SEC Obtains Final Judgments on Fraud Charges

The SEC announced that the United States District Court for the Eastern District of Michigan entered final judgments settling fraud charges brought by the SEC in related suits against the Mayor and the City Administrator of Allen Park, Michigan.

The judgments bar the defendants from participating in any municipal bond offerings and enjoin them from future violations of certain antifraud provisions of the federal securities laws. The judgement against the Mayor also imposed a civil monetary penalty.

The SEC's complaints (the "Complaints") and an administrative proceeding the SEC filed against the City of Allen Park arose from the city's issuance of $31 million in general obligation bonds to support a movie studio project. According to the Complaints, by the time the bonds were issued, the studio project's scope had dwindled to merely building an onsite vocational school. However, this change of plans was not reflected in the bond offering documents or other public statements, and investors remained uninformed about the project's deterioration as well as the impact that the change would have on the city's ability to service the bond debt.

According to the SEC, the studio project collapsed within months of the second bond issuance and the state appointed an emergency manager in October 2010, citing the failed project as a primary factor in the decline of the city's economic condition.

See: SEC Press Release.