15 TH ANNUAL PRE-CONFERENCE AT THE BOND BUYER CA PUBLIC FINANCE CONFERENCE THE RELATIONSHIP BETWEEN ISSUERS AND THEIR CONSULTANTS IN THE POST-DODD-FRANK ERA September 20, 2016
SESSIONONE RECENT ENFORCEMENT ACTIONS AGAINST ISSUERS AND PUBLIC OFFICIALS Session one Presented by Robert Doty, President and Proprietor, AGFS, Annapolis, MD Elaine Greenberg, Partner, Greenberg & Taurig
EXP XPANDING M G MUNICIPAL S SECURITIES E ENFOR FORCEMENT Profound ound Chang nges es f for I Issuer uers & & Offici cial als Prese sente ted t d to California D Debt & & Investm stment A t Adviso sory y Commissi ssion Bond ond B Buy uyer Califor ornia Pre-Confer eren ence ce September 20, 20, 2016 2016 3
SEC SEC NON-MCDC ENF NFORCEMENT S SINC NCE EARLY 2013 2013 4
• NON ON-MCDC ENF NFORCEMENT A ACTI TIONS (3 (3 ½ Year ears) AGAIN AINST— 18 18 Sta tate or Local cal Gover ernmental E l Enti titie ies 16 16 Loca cal O l Officia icials Include des 4 4 Act ctio ions Pendi ding g Again ainst 6 6 Local G cal Gover ernmental l Enti tities & & 6 6 Offici icials ls 5
• CONTRAS AST: : IN N 14 14 YE YEARS F FROM 1999 T 1999 THR HROUGH 2012 2012— 11 11 Sta tate or Local cal Gover ernmental E l Enti titie ies 10 10 Loca cal O l Officia icials 6
SIN SINCE EAR EARLY 2 2013 Two S Sta tates es—Illin inois is & & Kan ansa sas (No (Not F Fir irst st—New Jer ersey in in 2010 2010, Add Ha dd Hawaii ii an and M Min innesota A Afte ter MCDC) Stat ate A Agency cy—Rhode Isla sland C Commer erce C Corp. (f (formerly, E Eco conomic ic Develo elopment Commis issio ion) (in (in progress) ss) (No (Not F Fir irst—Massachusetts T Turnpik ike in in 2003, 2003, After er MCDC, 1 10 State A e Agencies cies) 7
COM OMMISSION ON GOI GOING TO O FEDE DERAL DI DISTRICT CT CO COURT MOR ORE OFT OFTEN (As Opposed ed t to A Admin inis istrativ ive P e Proceed ceedin ings) Will ill Lose se S Some, B But A t Also lso Will ill Produce C e Court Decisi ecisions as P as Prec eceden ent More e Rem emedies es in in Feder ederal Court ( e. e.g ., Contr trol Per erson L Lia iabil bilit ity, Inju junctio ions, Emergency Relie elief to to Halt O Halt Ongoing C g Condu duct) To o Date, Qui Quite Suc uccessfu ful 8
NOTABLE “ “FIRST STS” & OTHER ER D DEVEL ELOPMEN PMENTS 9
FIRST ST T TIME: E: Emergen ency I Inju junct ction A Agai ainst Issu ssuer To Ha Halt lt Bond ond Of Offering in n Prog ogress (C (City ity o of Har Harvey, I Illin llinois) (P (Paci cific G Gen enes esis, Un Under derwriter er, in in 2001 2001) 10
FIRST ST T TIME: E: Prohib ibitio ions Again ainst Issu ssuers Issu ssuing B g Bonds ds in in Futu ture (With thout t Sati tisf sfyi ying C g Conditi tions P s Precede dent) t) UNO UNO C Char arter S School Ne Netw twork—5 Y Year ears; Cond ondition ons: Poli lici cies, Train ainin ing, Res espo ponsible O e Offici icial, & & More City o ity of Har Harvey, I Illin llinois—3 Y 3 Year ears; Cond ondition on: Inde depende dent D Disc isclo losure Counsel Allen llen P Par ark, M Mic ichig igan—2 Y Year ears; Cond ondition ons: Disc isclosure o of Order er, C Cer ertif tific icatio ion Afte ter C Consu sult ltation with ith Disc isclo losure C Counse sel 11
FIRST ST T TIME: E: Civil P ivil Pen enal alties A Agai ainst Issu ssuers (G (Greater Wen enatchee, Wash ashingt gton, R Regio gional l Even ents C Cen enter ter Publi lic Faci acili litie ies Distr istrict—$20, 20,000; 000; Also lso Oper perator of Cen enter ter an and d Its ts Pres esiden ent—$10, $10,00 000 E 0 Each) (W (Wes estla lands Water D Distr istrict—$125, 125,000) 000) 12
FIRST ST T TIME: E: SEC W Won in in Distr istric ict & & Appe ppell llate C Courts on Issu ssue of of Qualif ifie ied Immunit ity o of Public O ic Officials ials Basi asis: S SEC See eekin ing Inju junction & & Civil ivil Penalty vs vs. D Dam amages (S (SEC v v. Miam iami’s B Budg dget D Dir irect ector) 13
FIRST ST T TIME: E: Bar ars A Again ainst O Offici icial als—No Fut o Future B Bond ond Issues Includes T Two Mayo ayors (One Stil (O till S l Sitt itting—Can’t C Cer erti tify Bond d Disc isclo losures) Include des Bar ars A Again ainst Work in in Indu dustry 14
