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
"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