The U.S. Securities and Exchange Commission on Friday charged the city of Miami and its former budget director with civil securities fraud for engaging in questionable budget transfers that misled bond investors.
The SEC’s enforcement action also charged the city with violating an existing cease-and-desist order entered in 2003 based on “similar misconduct.’’ The agency said it’s the first time the SEC has alleged further wrongdoing by a municipality already under an existing cease-and-desist order.
The charges, filed in federal court in Miami, allege that the city and former Budget Director Michael Boudreaux “made materially false and misleading statements and omissions” about internal fund transfers leading up to three 2009 bond offerings totaling $153.5 million. They also are accused of including “false and misleading” information in the city’s 2007 and 2008 financial statements distributed to bond investors.
The investigation, which began in 2009 after a Miami Herald report, revealed that Boudreaux transferred $37.5 million from the capital budget that pays for big-ticket construction items into the general fund to reduce gaping holes in the operating budget as the local economy soured. At the time, he justified the transfers by saying the projects were no longer necessary.