Paul Doughty's testimony regarding criminal profits.
Case 5:15-cr-00085-R Document 106 Continuation of Paul Doughty Testimony, Page 33-35 of 103, Thursday, June 30, 2016. Filed 11/15/16
Doughty is being questioned by his defense attorney Bob Wyatt
Picking up with Wyatt
McLaughlin and to, I believe, Lee Doughty concerning the bonus structures at the bank.
A. Yes, sir.
Q. They were board minutes?
A. Yes, sir.
Q. Do you recall those?
A. Yes, sir.
Q. Okay. And we saw that in 2005, 2006, and 2007, that Harold Doughty (Paul Doughty's father and chairman of the board), to the extent he was there, and Paul Doughty were the only two officers and directors who were not bonused; is that right?
A. I believe Harold had a $10,000 bonus in '05, but he didn't have any bonuses in '06 or '07.
Q. Okay. And would you tell the jury why you did not have bonuses during those three years?
A. Well, the -- he wanted to take care of his people. And because, I guess, the tax credit revenue on the management fees that we were realizing, that was -- that's where I was getting bonus income.
And I was spending, you know, a lot more time over there at the time. And so we were relying on, at least Larry and Lee, to spend more -- step up and do more in the bank.
And so we felt like them and the rest of the employees should reward from that rather than us trying to take that money out of the bank.
Q. Okay. And were you comfortable in receiving your bonuses from Altus Ventures?
A. Yes. I mean, I didn't expect it to be that big. That was kind of an accident.
Q. Explain that to the jury.
A. Well, when the -- we had the tax credits set up and, if you remember the letter Don sent, we were trying to allocate 20 percent of the fee income that was earned by Altus Ventures to the management of Altus Ventures, which I was the president, Don was executive vice president, and Bill Grissom was the chief financial officer, and then a couple others that were, you know, key in that organization.
That being said, we went through a couple of funds, and there was reasonable income, and we expected that to continue on. Well, what happened right in the middle -- I'm going to say '06, '07 -- I forgot what the time frame is -- the state legislature changed the tax rules.
We had a couple of funds that we were actively recruiting and wanting investments in. And the industry -- Capital West, all the clients that Capital West marketed these to, they had gotten used to them and accustomed to them. We had the letters and everybody had -- they had passed the due diligence.
When the legislature changed it, that eliminated the way we were structuring tax credits.
Q. Okay. Just to simplify this, are you saying that the --and I apologize. I know I'm leading.
Are you saying that the tax credits were going away and, as a result of that, that you weren't going to be able to get them the next year?
A. That's correct.
Q. Okay. And what did that cause?
A. It basically caused a run for the border. Everybody said, wait a minute, we're not going to get these anymore, and so they'd buy four, five, six years' worth of tax credits, because you could carry these forward.
So we had the Chesapeakes, the Bank of Oklahomas, the --you know, all the banks all around the state, anybody that had tax liability in the state of Oklahoma, they started writing very large checks, million dollars, $500,000, et cetera.
And the key was, we had to have a project to put the money in to earn the tax credit. And we just happened to have projects at that time. We had several projects going, of which Quartz Mountain was the big one.
So we ended up raising $30-, $40 million from tax credits. The legislatures, they grandfathered the existing funds we had. And we were the only solution, so everybody --it was a feeding frenzy, I guess, for the big guys. And it all ended up in southwest Oklahoma.
And because of that, we were on a commission basis,