The mayor of Birmingham, Ala., was indicted on federal charges of bribery, fraud and conspiracy Monday, part of a probe into a local financial crisis that has the surrounding county on the brink of one of the largest municipal bankruptcies in American history.
The 101-count indictment focuses on Mayor Larry P. Langford’s tenure as Jefferson County Commission president from 2002 to 2006. Langford also served as head of the county finance department, where he engaged in a risky strategy to restructure $3.2 billion in debt the county incurred while fixing its sewer system.
That strategy eventually left the county government in disastrous financial shape. It also had the short-term effect of enriching Langford’s friend William B. Blount, a Montgomery investment banker who earned $7.1 million in fees from transactions related to the restructuring, according to the indictment.
Prosecutors allege Langford pressured financial institutions that took part in the county’s debt deals to hire Blount as a consultant.
In exchange, prosecutors say, Langford received money and gifts from Blount and a Birmingham lobbyist, Albert LaPierre.
U.S. Atty. Alice H. Martin on Monday called it “a classic pay to play scheme.”
“Former Commission President Langford owed a duty of loyalty to Jefferson County in the administration of the county’s financial affairs,” Martin said in a statement. “He sold out his public office to his friends Blount and LaPierre for about $235,000 in expensive clothes, Rolex watches and cash to pay his growing personal debt.”
Blount, 55, and LaPierre, 58, also were indicted Monday on bribery and other charges. All three pleaded not guilty and were released on bond.
Mayoral spokeswoman April Odom said Langford would continue to serve as mayor.
“We are glad the mayor will finally have his day in court,” Odom said in a statement.
The federal government’s concern over Jefferson County’s financial meltdown -- and Langford’s role in it -- has been apparent for months. Three of the former commissioners on the five-member board have been found guilty of federal corruption charges related to the sewer work or the debt restructuring. In April, the Securities and Exchange Commission filed a civil lawsuit accusing Langford of improprieties similar to those in the criminal complaint.
The indictment is nonetheless an embarrassment for Langford, 62, who is accused in the indictment of going on buying trips to designer stores including Ferragamo and Ermenegildo Zegna that were all funded by Blount.
The mayor of Alabama’s most populous city is an African American Democrat, but a socially conservative one -- a mix that has at times earned him a following among both urban blacks and suburban whites.
His popularity has been undermined by a questionable financial record, including a reported personal bankruptcy, and his work in bringing a theme park called VisionLand to the Birmingham suburbs in the 1990s.
The theme park, funded by millions in public bond money, eventually declared bankruptcy.
Thomas Baddley, Langford’s attorney, could not be reached for this article. In an October interview with Fortune magazine, he characterized the federal government’s focus on Langford as making a “scapegoat” of an “African American mayor.”
Jefferson County’s financial problems were not driven by criminality as much as the decision to take on a troubling amount of risk, said Robert Brooks, a business professor at the University of Alabama in Tuscaloosa.
To lower its debt payments, the county embraced a complicated package of new ideas offered by Wall Street firms, including abandoning fixed rates for adjustable rates and using derivatives called interest-rate swaps as a hedge.
The idea worked for a while, but it fell apart with the global credit crunch, leaving the county facing high interest rates and even greater debt. This year, the County Commission has debated filing for bankruptcy but has not yet done so.