California & Florida Cities face SEC lawsuits

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California & Florida Cities face SEC lawsuits

California & Florida Cities face SEC lawsuits

Isn’t Wall Street doing the same?

If I was them I would focus on the LIBOR mess that will most likely use tons of resources.

California via Reuters

In a case that illustrates the mounting risks facing cash-strapped California cities and their lenders, the desert city of Victorville is bracing for possible litigation amid allegations that it improperly shifted funds among different city-controlled entities.

The Victorville city council was told by its attorney last week that it faced “significant exposure to litigation” relating to a little-publicized Securities and Exchange Commission investigation into its financial practices, the city attorney acknowledged in a statement to Reuters.

City attorney Andre de Bortnowsky denied that Victorville had violated any laws, and said “it almost appears as if the SEC is on a fishing expedition.”

Miami via Reuters

Two years ago, the Securities and Exchange Commission brought its first-ever enforcement action against a state, accusing New Jersey of deceiving municipal bond investors about the state’s unfunded pension liabilities. The case was a wake-up call. Bloomberg predicted a wave of similar SEC suits against muni bond issuers, the National Association of Bond Lawyers convened a task force pension obligation disclosure, and the enforcement bar braced for action.

And then … nothing. Well, not exactly nothing. In October 2010 the SEC’s municipal securities unit announced a settlement with two officials from San Diego, in a case that dated back to the commission’s 2008 settlement with the city for underreporting pension liability to bond investors. There were reports of SEC investigations of bonds issued by the city of Victorville, California, and of California’s disclosure of obligations to its gigantic public employees’ pension fund. The SEC also worked with the Justice Department on its municipal bond bid-rigging case against several major banks, and reached its own $51.2 million muni bond bid-rigging settlement with JPMorgan Chase in 2011. But the expected wave of enforcement actions didn’t materialize. “Candidly, I expected to see a lot more,” said Thomas Gorman of Dorsey and Whitney, who writes the SEC Actions blog. “These are complicated cases and they take a long time, but it’s been a while.”

[CALIFORNIA REUTERS]

[MIAMI REUTERS]

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