San Bernardino County Says It Will Sue Bond Underwriter

San Bernardino County said it plans to sue one of its municipal bond underwriters, alleging the firm provided gifts to county officials who recommended it for bond assignments.

The lawsuit against Minneapolis-based Miller & Schroeder will be filed within a month, said Alan Marks, San Bernardino County counsel.

“Basically, the concern we have is there were various gratuities provided by Miller & Schroeder, either directly or indirectly, to certain county officials,” Marks said. “These same officials made recommendations” regarding bond sales Miller & Schroeder handled for the county.

The county late last year launched an internal investigation into past contracting practices after former county executives pleaded guilty to bribery charges over vendor contracts. Those contracts were unrelated to bond underwriting assignments. That investigation is expected to produce other lawsuits regarding vendor contracts, Marks said.

The expected suit against Miller & Schroeder and James Iverson, an executive vice president in the firm’s Solana Beach office, will involve civil rather than criminal charges, Marks said.

“What we’re focused on are provisions of the state government code” restricting conflicts of interest when government officials award contracts, Marks said.

Miller & Schroeder worked on several bond sales for San Bernardino over the last decade and earned hundreds of thousands of dollars in commissions from the transactions, according to county estimates. Marks said the county’s suit would seek repayment of some of those commissions.

“Miller & Schroeder is aware of allegations that have been made about its work for San Bernardino County,” said Matt Forsgren of the law firm Briggs & Morgan in Minneapolis, the underwriter’s legal counsel. “The company is investigating those allegations” and isn’t commenting until its investigation is complete, he said.

Miller & Schroeder last year ranked 13th among managing underwriters on negotiated municipal bond sales in California, according to Thomson Financial Securities Data.

The county is being assisted in its investigation by the accounting firm Arthur Andersen LLC and outside lawyers.