SEC Sues Birmingham Mayor in Groundbreaking Case

The Securities and Exchange Commission has sued Birmingham, Ala., Mayor Larry Langford, claiming he violated securities rules for accepting more than $156,000 in undisclosed payments from a friend whose firm benefited from government fees on municipal-bond offerings and swap agreements.

The groundbreaking suit (PDF) seeks to reach swap agreements, which are not explicitly regulated by the SEC, the Wall Street Journal reports. The suit is characterizing the swaps as bond offerings that are subject to regulation.

The suit contends Langford accepted the money while he oversaw the finances of Jefferson County. The interest-rate swaps were supposed to lower borrowing costs for the county, but such agreements are backfiring due to problems in the market for auction-rate securities.

The SEC suit says the payments to Langford should have been disclosed and that the alleged conduct operated as a fraud on the county.