The US Securities and Exchange Commission (SEC) has accused the city of Miami and its former budget director with securities fraud in connection with several municipal bond offerings and other disclosures made to investors.
An SEC investigation in 2008 found that Miami and former budget director Michael Boudreaux made materially false and misleading statements and omissions about certain interfund transfers in three 2009 bond offerings totalling US$153.5 million.
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George Canellos, co-director of the SEC’s Division of Enforcement, said in a news release that the city of Miami actively marketed bonds to investors while hiding the true reason for moving around approximately US$37.5 million in city funds.
"The fact that a city official would enable these false and misleading disclosures to investors merely a few years after Miami had been reprimanded by the SEC for similar misconduct makes this repeat behavior all the more appalling and unacceptable," Canellos added.
According to the SEC complaint, Boudreaux orchestrated the transfers from the city’s capital improvement fund to its general fund in order to mask increasing deficits in the general fund, which is viewed by investors and bond rating agencies as a key indicator of financial health.
The SEC’s action also charges Miami with violating an SEC cease-and-desist order that was entered against the city in 2003 based on similar misconduct. The agency said it’s the first time SEC has alleged further wrongdoing by a municipality subject to an existing SEC cease-and-desist order.
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By GlobalDataMiami failed to disclose to bondholders that the transferred funds included legally restricted dollars and that the transferred funds were allocated to specific capital projects.
Eric Bustillo, director of the SEC’s Miami regional office, added, "Miami cannot continue to play shell games with its finances. Investors and the markets deserve complete transparency in assessing the city’s municipal bond offerings."
