SEC Charges Former College Official with Defrauding Municipal Securities Investors

The SEC charged the former controller of a New York-based college with defrauding municipal securities investors by unlawfully hiding the college's declining finances.

According to the Complaint filed in the U.S. District Court for the Southern District of New York, the college came under financial duress as student enrollment declined and tuition revenues decreased. The SEC alleged that former controller Keith Borge illegally withdrew funds designated for the college's endowment to fund other expenses at the college.

The SEC stated that Mr. Borge took steps to produce financial statements that concealed the financial condition of the college and its use of assets. These inaccurate financial statements were made available to investors through the "online repository in connection with the [c]ollege's continuing disclosure obligations stemming from a 1999 bond issuance for which the [c]ollege served as obligor." Due to Mr. Borge's unlawful conduct, the secondary market purchases and the sales of bonds were based on inaccurate financial information.

The SEC requested that the Court enter a judgment ordering Mr. Borge to, among other things, pay a civil monetary penalty. In a parallel action, the DOJ brought criminal charges against Mr. Borge. He pleaded guilty to those charges.