25 Jul Miami misled investors over city’s financial health.
BY CHARLES RABIN AND KATHLEEN MCGRORY
A 2½-year investigation by federal authorities has concluded that the city of Miami misled investors about the city’s financial health as it sold hundreds of millions of dollars worth of bonds dating back to 2007.
A two-page letter sent by the Securities & Exchange Commission and received by the city late Monday said the agency intends to seek civil fines and a court order against the city for violating federal laws. It is the second time the city has faced such sanctions.
Former city administrator Michael Boudreaux, who was the budget director during the time at issue, also received an SEC letter accusing him of securities violations, said his attorney, Michael Pizzi.
The city will write a response letter arguing that the charges are not warranted, city officials said Tuesday.
Miami Mayor Tomás Regalado said he was relieved to have the probe coming to an end.
“We keep paying for the sins of the past,” Regalado said. “But we have taken many, many measures to avoid anything like this from happening in the future.”
A separate SEC investigation into government bonds issued for the Miami Marlins ballpark is still ongoing.
The SEC investigation that is wrapping up dates back to 2009, when The Miami Herald found that city financial officials had moved $26.4 million from the capital budget into the general fund. The move gave the appearance of a balanced budget immediately before a bond issue needed to finance improvements to city streets and sidewalks.
Around the same time, then-Internal Auditor Victor Igwe issued a report blasting the city for “inaccurate and misleading” budget practices. Igwe lost his job after the audit was published, and has since filed a whistleblower complaint.
SEC investigators combed through thousands of budget documents, memos and emails in the 30 months that followed, and Miami shelled out more than $1.4 million defending itself.
Miami Commission Chairman Francis Suarez noted that commissioners “took steps to restore the accounts where the transfers had come from to show we were being fiscally conservative.”
The SEC last probed Miami’s finances in the late ‘90s. Investigators concluded the city had defrauded bond buyers by glossing over problems with the budget, and forbade city officials from doing so again.
Similar allegations were at the center of the latest SEC investigation — and the ongoing probe into the bond issue used to finance the Marlins ballpark. Investigators want to know if investors were misled, and if the elected officials who championed the project were improperly influenced.
The stadium deal has befallen a great deal of scrutiny, partly because the city and county covered 80 percent of the project while the Marlins franchise will likely make most of the profits. At one point, it seemed Miami would have to pay $1.2 million in property taxes for the parking garages at the ballpark — an expense that would have threatened the city’s ability to meet its debt obligation.
State lawmakers exempted Miami from the tax in March.