U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23997 / November 29, 2017
Securities and Exchange Commission v. Town of Ramapo, et al., Civil Action No. 16-cv-2779 (S.D.N.Y., filed April 14, 2016)
SEC: Ramapo, RLDC Consent to Court-Appointed Independent Consultant Among Other Undertakings
The Securities and Exchange Commission announced that, on November 17, 2017, the Honorable Cathy Seibel, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment on consent as to Defendants Town of Ramapo (Town) and Ramapo Local Development Corp. (RLDC).
The Final Judgment permanently enjoins the Town and RLDC from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and, additionally, imposes undertakings on the Town and RLDC: (a) requiring the Town and RLDC to retain an independent consultant (IC) with municipal finance experience appointed by the Court to review and recommend improvements to the Town's and RLDC's financial reporting procedures and controls, as well as the Town's and RLDC's municipal securities offerings disclosure policies and procedures, to require the Town and RLDC to adopt any such recommendations, and for the IC to review and assess the sufficiency of the Town's and RLDC's implementation of the IC's recommendations for two full fiscal years thereafter; (b) requiring the Town and RLDC, for fiscal years 2017, 2018, and 2019, to retain an Independent Auditing Firm, not unacceptable to the SEC staff, to conduct audits of the Town's and the RLDC's annual financial statements for those fiscal years; and (c) requiring that, for a period of three years from the date of the entry of the Judgment, the Town and RLDC may not participate in the offer and sale of any municipal securities for which the Town and RLDC are issuers or obligated persons unless the Town and RLDC have, prior to each such offering retained an Independent Disclosure Counsel (IDC) not unacceptable to the SEC staff and which are also unaffiliated with the bond counsel retained for such offering. The IDC shall participate in the preparation of the disclosure document for the offering, assist the Town and RLDC in performing a reasonable investigation concerning the accuracy and completeness of that disclosure document, and render an opinion to the effect that, during its work, nothing came to its attention that would cause it to believe that the disclosure document contains, as of the date of the opinion, any untrue statement of a material fact or omits to state any material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading, including the disclosure therein of the terms of the Judgment in this case.
The SEC filed on April 14, 2016 its complaint against the Town and RLDC and four town officials who allegedly hid a deteriorating financial situation from their municipal bond investors. The SEC alleges that Town officials resorted to fraud to hide the strain in the town's finances caused by the approximately $60 million cost to build a baseball stadium as well as the town's declining sales and property tax revenues. The SEC also alleges that Town officials cooked the books of the Town's primary operating fund to falsely depict positive balances between $1.4 million and $4.2 million during a six-year period when the town had actually accumulated fund balance deficits as high as nearly $14 million. Further because the stadium bonds issued by the RLDC were guaranteed by the town, certain officials also masked an operating revenue shortfall at the RLDC and failed to inform investors that the town would likely need to subsidize those bond payments and further deplete its general fund.
The SEC continues its enforcement action against the remaining defendants: Christopher St. Lawrence, Nachman Aaron Troodler, Michael Klein, and Nathan Oberman.
For further information, see Litigation Release No. 23521.