The Securities and Exchange Commission (“SEC”) has filed fraud charges in the U.S. District Court for the Northern District of Illinois against the City of Harvey, Illinois and its comptroller, Joseph Letke (“Letke”). The City of Harvey has been accused of defrauding investors through the misuse of portions of municipal bond fund proceeds, including $1.7 million of over $14 million bonds sold in all from 2008 to 2010. The funds were intended for developing a Holiday Inn hotel and conference venue for the city but years after the bonds were sold, the Holiday Inn building remains in shambles after the developer moved overseas. Meanwhile the bond money has been tied to paying payroll and operational charges, as well as Letke, $269,000 “in undisclosed payments while advising the developer”on the Holiday Inn project.
The SEC has since taken an “unprecedented step”by seeking an emergency court order to keep additional bonds from coming to market to halt any further securities fraud. The SEC also requested the court prevent the City of Harvey and Letke from offering municipal securities for five years unless a court appointed independent consultant is retainedto review and make recommendations on any offerings. Although the SEC has had only limited authority over the municipal bond market in the past ” in recent years, as municipal bankruptcies and bond defaults have become more common, the Commission has been finding ways to step up its activities in the $3.7 trillion municipal bond market.” Detecting undisclosed payments and compensation arrangements continue to be at the forefront of the SEC’s initiatives. For further information on this and other related subjects, please contact us at firstname.lastname@example.org or (619) 298-2880