SEC Charges City of Miami and Former Budget Director With Municipal Bond Offering Fraud (with Lofchie Comment)

The SEC has charged the city of Miami and the former budget director, Michael Boudreaux, with securities fraud in connection to several municipal bond offerings and other disclosures made to investors.

An SEC investigation found that beginning in 2008, Miami and Michael Boudreaux made materially false and misleading statements and omissions about certain interfund transfers in bond offers totaling $153.5 million. They similarly included false and misleading information in the city's fiscal year and financial reports that are distributed to broad segments of the investing public. Boudreaux also orchestrated transfers from the city's Capital Improvement Fund to its General Fund in order to mask increasing deficits.

The SEC's complaint, filed in the U.S. District Court for the Southern District of Florida, charges Miami with violations of Section 17(a) ("Fraudulent Interstate Transactions") of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 ("Employment of Manipulative and Deceptive Devices"). It also charges Boudreaux with the same violations. The complaint seeks injunctive relief and financial penalties against Miami and Boudreaux, and an order commanding the city to comply with the SEC's 2003 cease-and-desist order.

Lofchie Comment: The newspapers have touted these charges as evidence of a new get-tough policy on the part of the SEC. However, the SEC has recently brought charges against the city of Harrisburg and the city of Victorville, so this seems to be a continuation of an enforcement direction that was initiated by former Chairman Schapiro. For news articles linking to those prior enforcement actions, link to "Current Topics - Munis".

See: SEC Press Release.See also: SEC Complaint.