SECURITIES AND EXCHANGE COMMISSION Washington, DC Litigation Release No. 15565 / November 20, 1997 SECURITIES AND EXCHANGE COMMISSION v. RICHARD P. POIRIER, JR., JAMES E. EATON and MICHAEL S. DEVEGTER, United States District Court for the Northern District of Georgia, Civil Action No. 1-97-CV-3478 The Securities and Exchange Commission announced that it filed a Complaint in the United States District Court for the Northern District of Georgia against Richard P. Poirier, James E. Eaton, and Michael S. deVegter, charging them with securities fraud in connection with two municipal securities offerings involving Fulton County, Georgia. The two offerings were an October 1992 offering of $163.375 million in revenue bonds by Fulton County and a May 1993 offering of $336 million in revenue bonds by the Fulton-DeKalb Hospital Authority. DeVegter, formerly a vice-president in the Public Finance Department of Stephens Inc., was a financial advisor to Fulton County in both transactions, and a financial advisor to the Hospital Authority in the second transaction. Poirier was formerly a partner and Eaton was formerly a vice-president at Lazard Freres & Co. Lazard Freres was the senior managing underwriter for the Fulton County transaction and co-senior managing underwriter for the Hospital Authority transaction. The Complaint alleges that in the Summer of 1992, deVegter entered into an undisclosed arrangement with Poirier, Eaton and a consultant for Lazard Freres. The consultant asked deVegter to assist Lazard Freres in obtaining the position of senior managing underwriter for the Fulton County transaction and promised deVegter that he would be compensated for his efforts. DeVegter agreed, and provided assistance to the firm in its successful bid to become senior managing underwriter for the offering. The Complaint alleges that in December 1992, following closing of the bond issue, Poirier and Eaton caused Lazard Freres to issue an $83,872 check to the consultant, who then paid deVegter half of that fee, $41,936. The Complaint charges that shortly before he received the $41,936, deVegter helped Lazard Freres with its efforts to be named underwriter on the Hospital Authority transaction, deVegter assisted Lazard Freres in this transaction by, among other things, assisting Lazard Freres with the hiring of a local consultant and joining in the recommendation to the Hospital Authority that Lazard Freres be named as co-senior managing underwriter. The Complaint alleges other fraudulent conduct in connection with the selection of Lazard Freres as senior managing underwriter for an April 1992 $184.5 million offering by the School District of Duval County, Florida. In that transaction, Poirier caused two materially misleading representations to be made to the issuer. Both representations attested to the absence of any consultant or lobbyist services or fees in connection with Lazard Freres' selection. In fact, a lobbyist was used, and Poirier had agreed to a success fee on the transaction, which he caused the firm to pay. That payment was in violation of the underwriting agreement with the ======END OF PAGE 1====== School District. The Complaint charges other improper conduct by Poirier as part of his efforts to obtain underwriting business for his firm. In 1992 and 1993, Poirier arranged for the reimbursement by Lazard Freres of at least $62,500 in political contributions to the campaigns of two incumbent governors at a time when the firm was seeking and obtaining municipal securities business from their respective jurisdictions. Poirier enlisted others to arrange for third parties to make the political contributions, and reimbursed those third parties, through false invoices for consulting and other services submitted to Lazard Freres. According to the Complaint, Poirier, Eaton and deVegter defrauded Fulton County, the Fulton DeKalb Hospital Authority, and investors in the two offerings by failing to disclose deVegter s agreement to assist Lazard Freres, the $41,936 payment, and the actual and potential conflicts of interest created by those arrangements. As a result, the three violated the following antifraud provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Complaint charges that Poirier s and Eaton s conduct also violated Exchange Act Section 15B(c)(1), rule G-17 of the Municipal Securities Rulemaking Board, which prohibits unfair practices in the conduct of municipal securities business, and MSRB rule G-20, which prohibits certain gifts and payments in the conduct of municipal securities business. Poirier is also charged with violations of the antifraud provisions and MSRB rule G-17 in connection with the Duval County transaction, and with violations of MSRB rule G-17 in connection with the reimbursement of political contributions. In its Complaint, the Commission seeks to enjoin the three defendants from violating the provisions described above. In addition, the Commission seeks orders requiring each of the defendants to pay civil money penalties. Simultaneous with the filing of the Complaint, and without admitting or denying the allegations contained in the Complaint, Eaton agreed to the entry of a final judgment of permanent injunction barring future violations of Section 17(a) of the Securities Act, Sections 10(b) and 15B(c)(1) of the Exchange Act and Rule 10b-5 thereunder, and MSRB rules G-17 and G-20; and ordering him to pay a civil penalty of $15,000 pursuant to Section 20(d)(1) of the Securities Act and Section 21B(a) of the Exchange Act. As part of his settlement with the Commission, Eaton has agreed to the entry of a Commission order barring him permanently from the securities business. The Commission's investigation concerning pay-to play-practices in Florida and Georgia continues. ======END OF PAGE 2======