/Noser Corp., who lost out to Mr. Keenan in a close three-way race, said 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. “I don’t know if it would have made a difference.”

Mr. Keenan says 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 does not vet petition candidates.

“There is not currently a plan to change the [election] process,” said Finra spokeswoman Nancy Condon, in an email.

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

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

“They’ve got every e-mail, phone call, confirmation, analysis and suitability review” his firm has, he said. “If I’d done something wrong, they already would have charged me with something.”

Ms. Shoffner, a Democrat, was first elected treasurer in 2006 and won a second term in 2010, according to the Associated Press. She 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.

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