September 9, 2016 / 9:01 PM / 3 years ago

UPDATE 1-BOK Financial to pay $1.6 mln for gatekeeping failures

(Adds details about case, comment from BOK)

By Suzanne Barlyn

Sept 9 (Reuters) - A BOK Financial Corporation unit has agreed to pay more than $1.6 million to settle civil charges for failing to alert investors to problems in municipal bond offerings that turned out to be part of fraudulent scheme, the U.S. Securities and Exchange Commission said on Friday.

The agency also filed a civil fraud complaint in a Newark, New Jersey federal court against Marrien Neilson, a former senior vice president at the unit, saying she was chiefly responsible for the failures of the bank’s corporate trust department.

Oklahoma-based BOKF NA, as indenture trustee, had overseen the offerings which raised $190 million from investors who believed they had a stake in retirement home income. The SEC charged Atlanta-based businessman Christopher F. Brogdon, who managed the offerings, with fraud in November for tapping those funds for other business and personal expenses.

A court later ordered Brogdon to repay $85 million to investors, according to the SEC.

BOKF, which was also the dissemination agent, failed in its “gatekeeper role,” the SEC said.

BOKF, in the settlement, neither admitted nor denied the SEC’s allegations. BOKF had set aside funds in the first quarter to cover the penalty, the company said in a statement.

Neilson’s lawyer, Robert Heim, in New York, said in a telephone call that she “vigorously denies the SEC’s allegations and we look forward to proving her innocence in court.”

BOKF and Neilson became aware that Brogdon was withdrawing money from reserve funds for the bond offerings and failing to replenish them, the SEC said in the settlement.

The agency added that BOKF and Neilson knew that the nursing home facilities serving as collateral for one of the offerings had been closed for years, and that Brogdon had failed to file annual financial statements for the deals. (Reporting by Suzanne Barlyn; Editing by Chizu Nomiyama and Richard Chang)

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