By Ann C. Logue
The SEC was a quiet place this week, at least in term of announced enforcement actions. Its derivatives counterpart, the Commodity Futures Trading Commission, picked up the slack and suspended the registration of Ted Brent Alexander of Jackson, Mississippi because of his federal criminal indictment on securities and commodities fraud, conspiracy, and wire fraud.
The case goes back a few years and involved several bigwigs in Mississippi politics. In 2018, Arthur Lamar Adams pleaded guilty to wire fraud in a $100 million Ponzi scheme that he created called Madison Timber. Its victims were a who’s who of Mississippi elites, including Senator Roger Wicker. Madison Timber’s purported business was brokering timber rights. Investors were told that the company purchased timber rights from landowners and then selling those rights to lumber mills at a higher price. The money raised was in the form of supposed promissory notes that would finance the rights purchases. Investors were told that they would receive a guaranteed rate of interest of 12% or so for a year. Adams falsified documents and had them notarized to give the impression that they were legitimate.
They were not.
Adams recruited a network of folks to sell the promissory notes, and here is where Ted Brent Alexander came in. Alexander worked for a connected Mississippi law firm, Baker Donalsen as a lobbyist in its political practice. He is not a lawyer, but he and one of the lawyers at the firm, Jon Darrell Seawright, used their positions at the firm to establish a limited liability partnership to invest in the promissory notes, the firm’s name and client list to attract investors, and even the firm’s escrow account to hold funds. The raised about $20 million from 50 investors.
Alexander registered with the CFTC in 2008 as a sole proprietor. Although the fraudulent promissory notes were not covered by his registration, the CFTC pulled it because Alexander’s involvement with the scheme called into question his fiduciary qualities and fitness.
Sometimes, the financial regulatory agencies seem to be in the business of pulling licenses or levying fines after other regulators and the courts have done their work. I’m not sure if the effect is adding insult to injury or making sure that the culprit is punished. In any event, the agencies have long arms and lots of reach.