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Langford has been in the public eye in Jefferson County for more than 30 years. He's a proud son of Titusville (the Birmingham neighborhood where Condoleezza Rice grew up) who rose from selling Popsicles from a pink pushcart as a kid to become a sports reporter on Channel 6, a PR man for the local Budweiser distributorship, and a three-term mayor of the Birmingham suburb of Fairfield. He left his commission post when he was elected mayor of Birmingham in 2006.
The man defies easy classification. To some he's a scoundrel who's been cavalier with the public trust ever since, as mayor of Fairfield, he built Visionland, an amusement park financed with $90 million in muni bonds and featuring a statue of himself near the entrance. Visionland soon went into Chapter 9. (If Jefferson County follows suit, it will be a rare and ignominious twofer for a public official.) He has also been through personal bankruptcy. "He is the most creative politician you've ever seen," says Langford's friend Jesse Lewis, publisher of the weekly Birmingham Times. "If he had to run a business by himself, he wouldn't do too good, in my mind. Larry will spend whatever money he has. He'll just spend it."
Langford's solution to the need for more public transportation in Birmingham? Spend millions on retro-style trolleys. In June he shocked everyone - that is, everyone who didn't think it was a joke - by proposing to make a bid for the 2020 Olympic Games. He once suggested building a canal from the Tennessee - Tombigbee Waterway so that cruise ships from the Gulf of Mexico could dock in Birmingham, some 250 miles inland. "What saves him," says Whitmire, "is, with the exception of Visionland, these things never materialize."
But Langford never runs out of ideas. In July he made a big show of delivering his budget rescue plan, entering a meeting with a case labeled TOP SECRET and accompanied by machine-gun-toting police officers. The substance of the secret plan? Shuffle around some funds already committed to other projects. He's a fiscal liberal and a social conservative who has counseled parents to beat their kids more often, and once said, "Alabama needs a knee-high electric chair." Fortune would have asked him if he was joking, but Langford declined to grant an interview.
The substance of the SEC complaint is that Langford, who admits to having had personal money problems, obtained suspicious loans arranged and in some cases paid off by William Blount, a Montgomery banker. Blount's firm earned more than $6.7 million for work related to the county's refinancing. A former chairman of the Alabama Democratic Party, Blount is widely believed to be the banker who went shopping for Mary Buckelew at the Ferragamo boutique. Blount declined to comment to Fortune.
Langford has known Blount for years, Langford's lawyer acknowledges. They exchange Christmas gifts. And so when Langford was looking for an investment bank to handle this new bond deal, it made perfect sense that he would turn to Blount Parrish, his trusted friend's firm. And when, at the same time, Langford needed money - for credit card and clothing store bills - it was natural that he would discuss his need with another old friend, Albert LaPierre, a lobbyist. How was Langford supposed to know, wonders Baddley, that the money to pay off those loans would ultimately come from Blount? And let's not forget: The whole point was to save the county some money.
Unfortunately, the opposite occurred. Jefferson County wound up with 68% of its debt in auction-rate securities, instruments for which the interest rates are regularly reset. When that market froze last winter, effective rates on the debt shot up. Then, in the spring, the two principal bond insurers that served the county had their credit ratings cut from AAA to junk, because of exposure to subprime mortgages. That automatically reduced the credit ratings for Jefferson County itself, and its interest payments doubled within weeks, from $130 million a year to $260 million. Add an accelerated annual principal payment of $200 million, and here's the bottom line: $190 million a year in gross sewer revenues chasing $460 million a year in debt service. The numbers don't add up.
It was Blount who arranged some of biggest interest rate swaps. According to an analysis by Porter White, the county ended up being overcharged a total of $100 million by JPMorgan and other issuers for its $5.6 billion in swaps. The swaps were supposed to protect Jefferson County. But when rates behaved unexpectedly, terminating the swaps cost the county an extra $277 million. A JPMorgan spokesman declined to comment on specifics, but said the bank, along with other creditors, continues to make proposals that would help Jefferson County avoid bankruptcy.
Langford made "a mistake," Baddley concedes, but "I don't think any crime was committed. I'll go to my grave thinking that." He adds, "I think the SEC is loading up on Larry Langford, African-American mayor, county commissioner. They're making him a scapegoat."