An Illinois federal court has ordered the City of Harvey, Illinois (City) to fulfill its obligations under a consent judgment to implement a consultant's recommendations for strengthening the City's internal controls.

The SEC sued the City and its then-Comptroller in June 2014. The SEC alleged that the City diverted at least $1.7 million in municipal bond proceeds, purportedly to be used for a hotel redevelopment project. The complaint alleged that while under severe financial distress, the City improperly used municipal bond proceeds for the City's general operations, including payroll. In December 2014, without admitting or denying the allegations, the City consented to a judgment requiring, among other things, that the City hire an independent consultant to make recommendations for strengthening the City's internal controls and that the City implement the independent consultant's recommendations.

On October 28, 2020, the SEC filed a motion to enforce the consent judgment. According to the SEC's motion, the City hired an independent consultant, and the independent consultant made recommendations to strengthen the City's internal controls, but the City failed to implement the independent consultant's recommendations. On January 13, 2021, the United States District Court for the Northern District of Illinois found that the City violated the consent judgment and granted the SEC's motion to enforce the consent judgment.

The litigation is being handled by Eric M. Phillips and Public Finance Abuse Unit members Eric A. Celauro and Sally J. Hewitt.