FIRST ST T TIME: E: Bar ars A Again ainst O Offici icial als City ty of of Harvey, Il Illinoi nois— Sitti tting ng Mayor or & & For ormer Com omptroller City ty of of Al Allen n Park, Michi higan— For ormer Mayor or & & City ty M Mana nager Rhod Rhode I Island nd E Econom onomic D Development nt Commissi sion—For ormer Executi tive Director tor & Deputy uty D Director tor Uni nite ted Neighborhoo hood Organi nization on of of Chicago go—Form rmer C er CEO 15
FIRST ST T TIME: E: Civil ivil Pen enal alties Agai ainst Sta tate A Agen ency O Officia icials (E (Exec ecutive D e Dir irect ector an and d Depu puty Dir irec ector o of Rhode Islan and C Commer erce ce Commis ission—$25, 25,000 E 000 Each) 16
INCRE REAS ASED U USE OF CIVIL IL PENAL ALTIE IES AGAIN AINST OFFIC ICIAL IALS $180 $180,000 00 A Again ainst 8 8 Officia icials City ty of of Harvey, Il Illinoi nois—Sitti tting ng M Mayor—$1 $10, 0,000 00 For ormer Com omptrol oller—$30 30,00 000 ( 0 (plus d disgorgem emen ent & inter eres est) City ty of of Al Allen n Park, Michi higan—Forme mer Mayor—$10,000 Wes estlan ands Water er D District— Gen ener eral al Man anager er/Gen ener eral C Counsel—$50,000 For ormer As Assista tant nt G Gene neral M Mana nager—$20, 20,000 000 Rhod Rhode I Island nd E Econom onomic D Development nt C Com ommission on— Forme mer Execu ecutive Direct ctor—$25, 25,00 000 Former Deputy uty D Director tor—$25,000 Uni nite ted Neighborhoo hood O Organi nization on—Forme mer C CEO—$1 $10, 0,000 00 17
CONTRAS RAST: Prio ior 15 5 Year ears— 5 5 Officia icials (in (in tw two acti actions) $8 $85, 5,000 (P (Primaril ily S San an D Die iego Officia icials) 18
LAR ARGEST C CIV IVIL PEN PENALTY TO DATE A E AGAINST ISSUER R OFFICIAL IAL—$50, $50,000 000 Double P le Prio ior Hig Highest (W (Wes estla lands, C Calif alifornia ia, W Water Distr istrict) 19
FIRST ST T TIME: E: BI BIG D DEAL AL “Contr trol l Per erson” L Lia iabil bility f for I Issu ssuer Offici icial als (Joint & & Several w with ith Prim imary V Vio iola lator) Mayo ayors o of— Har Harvey, Illin llinois Allen llen P Par ark, M Mic ichig igan Shi hift ft i in n Bur urden of of Proof oof SEC Need O Need Only P ly Prove Contr trol, No Not K t Knowle ledg dge Par artic icip ipation in in Frau aud Un Unnec ecessary 20
CONTRO ROL P PERS RSON LIABI BILIT ITY: To Esta stablis ish Succ ccessful D l Def efen ense, “Cont ontrol P Person ons” Mus ust P Prove— “Good Good F Faith” — and nd — Did No id Not t “Dir irec ectly or I Indir directly” Indu duce ce Acti ction of Prim imar ary V Vio iola lator 21
CONTRO ROL P PERS RSON LIABI BILIT ITY: Po Poses Sign ignif ific icant Ne New R w Risk isks for Community L Leader eaders—Mayors, s, Boar ard C Chair airs Abso bsolu lute “ “Contr trol” l” No Not t Requ equir ired Def efen ense M e May y Requ equir ire Exercise se o of Oversi sigh ght t to to E Evid vidence “ “Good Faith aith” If Poli licie ies/Proce cedures Ado dopted d & & Imple lemented, M May y Be e Helpf Helpful 22
FIRST ST T TIME: E: AN ANOTHER BI R BIG DEAL AL Iss ssuer Former C CEO F Fin ined ed an and B Bar arred fo for NO NOT R T Read eading Officia icial S Sta tatement He S He Sign igned ed OS Conta tain ined M d Mate terial M l Misst isstatements/ Omitted ed M Mater erial ial I Informatio ion Only ly Char arged ed w with ith Ne Neglig ligen ence No Not C t Char arged with ith K Knowle ledg dge o of Misr isrepr presentations (C (CEO o of Un Unite ited Neigh Neighborhood O d Organization of Chica icago) 23
FIRST ST T TIME: E: Acti ction A Again ainst Iss ssuer er f for Informatio ion o on Webs bsit ite (NO (NOT O Offici icial l Sta tatement o or Conti tinuing Disc isclo losure F Filin iling) Inf nfor ormation on on on Ge Gene neral W Webpage (Not ot I Investor P Page) Includi ding g Mayor’s Polit litical al S Spee peech (Annual Sta (A tate o of City ity—Poste sted o d on General Webpa page) (C (City ity o of Har Harrisburg, P Pen ennsylvania) 24
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