June 12, 2013 (Press-News.org) The Securities and Exchange Commission has accused the City of Victorville, California, of defrauding investors by inflating property values in a 2008 municipal bond sale. The SEC also filed civil charges against the bond underwriters and a city official allegedly involved in the scheme, as well as against the Southern California Logistics Airport Authority.
Inflated property values
In a suit filed on April 29, 2013, the SEC alleged that the parties dramatically overstated the value of properties in an area that they planned to redevelop, and that they used the inflated figures to sell bonds secured by the taxes on those properties. The redevelopment plans included the construction of four airplane hangars in an area that was once an Air Force base.
The bonds were sold to investors based in part on a $65 million valuation of the hangars. However, the SEC alleges that the underwriter and the city official knew that the hangars had been valued at less than half that amount by a county assessor.
According to the complaint, the allegedly inflated property values allowed the Airport Authority to sell significantly more bonds than it otherwise would have been able to. In addition, the SEC claims, investors who purchased the bonds were misled regarding the value of the property securing their investments. The Los Angeles Times reported that the bond offering raised more than $13 million.
Misuse of funds
The SEC complaint also accused the bond underwriter of misappropriating over $2.7 million in bond proceeds, which were supposed to be used for the construction of airplane hangars. Instead, the SEC contends, the firm used the funds to cover its own operating costs.
The SEC also alleged that the Airport Authority loaned more than $60 million in bond proceeds to the underwriter and agreed to pay the underwriter two percent of the remaining construction costs in the form of construction management fee as compensation for the project. According to the complaint, however, the underwriter took $450,000 in unauthorized additional fees to oversee the construction, as well as allegedly taking another $2.3 million in fees without the Airport Authority's knowledge.
An attorney representing the Airport Authority and the City of Victorville told the Washington Post that his clients dispute the SEC's allegations and that they intend to defend vigorously against them. If the allegations are proven, the defendants could face steep fines and may be required to repay any ill-gotten gains from the alleged scheme.
Legal help for white-collar crime charges
When facing allegations of fraud, embezzlement or other white-collar crimes in Southern California, it is extremely important to seek help from an attorney who is highly experienced in these matters. A knowledgeable attorney with a background in white-collar criminal defense will take swift action to preserve the clients' rights and with fight strenuously on the client's behalf to defend against the charges.
Article provided by The Law Offices of Mark J. Werksman
Visit us at www.werksmanlaw.com
Investment fraud allegations strike Southern California city
The Securities and Exchange Commission has accused the City of Victorville, California, of defrauding investors by inflating property values in a 2008 municipal bond sale.
2013-06-12
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[Press-News.org] Investment fraud allegations strike Southern California cityThe Securities and Exchange Commission has accused the City of Victorville, California, of defrauding investors by inflating property values in a 2008 municipal bond sale.