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Swink or swim? Bond Daddy Jim Swink puts his company on the line with a crap shoot investment and rolls snake eyes.

Swink Or Swim?

Bond Daddy Jim Swink Puts His Company On The Line With A Crap Shoot Investment And Rolls Snake Eyes

Dec. 27th began like most any other workday at the offices of Swink & Co. on the third floor of the Spring Plaza Building in Little Rock. Brokers were busy cold calling prospects, talking with clients and preparing for the markets to open. The back shop employees were gearing up for the daily clerical chores of bond house business. The daily mounds of cigarette ashes and coffee grounds were just beginning to take shape.

Shortly before 9 a.m., managers began passing word for all employees to get off the phones, so the firm's namesake boss could have a word with everyone on the sales floor.

According to some of those who were there, Jim Swink opened the meeting with this statement: "I've always shared the good with you and the bad. What I've got to share with you now is not good."

After 18 years in the business, Swink was closing the company's doors to begin a voluntary liquidation process necessitated by suspected deficiencies in its net capital requirements. "I have decided to cease operations until a determination can be made," Swink is reported to have said.

The employees were stunned.

"He told us around Thanksgiving that we were having a better year in 1989 than 1988," reports an ex-Swink broker who was there on that last day. "Everyone had thought that we were on the move up."

Filings with the Arkansas Securities Department show the net capital of Swink & Co. fell from $2.43 million at year-end 1985 to $550,000 Dec. 31, 1988. Assets for the same period shrunk from $37.79 million to $6 million.

There was little elaboration publicly on what had caused the company's net capital to fall below regulatory guidelines other than a terse announcement that included this statement: "This registrant has incurred unrealized losses because of market value decline in government securities."

Initial reports had Swink & Co. eating more than $1 million after a client backed out on a treasury bond trade following a drop in the market. Other sources say it is more likely that Swink himself initiated the trade and failed to back off his position until it was too late.

"I've seen him do it a 100 times," says an ex-Swink broker. "A disciplined trader will take his loss and regroup, but Swink never limited his losses. It was just a matter of time before he lost his ass. The man is a compulsive gambler."

"You're not just playing with your job," observes another ex-Swink broker of betting the business on the outcome of one big investment. "You're risking the livelihood of the people who work for you."

The list of disgruntled Swink & Co. employees is long. After all, neophytes to the trading floor of the broker-dealer were welcomed to "Swink or Swim;" competitors like to refer to the firm as "Swink or Swindle."

Whether or not the circumstances of Swink's demise come to light in the months of regulatory investigation to come, many company insiders believe it was Swink who cast the dice and lost big.

The cost so far has been the loss of as many as 100 jobs. There are hints of more financial fallout in the days to come, but for now the closing is all that has surfaced. Swink could not be reached for comment.

IT'S UNCERTAIN WHAT effect if any the closing of Swink & Co. will have on a $4.2 million bond issue used to finance the acquisition of the Spring Plaza Building by Jim Swink in 1983. The bond payments are largely predicated on Swink & Co. making its monthly lease payments.

The deal was structured so that Swink & Co., would relocate from the Tower Building and lease space at Spring Plaza at a rate sufficient to cover the project's annual debt service. In 1989, the company's lease payments totaled $568,981. The Spring Plaza Building was 80 percent leased during 1989, but that figure falls to 35 percent with the vacancy created by Swink & Co.

The bonds were issued through the Metrocentre Improvement District No. 1 of the City of Little Rock with Mercantile Bank in Jonesboro as the trustee. The bonds were divided into two series underwritten by Swink & Co. and Compton & Sons (a now-defunct Little Rock bond house).

The bond payments are current, and the next scheduled payout to bondholders is due June 1, 1990.

Craig Boone, trust officer at Mercantile Bank, has been in contact with Jim Swink but could learn little about Swink's plans concerning future bond payments. The payment schedule calls for semi-annual payments on June 1 and Dec. 1 of each year.

"We'll wait till June; until then, I don't know any more than you do," Boone states. "You can count on us taking quick action should they miss a payment. Our main concern is getting the bondholders paid off."

As of Dec. 1, 1989, $3.03 million is outstanding on the Series A bonds, and $955,000 is outstanding on the Series B bonds.

In the event of a default, the Series A bonds are fully backed by a letter of credit with Worthen Bank and Trust -- an irrevocable obligation by Worthen to pay upon request of Mercantile Bank an amount equal to the total principal outstanding.

LAST MONTH WASN'T the first time that Swink & Co. encountered problems with maintaining its net capital. In April 1988, the company did business on nine separate dates when its net capital was below the minimum required.

The National Association of Securities Dealers fined Swink & Co. and Jim Swink $50,000 jointly and severally for the violations. Swink was censured along with EVP Louis J. Pagillo, who was fined $5,000.

There are 34 other exhibits that include a couple dozen lawsuits in various stages of development against Swink & Co. (some cases are active; others are settled) and a handful of NASD complaints in the firm's file with securities regulators.

"If anybody can find legitimate loopholes in the law, he can," sighs a regulatory source. "It hacks you off, but what can you do about it? He's very careful, and he's not dumb.

"He believes a business is run to make money, not to make people happy. I don't think it really matters to Jim Swink whether you like him or not. He's not motivated by all the same things most of us are."

There seems to be an infinite number of Swink & Co. alumni, brokers who either received their training at the company or spent a portion of their career with the firm. In 1989 alone, 133 employees were listed at one time or another as licensed brokers at Swink & Co. Of those, 67 came and went before the shop closed for good in December.

"His favorite saying was `Nothing personal, just business,'" recalls a ex-Swink & Co. broker. "He used the name of business to screw people, including the employees."

If a sampling of opinions from Swink alumni is any indication, Jim Swink, who turned 53 on Jan. 11, didn't get very many birthday cards from well-wishers.

Swink, a native of Leachville (Mississippi County), is described as a private man. He graduated from Bragg City High School, located in the small Missouri Bootheel community of the same name, and earned a bachelor's degree in education at Arkansas State University in Jonesboro.

His work history includes stints at Arkansas Underwriters Life Insurance and the Powell & Satterfield bondhouse. Swink and Jon Brittenum formed a namesake bondhouse of their own before both went solo.

Swink lives in 4,650-SF west Little Rock home located on an 18-acre spread on Katillius Road off Ark. Hwy. 10. He once raised quarter horses but has reportedly sold off most of his horses.

Some say his home will be next to go on the block, and that he will set up business elsewhere. The accuracy of such observations is uncertain.

IN DAYS GONE BY, Swink employees would gather after work to knock down pitchers of beer at The Farkleberry, a watering hole and eatery in the First Commercial Building that preceded Swink & Co. in closing its doors.

Occasionally, the rowdier ones would belt out the lyrics to an unofficial bond daddy anthem sung to the tune of "Swinging'," the 1983 Country hit by John Anderson.

The renamed parody entitled "Swinkin'" recounts the glories of being a fast-talking broker who has the ability to sell thousands of dollars of bonds to an old lady living on social security and revels in other shady feats. Each irreverent verse is followed with a chorus featuring the line "I'm Just A Swinkin'."

What new songs will there be following the demise of Swink & Co., and who will do the singing?
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Title Annotation:Swink and Co.
Author:Waldon, George
Publication:Arkansas Business
Article Type:company profile
Date:Jan 15, 1990
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