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Tuesday, September 25, 2012

Breaking news: An Oregon muni bond deal without Harvey Rogers

We noted yesterday that of the last dozen or so municipal bond transactions in Oregon, not a one had been presided over by bond counsel other than the firm of Hawkins Delafield & Wood LLP -- namely, attorney Harvey Rogers. Shortly after we wrote that, this upcoming bond deal, by the Lane County public school district, was announced. And lo and behold, bond counsel is the Portland law firm of Mersereau Shannon LLP. That firm is the successor to Howard Rankin's old shop, which with one other dominated the bond business for Oregon lawyers for many years.

But the new deal is not something completely different. Still serving as financial advisor and taking a nice cut is Seattle-Northwest Securities. As Oregon local government puts itself irretrievably into hock, that outfit makes a profit on just about every loan.

Comments (5)

Given that, like Jack, I am J>D> impaired, I probably should know this, but I don't.....

What does "bond counsel" actually do?

I know they work for the issuing governmental entity, are paid by the issuer, and I thought give an opinion as to whether:

1)bond interest is federal and state income tax exempt;

2) whether the bonds are backed by the full faith and credit of the issuing governmental entity, or are mere "revenue" bonds.

How is bond counsels compensation figured? A percentage of the net procveeds obtained by the issuer? Some other way?

Is an erroneous bond counsel opinion actionable by an underwriter of after market bond buyer? In other words, Charlie Counsel says its fed and state tax evxempt interest, and it isn't, can the ultimate bond buyer sue bond counsel for malpractice? Same questions as to "full faith and credit" opinion? Also, suppose bond counsel says bond issued in accordance with all state and local laws and it develops, like Clackamas County, TRiMet Orange Line, that ain't quite so: does bond counsel get successfully sued by ultimate buyer when government refuses to pay interest?

Why is it so lucrative for law firms? Are they acting, with their malpractice coverage, as an analog to say NCUA or FDIC with a liability e4xposure to the ultimate bond buyers, not the underwriters?

It's lucrative for law firms because bond work is priced as a flat fee -- "I will charge you $X for giving you my opinion that the interest will be exempt from federal income tax" -- related to the size of the bond issue. Bond buyers will not buy municipal bonds unless the opinion of bond counsel comes from one of a small number of lawyers and firms who are listed in what I think is called "the Red Book."

Cool Isaac.

"White shoe" law firms as whores.

At least thats nothing new.

Far be it for me to defend attorneys, especially ones making a living via the tax payer, I'm a proud "tightly righty", but I don't think bond attorneys are the rightful recipients of scorn. You can say that the tax code should not be so complicated that you need an attorney's advice to file a return,but it is the tax code that is the issue, not the attorney. And like a tax attorney, the muni bond folks have skills and expertise they should be fairly compensated for.

Pom Mom of LO says: "the muni bond folks have skills and expertise they should be fairly compensated for."

OR is it political connections they have? Greg Macpherson's daughter Mary is with Seattle Northwest Securities' PDX office and was the person who filed the bond sale for the rogue Clackamas Co. commissioners to pay for Milwaukie Light Rail. That bond sale was cancelled under the legal heat from bright lights being shone on it, including right here by Jack.

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