The federal government announced Thursday that it has entered into a settlement agreement regarding the Sweetwater Union High School District’s handling of $28 million in bonds.
The settlement, between the Securities and Exchange Commission, the district and its former chief financial officer, resolves allegations that investors who purchased the municipal bonds were misled.
The SEC alleged that in April 2018, the district and former CFO Karen Michel gave investors false budget projections indicating it would end the fiscal year with a general fund balance of around $19.5 million.
The agency, though, was actually on track to be in the red by $7.2 million.
The SEC said that despite contradictory internal reports, the district and Michel included the projections in its offering documents and presented them to a credit rating agency.
Michel also signed “multiple certifications falsely attesting to the accuracy and completeness of the information included in the offering documents,” according to the SEC.
While neither settlement includes admissions or denials of the SEC’s allegations, Michel agreed to pay a $28,000 penalty.
The district submitted to an SEC order that requires it to retain an independent consultant to evaluate and make recommendations to procedures regarding municipal securities disclosures.
Following the SEC announcement, the school district said in a statement, “The district looks forward to implementing the improvements and changes outlined in the SEC’s order. It will continue to take steps to ensure it provides accurate disclosures and information to the public.”
The statement also said the settlement “represents another positive step in the district’s ongoing remedial efforts to continuously evaluate and improve its fiscal health.”
LeeAnn G. Gaunt, chief of the SEC’s Public Finance Abuse Unit, said, “As the order finds, Sweetwater and Michel presented stale and misleading financial information as current and accurate. The SEC will continue to address deceptive conduct that prevents municipal bond investors from getting an accurate picture of the financial risks of their investments.”
– City News Service
