Locke Lord QuickStudy: Guilty Plea Entered for Municipal Securities Fraud

In an April 2016 Quick Study, we reported the criminal action brought by the U.S. Department of Justice against two former municipal officials of the Town of Ramapo, New York for securities fraud involving the issuance of municipal securities by the Town and the Ramapo Local Development Corporation (RLDC).  We emphasized that these actions were a reminder that disclosure in the sale of municipal bonds must be accurate and complete. 

On March 7, 2017, one of the officials, the former Executive Director of the RLDC, pled guilty and will be sentenced in September.  Charges remain pending against the second defendant.

In announcing the guilty plea, the U.S. Attorney for the Southern District of New York said, in part, “This guilty plea, in what we believe to be the first municipal bond-related criminal securities fraud prosecution, is a big step in policing and bringing accountability to the $3.7 trillion municipal bond market.”  The U.S. Attorney’s office also issued a Superseding Information, which is a revised set of charges, to which the defendant pled guilty.  

This matter reflects the federal government’s willingness to seek and impose increasingly severe penalties for fraudulent activities in the issuance of municipal securities.  It further underscores the importance of accurate and complete disclosure in connection with the offering of municipal securities by demonstrating the personal consequences for officials responsible for securities fraud.  It also should, as noted in our earlier Quick Study, encourage issuers and their officials to adopt written disclosure policies and procedures, train those involved in disclosure matters and engage experienced advisers to assist with these matters.

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.