SEC Charges Two California Charter School Officials with Misleading Investors in Bond Offering

Litigation Release No. 24806 / April 27, 2020

Securities and Exchange Commission v. William Alfred Batchelor and John Michael Zukoski, No. 3:20-cv-02871 (N.D. Cal. filed April 27, 2020)

The Securities and Exchange Commission today charged William Batchelor and John Zukoski with misleading investors who purchased $25.54 million in bonds issued on behalf of Tri-Valley Learning Corporation, which operated two public charter schools.

According to the SEC's complaint, in May 2015, Batchelor, Tri-Valley's then Chief Executive Officer, and Zukoski, Tri-Valley's then Director of Finance, helped prepare and signed a bond offering document to fund the purchase and renovation of a building to house the schools. The complaint states that Batchelor and Zukoski were aware that Tri-Valley was experiencing serious cash flow problems that negatively affected its ability to make debt service payments on the bonds, was delinquent on payments owed to vendors, had incurred additional debt in the form of a private term loan that was overdue by nearly one year, and had drawn a bank line of credit to its limit just prior to the bond sale. However, the offering document allegedly failed to disclose that Tri-Valley was in serious financial distress at the time the bonds were sold and contained misleading financial projections. Additionally, the complaint alleges that, despite knowing the true state of Tri-Valley's financial condition, Batchelor and Zukoski signed separate certifications that the information in the offering document contained no material misrepresentations or omissions.

The SEC's complaint, filed in U.S. District Court for the Northern District of California, charges Batchelor and Zukoski with violating the antifraud provision of Section 17(a)(3) of the Securities Act of 1933. Without admitting or denying the allegations in the complaint, Batchelor and Zukoski agreed to be enjoined from future violations of the charged provision and from participating in future municipal debt offerings. Batchelor agreed to pay a $20,000 penalty and Zukoski agreed to pay a $15,000 penalty. The settlements are subject to court approval.

The SEC's investigation was conducted by Brian P. Knight and Creighton Papier of the Public Finance Abuse Unit with assistance from trial counsel Brent Smyth. The investigation was supervised by Jason H. Lee.