The U.S. Securities and Exchange Commission (SEC) has
charged the City of Miami with violating a 2003 cease-and-desist order
concerning the fraudulent sale of municipal bond offerings.
According to the complaint, the City and its former Budget
Director, Michael Boudreaux, made materially false and misleading statements
while raising approximately $153.5 million from the investing public through
several bond offerings in 2009. The SEC
alleges that the City and Mr. Boudreaux failed to disclose, among other things,
inter-fund transfers of $37.5 million from certain City funds into its General
Fund in order to mask increasing deficits in the General Fund. The failure to disclose the surreptitious
transfers during a period when the City was actively marketing bonds to
investors was fraudulent, according to the SEC, because the City’s General Fund
is deemed by investors and bond rating agencies as a key indicator of financial
health. As a result of the transfers,
the City’s bond offerings were rated favorably by credit rating agencies.
The SEC’s complaint is particularly noteworthy because it
represents the first time the agency has sought injunctive relief against a
municipality that is already under an existing SEC cease-and-desist order. In 2003, the Commission obtained an order
against the City for violation of federal securities laws in connection with
bonds issued in 1995. Despite the
existence of the prior order, the SEC asserts that the City “has gone on to
violate these same provisions again – this time in connection with three bonds
the City issued in 2009.”
Investors who purchased City of Miami municipal bonds in
2009 on the basis of misrepresentations and omissions of material fact should
contact the experienced securities fraud attorneys at Block & Landsman for
a free and confidential consultation.
