Muni advisor’s bid to end SEC’s case against him fails
3 min read
Accused municipal advisor Brandon Comer and his firm Comer Capital Group’s motion for summary judgment has been denied, keeping alive the case brought by the Securities and Exchange Commission that he breached his fiduciary duty in connection with a 2015 bond offering for the Harvey, Illinois Public Library District.
A status hearing before Northern District of Illinois Judge Elaine Bucklo is scheduled for Jan. 26, 2023 and both parties will file a joint written status report by Jan. 19.
Comer moved for summary judgment in August, claiming that the SEC has not provided sufficient evidence, which was opposed by the Commission as “meaningless.”
The matter arose when Comer and Comer Capital Group were brought on to assist in the Library District’s bond offering process and provide advice on the selection of an experienced underwriter and the pricing of the bonds.
“The SEC alleges that Comer Capital and Comer did not provide advice to the Library District on the qualifications of the underwriter and upon learning that the underwriter was having difficulty finding investors to buy the bonds, did not consider or recommend that the district consider engaging a different or an additional broker-dealer to underwrite the bonds,” the complaint said.
“The SEC also alleges that Comer Capital and Comer did not provide the Library District with the information and advice needed to determine whether the price of the bonds was fair and reasonable,” the complaint added, stating the price was not reasonable and led to the district to pay more than $500,000 in additional interest over the life of the bonds.
When brought on by the District, Comer also agreed to accept a lower than usual payment of $15,000 for his services, but then a few days later, asked broker-dealer IFS to negotiate an increase to $20,000, which was awarded. Comer then personally negotiated another fee increase which ended his compensation with the District at $40,000, the SEC alleges.
The SEC settled a related administrative action against IFS, finding that they did not act with reasonable care in underwriting the bonds and when it had difficulty finding buyers, sold the bonds to another broker-dealer at a price which was not reasonable to the District.
In their motion for summary judgment, Comer and his firm argued that it does not constitute a breach of fiduciary duty because they provided the advice they promised to provide as the District’s municipal advisor and that IFS was qualified to act as underwriter for the bond’s issuance and that IFS was hired before Comer and his firm.
They also asserted that the evidence “does not establish that defendants asked IFS to renegotiate CCG’s fee but only that Comer ‘informed IFS that they needed to discuss the issue with the District,” the most recent order said.
“At all events, defendants continue, the renegotiated fee was appropriate given the amount of work defendants performed on the transaction,” the order said. “None of these arguments establishes defendants’ entitlement to summary judgment.”
Judge Bucklo also said the defendants’ insistence that the record reflects no triable disputes ignores the report of the plaintiff’s expert, Richard Kolman, a longtime muni banker at multiple Wall Street firms, who opined that Comer and his firm created a conflict of interest by asking IFS to help renegotiate their municipal advisory fee.
Kolman also asserted that Comer failed to ensure the District paid a fair and reasonable interest rate, failed to conduct a historical pricing analysis and failed to advise that the yield proposed by IFS was well above market levels for comparable bonds.
Comer’s expert Albert Grace said that he has “differing views on a number of statements in the Kolman report,” and according to Judge Bucklo, “confines his opinion” by stating that he “did not see a conflict as stated in the Kolman Report but rather the natural outgrowth of the delivery process of financial services to municipal issuers.”
