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Pension fund pirates pay piper 

City in no hurry to recover lost booty

Raymond J. McClendon came up behind co-defendant Theresa Stanford outside the courtroom after the two were sentenced on Monday.

As his hand clasped Stanford's shoulder, McClendon's round face wore the same beatific look it had all day long.

But Stanford whirled around and put her hand, palm out, near her face.

"Please. Please. Please," said the 47-year-old former city employee who had managed the city's pension funds. A man then wrapped his arm around Stanford and whisked her away from the investment banker who helped her lose $18 million in money that should be in Atlanta city coffers.

If only Stanford had waved McClendon off years ago. Between 1992 and 1994, she directed the bulk of the city's pension fund investments to McClendon's investment firm -- Pryor, McClendon, Counts & Co. McClendon, 48, traded U.S. Treasury securities called STRIPS, which Stanford funneled to the firm, at the same time preventing competing brokers from having access to the securities information, according to an April 1999 SEC filing. The pair "churned" those investments -- needlessly traded securities to beef up commissions -- eight times all told, turning a tidy $15.3 million profit for McClendon's firm.

Because Stanford gave PMC access to the city's portfolio, the firm could also employ a scheme called "hold and cover" in which PMC could use its knowledge to make lucrative securities trades while sticking the city with losing trades. At the same time, Stanford kept secret a business relationship McClendon had with her husband.

Last July, the pair were convicted on numerous mail fraud counts related to the case. On Monday, U.S. District Court Judge Jack Camp sentenced McClendon to 6-and-a-half years in federal prison and ordered him to pay $1.5 million in restitution. Stanford was sentenced to nearly four years and ordered to make $125,000 in restitution.

Oddly, the city hasn't rushed to demand restitution from McClendon, a former campaign treasurer for ex-Mayor Maynard Jackson. Atlanta Police Capt. Lou Arcangeli, the trustee of the Atlanta Police Officer's Pension Fund, was the only city official to ask the judge to force McClendon and Stanford to repay money from the fund that was lost.

Part of the problem is that the city hasn't figured out exactly how much was taken from each of its pension funds -- general employees, fire department and police -- though Arcangeli requested such an audit in September 1999.

Larry D. Thompson and Evans Edwards, McClendon's King & Spalding attorneys, kept returning to that detail -- even after Camp had agreed with federal prosecutor Christopher Wray that the city lost nearly $20 million.

How can you assess damages when the city never quantified its injury? Edwards asked the judge.

Meanwhile, McClendon, whose annual salary between 1991 and 1993 totaled nearly $2 million, is living with a $27,000-per-month deficit. He's paid for legal fees by selling $400,000 in stock holdings, as well as $500,000 in art. Oddly, though, he still has enough money to pay $12,000 worth of business bills every month, U.S. Probation Officer Jan M. Kay pointed out.

But the money McClendon spent on his attorneys certainly seemed wise Monday. While McClendon's King & Spalding hired guns fired away, Stanford's attorney Anthony L. Cochran seemed to have occasional trouble making salient points on his client's behalf. Stanford hired Cochran as her private attorney, but ran out of money to pay him, Cochran says. Instead of dumping her, Cochran stayed on as her appointed attorney.

In asking for leniency, Stanford, like McClendon, never admitted guilt or apologized. Instead, she said she'd been duped by McClendon. In examining who wound up with the ill-gotten gains -- $15 million to PMC, millions to McClendon and only about $325,000 funneled by McClendon to Stanford -- it looks like she's right.

"I am guilty of trusting people," she said. "This is only a test of my faith and a lesson that people are not always what they seem."

Stanford had Fulton County State Court Judge Patsy Y. Porter speak on her behalf, among others -- each testifying how important Stanford is to her community and family. McClendon counted on members of 100 Black Men of Atlanta and former Atlanta City Attorney Marva Jones Brooks.

Said Camp: "I've rarely heard people speak so highly of people convicted of fraud."

There's a chance McClendon and Stanford will be allowed to remain free pending appeals.

Arcangeli says the pair's sentencing is a good first step, but the city now needs to start restitution proceedings. He says the law firm Holland & Knight is exploring the case, but City Attorney Susan Pease Langford could not be reached for comment on the status of that investigation.

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