Four ex- San Diego officials will pay $80,000 in fines to resolve municipal bond charges by the US Securities and Exchange Commission for allegedly misleading investors. Never before has the SEC obtained financial penalties against a city’s officials for municipal securities fraud. By agreeing to settle, ex-San Diego City Manager Michael Uberuaga, ex-Deputy City Manager for Finance Patricia Frazier, ex-Auditor and Comptroller Edward Ryan, and ex-City Treasurer Mary Vattimo are not denying or admitting to the charges. There are still charges pending against San Diego’s ex-Assistant Auditor and Comptroller Teresa Webster.
The SEC filed its securities fraud charges against the former city officials in 2008. The officials are accused of knowing that the city of San Diego had purposely underfunded its pension obligations to increase benefits will deferring costs. The SEC also contends that the ex- officials understood that without cuts to city services, employee benefits, or new revenues, it would be difficult to fund future retirement obligations. Yet the former officials allegedly did not let investors know about the serious funding problems and made false and misleading statements in 2002 and 2003.
Regulators contend that when San Diego sold over $260 million in bonds, city officials did not disclose that the pension deficit was expected to hit $2 billion in 2009. According to Rosalind Tyson, the director of the SEC’s Los Angeles Regional Office, municipal officials are obligated to make sure that investors get accurate and full information about the financial condition of an issuer.
Related Web Resources:
Ex-San Diego Officials Agree to Pay Fines to End SEC Pension Fraud Case, Bloomberg, October 27, 2010
Former San Diego Officials to Pay Penalties in SEC Municipal Bond Fraud Case, Asset International October 29, 2010
More Municipal Bond Blog Posts, http://www.stockbrokerfraudblog.com
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