The Securities and Exchange Commission is investigating alleged fraud committed by the City of Miami to deceive investors, and has recommended that a civil suit be filed against the city. In a letter sent to the city, the SEC states that they have been investigating the bonds issued in 2007 and 2009 for the last two and a half years, and have concluded that the city moved money around to the general fund to appear stronger to investors prior to the bond sales. According to numerous news sources, the SEC is contemplating levying fines to the city, as well as a cease-and-desist order. Furthermore, the Miami Herald is reporting that letters were also sent to former city budget director Michael Boudreaux, and stated that at this time it is unknown “if any other city officials have also been targeted”.

This is not the first time the city faces the SEC, and with this latest allegation, it would make Miami the only city to be targeted by the SEC twice in the last 12 years. The previous indiscretion was the result of a very similar claim, in which the city was accused of moving money to the general fund to balance the books prior to a bond sale in 1995. This ended with a trial in 2001, during which the judge issued a cease-and-desist order and mandated the city to keep a reserve of 10% of the budget, something the city has failed to do for years now.

The current scandal is a result of 3 bonds sold in 2007, which accumulated to $233 million and an additional 3 sold in 2009, which added to $153.9 million, and the transfer of money from the gas tax and impact fees to the general fund. The SEC stated in its letter to those involved that they believed the money was transferred to deceive investors into thinking that the city was more financially stable than it really was. The money was supposedly transferred into the general fund to fill up the holes in the budget. As a result of the investigation, the SEC has recommended that civil charges be filled against the city, but also against some of the individuals involved. This is a new strategy which the agency has begun to impalement whereby they fine the individuals involved as opposed to placing that burden on the taxpayers of the city.

The SEC is also currently investigating the bonds issued by the to finance the new Marlins Stadium, according to the Miami Herald. If the city is indeed charged with having committed fraud during the sale of those bonds, it would be the 3rd such allegation by federal regulators in the last 12 years. This appears to have became and institutional problem for the city, with Joe Arriola, a former city manager, stating that over at City hall there is a “culture of incompetence”.

What will happen remains to be seen since the SEC has given the city and Mr. Boudreaux until August 6th to respond to the allegations presented against them. What is clear, is that the city will surely face challenges during future bond offerings.

Sonn Law Group is investigating claims regarding Joel Eziekel Blum (CRD #4905379, Goshen, New York). Blum recently submitted an AWC in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for 20 days. See FINRA Case #2014040186601. Blum was associated with Merrill Lynch from May 2008 until his termination in February 2014. Blum has been associated with Ameriprise Financial Services, Inc., since February 2014. The Form U-5 filed by Merrill Lynch to terminate Blum's registration states that he was discharged for "conduct including failure to contact clients in advance of entering orders in non-discretionary accounts and mismarking order tickets as unsolicited." FINRA found that Blum executed discretionary transactions in customer accounts without written authorization to do so. In addition, Blum mismarked order tickets in connection with these transactions, inaccurately indicating that the trades were unsolicited, according to FINRA. In entering into the AWC, Blum neither admitted or denied FINRA's findings. Pursuant to FINRA Rules, member firms are responsible for supervising a broker's activities during the time the broker is registered with the firm. Therefore, Ameriprise or Merrill Lynch may be liable for investment or other losses suffered by Blum's customers. If you were a client of Ameriprise, Merrill Lynch, or Blum, and have suffered investment losses or financial irregularities, please contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 844-689-5754 or complete our "contact form."
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