The SEC won a jury verdict this week against the City of Miami and former budget director, Michael Boudreaux. SEC v. City of Miami, Florida, Civil Action No. 1:13-cv-22600 (S.D. Fla. Verdict Sept. 14, 2016). The charges centered on fraudulent representations pertaining to three bond offerings.
In advance of three bond offerings in 2009, the City distributed financials and disclosure documents that were represented to be complete and reliable in all material aspects.
The bonds were not insured, but were instead secured by certain city tax revenues. Over $150 million in bonds were issued in 2009.
However, the SEC charged the offering materials did not disclose that a series of transfers had been made from a restricted fund to the city’s general fund in order to conceal deficits in the general fund. The city had an established goal of maintaining $100 million in reserves in its general fund. The SEC charged that Boudreaux made misrepresentations about the funds to facilitate their transfer in light of applicable restrictions, and also made misrepresentation to credit rating agencies. The purpose of such misrepresentations, per the SEC, was to attain favorable ratings on the bond issuances. A future hearing date will determine the remedies to be issued in this action.