Firm Mum on School Bond Deal

By Finotti, John | The Florida Times Union, January 15, 1997 | Go to article overview
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Firm Mum on School Bond Deal

Finotti, John, The Florida Times Union

Board on a 1992 bond issue is ignoring a top school official's

requests for more details about the controversial deal.

The firm earned as much as $700,000 in profits from Treasury

securities it sold to the School Board as part of the bond

refinancing transaction, in addition to a $50,000 consulting


St. Petersburg-based William R. Hough & Co. acknowledged it

earned a "mark-up" from the sale of securities to the School

Board, but insisted it was "substantially" lower than $700,000

and was proper, according to two memos obtained by the


But interim Superintendent Donald Van Fleet said he has been

waiting nearly a month for the firm to provide documentation to

support its assertion that the bond transaction won't end up

costing Jacksonville taxpayers hundreds of thousands of dollars

in payments to the IRS.

The Securities and Exchange Commission is investigating the

School Board's $184.5 million bond issue and had, in other

cities, looked at deals where there have been allegations that

investment firms have overcharged municipalities when setting up

the complex transaction used to refinance municipal bonds.

A Times-Union analysis of the 1992 bond deal found that the

School Board had been overcharged more than $700,000 to

refinance bonds issued in the late 1980s to build new schools.

That article appeared on Dec. 12. In a letter to the School

Board dated four days later, Hough & Co. First Vice President

Susan F. McGarry said the investment firm "continue[s] to

believe that the mark-up which we charged the school district

was appropriate" given the volatility of the bond market,

uncertainty of the deal closing and comparable prices charged by

other investment firms.

She also said Hough & Co. had "obtained bids from several firms

to obtain the best possible price for the securities."

And in a memo to a New York law firm after the Times-Union

article, Hough & Co. President W. Robb Hough said "our profit in

selling these securities to the school district was

substantially less than [$700,000]."

But he, too, did not say how much profit Hough & Co. made off

the deal.

"They've assured me it wasn't $700,000, but they won't tell me

what it was," Van Fleet said.

Hough & Co., one of the more prominent municipal bond

underwriters and advisers in Florida, did not return phone


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